Alternative History
Evaluate a decision using the information, alternatives, and possible consequences available at the time. The result is evidence to learn from, but it cannot by itself show whether the choice was sound.
THE IDEA
ALTERNATIVE HISTORY
I start with the platitude that one cannot judge a performance in any given field (war, politics, medicine, investments) by the results, but by the costs of the alternative (i.e., if history played out in a different way). Such substitute courses of events are called alternative histories. Clearly, the quality of a decision cannot be solely judged based on its outcome, but such a point seems to be voiced only by people who fail (those who succeed attribute their success to the quality of their decision). Such opinion—“that I followed the best course”—is what politicians on their way out of office keep telling those members of the press who still listen to them—eliciting the customary commiserating “yes, we know” that makes the sting even worse. And like many platitudes, this one, while being too obvious, is not easy to carry out in practice.
When to use it
Evaluating the performance of a fund manager whose portfolio underperformed due to market-wide downturns, not poor stock selection.
Assessing a military commander's strategy that resulted in a tactical defeat but prevented a larger catastrophe.
Reviewing a business pivot against the evidence and alternatives available when it was chosen, rather than relying only on whether it later succeeded.
Judging a political policy that had negative short-term effects but long-term benefits that are difficult to measure.
FROM THEORY TO EVERYDAY LIFE
In practice
Investment Decision
An investor researches a stock and buys it before an unexpected regulatory change causes a loss. Reviewing the decision means examining what risks were knowable, how they were assessed, and what alternatives existed. Neither the loss nor the amount of research alone establishes decision quality.
Medical Treatment
A patient has a rare fatal reaction to a standard treatment. Reviewing the choice requires the patient’s circumstances, known risks, expected benefits, and available alternatives. The tragic result alone does not establish negligence, and calling a treatment standard alone does not establish that the choice was appropriate.
A MOMENT TO REFLECT
Put it to work.
Think of a time when a good decision led to a bad outcome. How would you evaluate that decision now, considering the alternative histories?
Why do people tend to judge decisions by their outcomes rather than by the decision-making process? How can you guard against this bias?
In what ways might the concept of alternative history change how you assess your own past choices?
CONTINUE THE CONVERSATION
Source texts
- Fooled by Randomness The Hidden Role of Chance in the Markets and in Life (Nassim Nicholas Taleb)