One Simple Thing an Investor Can Do to Improve Their Performance
How one idea from a Nobel Prize-winning economist can accelerate your learning.

How exactly can someone become a better investor? I wrestle with this question each week, and as you’ll see from this newsletter, there are no simple answers. However, I occasionally find concepts that are surprisingly simple yet extraordinarily effective. These ideas might seem trivial at first glance, but they can yield remarkable returns when applied with discipline.
One such concept comes from the Nobel Prize-winning economist and renowned psychologist, Daniel Kahneman. When he was asked, “what is a single thing an investor can do to improve his or her performance,” he responded swiftly: “Go down to a local drugstore and buy a very cheap notebook and start keeping track of your decisions.”
The source of this anecdote is Michael Mauboussin, a prominent investment strategist at Morgan Stanley and author of one of my favourite books, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing. He’s the one that asked Daniel Kahneman the question.
Both the question that Michael asked and the answer that Daniel gave underscore the importance of the fundamentals. A simple document that lays out why you said “yes” or “no” to an opportunity is a record you can use in the future for feedback on your investment decision. You can look back without hindsight bias and learn what you got right and what you got wrong.
How do VCs do this? With thousands of pitch decks to review and hundreds of startups to meet, most investors only write an investment memo (a document that articulates the rationale and risks of an investment) for opportunities that make it to the final stage of an investment process — the investment committee. You can read an example memo below from Sequoia’s investment in Youtube.
However, suppose we only keep detailed records of the decisions that make it to an investment committee. In that case, we miss out on hundreds of other valuable learning opportunities — or “reps”, as I like to call them.
These additional learning opportunities involve tracking the “false negatives” (the startups we say “no” to but which go on to succeed) as well as the “true negatives” (the startups we say “no” to and which ultimately fail.)
Systematically tracking your view on every opportunity that you meaningfully consider is hard. But if you set up processes to do this well, you can accelerate learning and improve the quality of your judgement. Here’s how you can do that with software.
A Simple Scorecard for First Meetings
Since writing a detailed investment memo after every pitch deck review or initial startup meeting is impractical, a low-friction tool like a scorecard can help. Simply grade an opportunity on a handful of dimensions that you believe are important, keep this note somewhere that’s easy to reference, and review a batch of decisions periodically — perhaps annually or bi-annually. Here’s an example from a dashboard I created.
Step 1: Populate the scorecard.
Step 2: Export the results into a PDF or CSV for record keeping.
This interactive tool can help solve the long feedback cycle problem that’s typical in a venture capital career. Instead of only tracking decisions on the investments you make, you can also track decisions on the hundreds of investments you don’t make, thereby putting in more reps.
The tool I created is available for anyone to use. There’s a live app here you can try out. I’ve also open-sourced the code here if you wish to adapt the scorecard to your investment process.
If you find the tool useful or have any feedback I’d love to hear from you in the comments, on Twitter, or LinkedIn!