Decisions ≠ Outcomes

While reflecting on how well I make decisions, I realized that it’s possible, and in fact important, to separate the evaluation of the decision-making from its outcome. In other words, the process of making a decision is not the same thing as the outcome of the decision — it’s possible to have a well-made decision that results in a bad outcome, or to have a poorly-made decision that results in a good outcome.

This is not an original idea (in fact, Peter Attia’s recent newsletter shares the same idea and prompted this piece), but it’s also not obvious or commonly-held.

To a first approximation, four components make up an outcome:

• Information availability: how much relevant context and information does the decider have)
• Judgment: how good is the decider at interpreting the information, avoiding detractive biases, and committing to a decision
• Execution: how well the decider and/or people-doing-the-actual-work can actually get things done
• Luck: the influence of chance or exceedingly rare events

These components contribute in different quantities to every outcome. For example, in a round of blackjack with an experienced player, the outcome is determined by a small amount of information availability, a moderate amount of judgment, and mostly by luck. What you end up having for lunch is determined mostly by information ability and judgment and a small amount of execution.

The important thing is that only the first two components make up the decision itself (Execution also matters, but in a different way). In the blackjack example, for a player dealt a 12, good judgment would likely mean “hitting” (taking another card). Given the available information, that is a “good” decision. However, luck plays a large role, and its possible that the player might be dealt a face card, causing them to lose their bet (since a face card is worth 10, and 12 + 10 exceeds 21). This is a bad outcome from a good decision.

Execution is also important — a decision should take into account the execution ability of the decider or that of the team carrying out the decision. However, the way to improve execution ability is usually different from the way to improve decision-making, which is what I’m more interested in right now.

I’m very interested in improving my decision-making ability, and I think being able to separate an outcome from a decision itself is an important part of doing so. It is only one part of doing so though — if it seems like I’m always making good decisions, but I’m always getting bad outcomes, then that should feed back into what I consider a good decision.