Quality of Decisions vs. Quality of Results

Do you judge a person by the results of their action or the decision making process that led to those results?

Judging from the most overused terms on LinkedIn we all seem to focus exclusively on results.   That is likely a result of our focus on being, “action oriented”.  Action leads to results while (decision) analysis leads to paralysis – so the saying goes.

When you judge only by the results can you identify sheer dumb luck?

Writing in the context of Poker betting, Poker theorist David Sklansky, writes

What matters is the quality of your decisions, not the results that come from them.

Seems irrelevant to quote Poker process to businesses? Not if you recognize the essence of business is decision making under uncertainty. We make “investment decisions” everyday with resources and people.

We don’t know the exact market size and which segment to target first. We do not know what prices to set. We don’t know what benefits customers value more and hence what products to build. We do not know what channels to develop and what promotions to run.

If we have a rigorous decision making process  we can estimate market sizes and pick the segment that offers best chance of success, tease out distribution of customer willingness to pay and set a price, we use statistical models to determine customer value distribution, we evaluate channel and promotion impact from past data and pick the most likely one to succeed.

There is lot of uncertainty in the results. Other factors may crush your market size. Your pricing could be all wrong. Customers may reject the main value proposition due to other factors. Your channel choice may fall flat because customer buying behavior changed. Besides all these your competition may take steps that nullifies all your actions.

Think about it, the uncertainty of outcome is not that different from Poker. Or is it Poker more like business strategy?

When you judge a person only based on the results of their actions you fail to understand if they are capable of delivering similar results in future especially when conditions are radically different. Someone with solid (and evolving) decision making process but with failed projects in the past however has the wherewithal to operate under uncertainty in the future.

It is like drafting a quarterback who threw a few game winning Hail-Mary’s vs one that plays the long game.

A person’s results do not tell the full story or tell the wrong story. Their decision making process however tells you the real story.  Let me rephrase the Poker quote,

It is the quality and repeatability of the decision making process that matters more than the results.


Probability of Winning MegaMillions Vs. Probability of Dating Supermodel

$640 million jackpot is hard to resist. Those who do not usually play the lottery are now playing, buying at least five tickets. The WSJ reports Megamillion sold two tickets for every adult in the country.

The probability of winning is still 1/175,711,536.

MarketPlace Radio tries to put this number in perspective by giving a list of things that are more likely to happen to us.

Chances of dating a supermodel?  1/88,0000

But there is a big difference in the definition of probability between these two scenarios that is lost.

Probability of winning MegaMillions is determined by simply counting all possible ticket numbers. This is the frequentist approach and it is correct in this case.

We cannot use the same frequentist approach for finding your chances of dating a supermodel. The 1/88,000 number is based on number of supermodels and number of men.  This is relevant only if we are estimating, “what is the probability that a randomly selected man from the population is dating a supermodel?”

When you want to measure your chances of dating a supermodel you need different definition – probability as a measure of uncertainty.  It is not 1/88,000. (For a more detailed discussion of this definition of probability see here.)

How can you measure this probability? If you imagined living your life 10,000 times, given all possible events that could happen and the many different choices you make, in how many such lives do you find yourself dating the supermodel? That is your probability and it is different for every individual.

On the other hand, if you do win tonight the probability of dating supermodel is 1. That is the conditional probability.