Good decisions don’t always lead to good results
The correctness of your decisions should be independent of their outcomes
Making good decisions is not the same thing as achieving good outcomes because things are very rarely deterministic. It is impossible to predict with absolute certainty the outcome that will result from a particular decision.
What we are really doing when we are making a “good decision”, ie a decision that will get us closer to our goal, is increasing the probability of that goal being achieved not guaranteeing that goal will be achieved.
In addition our judgement of the probability of success is based on what we know at the time we’re making the decision.
Somtimes we make a decision that ends up hurting us but was actually the right decision in terms of what we knew at the time. Even hindsight isn’t truly 20/20 because after the fact we may still not have the full information.
As a result it is important to not confuse the results of a decision with the correctness of the decision. This is because we need to learn from our mistakes but that only works if we categorize our mistakes correctly.
If we make what we think is the best decision based on the information we have and the situation as we understand it but it turns out that decision was one that took us further away from our ultimate goal then we need to figure out exactly why we went wrong so that we can avoid doing that in the future.
Developing good judgement relies on knowing the true causes for something. You could have tried and failed because your approach was wrong or you could have failed due to circumstances beyond your control. You could have done everything right and still failed, you could have done everything wrong and still succeeded.
There are three possibilities,
- Our judgement as to what to do based on the information we had was wrong
- The information we understood about the situation was wrong or incomplete
- We made the best decision we could but the best decision was the least bad decision because there were no good decisions.
And it’s not really three possibilities but more like three factors since all of these could be contributing to the error to varying degrees.
Depending on which situation we are in, we either need to continue or change our approach. Only if the first case was the dominant factor do we actually need to change because only in the first case was our actual decision at fault.
A good analog is poker.
Often you have the best hand, you bet the way probability says you should, and some doofus who is playing randomly catches the right card at the end and you lose the hand.
You made all the right decisions but still lost. The doofus made all the wrong decisions and got lucky. Over time, you’ll come out ahead but if that hand was an all in bet and you have no more chips, that’s not going to make you feel better.
This means that a key part of decision making is to consider the uncertainty in your situation.
In the above poker example, it may have been a bad idea to bet hard even if your hand was good because you needed to take into account more than just the cold, calculating probability of the cards.
You also needed to take into account the fact that your opponent was a doofus and wild play sometimes succeeds in the short run even if over time it fails.
To apply that to our own lives, we need to make sure when we make a decision we are truly taking into account the full situation, and not getting hung up in a theoretical model that by definition is a simplification of reality.
We need to take into account how much randomness is inherent to our situation and consider it’s effect on how likely the worst case scenario is. The more randomness, the more likely it is that unlikely events can occur.
In the above case, if we were playing against professionals then a more orthodox probabilistic approach would be best. But if we are playing against doofuses then we need to be extra cautious in not over-betting in case the doofus gets lucky at the exact wrong time for us.
Though a “good decision” in terms of betting based on the cards is still applicable, maybe we don’t bet quite as hard in the second case as in the first. The decision we are making isn’t only whether or not our hand is good but also how much we should bet based on the quality of our hand and the situation at the table.
This human factor comes into play internally also. Getting beat when we are playing “correctly” as defined by the probability feels terrible especially because we did everything right according to the book.
This has two implications, the first is that feeling good about your decision isn’t necessarily correlated with making the right decision. And second, our feelings affect our judgement and if we are not aware of what we are feeling in that moment, we may not be aware of how that feeling affects our perception of risk.
In the moment, it’s hard to be objective but we owe it to our future selves to understand what we are feeling, respect it, and when we can think more clearly really be honest with ourselves as to how much it is affecting us.
This means that sometimes the best approach to dealing with a mistake is to do nothing and wait for our mind to clear.
When we are making a decision we need to fully take measure of the risk of a situation and the uncertainty of that measure not just what “should happen”.
When we are viewing a decision after the fact we need to wait until we are no longer being dominated by the feelings generated by the result of that decision so that we can have a clear-headed view of whether we need to readjust our judgment. And sometimes that means being okay with doing everything right and still failing.
