Outcome Bias

Hi,

This week’s email is about a common bias that interferes with people’s ability to accurately judge whether certain decisions are good or bad.

The information here is from my new article.

Here are the key practical points you should know:

• The outcome bias is a cognitive bias that leads people to judge decisions mainly based on their outcomes, in a way that’s irrelevant to the true quality of those decisions.

• For example, the outcome bias can cause someone to believe that it was a smart idea to take an unnecessary risk, just because they got lucky and ended up being fine.

• This bias can cause issues like punishing good decisions and rewarding bad ones, in cases where associated outcomes were determined mainly by uncontrollable factors, like luck.

• This bias can be caused by mechanisms like a desire to feel better about decisions that were made, a preference for spending less effort evaluating decisions, and flawed cognitive reconstruction of chains of events (when people start with known outcomes, and then work backward to try to justify their causes).

• To reduce this bias, you can judge a decision before knowing its outcome, minimize the salience of information relating to the outcome, and consider how you would judge a decision if it led to a different outcome.

As always, I'm happy to hear your thoughts.

Have a great week,
Itamar