Investment leaders operate in a high-stakes world where every decision carries weight. Yet, one of the biggest risks isn’t found in market data or economic forecasts — it’s in their own judgment. The tendency to confuse luck with skill can lead to overconfidence in bull markets and misplaced blame in downturns. Leadership in investing requires the ability to separate process from outcome, ensuring that decisions are evaluated on their merit, not just their results.
This is the final post in my series about leadership-focused self-improvement. I’ll be speaking about these topics during a panel discussion at CFA Institute LIVE 2025. This is a quick read reminding us about the hidden trap sabotaging our decisions: our egos.
Our egos are hardwired to fall into the trap of confounding luck and skill.
Suppose you decide to drive drunk and you make it home safely. That was a bad decision with a good outcome.
One week later, after a good night of drinking Zinfandel, you ask a designated driver to drive you home. The driver gets into an accident. That was a good decision with a bad outcome. (Setting aside that you drank Zinfandel, which clearly is a horrible decision.)
Because of randomness, outcomes are often silent on the quality of decisions. Worse, they can mislead. In a world in which we can’t predict much of the future, good decisions can lead to bad outcomes, and bad decisions can lead to good outcomes. In the business of investment management, we say there’s “randomness.”
To manage this, investment leaders must be clinical about their wins and losses.
Confusing Luck and Skill in the Investment World
This problem is acute in the investment world. You can make money, at least for a while, by making bad decisions like holding a concentrated portfolio or investing in fads. If you don’t examine your process and the quality of your decisions, in other words, if you only focus on outcomes, you may think you’re an absolute genius. But you’re unlikely to be a successful investor in the long run.
Annie Duke’s excellent book, Thinking in Bets, has become required reading in the investment world. Duke is a business consultant and ex-professional poker player. She explains that we instinctively associate good results with good decisions and bad results with bad decisions. She calls this instinct “resulting.” But in poker and many aspects of life, “winning and losing are only loose signals of decision quality,” she says.
Differentiating Between the Two
To help differentiate between the two, cultivate self-awareness. Focus on your decision-making process rather than outcomes. When you’re winning, remember that luck may be involved. This is hard. We all have this reflex of wanting to take credit for our wins.
And if you miss your target, don’t beat yourself up. Is it possible you made the right decisions but got unlucky? That’s easier to tell yourself.
Quoting one of my mentors:
“There are only two types of investors: those who are talented and those who are unlucky.”
Key Takeaway
Great investment leadership isn’t about being right all the time — it’s about fostering a process that prioritizes sound decision-making over short-term outcomes. By recognizing the role of chance and reinforcing analytical discipline, investment leaders can build more resilient strategies and teams. In an unpredictable financial world, the best leaders don’t just chase returns, they cultivate the judgment and processes that drive sustainable success.
Sébastien Page, CFA, is the author of The Psychology of Leadership.
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