Module 6.3 45 min read
3. The Rational Investor's Quantitative Checklist: Anti-Bias Protocols and Decision Systems
How to build a bias-proof investment checklist, pre-mortem systems, Kelly rules, and thesis review protocols
2. The Pre-Mortem: Imagining Failure Before Investing
Page 2 / 52. The Pre-Mortem: Imagining Failure Before Investing / n / nGary Klein's Pre-Mortem technique requires imagining your investment has completely failed 3 years in the future, and asking "Why?". This bypasses confirmation bias and overconfidence, allowing you to objectively identify structural risks before deploying capital.
3. The Kelly Criterion and Position Sizing
Page 3 / 53. The Kelly Criterion and Position Sizing / n / nThe Kelly Criterion [f* = (bp - q) / b] determines optimal position sizing based on your edge (p) and payout odds (b). Because precise probabilities are unknowable in investing, professionals use "Half Kelly" to mitigate overconfidence and avoid risk of ruin while capitalizing on asymmetric bets.
4. Thesis Review Protocols and Exit Rules
Page 4 / 54. Thesis Review Protocols and Exit Rules / n / nSelling is harder than buying. Keep an Investment Journal detailing your thesis at purchase. A thesis is broken when fundamentals permanently deteriorate (loss of moat, structural change, capital misallocation), not when the stock price drops. Exit based on broken thesis, not price-based stop-losses.
5. Building Your Personal Anti-Bias System
Page 5 / 55. Building Your Personal Anti-Bias System / n / nOperationalize your knowledge by linking tools: Idea generation -> Checklist -> Pre-Mortem -> Half-Kelly Sizing -> Investment Journal -> Thesis-based Exit. Success in investing comes from disciplined temperament backed by rational systems, not just raw IQ.
Module Practical Assessment
This lesson includes 15 interactive quantitative questions inside the platform viewer to test your proficiency.
Complete Interactive Quiz in Private Terminal →