6 Examples of Outcome Bias That Can Negatively Affect Your Decisions

Let's say you're ready to learn a new hobby, but you need to learn its strategies, so you decide to take a few lessons to help learn it. Now you have two options for people you can hire to help you, either someone who practices that hobby a lot, or someone who only does it for fun.

If you have chosen the person who practices the hobby a lot then you have just fallen into outcome bias, you have assumed that the best teacher for you is the one who shows positive outcomes in public. But what you didn't do was spend some time understanding how these outcomes were achieved, you didn't watch either of them practice the hobby to be able to evaluate their decision-making processes and only relied on their potentially misleading outcomes.

So, basing your decision on a person's outcomes prevents you from thinking about other important factors that can determine who is actually the better person. You overvalue outcomes and undervalue the processes behind those outcomes, and that means you like the idea of cognitive bias.

In this article, we will learn about outcome bias. First, we will define this concept, then we will mention 6 examples of this bias that will show you how this wrong way of thinking can negatively affect your decisions.

What Is the Outcome Bias?

Outcome bias is a cognitive bias that occurs when the quality of a decision is determined after knowing the outcome, but failure to invest the time needed to understand how the outcomes are achieved can lead to poor decisions in the future, whatever the past outcomes were.

Therefore, judging an earlier decision by its outcome rather than the quality of the decision-making process does not take into account the information that the decision-maker possesses at the time the action was taken.

This thinking is wrong because the outcome of any consequential decision is affected by external factors and a certain level of opportunity, which means that decision-makers do not know exactly how the calculated risks will end.

So when you withhold your judgments because of outcome bias, you make the mistake of making decision-makers responsible for situation elements that are out of their control.

Outcome bias is often confused with hindsight bias, which is similar but not the same. Hindsight bias includes the tendency of those who observe the retrospective effect of a situation to dismiss any possibility that the outcome of a decision might appear in any other way.

Hindsight bias describes a distorted memory that favors a desired outcome in which someone claims to know what the outcome will be like during the entire process while ignoring the process outcome bias altogether.

We fall prey to outcome bias because our brains skip complex processes and think of the simplest possible conclusions, we also evaluate people's competence through our perception of their judgments, but this is unreliable if you are influenced by outcome bias.

Why Is It Important to Recognize Outcome Bias?

It is important to recognize outcome bias so that you can establish good decision-making, your ability to improve in any matter requires practice, as well as thinking about the process that led you to the outcome so that you can identify where improvements can be made.

After knowing the outcome, hindsight interferes with our ability to evaluate whether or not a decision is good. Although it is difficult to judge yourself, it can be difficult to judge others, and outcome bias can make people, particularly leaders, averse to risk. But it may also allow irresponsible leaders who engage in reckless adventures to be rewarded if their actions lead to positive outcomes.

A leader who performs poorly may be seen as a visionary of success if they make a risky decision and the outcomes are in their favor. In this case, supporters sanctify reckless leaders, while those who question the leader are treated as weak people when the outcomes are announced.

Outcome bias can be detrimental to decision-makers such as doctors or politicians who act for the benefit of others. This is because when the outcomes are bad, people blame the agent for not being able to predict the bad outcome during the decision-making process. For this reason, it is important to remember that some information is not known until the decision-making process is over.

Are You Just In Judging People's Decisions?

Studies have found that when people rate the efficiency and quality of decisions made by others, 44% of participants think the decision is good when the outcome is positive, and only 9% consider the quality of the decision itself to be good when the outcome was negative.

6 Examples of Outcome Bias That Can Negatively Affect Your Decisions

1. The COVID-19 Crisis

Decisions made by public health officials early in the pandemic were judged with an outcome bias, and essentially four possible outcomes were found when the coronavirus emerged:

• The officials cannot do anything, and the virus can pass without becoming a major problem, meaning that the officials made a good decision.
• Officials can impose strict rules, the virus could turn into a pandemic, meaning that officials made a good decision.
• The officials cannot do anything, and the virus may turn into a pandemic, meaning that officials made a bad decision, and they will be seen as reckless for not preventing deaths.
• Officials can impose strict rules, and the virus may turn out to be normal, meaning that officials are seen as being overly cautious and causing panic in the community.

Whatever option officials chose when the Coronavirus first broke out, it would have had no effect on the virus, and that's because we didn't know anything about it at the time and we could just look back to evaluate those decisions and think about the information that the officials had at the time of the decisions, which wasn't much. It is easy to judge past decisions regarding the coronavirus now that we have more information on how things are developing.

2. Leadership

Think of a supervisor whose position at work is directly related to student outcomes in their area, does this mean that if a particular area has a well-respected supervisor, you can send your child to school there and they will definitely get high grades with other factors affecting student achievement, such as:

• Motivation.
• Parental support and encouragement.
• Critical thinking opportunities.
• Teaching methods versus learning methods.
• Teaching quality.
• Availability of teachers, mentors, and more.

It is clear that the whole system either supports or hinders the success of the student, and the role of the supervisor is largely indistinguishable. If applicants to the position of supervisor show students' past achievements as part of their history of success, they are assigning themselves undeserved credit that goes beyond their individual roles.

According to organizational theory, organizations will remain fully consistent with their practices, no matter who the leaders are. New leaders often have little influence in the broader system because groups and individuals resist change, and the power of external forces - such as supervisors - is constrained by tradition and mores.

Outcome bias applies to leaders—such as supervisors—because their process and decision-making ability are often overlooked, and people focus only on outcomes, whether or not those outcomes are relevant to the leader's attitude.

3. Investment

Let's say you have a friend who was talking about how much money they made by investing in a company, you might think that this is great and that you should do the same and buy shares in that company, but if that's the case, you're thinking in terms of outcome bias so consider some of the factors that may have changed since your friend bought their shares in that company:

• Interest rates.
• The general state of the economy.
• Company performance.

When you focus only on the money your friend has made, you ignore important facts, such as the element of randomness associated with share prices, so you have to know the share prices for two years to make a useful decision about your investment, and you also need to think about whether and when the market is overvalued, and of course, you cannot judge your current investment decision based on a previous outcome.

And remember that making a good decision today, or a decision that may seem good, does not guarantee that you will end up with a good outcome, as the external factors involved play luck in your investments, and you will not have all the information needed to make an absolutely positive decision when it comes to your investments.

4. Sports

When thinking about sports, you are likely to assume that the decisions players make are either good or bad depending on whether they win or lose the game. Sport is a field that is closely related to outcome as it is judged by the outcome of winning and losing, so many do not pay attention to the way the player wins the match, they only care about the winning factor.

People are often unable to recognize the role of luck in sports, and while coaches try to minimize the role that luck plays, it cannot be ignored. A team can do a lot of things incorrectly, but it can have luck, and when that happens, people don't blame it on luck, and instead give high praise to players who have played regular roles.

Suppose someone passed the ball and the match ended in victory or success, does this mean that their decision or strategy associated with that pass was good?

Not necessarily, because there are other factors that play a role. Perhaps the other team's defence was not attentive, which in turn allowed them to pass and this means that the pass decision resulted in a positive outcome. This is because the other team's defence was bad, not because the playing strategies were necessarily good, or the match may have stemmed from a risky or bad decision that ended in luck.

When coaches and teams take a look and watch videos of past matches, they may like the idea of biasing the score by basing the quality of players' decisions on the score. Rather than analyzing the whole situation, if the player scored a goal, were they completely confident in the decisions that led to those outcomes? Or are there some luck or external factors that have affected the success of the goal? Focusing on the events that led to the goal may be underestimated while the outcome itself may be exaggerated.

No matter how good the coaches are, they are judged based on the results of the matches they coached, which is an important part of their continued employment. But there are more factors that affect the quality of the coach, such as their leadership skills, their ability to maintain a highly motivated team, their knowledge, and the level of support they provide to the players.

One suggestion to reduce score bias in the sport is to adopt an objective rating system for some things, such as trying to score where players are evaluated based on the quality of their work that leads to their passes, whatever the score and on things like:

1. Was the player clear?
2. Does the player have features?
3. Did the player make thoughtful decisions that led to a chance to win?

Besides the detailed scoring system for trying to score, there are correlations to the score, assessing the quality of small match biases, and thinking about players' strategies for success with the same amount of analysis associated with their tactics for failed attempts, can help coaches determine what factor luck might play. It helps players realize that they can really do everything right, they do exactly what they have been trained to do and they miss the opportunity.

Players cannot only accept positive outcomes and move forward without thinking about past events, instead, it is important to evaluate successes with the same degree of scrutiny as failures.

5. Occupational Cases

In business environments, employee performance can be overemphasized, which leads to an outcome-based culture, and this type of work environment can lead employees to think that they are either good at their job or not good without caring about the process that leads to the outcome. Employees may overlook some gaps in judgment when it comes to ethics and policies, particularly if the outcome turns out to be positive.

Outcome bias plays a role when employees are evaluated based on their results rather than the quality of their decision, given that most business decisions involve uncertainties. Instead of acknowledging that employees' decisions are good, they over-reward the lucky ones.

If two employees have identical pieces of information to reach a final decision, their performance must be considered to reach the final outcome. Even if one of them achieved a positive result and the other did not. However, some research has shown that performance evaluations are largely affected by outcome information, and this gives importance to unrelated information in understanding overall knowledge, capabilities, and performance.

So even though having too many skills leads to good outcomes, and having too few skills leads to bad outcomes, however, doing so reduces the importance of other factors that go into an individual's overall success.

6. Moral judgments

Studies have found that people judge behavior as immoral and say that they deserve to be blamed and punished more if it leads to bad outcomes than if it leads to good ones. Even if the outcome was determined entirely by chance, and some who conceived behaviors as acceptable while observing a process later realized that these same decisions were immoral after learning about the negative outcome, imagine these two scenarios:

• Pharmaceutical researchers have strict criteria for who is allowed to participate in the study to be data reference points in their research to bring the product to market. They think the product is safe, is fast approaching the deadline, and when they do an analysis of their research, they discover that they only need three more data points to make their outcomes statistically significant as they make up some data and add it to their research, allowing the drug to reach the market.
• Same case but instead of forming three dummy data points, the researchers note that three data points have been pulled from the final data set because of technical aspects that are not understood, they think that this missing data is suitable for use.

Certainly, when they add these participants' data again, the outcomes hardly become statistically significant, and the drug will get to the market soon, so think about which situation you think is more moral than the other.

In this study, participants assigned higher moral scores for the second possibility, this means that the researchers who used the actual data acted more morally than the researchers who composed the data. Now, let's check the results:

• In the first scenario in which the researchers formed data for fictitious people, both effective and profitable medication ended up being obtained, and the long years of research do not show any significant side effects.
• In the second possibility, in which the researchers added some real data, the drug was later withdrawn from the market after five people were killed and hundreds were infected with the disease.

In this study, participants who knew the outcome of each possibility assigned higher moral scores to the positive outcomes associated with the first possibility as the data were formed. This indicates that the moral judgments of researchers' behavior before the product reached the market were affected by information that the researchers did not know during their procedures.

Are dubious personal actions morally justified if they do not produce negative consequences? And what about the actions of others?

How to Overcome Outcome Bias?

The first step to overcoming outcome bias is to shift your focus from the outcome of the process to the process itself. Whatever the outcome of the decision, think about the process and identify errors, considering:

1. People

Who was involved in the decision? Did these people have something to do with it?

2. Information

Does it focus on the information that was available during the decision-making? Are you focusing too much on irrelevant information?

3. Ownership

Did the right people make the decision?

4. External influences

Are there other factors that led to the decision deviation?

Secondly, remember that focusing only on the outcome can prevent you from thinking clearly, this is because complexity and luck will always play a role in the outcomes. This means that you cannot assume that you did a great job when you got something right as you have to evaluate the process to find things that need improvement. Doing so will help reduce the culture of blame, and reduce excessive rewards for people who are barely fortunate.

By evaluating your own processes, you can make better decisions in the future without letting outcome bias overshadow your judgment, so always think about all the possible outcomes that can occur as a result of your actions, and determine the consequences of poor choices versus the consequences of a lack of resources to make better decisions in the future.

In Conclusion

It is important to be able to identify the external elements that affect your outcomes, in order to be able to identify errors in the decision-making process, you cannot judge a decision by its outcomes, especially if external factors play a role, as a bad outcome does not always indicate a bad decision, and vice versa.

So instead of focusing on a wrong decision, think about why you made that decision, and if your methods make sense, it will be beneficial for you to use this method in the future, even if it didn't work out for you the first time.