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Outcome bias

type: effect · origin: study · evidence: strong · themes: judgements and probabilities

Claim assessed: We judge a decision by how it turned out, not by how well it was made.

Published · how we work

In short

Outcome bias means judging a decision by how it turned out, not by how well it was made with the information available at the time. Every real decision is made under uncertainty, so it is a kind of bet. A good bet can be lost, and a bad one can be won. When the outcome tells us something new about the decision, it is natural for it to count. The problem is when it counts even though the decision maker couldn’t have known more.

What it says

The original experiment. Baron and Hershey (1988) gave students descriptions of medical decisions. One example: a 55-year-old man has chest pain that stops him from working. A bypass operation would relieve the pain and raise his life expectancy from 65 to 70, but 8% of patients die during the operation. The physician decides to operate. In one version, the operation succeeds. In another, the patient dies. The students rated the quality of the decision on a scale from −3 to +3, and were explicitly asked to judge the decision and the thinking behind it, not the outcome. The same decision got, on average, 0.85 when the operation succeeded and −0.05 when the patient died.

Even when you know it shouldn’t. Of the last 8 students asked, 7 said the outcome shouldn’t count in the evaluation, and the effect appeared in them too. In another experiment, with 29 participants, the outcome also changed how competent the physician seemed for future decisions. The instructions said clearly that the physician hadn’t performed the operation and hadn’t known more than the participants. The effect also appeared with money gambles: a choice was rated better when the rejected option would have turned out badly.

The replication. Aiyer et al. (2023) repeated the first experiment, with the analysis registered in advance, on 692 online participants. Unlike the original, each participant saw only one version, not both. The effect appeared clearly and was even stronger. The physician’s decision got 1.81 when the operation succeeded and 0.45 when the patient died. The effect also appeared in the 44 participants who had said the outcome shouldn’t count.

The rating given to the physician's decision to operate, on a scale from minus 3 to plus 3. In the original study, with 20 students, 0.85 when the operation succeeded and minus 0.05 when the patient died. In the replication, with 692 participants, 1.81 and 0.45. Same decision, different outcome Baron & Hershey, 1988; Aiyer et al., 2023 Rating of the physician's decision, −3 to +3 an operation with an 8% risk of death Original study, 20 students the operation succeeded 0.85 the patient died −0.05 Replication, 692 participants the operation succeeded 1.81 the patient died 0.45 The decision was the same; only whether the patient survived changed.
Baron and Hershey (1988), Table 1, cases 1 and 2; Aiyer et al. (2023), Table 5, the physician conditions. In the original, each student rated both versions; in the replication, each participant saw one. Compare the direction, not the size.

Outside the lab. Lefgren, Platt and Price (2015) followed NBA coaches. After a loss, they change strategy more often than after a win, even when the game was lost by a very small margin, which says very little about how good the team is. The change appears even when the loss was expected, and when it was caused by factors outside the team’s control. Meier, Flepp and Franck (2023) replicated the result: NBA coaches change their starting lineup more often after narrow losses than after narrow wins. The same pattern appeared in the top women’s professional league, in college basketball and in American football (NFL), although in some cases it weakened over time.

The outcome also changes what seemed predictable. Kneer and Skoczeń (2023), in ten preregistered experiments with 2,043 participants, showed that a harmful outcome makes people believe, afterwards, that harm was more likely. As a result, the decision maker seems more negligent and more to blame. Some ways of correcting this distortion worked, others didn’t.

Example

A team launches a product after a good test with a small group of customers. The launch fails because of a supply crisis nobody anticipated. In the meeting afterwards, the decision to launch is called “rushed”. Had the launch succeeded, the same decision, with the same data, would have been called “bold”. The example is an illustration, not a study cited here.

How to apply it

The steps below are a practical way to apply it that we propose, based on the studies cited.

  1. Write down your reasons before you learn the outcome. What you knew, what options you had and what risks you weighed. Otherwise, after the outcome, you can no longer reconstruct accurately what could have been known.
  2. When you evaluate a decision, first ask what was known at the time. Then ask whether the outcome brings new information about the decision or was just luck, good or bad.
  3. Don’t change a strategy after a single narrow failure. A game lost by one point, or a project that failed from an outside cause, says little about how good the plan was.
  4. Don’t rely on knowing about the effect. In both lab studies, the effect appeared even in those who said the outcome shouldn’t count. A written process, set in advance, helps more than the intention to be fair.

Limits and nuances

Sources

See also: Fundamental attribution error, Hindsight bias, Regression to the mean