Counterfactual is a word coined in the 1940s that describes a world, scenario, or outcome that didn’t actually come to fruition.
Counterfactuals are deeply ingrained in the more commonly discussed concepts of opportunity cost and being ‘process-oriented’ instead of ‘outcome oriented’.
Opportunity cost is essentially a quantification of a counterfactual: if I had done X instead of Y, how much time or money or whatever else I want would I have?
The right way to make decisions in practical life is based on your opportunity cost. When you get married, you have to choose the best spouse you can find that will have you. The rest of life is the same damn way. – Charlie Munger
People who are dating imagine counterfactuals all the time – most people are familiar with the distinct feeling that it is much easier to have people attracted to you when you are taken than when you are single. Part of that might actually be due to being more confident or put together or pheromones, but I’d wager no small sum that the majority of that feeling is just bad counterfactualizing. When you are taken, every guy or girl that smiles at you is single and looking to date, when you’re single, you’ve got to swipe right 50 times before someone matches. Clearly perception is not reality here. But that doesn’t matter to the taken person, because they’ll never have to find out.
Trust the Process
Sam Hinkie is famous in basketball circles for his commitment to the process. Though his own team’s management didn’t trust the process enough to see him through, it seems three years of his process has been enough to totally turn around the despondent 76ers franchise. His process was to be bad, get good draft picks, and then draft players they thought had the most upside. NBA drafts are notoriously unpredictable, but Hinkie’s insight is that if you just trust the process (and, ahem, keep losing) until you get the players you need, eventually you’ll have a championship contender.
By now most people are familiar with the concept of being process oriented instead of results oriented. This is especially important in areas that are highly luck dependent. Outcome oriented people get themselves stuck in grooves far too easily. The human brain has a knack for seeing patterns in random noise. If you don’t believe me, just wait a week on any financial site and you’ll see somebody comparing the current market to some market that happened in the past based on the charts looking sort of similar if you squint a little and mess around with the axes. Inevitably the charts diverge, as they always do, but humans have a deep desire to want to find the pattern and get ahead of it.
Being process oriented means creating your process ex ante and then making the best decision you have with the information at hand. You are happy if you made the best decision you could have, and the outcome is in the hands of fate.
Alea iacta est.
The die is cast. – Julius Caesar, 49 BCE
Being process oriented has been understood since before recorded history, and Julius Caesar may have held the title for most famous quotation about it for the past couple of millennia. Caesar said the above quote when he was crossing the Rubicon river at the head of his army, initiating a civil war. At that time nobody could be certain what would unfold, but Caesar understood, the forces that would determine the outcome were already in motion. All he could do now was trust his process.
The Rise of Stoicism
Stoicism has generated an almost cult-like following over the past few years, and no shortage of pop-philosophy books. I won’t try to boil stoicism down to a sentence (there’s an author whose name rhymes with Myan Molliday if you want that), but I think a big part of the rise is that it is a digestible narrative that explains being process oriented.
I keep a version of the following quote on my desk:
Well then, man: do what nature now requires. Set thyself in motion, if it is in thy power, and do not look about thee to see if any one will observe it; nor yet expect Plato’s Republic: but be content if the smallest thing goes on well, and consider such an event to be no small matter. – Marcus Aurelius
My version doesn’t have the thys, but it’s the same gist. Marcus Aurelius understood that all you can control is doing what you can. If things go your way, you should be very happy, if not, you did what you could and are doing what you can. The process oriented person can be happy with themselves, the outcome oriented person needs validation from the outside world, or worse, from the goddess of luck.
The good stoic understands that counterfactuals must be considered before making a decision, but once the die has been cast, they cease to exist. And that reality is neither good nor bad.