Resulting (outcomes in the rearview mirror may appear larger than they’re)
Resulting is the tendency to look at the results (whether it’s good or bad) to find out whether a decision was good or bad. Results do cast a shadow over the decision process, leading you to overlook some important information.
In the short-term, for any single decision, there’s only a loose relationship between the quality of the decision and the quality of the outcome. The two are closely related but the relationship can take a long time to play out.
Sometimes, luck can play a role between your decision and the actual results. Resulting diminishes your view of the role of luck. It’s really hard to tell the quality of a decision based on a single outcome, especially considering the role of luck.
“When you make a decision, it’s rarely guaranteed to get a desired outcome (even if that’s a good decision). Your goal then should be to choose the option that will lead to the most favorable ‘range of outcomes’.”
As the old saying goes, hindsight is not 20/20
Hindsight bias is the tendency to believe that an outcome, after it occurs, was predictable or inevitable. Like resulting, hindsight is a manifestation of the outsized influence of outcomes. In this state of mind, the outcome casts a shadow over your ability to remember what you knew at the time of that decision.
Hindsight bias distorts the way you process outcomes into two ways:
- Should have known
- Knew it all along
To learn from your choices and their outcomes, you should try to be as accurate as possible about what you knew at the time of that decision.
The decision multiverse
Experience is crucial for optimal learning experience but individual experiences can interfere with learning. This is in part due to the biases that cause us to overfit outcomes and decision quality.
There’re many possible futures but only one past. Re-creating a simplified version of a decision tree puts the actual outcome in its proper context. Exploring the other possible outcomes is a form of counterfactual thinking (meaning a thinking that relates to an outcome that has not happened but could have happened, or an imagined state of the world.)
Our willingness to examine outcomes is often asymmetrical. We’re inclined to put bad outcomes in context than good ones. To become a good decision-maker, you need to put outcomes into perspective (whether they’re good or bad).
The three Ps: preferences, pay-offs and probabilities
Incorporating preferences, pay-offs and probabilities into a decision tree is crucial to make a good decision. Preference is subjective to you. The pay-off is how an outcome affects your progress toward or away from a goal. Some possibilities will have pay-offs where you gain something you value. This is the upside potential of a decision. Some possibilities will have pay-offs where you lose something you value. This is the downside potential of a decision.
Risk is your exploration of the downside. Pay-offs can be measured in anything you value (money, time, happiness, health or others). As you’re figuring out a decision is good or bad, you’re in a way comparing the upside to the downside.
Probabilities express how likely something is to occur. Combining the three Ps helps you to better resolve the paradox of experience, allowing you to get out from the shadow of the particular result.
Taking dead aim at the future: the power of precision
Natural language expressions like ‘very likely’, ‘unlikely’ are useful but often blunt choices. The drive to improve your initial estimates is what motivates you to check your information and dig deeper. If you hide behind the safety of a general term, there’s no opportunity to improve.
Terms that express the levels of likelihood are highly subjective. Ambiguity can lead to confusion and miscommunication with people you want to engage. Being more precise, by expressing probabilities in percentages, makes it more likely to uncover accurate information. You can also offer a range by including a lower and upper bound that communicates the size of your target.
‘Shock test’ is a great tool to determine if your upper and lower bounds are realistic. Ask yourself, “would I be really shocked if the correct answer was outside that boundary?” Your goal should be to have almost 90% of your estimates capture the objectively true value.
Turning decisions outside in
The inside view is the view of the world through your own perspective, your own beliefs and your own experiences. Many common cognitive biases are, in part, the product of the inside view. Pros and cons lists amplify the inside view.
The outside view is the way that others see your situation. It’s important to explore the outside view even if you think you’ve got your facts straight, as you never know whether the other people are looking at the same facts and come to different conclusions. Accuracy lives at the intersection of inside view and outside view.
‘Perspective tracking’ is a great habit to develop. Intentionally considering your situation entirely from the outside view and then entirely from the inside view can expose you to a bigger truth.
Breaking free from analysis paralysis
We spend an enormous amount of our time on auto-pilot. The average person spends 250 hours a year deciding what to eat, watch and wear. That’s the equivalent of the time they spend at work in six or eight weeks.
There’s a time-accuracy trade-off. Increasing accuracy costs time. Saving time costs accuracy. The key to finding a sweet spot is to figure out the penalty for not getting the decision exactly right. Understanding how your decision could impact your situation helps you determine if you should sacrifice accuracy in favor of fast decisions. ‘Happiness test’ is a great exercise to find out how you’ll feel because of your decision in a week, in a month or in a year.
The power of negative thinking
We’re talented at setting positive goals for ourselves. Where we fall flat is in the execution. The gap between things we know we should do and things we really do is the behavior gap.
The power of positive thinking dictates you’ll succeed if you imagine yourself succeeding. However, positive visualization alone doesn’t guarantee you success. Negative thinking helps you identify potential obstacles that might get in your way. Deploy ‘mental contrasting’ – thinking how things can go wrong – to foresee the barriers and find ways to overcome.
‘Mental time travel’ is a great tool to picture yourself in the future having failed to achieve a goal, and then looking back at what got you to that outcome.
One of the best ways to improve the quality of your beliefs is to get other people’s perspectives. Beliefs are contagious. Informing someone about your belief before they give you their feedback significantly increases the likelihood that they’ll express the same belief back to you.
Exercise ‘decision hygiene’ to stem the infection of beliefs. The only way you can know if someone is disagreeing with you is to ask for their opinion first. So, resist the temptation to share your opinion before you solicit theirs.
Anonymizing opinions in group settings allow ideas to be considered objectively, rather than according to the status of the individual who holds the belief. ‘Group decision hygiene’ helps to fulfill the decision-making potential of groups by soliciting initial opinions independently before sharing out in the open.