The Outcome Illusion

Why Results Aren’t the Right Scorecard

When results lie

Two investors make decisions on the same day. One buys a speculative stock because a podcast guest sounded convincing. Six months later, it’s up 80%. He calls it one of the smartest moves he’s ever made.

The other calmly rebalances her portfolio, trimming what’s surged and adding to what’s lagged. The market keeps roaring, and she underperforms. She wonders if she overthought it.

Here’s the twist: the first decision may have been reckless, and the second may have been exactly right.

We have a bad habit of grading decisions by how the story ends rather than by how the choice was made. If the result is good, we label the decision smart. If the result hurts, we label it a mistake. I call this the Outcome Illusion: mistakenly judging the decision quality by results rather than reasoning.

It’s a costly illusion, because markets are noisy, the future is unknowable, and luck often shows up dressed like skill.

Casino lessons in disguise

At a blackjack table, everyone playing, or even just watching, knows hitting on 20 is statistically foolish. Draw an ace and win a pile of chips? Great outcome, but still a bad decision. Luck doesn’t rewrite the math.

In Wealth Your Way, I tell the story of Ashley Revell, who in 2004 sold everything he owned, flew to Las Vegas, and put his entire net worth—$135,000—on a single spin of a roulette wheel. The ball landed on red. His money doubled. Fantastic outcome. Reckless decision.

If that spin had landed on black and he lost it all, no one would debate the quality of his choice. But because it “worked,” some people feel tempted to call it bold, gutsy, or even smart. So here’s the real question: how many times should someone bet 100% of their financial future on one spin… and will you be joining them?

Investing is no different. You will make smart decisions that turn out poorly and questionable decisions that work out beautifully. If you only look at the result, it can lead you to ‘learn’ a flawed truth, the equivalent of ‘learning’ that it’s a good idea to hit on 20 in blackjack.

Why this gets more dangerous over time

The Outcome Illusion doesn’t just distort how we see the past. It quietly reshapes how we act in the future.

When a risky move works, we label it skill and take bigger risks next time. When a disciplined decision disappoints, we label it failure and start abandoning the very habits meant to protect us.

That’s how investors drift into trouble: luck gets rewarded, discipline gets sidelined, and risk creeps up while fragility builds. Eventually, randomness turns unfriendly. And by then, the process that once anchored you is gone.

This is why some people look like geniuses right before things unravel. They weren’t brilliant. They were just being paid for risk that hadn’t come due yet.

Process is the only lever you control

You can’t control market returns or economic shocks. You can’t control whether this year will reward caution or speculation. You can control whether your decisions are thoughtful, repeatable, and aligned with your goals.

That distinction runs throughout Wealth Your Way, where I argue that a durable decision process matters more than any prediction.

A good process doesn’t promise good short-term results. It improves the odds of good long-term ones while reducing the chance of catastrophic mistakes. That’s the real objective.

This is also why financial independence is never solely about reaching a number. As we saw in the Finish Line Fallacy, there is no final “arrival” point where decision-making stops. The need for good process doesn’t end when the portfolio grows. It becomes more important.

How the illusion sneaks into everyday life

This thinking error isn’t limited to investing:

Someone regrets taking a stable job because a startup they declined later takes off.
A homebuyer feels foolish for not stretching further after prices rise.
A parent questions a sensible spending boundary because “we could have afforded it after all.”

In each case, the original decision may have been rational based on the risks and information at the time. But hindsight cheats. It judges yesterday’s choices using today’s information. That’s not wisdom. That’s hindsight masquerading as insight.

Breaking the illusion

Escaping the Outcome Illusion requires a simple but powerful shift: separate decision quality from outcome quality.

Start by capturing your reasoning before important financial decisions. Write down why you’re investing, changing allocations, or making a major purchase. Later, judge the logic, not just the result. This prevents hindsight from rewriting history.

Next, practice rewarding good process even when outcomes disappoint. If you rebalanced during a downturn and markets kept falling, that doesn’t mean the decision was wrong. It means you followed a disciplined approach in uncertain conditions, which is exactly when discipline matters most.

Also, be wary of decisions that “worked” if they depended on luck or concentration. A single stock that soars, a speculative bet that pays off, or a risky shortcut that succeeds can quietly train you to take bigger risks next time. A good outcome doesn’t repair a flawed process. It just delays the consequences.

Finally, shift your internal scorecard. Instead of asking, “Did this work?” ask, “Would I make the same decision again, knowing only what I knew at the time?” That question builds consistency. And consistency, over time, is what turns uncertainty from a threat into a manageable cost of investing.

The real scorecard

In the short run, outcomes are noisy and misleading. In the long run, process is the only edge most investors will ever truly control.

If you measure your financial life by results alone, you’ll constantly feel behind, tempted to change course at exactly the wrong time. That’s the Outcome Illusion at work: when luck disguises itself as insight and outcomes get mistaken for evidence of skill.

If you measure it by decision quality, something steadier takes hold: confidence that you’re playing a sound game, even when a few hands go against you. As my buddy, Rob, loves to remind me after a ‘bad beat’ at a blackjack table: “If it makes you feel any better, you did the right thing.”

Over time, the investors who last aren’t the ones who were right most often. They’re the ones who built decision-making processes that could survive being wrong. They understand that markets will always contain an element of chance, and that resilience matters more than brilliance. Denying the role of luck in investing is like building a house on sand and trusting it will stand firm.

Instead of falling for the Outcome Illusion, successful investors manage exposure, control risk, and repeat sound decisions long enough for probabilities to tilt their way.

Brilliance without discipline is just luck with a good publicist.

As always, invest often and wisely. Thank you for reading.

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Originally published at www.CosmoDeStefano.com