Pre-mortem

Writing, before committing, that the decision has already failed, and describing in the past tense what happened.

Example

'It is three years on and this failed. The second plant ran late and over budget' - against the conditional version, which produces 'execution risk'.

Important

Asked as 'what could go wrong?' it produces categories, and a category cannot be monitored. The past tense is the whole technique, and the discomfort of arguing against a decision you have just made is what it buys.

Related terms

  • Disconfirming evidence — Information that would make your thesis wrong - facts you would have to explain away rather than cite.
  • Decision journal — A written record of why a decision was made, written at the time it was made, and never edited afterwards.
  • Exit criteria — Conditions set in advance that oblige you to reconsider a position - in both directions, for the thesis breaking and for the position growing beyond its intended size.

Lessons that explain it

  • If you cannot write a good bear case, you do not understand the deal — A bear case built from generic risk categories teaches nothing. A bear case built from 'what would have to be true' names the specific number the whole thesis depends on. (12 min)
  • The committee's job is to break the memo, not approve it — An investment committee that never says no has stopped being a check on anything. The difference between a real pressure test and a rubber stamp is almost never visible from the approval rate alone. (13 min)
  • The entry itself: eight lines, five minutes — A template short enough that you will actually use it, and specific enough to be worth reading in three years. Write one by the end of this lesson. (8 min)

All 578 terms in the Investing glossary