Outcome Bias
Judging the quality of a decision by how it turned out rather than by the information available when it was made.
How it is identified
Test: two identical decision processes are evaluated differently solely because their outcomes differed
Unit
qualitative
In depth
In any activity with a large random component, good decisions produce bad outcomes regularly and bad decisions produce good ones, so outcome is a noisy signal about process. Judging by outcome therefore teaches the wrong lessons: a reckless trade that worked gets repeated and a sound one that failed gets abandoned. This is the single most damaging bias for anyone trying to improve, because it corrupts the feedback loop that improvement depends on. The remedy is a decision journal recording the reasoning and expected probabilities before the outcome is known, so process can be evaluated separately from result.
Worked example
An investor risks 30% of capital on one position and gains 60%, and another risks 2% and loses. The first process would eventually be ruinous and the second was sound, and only the outcomes are visible.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Outcome Bias” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.