Outcome Bias: The Problematic Effect of Judging Decisions Purely by Results

 

The outcome bias (or outcome effect) 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. Accordingly, the outcome bias can cause people to judge good decisions as being bad if they lead to negative outcomes, and to judge bad decisions as being good if they lead to positive outcomes.

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 not experiencing any negative outcomes as a result of that risk.

The outcome bias can strongly influence people’s judgment and decision-making in many situations, so it’s important to understand it. As such, in the following article you will learn more about the outcome bias, and see how you can deal with it effectively.

 

Examples of the outcome bias

An example of the outcome bias is that if someone makes a decision that leads to a bad outcome, they may feel incompetent, even if the decision that they made was the right one. In medicine, for instance, a doctor may feel bad for ordering many tests for a patient if the tests later turn out to be unnecessary, even if ordering all those tests was the right thing to do at the time.

Another example of the outcome bias is that if someone achieves a good outcome, they may feel proud and highly competent, even if the decision that they made was bad. In finance, for instance, an investor may think that they’re talented after an investment that they made was highly profitable, even though it was a bad investment and they just got lucky.

The following two hypothetical examples illustrate this bias further, also in the context of finance:

  • Someone is given $10, and an option to flip a fair coin; if it lands on heads, they lose the $10, but if it lands on tails, then they get $100 dollars instead. If the person takes that bet and loses, the outcome bias could make them feel that they made a bad decision, even though taking the bet was the right thing to do (since they stood to gain $90 or lose only $10, and both outcomes were equally likely).
  • Someone is given 100$, and an option to flip a fair coin; if it lands on heads, they lose the $100, but if it lands on tails, then they get $120 dollars instead. If the person takes that bet and wins, the outcome bias could make them feel that they made a good decision, even though taking the bet was the wrong thing to do (since they stood to gain only $20 but lose $100, and both outcomes were equally likely).

The outcome bias is also frequently discussed in the context of poker, where it’s referred to as resulting. There, you can make the optimal play mathematically (i.e., the one that’s most likely to win) but still lose due to bad luck, for instance if you bet high on a strong initial hand and then lose to someone who ends up getting lucky with a bad initial hand.

This is similar to other games where there’s luck involved, like backgammon, where dice are used. It contrasts with games that are often considered to have no luck involved, like chess and checkers, though luck may also arguably play a role there sometimes (e.g., a bad risky move might lead to victory if your opponent is sick, so they can’t concentrate well).

In addition, the outcome bias can influence not only how people judge themselves, but also how they judge others, as well as things other than people. For example, in sports, the outcome bias can influence how soccer fans view a certain player, and how basketball coaches view a certain strategy. This also means that people often consider the possibility that others might display an outcome bias toward them, so they sometimes act in a way that they expect will lead others to judge them positively, even if it isn’t expected to lead to the best direct outcomes.

Finally, the outcome bias can also play a role in many other contexts, such as legal decisions, medical decisions, economic decisions, military decisions, punishment decisions, attributions of blame, ethical judgmentsjudgments of competence, judgments of audit quality, evaluations of workplace performance, and evaluations of scientific methods.

 

Dangers of the outcome bias

There are two key potential issues that the outcome bias can lead to:

  • Punishing and discouraging good decisions. For example, if someone makes a good decision that leads to a negative outcome due to chance, this can cause them to feel bad about their decision, which can cause them to avoid making similar decisions in the future.
  • Rewarding and encouraging bad decisions. For example, if someone makes a bad decision that leads to a positive outcome due to chance, this can cause them to feel good about their decision, which can cause them to make similar decisions in the future.

Furthermore, the outcomes bias can cause many associated issues. For example, it can cause people to ignore important factors that play a role in decision-making, like people’s intentions or the amount of consideration that they put into their decisions. It can also cause people to reward irrelevant things, like luck, instead of more relevant things, like effort and proper reasoning. These issues, in turn, can hinder learning and improvement over time, on both an individual and group level, for instance by prompting people to focus only short-term positive outcomes, rather than on good decision-making.

In addition, the problematic influence of the outcome bias can extend beyond judgments of past decisions, to other things, like judgment of the decision-makers themselves, and predictions of their future performance. This can lead to various other issues, like placing valuable resources under the control of people who got lucky in the past, rather than those who made good decisions.

 

The connection between decisions and outcomes

Outcomes are often influenced by the quality of the decisions that are associated with them. When this happens, it’s reasonable to consider outcomes when judging the quality of associated decisions. This is particularly reasonable when outcomes are used as one factor when assessing the full decision-making process, or when they’re the only information available for judging a decision, so they must be used as a proxy for its quality.

However, the connection between decisions and associated outcomes varies substantially across situations. There are cases where decisions are partially, barely, or not at all responsible for their associated outcomes. That means that just because someone achieved a good outcome, that doesn’t mean that they necessarily made a good decision, and just because someone achieved a bad outcome, that doesn’t mean that they necessarily made a bad decision. For example, someone can make the best possible decision in a certain situation, and still achieve a bad outcome due to an issue that was impossible to predict.

This is particularly a problem in certain cases, such as where luck plays a substantial role, where there’s a lot of variance in expected outcomes due to random noise, or where there’s only a small sample of decisions to examine. For example, when judging someone’s investment skills, looking only at one of their investments generally isn’t going to tell you much, compared to looking at a selection of many decisions that they’ve made over the course of years.

 

Psychology and causes of the outcome bias

The outcome bias is attributed to various motivational and cognitive mechanisms. These include, most notably:

  • Self-enhancement, for example if people attribute positive outcomes that they achieved to their decisions rather than luck, to make themselves feel better. When the outcome bias occurs for this reason, it can also be classified as a self-serving bias.
  • Desire for feelings of certainty and control, for example if people ignore the impact of luck on outcomes so that they won’t have to worry about the unpredictable role that luck plays.
  • Preference for reducing effort, for example if people use outcomes as a heuristic for judging decisions, rather than making an effort to consider additional factors.
  • Flawed cognitive reconstruction. This happens when people start with a known outcome, and then work backward in an attempt to justify its cause. It can cause issues like focusing on aspects of the decision that align with the outcome and ignoring those that do not, for example by considering only on negative aspects of a decision when examining a bad outcome.

Multiple mechanisms can play a role simultaneously in causing people’s outcome bias. The influence of these mechanisms depends on personal factors, like how prone a person is to each of them, and situational factors, like whether there’s pressure to judge a decision quickly.

In addition, many associated factors can also play a role in determining whether and how people display this bias. These include, for example, professional norms (i.e., how decisions are normally judged in a certain group), the salience of outcome information (i.,e., whether people can see the outcome while judging an associated decision), the tendency to view luck as a stable internal trait, and people’s beliefs about free will.

 

How to deal with the outcome bias

To reduce the outcome bias that people experience, including yourself, you can use a combination of the following techniques, depending on your specific circumstances and goals:

  • Judge decisions before you know their outcomes.
  • Minimize access to outcome-related information until after you judge associated decisions.
  • Minimize the salience of outcome information, for example by getting away from things that will remind you of the outcome while you’re trying to judge an associated decision.
  • Commit to focusing on the decisions you’re trying to assess, rather than on their outcomes.
  • Explicitly outline and justify your judgment process, while focusing on analytic—rather than intuitive—reasoning.
  • Consider how you would judge the decision if it led to a different outcome.
  • Identify the information that was available to the decision-maker at the time, and consider only that information when assessing their decision.
  • Identify the extra information that you have now compared to what the decision-maker had, and consider ways in which this added information could be biasing your judgment.
  • Consider other relevant factors that are important to your evaluations, such as people’s intentions at the time they made a certain decision.
  • Consider other factors that could have influenced the outcomes beyond the decision, such as luck and various situational factors that were outside the decision-maker’s control.
  • Explain what this bias is and how it could be affecting your reasoning.
  • Identify potential causes of this bias in your particular situation.
  • Explain the dangers of this bias, both in general and in your particular situation, potentially while using relevant examples.
  • Use other debiasing techniques, such as slowing down your reasoning process and improving your decision-making environment.

In addition, there are several important caveats that you should keep in mind when trying to reduce the outcome bias:

  • This bias can persist, at least to some degree, despite debiasing attempts, so just because you try to reduce it doesn’t mean that you’ll succeed in doing so, or that you’ll eliminate it entirely.
  • People are often unaware of their own biases (or underestimate their own biases), so even if someone—including you—is sure they’re not letting the outcome bias influence their judgments, that doesn’t mean that they’re right.
  • It’s often reasonable to consider outcomes when assessing decisions; what’s important is to do this in an appropriate and unbiased way, for example by also considering the role that luck played in achieving those outcomes.

Finally, it can be beneficial to account for the outcome bias even in cases where you don’t try to reduce it directly, since doing so can help you understand and predict people’s behavior. For example, accounting for this bias can help you predict that people will judge your decisions not only based on how good the decisions are, but also based on their outcomes, so that even if you make a good decision, people may be angry at you if you achieve a bad outcome.

 

Related concepts

The following are phenomena—especially cognitive biases and logical fallacies—that are closely related to the outcome bias in various ways:

  • Hindsight bias. The hindsight bias is a cognitive bias that causes people to overestimate how predictable a past event was, once they already know its outcome. Like the outcome bias, the hindsight bias involves judgment of a past thing, once its outcome is known. However, the hindsight bias involves distorted memory and assessment of how predictable an event was, whereas the outcome bias involves distorted assessment of the quality of a decision.
  • Confirmation bias. The confirmation bias is a cognitive bias that causes people to search for, favor, interpret, and recall information in a way that confirms their preexisting beliefs. Like the outcome bias, the confirmation bias can lead to biased assessment of decisions based on their outcome. Furthermore, these two biases can co-occur and magnify each other, for example when someone places too much weight on an outcome when judging an associated decision, because the outcome confirms their preexisting beliefs.
  • Just-world hypothesis. The just-world hypothesis is a cognitive bias that causes people to assume that people’s actions always lead to fair consequences, meaning that those who do good are eventually rewarded, while those who do evil are eventually punished. Like the outcome bias, this bias causes people to overestimate the connection between the decisions that people make and the outcomes that they experience.
  • Fundamental attribution error. The fundamental attribution error is a cognitive bias that causes people to underestimate the influence of environment-based situational factors on people’s behavior, and to overestimate the influence of personality-based dispositional factors. Like the outcome bias, this bias can cause people to ignore various external factors that influence people’s behaviors and outcomes.
  • Moral luck. Moral luck is a phenomenon where people judge the morality of actions by their outcomes, even when this is inappropriate. For example, this can play a role when two people who acted the same way are judged differently, since one person’s actions resulted in a positive outcome and another’s in a negative outcome. The outcome bias is sometimes seen as causing the moral luck phenomenon in some cases, though this theoretical association has been criticized.
  • Historian’s fallacy. The historian’s fallacy is a logical fallacy that occurs when someone assumes that decision-makers in the past had the same information and perspective as those analyzing their decisions later. This can lead to judging decisions based on information that was not available to decision-makers at the time they made their decision, such as the outcome of that decision.
  • Resulting fallacy. The resulting fallacy is a logical fallacy that occurs when someone assumes that the quality of outcomes is always determined solely by the quality of the decisions and actions that led to them. Essentially, this fallacy corresponds to the outcome bias, but takes the form of a logical fallacy (i.e., a philosophical error in argumentation) rather than a cognitive bias (i.e., a psychological error in cognition).

In addition, the outcome bias is also associated with certain ethical theories. Most notably, this includes consequentialism, which suggests that the morality of actions is determined by their consequences, so actions are morally right if their consequences are more favorable than unfavorable (as reflected in idioms such as “the end justifies the means”). This is contrasted with deontology, which suggests that actions can be inherently right or wrong (or alternatively permissible, required, or prohibited), independently of their consequences and as based on some moral principles.

 

Prospective outcome bias

The prospective outcome bias is a cognitive bias that causes people to make decisions based on how the expected outcomes will make them feel, even when the decisions are not directly responsible for those outcomes. For example, this bias can prompt people to incur unnecessary costs in an attempt to achieve outcomes that are already likely without those costs, by spending money to win a game despite having an unbeatable lead, because they expect the resulting outcome to feel good.

 

Summary and conclusions

  • 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.