There are distinctive patterns in the errors people make. The reasons for this are many. Daniel Kahneman in his excellent work “Think Fast and Slow,” takes his reader down a thoughtful path to uncover how and why we make decisions – how and why we make the same mistakes over and over again.
Kahneman explains why observable error gives us our greatest opportunity for success. It is the opportunity to identify fallacious thinking so that we have greater odds of success the next time we’re presented with a similar situation. In this way, errors are the parents of good outcomes. We simply learn best after we’ve stepped in it. But even after we’ve made great decisions there’s another covert, more hidden form of “error,” – luck.
It takes a slight nudge in paradigm to view luck as favorable error – but that’s exactly what it is. Most of us prefer to take credit or discredit for an action, but we feel uncomfortable handing over outcomes of personal or professional success to that blind god of fate called luck. This is an especially difficult concept within financial services because we all want to be smart. We all want to believe our intelligence is the key component of our success – but often it plays a very minor role. It doesn’t rain because you have an umbrella – it just rains.
I agree with Kahneman, as we make decisions that don’t end well we have the greatest opportunity to elevate the probability of the next decision rendering better results. Error is like bricks in a wall, and to the extent we can build upon error we can build stronger, more stable lives.