When Good Decisions Go Bad: Investing Across Developed and Emerging Markets

There’s a saying I keep coming back to — one that rings especially true in investing:

"Just because something good happened doesn’t mean you made a good decision — and just because something bad happened doesn’t mean you made a bad one."

Annie Duke, Thinking in Bets

In investing, it’s easy to confuse the quality of our decisions with the quality of the outcomes. This confusion becomes even more pronounced when we compare developed and emerging markets.

What’s the Difference?

Developed markets — like the U.S., Western Europe, or Japan — tend to offer stability, liquidity, and transparent regulation. They’re "paved roads" in the investment world. The ride might not be thrilling, but you generally know where you're going.

According to the MSCI Indexes, developed markets accounted for nearly 70% of global market capitalization as of 2024, with the U.S. alone making up ~60% of the MSCI World Index. In contrast, emerging markets made up just 11% of global equity market cap — despite representing over 80% of the world’s population and roughly 60% of global GDP growth.(Sources: MSCI, IMF World Economic Outlook)

That said, recent years have shown that even the most established markets aren't immune to political dysfunction. The U.S., typically the gold standard for market confidence and institutional credibility, has exhibited characteristics that in other contexts might be associated with emerging markets — from policy volatility to debt ceiling brinkmanship and deepening political polarization.

For instance, in 2023, the U.S. faced a credit rating downgrade from Fitch Ratings, which lowered its sovereign debt rating from AAA to AA+, citing “erosion of governance” and “repeated debt-limit political standoffs.”(Source: Fitch Ratings, August 2023)

Under the current presidential regime, this erosion in perceived reliability has blurred the lines. Still, under more normal circumstances, the U.S. remains the benchmark for developed market strength and leadership.

Emerging markets — think Brazil, India, or Vietnam — are more like dirt roads with uncertain weather. The potential speed is exhilarating, but so are the potholes. Currency risk, political instability, and uneven corporate governance are just a few of the variables that can blindside even the most thoughtful investor.

The Process vs. the Outcome

If you buy a fundamentally strong business in a developed market and it underperforms for a few years, that’s not necessarily a bad decision. The outcome doesn’t change the integrity of the process.

Conversely, a lucky punt on a flashy stock in an emerging market that doubles overnight might feel like a win — but that doesn’t make it a repeatable strategy.

I've made both kinds of calls. I’ve held onto a company with great fundamentals, only to watch it stagnate in the face of macro headwinds. And I’ve watched speculative bets in emerging markets explode — for reasons I couldn't have predicted or replicated.

Historically, emerging markets have exhibited higher volatility. Over the past 10 years, the annualized volatility of the MSCI Emerging Markets Index was around 17%, compared to 13% for the MSCI World Index.(Source: MSCI Performance Data, 2024)

Yet, returns don’t always follow the risk: from 2013 to 2023, the MSCI Emerging Markets Index returned an annualized 2.3%, while developed markets (MSCI World) delivered 8.3%.(Source: MSCI Index Factsheets)

So, Which Market Is Better?

The truth is: neither is inherently better. It depends on what kind of investor you are and what you’re optimizing for. Developed markets reward consistency and discipline. Emerging markets reward risk-taking — but they also punish it, often severely.

Final Thoughts

The lesson is this: focus on your process, not just the scoreboard. Especially when investing in more volatile environments, it’s essential to separate decision quality from outcome.

Yes, the process should be sound and repeatable, but it must also be flexible and dynamic enough to adapt to regime changes, structural shifts, and uncertainty. In today’s world — where developed markets occasionally resemble emerging ones — adaptability is just as important as discipline.

Because in the long run, the markets will always test your conviction. The only thing that holds up through it all is a thoughtful, evolving process — whether the road is paved or not.