Do Outcomes Matter?

I have made some fairly significant errors in my life, but as I have gotten older I tend to look at mistakes and successes very differently. Our world tends to want to yell scoreboard when we are doing well and blame the refs when things go poorly, but these things are all about results. Getting positive results is a good thing, but I am much more concerned with whether I can continue to get the results I want next year and the year after than the one I want today. In fact, I have often wondered if results even matter.

Decision making can be broken down in a bunch of different ways, so I do want to differentiate a couple of decision types before I make my arguments. The type of decision I am not interested in talking about is decision making under certainty. If I walk up to you and say do you want the five dollar bill in my right hand or this ten dollar bill in my left hand, then you know exactly what happens and all of the possible scenarios. Even if the answer is not so easy as picking ten the ten dollar bill, say a Reuben versus club sandwich, the decision itself is not terribly interesting. I am not talking about this sort of decision.

Decisions get more difficult as you add a broader spectrum of possible outcomes, and get especially difficult when you are uncertain about what some or even many of those possibilities are. I want to talk about a couple of different decisions and how their outcomes are evaluated. Then I want to discuss how focusing on their outcomes can miss the point because of typically one of two things. Often focusing on the result only misses either all the costs associated with it, or it masks underlying factors that would significantly change the outcome in another context.

First I want to discuss something that seems demonstrably good, and if it is not actually that great. Let’s talk about seat belts. According to the National Highway Traffic Safety Administration, seat belts save around 15,000 lives each year just in the United States. How awesome is that? The CDC says from 1975 to 2008 the total was 255,000 lives. What an incredible invention the seat belt is! Actually, seat belts themselves are an important invention in a world dependent on cars, but then we start getting into other decisions from this that may be a little less awesome.

Seat belts have performed so well that we started mandating them, and most states now have a seat belt enforcement policy. The tougher the law, the more people tend to wear seat belts, which is good, right? If you want to go even farther as a state you can get involved with things like “Click It or Ticket”, referred to as enhanced enforcement. New Hampshire is the only state without a law that forces adults to wear seat belts. In 2012 seat belt use in New Hampshire was 68.6%, only South Dakota was a lower rate. Still, think about that number. Even without enforcing a law of any kind more than two thirds of adults are wearing seat belts. Would we rather have them at 96.9% like the top seat belt use state, Washington? Probably, but to what lengths should we be willing to go to make people do things that they may not want to do?

Governments can, and should think about and enact laws regarding public safety. That is not my problem with things like seat belt laws. My concern is that they do not consider costs or side effects when they do. Regulation is a dirty word in some political circles, but it can be done well. In this case though, it seems to mostly take care of itself. Over time the seat belts get used more without the government getting involved. When seat belts were new people didn’t wear them, unsurprisingly since adults tend toward being Luddites, but they do want their kids to be safe. You force your kids to wear seat belts, they force theirs, and in a couple of generations lots of people wear seat belts of their own accord because it makes sense to.

Seat belt laws speed this process up, but do we want them? Think about some of the costs that come with these laws; time spent enforcing, court challenges, costs for advertising Click It or Ticket, etc. The main one though, is a loss of personal freedom. In general my preference is to let people do what they want, unless what they want to do is overly burdensome to others. You may think that seat belt laws are a little thing, and I am overstating the case by calling it a loss of personal freedom, but think about other things like this that start to happen. Next the government wants to make us safer by mandating car seats until kids are 12 years old even though it isn’t necessary in a lot of ways (do yourself a favor and read Freakonomics). Then they want to tax sugary beverages. What comes after that? People could live longer, healthier lives in lots of ways, but I would rather people live how they want than the way I want them to live. One time I did this health screen thing with lots of tests. When it came back they said my life expectancy was in the late 70s, but that I could live five to seven extra years if I stopped eating red meat and drinking alcohol. Sorry, but I would rather live 50 years with beer and steak than 57 years without. Regulation in general should do things that people refuse to do, but that will make everyone better off, and what is truly better is really hard to know sometimes.

How about we head to another type of decision. Sometimes you can make a truly terrible decision and have it turn out amazingly well, or make a good decision that ends up badly. For instance, I could drain my savings, retirement, and checking account today to buy a bunch of Powerball tickets. That would be a truly bad decision, but it is possible that I would be better off financially if I accidentally won the millions of dollars up for grabs in the next drawing. Outcome thinking would say after winning millions of dollars that you did the right thing. I think a terrible idea is a terrible idea, so even if you won the money your decision was still a very bad one. Getting lucky does not make your decision itself good. Let me talk about a less extreme decision I made and the different ways it could have gone.

In December of 2007 I bought a house. Some people might be horrified at the moment because they know just how poorly 2008 went for housing, but rest assured that I made this decision knowing about housing crash possibility. In fact, only a couple of years earlier I had written a paper for a finance class about how the housing market was overheated and likely to crash. A couple of things led me to purchase a house at that point. One, interest rates were “low” so I figured we were not likely to get much lower, though the next few years would prove me very wrong in this assumption. Two, it was Topeka, Kansas so the huge price jumps had not occurred in the location we were moving to. Three, my wife and I now had grownup jobs so it was time to buy a house and stop throwing rent money away. Commonly held beliefs are dangerous.

Had I bought the house a year later/earlier things would have been different. Had I bought the house in Las Vegas, Atlanta, or San Bernadino it would have ended up hurting much more than it did. If this had been a more typical recession I may never have noticed much because interest rates wouldn’t have settled into historic lows for years on end. Decisions turn out differently depending on the context in which they are made. The reason mine was a bad decision here was nothing to do with macroeconomic situation. It was a bad decision because I bought a house without knowing about the job I was counting on to pay for it. Less than a year later I hated my job and selling a house means you pay the realtor, so leaving my job to go somewhere else meant writing a check to get out. You better make sure you are going to stay a good long while if you are going to put money into a house, if not at the job itself at least that you are committed to staying in the area. I did not stay and my estimate is that we would have saved at least ten to fifteen thousand dollars had we had rented instead of buying.

I just want to reiterate that the outcome was pretty bad here, but not actually the point. It could have been better or worse given a different time or place. It was my making a decision based on common knowledge, it’s time to buy a house, rather than asking questions of friends and family to figure out if in our situation buying a house was actually a good idea. This is how I like to evaluate decisions. Outcomes don’t tell you whether the decision was good. They are really just sign posts. You get a signal that something happened. You need to go backward and look at the time between decision and conclusion to see what you got wrong, what you got right, and what was random and uncontrollable or unknowable to properly evaluate whether you did the right thing. Outcomes do matter. Just not as the definitive good or bad ruling on you and your intelligence that people seem to want them to be.

If you focus on the outcomes what happens is ego tends to take over. You will watch people talk about their successes and hide their failures even when their successes are unearned and their failures are no big deal. If that isn’t possible people will point to their outcomes relative to someone else’s worse outcome. It becomes a game of finding a way to spin your results as good whether or not you have actually been making good decisions. This may help you in some short-term way to climb a social ladder, but it will not lead to better decisions or outcomes in the future. Failure is inevitable. In fact if you are not often failing you are only doing easy things and are not progressing as a human being. Pushing yourself, admitting failures, and then figuring out what not to do again is the fastest way to get better at life.