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Making Complex Decisions: Evaluation, with Lawrence Summers, Former Director, White House United States National Economic Council
I always believe in looking back at decisions that I’ve made and trying to learn from them. The first thing that’s essential to understand is that good decisions don’t always produce good outcomes and bad decisions don’t always produce bad outcomes. Take a classic example. You can bet on the flip of a coin. If it comes up heads you win $300. If it comes up tails you lose $500. A hundred percent of the time it’s a mistake to make that bet. But sometimes the person who makes that bet will do better than the person who doesn’t make that bet. But the fact that you’ve got a good outcome doesn’t mean it was a rational or a good decision. See, you can’t judge an individual decision by its consequences.
How can you judge an individual decision? You can judge it by whether it was rational and thoughtful on the basis of the information that was available at the time. So I told my colleagues when I became the head of President Obama’s National Economic Council, I said that in the course of our work together I was confident we would make recommendations which, with the benefit of 20/20 hindsight, we would have made a different recommendation–the world was uncertain, we couldn’t judge everything–and then I would not feel we had done badly if we made a recommendation that with the benefit of hindsight we would have made a different recommendation.
What I would feel badly is if we made a recommendation and we described the possible benefits, costs and risks associated with the recommendation and then something happened that we had not considered as a possibility, that we might well say that there was a ten percent risk that something would happen and on balance we thought it was better to go ahead despite that ten percent risk. If that risk happened, well, we said there was a ten percent chance that it would happen, and that would not mean we made a mistake. But if we said the major risks were A, B and C and then something D that we had not contemplated at all happened, then I would feel we had done a poor job because we had not thought widely enough and carefully enough about all the possible consequences of the action in which we are engaged.
So my approach to judging decisions is not to simply look at the consequence but is to look at whether the process was careful and thoughtful, whether the entire range of possibilities was well articulated and thought through, and whether there were alternatives that should have been considered that were for some reason excluded–because that, too, would represent a failure of the decision making process.