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Decisions and Outcomes

It is statistically possible for a manager to pinch hit for his best player in Game 7 of the World Series and have the scrub off the bench win the game with a hit.

That doesn't mean it was a good move.

Good outcome, bad decision.

In the entrepreneurial world, there are lots of examples of great teams being funded for good ideas that still don't make it. For the VCs, they're stuck having to explain away bad outcomes, even though, given all the available information at the time, the initial bet was a good one.

Good decision, bad outcome.

Too often, entrepreneurs mistake announcements of findings and exits in the press as signs of successful decision making. Just because the brand name startup you know about got funded doesn't mean that was a good decision to invest.

In fact, many good investments begin as seriously bad decisions. Investors will tell you what they saw in the team before the pivot in hindsight, but they're just rewriting history.

Over the course of your tenure as an investor or an entrepreneur, you should focus more on the quality of your decisions regardless of outcome. Noise and randomness will wreak havoc with your results, but over time these things go away--and good decision makers win.

That's why I like the portfolio approach to investing. I know that if I get great access to the best people working on the most interesting ideas, and I seed (at reasonable valuations) 30 of them, while helping them to reach their goals, I'll do fine. I'm aiming more to make 30 great decisions than trying to reverse engineer 30 successful outcomes.

So the next time you make a strategy decision, choose an investor, pick a startup, ask yourself the following:

"If I made decisions like this all the time, based on these motivations and information, do I think I'll come out ahead over the long term."

What this points to is that people get in trouble more often when they convince themselves that what they have is a special circumstance--where you'd never normally do this, except in this one case. That's not only a great way to make bad decisions, but eventually the bad outcomes will catch up with you.

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