Process Over Outcome Rule
Judge decisions by disciplined execution, not isolated results
- Difficulty
- Moderate
- Time to result
- ~ongoing to results
- Steps
- 6
- Confidence
- 98%
The rule separates decision quality from outcome quality. Before acting, define what information matters, how exposure will be managed, and what actions follow from changing conditions. Under pressure, execute those rules rather than improvising to avoid embarrassment or chase a favorable result. Afterward, reconstruct what was known at each point and assess whether the process was followed. A loss does not automatically mean the decision was wrong, just as a gain does not prove it was right. Improvements should come from recurring evidence about the method, not emotional reactions to one trade. Over many repetitions, this protects discipline, supports learning, and allows a sound edge to express itself despite unavoidable short-term variance.
Origin
Todd Harrison illustrated the rule with a losing First Interstate options trade at Morgan Stanley that his boss judged correct because Harrison followed the proper trading process.
Core principles
- 01A sound process can produce a bad short-term outcome
- 02One result does not validate or invalidate a method
- 03Rules matter most when pressure and uncertainty are highest
- 04Long-run consistency is more controllable than any single outcome
How to run it
- 1
Define the rules in advance
Specify how information will be evaluated, how exposure will be managed, and what actions different conditions require.
Pro tip Write the rules while calm, before money or reputation is at risk.
Watch out A vague intention is not an executable process.
- 2
Act on available information
Make the decision using only what is legitimately known at the time. Do not assume access to hidden information or future outcomes.
Pro tip Timestamp important observations and decisions.
Watch out Hindsight must not be allowed to alter the historical information set.
- 3
Stay disciplined under pressure
Follow the predefined sequence even when fear, excitement, or social pressure rises. Manage risk without abandoning the method merely to avoid a possible loss.
Pro tip Use checklists for decisions made in fast-moving environments.
Watch out Process discipline does not mean refusing to respond to genuinely new evidence.
- 4
Reconstruct the decision
After the outcome, document the sequence of events and explain why each action made sense at that moment.
Pro tip Describe the decision before looking at the final profit or loss when possible.
Watch out Do not omit uncomfortable actions that weaken the narrative.
- 5
Grade process and outcome separately
Score whether the rules were followed independently from whether the result was favorable. Identify luck, variance, and genuine process failures.
Pro tip Maintain separate fields for decision quality and financial result.
Watch out Profitable mistakes are still mistakes.
- 6
Revise only with evidence
Change the process when repeated outcomes or new knowledge reveal a structural flaw. Preserve rules that remain sound despite isolated losses.
Pro tip Look for patterns across a sample of comparable decisions.
Watch out Constantly changing rules prevents any process from being evaluated fairly.
In the wild
Harrison sold options to a customer, managed the resulting exposure, and later learned the underlying company had been acquired. The trade lost heavily, but he explained the sequence to his boss and demonstrated that he had handled the available information correctly.
→ His process was validated despite the loss, and he was promoted that year.
Common mistakes
Equating losses with bad decisions
A disciplined decision can lose because uncertainty cannot be eliminated. Automatic blame encourages future rule-breaking.
Rewarding profitable violations
A lucky gain from ignoring controls teaches the wrong lesson and increases the likelihood of a later catastrophic loss.
Using process as an excuse
Process discipline is not immunity from criticism. Repeated failures should trigger a rigorous review of the rules themselves.
Is it for you?
Best for
Traders, investors, and leaders making repeated high-stakes decisions under uncertainty.
Not ideal for
It is not ideal when the existing process is undocumented, unethical, or demonstrably based on false assumptions.
From the transcript
“you have your process. You stay to your process.”
“Sometimes it's gonna work, sometimes it's not gonna work.”
“But if you stay true to your process over the course of time, it's gonna work out pretty well.”
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Todd Harrison