Mule or Jackass?

So . . . I was eventually going to write about outcomes and how they affect decision-making and our evaluations of decisions. I had originally intended to do this in the context of sports (and probably still will) but an article I read in today's Globe and Mail proved to be the perfect vehicle. This guy in Vancouver was struggling with his new business and decided to become a mule for pot dealers. He was arrested trying to cross into the U.S. with 15 kilos of marijuana in his backpack. Yes, I know, dumbass move. What caught my attention, however, was the following quote:

"When they gave me the backpack, I knew I'd made a mistake, but by that point I was in too deep and had to commit to it. I didn't know who else was involved or how serious of a nature these people were.”

Now I don't know this guy Neary, have never met him, and likely never will. But I think he's lying, to us and to himself. I think that he knew he'd made a mistake, but not when he got the backpack - I think it happened when he got caught. Because you know what? If he knew he'd made a mistake when he got the backpack, he would have turned back (and suffered the consequences from the others who were 'serious in nature'). I also think he knew he might be making a mistake when he signed up for this job. After all, what did he expect when he agreed to smuggle illegal drugs? Kittens and grandmas?

I think that he (like most people) has a problem with outcomes and decision-making. Specifically he (and we) tend to retrospectively judge decisions by their outcomes, when the outcome information is not known at the time we make the decision. We use this information naively to form beliefs about the world and our lives.

Let's engage in a counterfactual. Let's say Neary didn't get caught. Would he have still 'known he made a mistake?' I think not. I think he would have had misgivings all along and been nervous, but if the mission had been a success he would have even possibly done it again. The misgivings he had became the knowledge of his mistake only when he got caught. Even if successful, would ten grand have saved his business, or just helped it limp along a little while longer? In other words, what was the long-term upside?

There are other indications in the story that Neary has an outcome problem. He was a successful Telus executive credited (at least partly) with their successful animal-themed ad campaign, and parlayed this success into founding his own firm. He took the outcome of a successful ad campaign and inferred from it that he was capable of running his own advertising firm. He ignored other considerations (e.g. others were involved in creating the campaign, luck, timing, competitive actions, etc.) that may have caused this outcome.

Then, when his ad firm was failing, he "worked 400% harder." This means that he took the outcome of his firm's failure and formed the opinion that it was caused by factors within his control, namely effort. Businesses fail all the time, and some are run by smart, diligent people. It just happens (luck, outside factors). Maybe he wasn't that great an advertiser to begin with, or maybe he was and had bad timing (his firm was launched shortly before the recent economic downturn). The point is that the outcome is not necessarily indicative of his skill or effort or judgment, but could be due to factors outside of his control or awareness. He took a risk (entrepreneurship) and it did not pan out. As a result, he took a bigger risk (smuggling) and it did not pan out either. But the fact remains that he took these risks with at least the potential negative outcomes available for him to consider (whether he did or not is unknown).

As an outsider evaluating someone else's decisions, it is easy to 'know better.' With the benefit of hindsight no one would make decisions that result in negative outcomes. I don't fault Neary for starting his own ad firm - without entrepreneurs taking risks we would not have an economy. I do fault him for trying to support his business with mule money, because a simple probabilistic cost-benefit analysis would have shown this was a bad bet.