Do you believe in Fluke outcomes?
The investment that everyone told you would fail and be unprofitable proved to be the best thing that happened to you!
Can a positive result always suggest that the decision was sound?
And does a negative outcome indicate that the choice was wrong?
Outcome bias is a cognitive bias that can lead to erroneous decisions. In this blog post, learn how this bias works and look into some tips on overcoming its trap.
Understanding “Outcome Bias”?
Outcome bias is when a person judges the quality of a decision based on the result(outcome) rather than basing it on an analysis of the decision itself at the time it was being made. Unfortunately, it is often the case, isn’t t it? Especially when the choice we made has a lot of unknowns attached that we can’t control.
Generally seen with gamblers who are trapped in a cycle of wagering even when they are consistently losing and unable to recover their losses. The classic example of outcome bias comes from the Mahabharatha. The Pandavas faced a seemingly impossible challenge to roll the perfect number with their dice.
In spite of warnings and cautious advice, King Yudhishthira decided to cast his dice for the fateful game. And he kept playing due to some random belief of potentially turning things around, like the times he had won, even though he was losing miserably.
Was it possible for him to turn his luck around and win back what he lost? What motivates a gambler to play even when on a losing streak? Yudhishtira lost his kingdom and family!
He could have avoided this fate by exercising sound judgment and refraining from outcome bias. Instead, even though he understood that his decisions should not be based on luck or the results of a single throw, he continued to play on. He could have relied on his wisdom and skill to make sound judgments, but instead, he just played on, which proved devastating!
The Exploited And The Exploiters
People with poor problem-solving skills and a lack of knowledge about the decision-making process, or those desperate to succeed quickly, can mostly get affected by outcome bias. This can lead to people taking risks for which they may not have the necessary skills or the temperament. They then go on to hold themselves responsible for any negative consequences and repent of their actions.
On the other hand, people who exploit Outcome Bias are usually adept at manipulation or scheming. Their primary objective is to trick their targets into making choices that are advantageous to them.
Day To Day Outcome Bias
- A student chooses an easier major so that he can get better grades rather than following their true passion of choice.
- An investor is buying low-yielding stocks due to the promise of attractive returns in the future.
- A homeowner opts for the more expensive option on home improvement projects to increase their property’s value without doing a proper cost-benefit analysis first.
- Political leaders tend to prioritize improving their approval ratings over considering the welfare of the country or the voters who elected them while making decisions.
Recognizing When You’re Slipping Into the Outcome Bias Trap
- Identify any decisions or situations you have difficulty seeing the whole picture.
- Look for signs of tunnel vision, such as focusing purely on the result with little regard for the risks involved.
- The question is whether you base decisions on past successes, current trends, and data-driven evidence.
- Challenge your assumptions with others who have an objective perspective on the situation.
- Ask yourself if you attach too much importance to the outcome when considering options.
Overcoming The Outcome Bias Trap
- Recognize and accept that our emotional state can affect our decision-making.
- It’s important to recognize that we could be mistaken in our evaluation of a situation or result.
- Think about the possible consequences of different scenarios before making a decision.
- Challenge yourself to look beyond the immediate gratification or outcome of any decision.
- Refuse to succumb to external influences that may compel you to act in a specific manner, and instead, base your decisions on your personal goals, values, and beliefs.
- Take time to consider whether any risks associated with a particular course of action are worth taking before moving forward with it.
- Remain open-minded and willing to adjust plans as new information becomes available or circumstances change instead of sticking rigidly to the plan you originally formed in your head without input from external sources or critical evaluation.
Final Thoughts
In the whirlwind of life, it’s tempting to care only for the grand finale, uttering “all’s well that ends well” and forgetting the twists and turns along the way. But beware of the outcome bias, luring you to make choices based only on dazzling prospects. Driven by the desire to succeed, Don’t be swayed by the glittering prize!
Do not let the products like fairness creams that promise you both a perfect complexion and your dream job fool you! Beware of this marketing hype and the promised outcomes. Does the so-called enchanting cream have any potential risks or side effects? Can its regular use, as advertised, produce favorable results? Can you land your dream job by using this cream?
Your dream job can still be out of reach, leaving you disillusioned and frustrated. Well, it is here that you must be mindful of the possible dangers of such marketing schemes and analyze the pros and cons of such products. Then, choose wisely based on factual information rather than empty promises.
Embrace the journey, craft-wise decisions, and find success woven into the tapestry of experience. This helps you make informed daily choices, whether the products you buy or even bigger life decisions. Reading this post was useful in learning about outcome bias. Stay tuned for more exciting blog posts like this by subscribing to our newsletter.
Reference
The above article is based on the book Thinking Clearly; this article is here to help us learn and understand how our minds can be tricked by something called cognitive biases.