Exercise (Part 1 of 2)
Before you read this article, think of the following.
- What was one of the best decisions you've made in the past year?
- What was one of the worst decisions you've made in the past year?
We will return to these at the end of the article.
Two things dictate how our lives play out: luck and the quality of our decisions. While we can't control luck, we can continually improve the quality of our decisions.
The art of decision-making goes well beyond the scope of a single blog post, but there is one concept that is so important that understanding it it could change your life. It's called resulting and this short article is going to give you what you need to combat it and make consistently better decisions for the rest of your life.
What Is Resulting?
Resulting is the inclination to judge the quality of a decision based solely on its outcome.
Someone who is resulting would believe that a favorable outcome proves they made a good decision, while an unfavorable one proves they made a poor one.
This perspective, however, overlooks the unpredictable role of luck and and unpredictable randomness.
It's important that we understand resulting because it can be extremely harmful to our decision making in the long run.
When we mislabel our past decisions by resulting, we deprive ourselves of the opportunity to use them to make better decisions in the future.
Common adages perpetuate this. When we take the sayings "never make the same mistake twice," or "if it ain't broke, don't fix it," at face value, we run the risk of resulting.
We need to better understand that decision quality cannot be judged merely by the results but rather by the quality of the decision based on what we knew at the time of making it.
The common adage "never make the same mistake twice," holds true but only if we can properly label our decisions as mistakes.
A good decision can also lead to a bad outcome by bad luck. Labeling it a mistake, is dangerous in the long run.
Likewise, the adage "if it ain't broke, don't fix it," is only half true and potentially damaging.
A bad decision can also lead to a good outcome by dumb luck. Labeling it a success, is dangerous in the long run.
Resulting, therefore, can deter us from making good decisions in the future and push us to repeat poor decisions based on their outcomes.
Resulting Example #1 Good Decision with a Bad Outcome
Ty Cobb holds the record in Major League Baseball for highest batting average at .366. However, he still got out nearly twice as often as he got a hit.
If a manager, influenced by resulting, removed Cobb from a lineup because he went 0 for 5 the day prior, it would be a classic case of letting the outcome overshadow the quality of the decision.
Quality of contact and at bats
This is an extreme example and no manager would dare do this, but the average person might.
If you're a fantasy football player, coach or gambler, you might be all to familiar with the flaws of resulting.
Resulting Example #2 Bad Decision with a Good Outcome
Fortune brings in some boats that are not steered
My personal experience with cryptocurrency investing in 2017 is a testament to the pitfalls of resulting. A random investment in NEO yielded a 3,000% return within a year. This success, however, misled me into believing I had a strategic approach, only to be disillusioned when the bull market ended.
The correct answer would have been to see the big picture.
To avoid being reactive to the outcome (price) and seek to better understand what can be improved with my decisions. I needed to learn more about the coin, the state of the market and the forecast.
Long term forecasting
Understanding of why price went up
The rise of all coins at the time (almost everything went up)
Strategies to Counteract Resulting
To make well-informed decisions without being swayed by the randomness of outcomes, consider the following:
#1 Embrace Uncertainty and the Role of Luck
Recognize that every decision comes with inherent uncertainties and randomness. Focus on making the best choice with the information available.
Be objective in attributing bad luck or good luck. It's human nature to want to protect our egos from the pain of bad choices. It's easier to attribute a bad result to bad luck and a good result to a good decision.
We want credit for good decisions and something to blame for bad ones. You're not bad for thinking this way, it's human nature.
Luck, however, doesn't care about our egos.
#2 Think in Probabilities
Instead of absolutes, weigh the potential outcomes based on available data to make more informed decisions. If you choose the most probable decision given everything you know, that is often a good decision, regardless of outcome.
Unfortunately, not every decision is able to be measured empirically with actual numbers and data.
#3 Be Constantly Aware of Resulting
I said that this article could change your decision making forever and I meant that. If you can remind yourself that you're going to fall into resulting frequently and easily, you'll be able to notice it when it inevitably happens.
Ask yourself "am I resulting" when making important decisions.
#4 Seek Diverse Perspectives
Engage with individuals who offer different viewpoints to broaden your understanding and counteract biases.
Yes, groupthink is dangerous, but so is making decisions without alternative perspectives.
Seeking several perspectives is typically more valuable than simply asking one person as well.
#5 Seek Statistical Significance
Over time, outcomes are more meaningful.
Ty Cobb goes 0-5 in a baseball game means little. If he goes 0-40, something is going on.
Resulting tends to forget the importance of the long term and weighs the immediate outcomes disproportionately. Yes, outcomes matter, but they are more insightful at scale.
Exercise Part 2 of 2
Now that resulting is fresh in your mind, did you find that your best and worst decisions you thought of at the beginning of the article were formed through resulting? Were the decisions based on outcomes or on more?
Learn More about Decision Making
Resulting is just a piece of the decision making puzzle. If you want to go further and learn more about decision making, I recommend checking out the books below.
- Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts by Annie Duke
- Think Again: The Power of Knowing What You Don't Know by Adam Grant
- Naked Statistics: Stripping the Dread from the Data by Charles Wheelan
- You Are Not So Smart: Why You Have Too Many Friends on Facebook, Why Your Memory Is Mostly Fiction, and 46 Other Ways You're Deluding Yourself by David McRaney
Thanks for reading!