Decision Quality vs Outcomes

A framework for evaluating decisions separately from their outcomes, drawing from poker strategy and investment principles.

Core Concept

• Must separate the quality of decision from the result that follows
• Good decisions can lead to bad outcomes and vice versa
• Being able to assess decisions independently from results is crucial for improvement

Decision Quality Assessment

• Evaluate decisions based on:
  • Information available at the time
  • Logic/reasoning used
  • Process followed
• Don't let outcomes bias your assessment of the original decision
• Example: Getting pocket aces in poker and losing is still the right decision to play them

Common Pitfalls

• Getting traumatized by bad outcomes from good decisions
  • People folding strong hands because they lost with them before
  • Avoiding good investments because previous similar ones failed
• Reinforcing bad decisions that happened to work out
• Letting results cloud judgment of the original decision-making process

Application to Investing

• Focus on investment thesis and process rather than just returns
• Don't abandon sound strategy due to temporary losses
• Evaluate investment decisions based on:
  • Research done
  • Risk assessment
  • Strategic fit
  • Process followed
• Accept that some good investments will fail
• Learn from process failures rather than outcome failures

Keys to Implementation

• Document decision-making process and reasoning
• Review decisions independently from results
• Look for patterns in decision-making rather than just outcomes
• Build robust frameworks that can survive bad outcomes
• Maintain emotional discipline when faced with poor results from good decisions