Decision VS Outcome
You know what annoys me the most?
Dumb people.
And you know what dumb people do?
They focus on the outcome of the situation instead of a decision someone made or an action they took.
Take a look at the Decision-Outcome Quadrant (yes, I just made it up):
You always want to make a good decision, but that doesn’t mean the outcome will be good as well. On the other hand, you can make a terrible decision but get a good outcome (we call that luck).
--> Good decision: Investing in the S&P 500
--> Bad decision: Investing in a stock because your uncle’s friend Bob tells you to.
Now, it’s possible Bob told you to invest in Nvidia or Tesla in 2019, and you would’ve gotten an amazing outcome. But he also could’ve told you to invest in Alibaba in 2020 (like I did) and you would’ve lost something like three quarters of your money.
The latter is much more likely to happen.
On the other hand, you might have invested in the S&P 500 in 1999 and become a victim of the “lost decade”. But in 90+% of cases, the S&P 500 beats a random stock pick.
You’re allowed to make stock picks if that’s what you do for a living. Everyone else – buy a broad-market index ETF.
Onward.
There is a personal story that prompted me to write this post.
I was playing football (soccer) Sunday league for years.
Actually no idea what it’s called in other countries, but it’s the lowest rung of league football in Serbia. So let’s call it Sunday league instead of the derogatory names we’re using.
Its main characteristics are real threats of violence from the sidelines, physical escalations between players on the pitch, balls disappearing in the forest, corrupt referees, alcoholism, pitch conditions so bad you can’t even pass a straight ball and holes so big you can easily twist your ankle or break your leg.
That’s why I stopped.
When they ask “Why aren’t you playing? Come on, we need help. Don’t you like football?”.
I say “Of course, I love playing football…but this is not football”.
Anyway, I digress.
My friends and I are decent players, we’re often near the top of the table. But the coaches in this league are often people who focus 0% on the decision and 100% on the outcome, at least when it comes to the game of football.
You do something that’s completely normal, like taking an uncontested shot, but the ball doesn’t go in. → “What the hell are you doing? Pass it to the open player!”
You do something dumb, like dribbling on your own half, but it turns out fine. → “Amazing, that’s how it’s done!”
It was always frustrating, and it still is, even if I just watch from the sidelines.
As it is annoying to keep having to explain to people that decisions and actions are what is important – outcomes are mostly random.
This is NOT just about investing in the stock market or playing Sunday league sports, your whole life is determined by your choice to focus on decisions or outcomes.
TLDR;
--> Make more good decision → end up with more good outcomes
--> Make more bad decisions → end up with more bad outcomes.
Like Shaan Puri says, do the things that make it easier for luck to find you.
That’s what I’m talking ‘bout,
Filip Stanojevic – Self-proclaimed philosopher