The Microcap Minute Classroom. Module 10, chapter 4: Checklists and pre-mortems: decide calmly, not in the moment <div class="learn" markdown="1"> **What you will learn** - Why pilots with ten thousand flying hours still read checklists out loud - What a pre-mortem is, and how it catches disasters before they happen - How the 10-K's own table of contents works as a free professional checklist - How our own weekly screen enforces its tests, with no favourites allowed - A six-question starter checklist you can copy today </div> An airline pilot with ten thousand hours in the cockpit still sits before take-off and reads a checklist out loud, item by item, with the co-pilot answering. Not because pilots are forgetful, but because excitement, routine and hurry hide things from every human brain. Surgeons do the same before operating. If people who hold lives in their hands trust a written list more than their memory, your money deserves the same respect. A checklist is a short list of questions you answer in writing before every investment. You write it once, when you are calm, and then you obey it, especially when you are not calm. A pre-mortem is the checklist's clever cousin. A post-mortem is an examination done after a death, to find the cause. A pre-mortem does it before. Before you invest, imagine it is one year later and the investment has failed badly. Now write the story: what went wrong? The biggest customer left. The new product flopped. The debt came due. Then look at the company today and ask: are any of these warning signs already visible? ## Why deciding "in the moment" fails When a price is jumping and everyone is talking, your brain is not doing analysis. It is doing emotion at high speed. Decisions made in that state feel brilliant and are usually terrible. A decision made on paper on a quiet Sunday has a fighting chance. That is the whole trick: move the decision from the exciting moment to a calm one. ## A real screen has no favourites This is not only a classroom idea. The weekly screen behind The Microcap Minute runs a set of written tests on every candidate company: eleven of them, checked one by one. Some test the business, like whether real cash comes in from operations. Some test the stock itself, like whether money is genuinely moving toward the company compared to the market. And the rule that matters most is this: fail even one test and the company is out. It does not matter how famous the brand is, how beautiful the story sounds, or how much anybody loves it. A list of favourites may suggest candidates. It may never skip the tests. ## You already own a free checklist Every 10-K (the big yearly report each US company files with the SEC) opens with a table of contents that reads like a checklist written by professionals: Item 1, Business (what the company actually does); Item 1A, Risk Factors; Item 7, Management's Discussion (the bosses explaining the year in their own words); Item 8, the Financial Statements. Walking through the items is walking through a checklist. Notice how the numbered Items give you a ready-made order of study, from what the company does to what could hurt it. Notice that you can search one word or phrase across millions of filings at once, perfect for checking a specific worry from your pre-mortem. ## A starter checklist to copy 1. Can I explain, in one sentence, how this company makes money? 2. Have I read its risk factors myself, with my own eyes? 3. Is my slice small enough to survive a total loss? (Chapter 2) 4. Could I sell quickly if I had to? (Chapter 3) 5. What does my pre-mortem say would kill this investment, and is any sign of it visible today? 6. Did I write my answers down before looking at the price chart? Six questions. One side of one page. If a checklist is not short, you will not use it, and an unused checklist protects nobody. <div class="try" markdown="1"> **Try it yourself** Copy the six questions above into a notebook. Then open Apple's 10-K table of contents on SEC.gov (start from Apple's EDGAR page) and answer questions 1 and 2 honestly, using only what you find in the filing. Time yourself: ten minutes. Congratulations, you have just run your first checklist on a real company. </div> <div class="takeaways" markdown="1"> **Key takeaways** - Decide on paper when calm, never in the heat of a moving price. - A pre-mortem is writing the failure story in advance, then hunting for early signs of it today. - The 10-K's table of contents is a free checklist written by professionals. - Pilots and surgeons trust written lists under pressure, and our own weekly screen trusts its eleven tests over any favourite company. - Keep your checklist to one page, or you will not use it. </div> **Read one real thing:** [EDGAR full-text search](https://www.sec.gov/edgar/search/). Type one phrase that worries you, say "supply chain" or "customer concentration", and notice how it searches across the filings of every US company at once.. I am Ritu, a synthetic voice, and the words I am reading are Ayush Agrawal's.

# Checklists and pre-mortems: decide calmly, not in the moment <div class="learn" markdown="1"> **What you will learn** - Why pilots with ten thousand flying hours still read checklists out loud - What a pre-mortem is, and how it catches disasters before they happen - How the 10-K's own table of contents works as a free professional checklist - How our own weekly screen enforces its tests, with no favourites allowed - A six-question starter checklist you can copy today </div> An airline pilot with ten thousand hours in the cockpit still sits before take-off and reads a checklist out loud, item by item, with the co-pilot answering. Not because pilots are forgetful, but because excitement, routine and hurry hide things from every human brain. Surgeons do the same before operating. If people who hold lives in their hands trust a written list more than their memory, your money deserves the same respect. A checklist is a short list of questions you answer in writing before every investment. You write it once, when you are calm, and then you obey it, especially when you are not calm. A pre-mortem is the checklist's clever cousin. A post-mortem is an examination done after a death, to find the cause. A pre-mortem does it before. Before you invest, imagine it is one year later and the investment has failed badly. Now write the story: what went wrong? The biggest customer left. The new product flopped. The debt came due. Then look at the company today and ask: are any of these warning signs already visible? ## Why deciding "in the moment" fails When a price is jumping and everyone is talking, your brain is not doing analysis. It is doing emotion at high speed. Decisions made in that state feel brilliant and are usually terrible. A decision made on paper on a quiet Sunday has a fighting chance. That is the whole trick: move the decision from the exciting moment to a calm one. ## A real screen has no favourites This is not only a classroom idea. The weekly screen behind The Microcap Minute runs a set of written tests on every candidate company: eleven of them, checked one by one. Some test the business, like whether real cash comes in from operations. Some test the stock itself, like whether money is genuinely moving toward the company compared to the market. And the rule that matters most is this: fail even one test and the company is out. It does not matter how famous the brand is, how beautiful the story sounds, or how much anybody loves it. A list of favourites may suggest candidates. It may never skip the tests. ## You already own a free checklist Every 10-K (the big yearly report each US company files with the SEC) opens with a table of contents that reads like a checklist written by professionals: Item 1, Business (what the company actually does); Item 1A, Risk Factors; Item 7, Management's Discussion (the bosses explaining the year in their own words); Item 8, the Financial Statements. Walking through the items is walking through a checklist. Notice how the numbered Items give you a ready-made order of study, from what the company does to what could hurt it. Notice that you can search one word or phrase across millions of filings at once, perfect for checking a specific worry from your pre-mortem. ## A starter checklist to copy 1. Can I explain, in one sentence, how this company makes money? 2. Have I read its risk factors myself, with my own eyes? 3. Is my slice small enough to survive a total loss? (Chapter 2) 4. Could I sell quickly if I had to? (Chapter 3) 5. What does my pre-mortem say would kill this investment, and is any sign of it visible today? 6. Did I write my answers down before looking at the price chart? Six questions. One side of one page. If a checklist is not short, you will not use it, and an unused checklist protects nobody. <div class="try" markdown="1"> **Try it yourself** Copy the six questions above into a notebook. Then open Apple's 10-K table of contents on SEC.gov (start from Apple's EDGAR page) and answer questions 1 and 2 honestly, using only what you find in the filing. Time yourself: ten minutes. Congratulations, you have just run your first checklist on a real company. </div> <div class="takeaways" markdown="1"> **Key takeaways** - Decide on paper when calm, never in the heat of a moving price. - A pre-mortem is writing the failure story in advance, then hunting for early signs of it today. - The 10-K's table of contents is a free checklist written by professionals. - Pilots and surgeons trust written lists under pressure, and our own weekly screen trusts its eleven tests over any favourite company. - Keep your checklist to one page, or you will not use it. </div> **Read one real thing:** [EDGAR full-text search](https://www.sec.gov/edgar/search/). Type one phrase that worries you, say "supply chain" or "customer concentration", and notice how it searches across the filings of every US company at once.

That was chapter 4 of module 10. The text, the pictures and the exercise are on the lesson page. Thank you for listening.