Process vs Outcome

Continuing with the previous article’s theme, I want to make sure that the right mindset is being laid. This will help the investor to follow along with the articles written, and most importantly to set themselves up for the highest probability of success.

I’m currently reading a book titled “More than you know” by Michael Mauboussin. Great book so far (I’m a quarter of the way through) that is filled with plenty of wisdom. In the first chapter, he discusses the importance of focus on the process vs outcome. Put plainly, the results of your actions alone are not the complete judgement nor accurate representation of your decision making capabilities. It fits perfectly with the focus on our thoughts because thoughts impact how we feel and what we do. Therefore, healthy thoughts can lead to healthy decisions/processes. Unhealthy thoughts, or thoughts built on whims and desires can lead to an inferior process, regardless of whether the outcome was positive or negative. This reminds me of this saying: “If you accomplish something good with hard work, the labor passes quickly, but the good endures; if you do something shameful in pursuit of pleasure, the pleasure passes quickly, but the shame endures”- Musoniud Rufus

For example, if you bought bitcoin at $1,000 dollars because you thought it was the next big thing (built on whims and desires for quick riches), the fact that it hit over $100,000 at its peak does not mean you made the smart decision. If someone played the lottery 10 times and won on one of those tries, telling someone else “you should play the lottery because look at my success” is a sure way to make the other person lose thousands of dollars on something that is extremely improbable. This is of course setting aside the fact that it is haram to even play the lottery.

On the other hand, if someone studied a company, looks at its balance sheet, sees that the management is very competent, and the cash flow is very healthy to the point where the company is virtually debt free, and decides that he/she wants to be part owner of that company to reap the benefits of its profits, then that’s a good process and decision. They thought about their decision using solid principles and convictions based on facts and observations. Now when the person buys the company, a recession hits. Its value and income decreases. For a period of time, the investment loses value, and may or may not ever recover their principal. From those two, who would you rather be?

Many may think I’d rather be rich than right. That may be true in a narrow time frame. A specific point in someone’s life. But when you extrapolate over the life time of a person, in the long run, a good process with the occasional bad outcome is better than a bad process with the occasional good outcome. And that right there is what we will keep in mind as Muslim (or ethical) investors. I’d rather invest in a halal manner that pleases Allah (SWT) and forgo certain income/profits, because in the long run, it’s what’s better for me and my akhira (afterlife). I am also willing to go through what it takes to look for halal options in the stock market (good process built on solid thoughts) instead of completely blocking myself off because of a false perception that all of the market is haram or that it is equivalent to gambling (bad process built on weak thoughts).

One last analogy to take it home. No one thinks doing all your worship and going above and beyond in Ramadan alone will save you and help you attain paradise. However, the person who does their daily prayers, zakat and sadaqah, is kind to others, (if married) is good to their spouse and takes care of their children, and fasts Ramadan (without the extras of the first person), that person surely wins. There is a saying paraphrased from a Hadith:

قليلا دائما خير عن كثيرا منقطع

A little that is continuous is better than a lot that is interrupted. Building a mindset that will last decades and provide a healthy approach to investing is done one thought at a time. One process implementation and iteration at a time. Always choose process over outcome. In the end, a good process is the best outcome.

Thank you for reading. Keep searching forward.