Outcome bias refers to the tendency to judge a decision based on its outcome rather than basing it on an assessment of the decision's quality process. This means that we tend to think that decisions that led to good outcomes were good decisions and those that led to bad outcomes were bad, even if the decision-making process was the same in both cases.
For example, imagine that you are considering two investment options: a risky stock and a safe bond. You decide to invest in the stock, which ends up going up in value. You might then think you made a good decision, even though the stock could have just as easily decreased in value.
On the other hand, imagine that you decide to invest in a bond, which ends up nosediving in value. You might then think that you made a bad decision, even though the bond was the safer investment.
In both of these cases, your judgment of the decision is influenced by the outcome, even though the decision-making process was the same. This is outcome bias.
Outcome bias can be a problem because it can lead us to make bad decisions in the future. For example, if we are more likely to make risky investments after they have increased in value, we will lose money in the long run.
There are a few things that we can do to avoid outcome bias. One is to try to be aware of the bias and to resist it consciously. Another is to gather as much information as possible before deciding so that we can make a more informed decision. Finally, we can try to think about the decision-making process itself, rather than just the outcome, when evaluating a decision.
Here are some examples of outcome bias:
- A business executive who makes a decision that leads to a financial loss may be more likely to blame the decision-makers, even if the decision was made with the best information available at the time.
- A doctor who prescribes a new medication that turns out to be harmful may be less likely to prescribe it in the future if the medication is effective for the majority of patients.
- A gambler who wins a large sum of money on a lucky bet may be more likely to make risky bets in the future, even though the odds of winning are still the same.
Outcome bias is a common cognitive bias that can hurt our decision-making. By being aware of and avoiding this bias, we can make better decisions that are less likely to lead to adverse outcomes.
There are many Cognitive Biases, many more than most people realise. If you want to think your way out of a mind trap, you must first realise that you're already trapped.
If you want to enhance your professional skill set or help a colleague on the road to success, enrol in our Public Speaking Classes. This executive public speaking course lets you polish your skills to present comfortably to the board and other industry professionals.
