Case studyDecision principleCrises and market historyDecision-making
Judge a decision on what was knowable at the time, not on how it turned out
Inside the Meltdown · 2009
The idea
Inside the Meltdown was made while the wreckage of 2008 was fresh, which makes it a rare thing: an account with no hindsight. It shows what the people in the room actually knew on the weekend Lehman failed, which was far less than later accounts assume. That is the standard any decision should be judged against. The film is useful as evidence for the principle Thinking in Bets argues: the quality of a decision is a property of the information and the reasoning available at the moment, and the outcome is only a noisy signal about it.
The fair test of a decision is the information available when it was made; hindsight is a different exam.
When it works
Discussing the Lehman decision, or any post-mortem where later knowledge is contaminating the judgement.
When it may fail
Contemporaneous accounts have their own blind spots: the people in the room may have known less than they should have. Not knowing can itself be the failure.
How to use it
In a post-mortem, write a timeline of what was known when, before writing what went wrong. Then judge each decision against the line above it, not the line at the bottom.
Where it came from
Documentary Inside the Meltdown · 2009
What the source says. A contemporaneous account, made while the wreckage was fresh, useful precisely because it has no hindsight and shows what was actually known at the time.
Connected ideas
Says something similar
A good decision and a good outcome are separate thingsJudge a decision by what was knowable when it was made, and keep the outcome in a separate column.
Puts it to work
Illiquid and insolvent are different problems with different rescuesLending cures illiquidity; only capital cures insolvency. Decide which problem you have before choosing the remedy.
Concepts
Put it to work on L3VLUP
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