I studied hard for months, failed the exam, concluded I was using the wrong method, switched, and did even worse.
Outcome bias is a phenomenon where we judge the quality of decisions based on the outcome and not on the decision-making process itself. This process is extremely mischievous, because to update our beliefs we are absolutely required to judge our decision and actions based on the outcome.
Peter Thiel put it best:
I think failure is massively overrated. Most businesses fail for more than one reason. So when a business fails, you often don't learn anything at all because the failure was overdetermined. You will think it failed for reason 1, but it failed for reasons 2 through 5. And so the next business you start will fail for reason 2, and then for 3 and so on.
But to make matters worse; this is also true for successful outcomes, and on some levels it is even more brutal. Mislearning from failure doesn't leave you entrenched in the wrong action, while mislearning from success does. It seemed like the action produced the desired outcome before, why won't it now?
Life is not only a multivariate problem, but also a time dependent one. Attributing certain actions to outcomes is difficult in and of itself, but it is even more difficult when the outcome is delayed. Unlucky streaks nudge our decisions away from the correct attribution so we "correct" in the wrong direction and end up worse off.
Luckily for us, extreme negative outcomes after good decisions are statistically likely to be followed by more average outcomes even if we change nothing.
The lesson is this - change course by degrees, not by U-turns; be patient to account for delayed feedback; and introduce small changes to your strategy to limit further mislearning. This prescription assumes that your inherent course of action was at least directionally correct.