Process Over Outcome

If you’ve followed Jim O’Shaughnessy for any length of time on Twitter you’re familiar with his maxim; “Process over Outcome”. It’s almost a mantra in my head daily. So I was delighted to learn of a story that perfectly illustrates it.

Why it matters: Sometimes a bad process gets a good outcome; but the key is to focus on the process and let the outcomes take care of themselves.

For me, and oh I don’t know, maybe all of humanity, storytelling is how I remember and assimilate things best. Turns out Tren Griffin did a podcast with Jim which came out in January of this year. Instead of the usual back and forth, this episode was a series of stories on business, investing, and life.

This led me to Tren’s blog and the perfect story for illustrating Jim’s concept of process over outcome. In the post, Lessons from Annie Duke (Author of “Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts”), Tren references Michael Mauboussin

“[A baseball executive] was in Las Vegas sitting next to a guy who has got a 17. So the dealer is asking for hits and everybody knows the standard in blackjack is that you sit on a 17. The guy asked for a hit. The dealer flips over 4, makes the man’s hand, right, and the dealer sort of smiles and says, “Nice hit, sir?” Well, you’re thinking nice hit if you’re the casino, because if that guy does that a hundred times, obviously the casino is going to take it the bulk of the time. But in that one particular instance: bad process, good outcome. If the process is the key thing that you focus on, and if you do it properly, over time the outcomes will ultimately take care of themselves. In the short run, however, randomness just takes over, and even a good process may lead to bad outcomes. And if that’s the case: You pick yourself up. You dust yourself off. You make sure you have capital to trade the next day, and you go back at it.”

Everybody loves a good story.