Decisions vs Outcomes
“The correctness of a decision can’t be judged from the outcome.”
- Howard Marks
Howard Marks is a successful distressed debt investor known for his “memos” detailing risk management. These memos are widely read in the financial world because Marks combines rigorous analysis with simple and practical wisdom, a rare combination.
Marks's quote above is another wise piece of practical wisdom that applies to most things, especially poker (and golf).
Let’s say you are playing blackjack and showing 19. Well, most of us would stand on 19. But your one buddy decides to hit. You cringe. But the dealer deals a 2, and he hits.
BLACKJACK!
Everyone congratulates the winner and says nice hit!
As we all know, it wasn’t a wise decision, but the result clouded everyone’s judgment.
This is known as resulting.
Resulting is the tendency to judge a decision based on its outcome rather than its quality.
In a just world, good decisions would always result in good outcomes, and bad choices would result in bad effects. But we don’t live in a just world.
Thus judging the quality of decisions based on the outcomes of those decisions is not an accurate way to determine if your decision-making is sound. So how do you know if you are making good decisions even when the outcomes are bad? And how can you make better decisions in the future? - Charles Black M.D. link
According to the pro poker player and decision expert Annie Duke, we can overcome resulting by:
Accepting there will be uncertainty
Thinking in probabilities
Separating decision quality from outcome quality
Don’t let a good result fool you into thinking it was a good decision when golfing. Even more importantly, don’t let a lousy result fool you into thinking you made a poor decision.
TLDR
Know the odds.
Separate decisions from outcomes.
Accept a poor result even when you made the right decision.
Thank You
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Have a good weekend!
