For as long as human beings have had the ability to communicate, people have been saying “I told you so.” The tendency to think that we can foresee events is pervasive.
We like to think that we can predict what will happen, but when outcomes prove otherwise, we still cling to this false sense of accuracy. Hindsight is always 20/20. But when we fail to have perfect hindsight it can shake our worldview and our self-identity.
Most people like to think the world is predictable and stable. However, that is often not the case. When that happens, it creates an uncomfortable feeling. That feeling has to be resolved in some way.
Definition of Hindsight Bias
Hindsight bias is an implicit cognitive bias that occurs when people overestimate their ability to predict outcomes, after the fact.
For example, although someone may make a prediction, when that prediction fails to materialize, they are likely to say that they “knew it all along.”
This is a way of restoring cohesion to a world that is sometimes unstable. It also serves as a defense mechanism. No one likes to look bad, so saying that we knew something was going to happen helps restore our self-esteem.
Hindsight bias is so prevalent you can see it happen nearly every day. Examples exist for trivial events, such as if it will rain or not, to significant historical events involving economics and wars.
Examples of Hindsight Bias
1. Predicting the Stock Market
Being wrong about stocks can be devastating. It can be a real blow to one’s confidence and bank account. It is no wonder that people in this profession have a lot of stress.
As in other industries, professional stock brokers also exhibit hindsight bias. For example, there may be a group meeting to discuss potential buys. Many opinions are expressed, some for and some against certain stocks.
After the team has selected a few stocks to invest in, then spent a couple of million to buy a bunch of shares, if one fails, you will likely see a range of reactions, including the hindsight bias.
The first words out of the mouth of some might very well be, “I knew it was going to go down.”
Of course, statements like that are not going to make anyone feel good, except for the person that said it.
2. Hiring Decisions
The HR department of any company faces the tough task of hiring. Lots of resumes may look good and many candidates can perform well in an interview.
But at the end of the day, it is still a gamble. You just never know.
After three months on the job, the person hired may be great, or, they may be a complete train-wreck. If the recent hire works out well, then the HR guru will conclude “My gut told me they were right for the job.” On the other side of the coin, if the person didn’t work out, the HR manager might say “Well, I had a bad feeling about that person all along.”
Either way, the blow of making a bad decision can be softened by using the hindsight bias. Claiming that you knew it all along is a way to be right, even when you were wrong.
3. In Relationships
“I knew he was trouble,” or “I tried to tell you she was bad news,” are words we have all heard before.
Unfortunately, when it comes to relationships, finding the right one can involve going through a long list of “not the right one.” This is just part of the journey.
In the beginning of a relationship, our judgment can be clouded by hope and hormones. When things go sour and the inevitable heartbreak unfolds, we can rely on our trusty friend the hindsight bias. Whether it comes from ourselves or our circle of good friends, feeling that we knew it all along can make us feel just a tiny bit better.
4. Introducing New Products
Business decisions regarding product lines can involve putting a lot on the line. The company may have spent millions of dollars in R&D for a new product, and once a decision is made to introduce it to the market, more money will be spent on advertising.
If the product fails, the company will have lost a lot of money and wasted a lot of resources. When that happens, you can observe a lot of hindsight bias in action.
For example, some of the decision-makers may complain that they didn’t have enough information about a competitor’s product. If they had known, they would not have gone through with the business plan.
5. Military Actions
If you are looking for controversy, then this example is right for you. There are certainly plenty of wars to choose from, one of the most recent was the invasion of Iraq.
The U.S. claimed to have evidence of weapons of mass destruction (WMD). However, after the invasion, none were found.
That’s when many journalists really changed their tune. Before the invasion, you could find numerous articles supporting the premise that WMDs were there.
After the war, not so much. In fact, articles began to call into question the legitimacy of the pre-war data. Holes could be found in the logic and questions of validity were now abundant, albeit after the fact.
This is a classic example of the hindsight bias if there ever was one.
6. The Monday Morning Quarterback
While watching American football on TV one can really appreciate the modern game.
With playbooks that are hundreds of pages thick and athletes that are smarter and more physically gifted than ever before, the game has become both an intellectual and athletic competition.
The teams are so balanced across the league that on any given day, anyone can win. This makes predicting the outcome especially difficult. However, that doesn’t stop the Monday morning quarterbacking that occurs at the office.
We can often see a few people making claims that the coach “should have known” that play was going to be called by the other team; “it was obvious.”
7. A Broken Plate
When cleaning out the cupboards in your kitchen, you place a plate on the counter, but a little off of the edge.
As you go about cleaning you make a quick turn and accidentally knock the plate off the counter. Of course, it shatters on the floor below.
In addition to feeling guilty for being so clumsy, you might just tell yourself, “I should’ve known not to put it on the edge”. You could easily start to blame yourself for “not knowing” that it was going to fall.
This is an example of the hindsight bias because the person feels that they should have been able to foresee something happening, even though they did not.
8. Betting on Horses
Going to the track can make for a very exciting day. A lot of tracks allow betting and will provide a small booklet that contains detailed information about the horses in each race.
The information will include the horse’s record, how much it weighs, whether it prefers hard or muddy tracks, etc.
Placing a bet can be a lot of fun and watching the horses gallop at full speed around the track is an exhilarating experience as you can imagine. Trying to predict the winner is a lot harder than it looks, and most people fail.
But one thing is certain, at the end of each race you can hear dozens of people claim, “I knew he was going to win!” This is a classic example of hindsight bias; thinking you knew something was going to happen, even though you didn’t.
9. The Courtroom Jury
Defendants and victims alike can fall prey to the hindsight bias. Imagine a scenario where the defendant is being charged with shooting another person. The defendant claims they did not know the gun was loaded, and they thought the safety was on.
At the time of the incident, it may have been perfectly reasonable to have those assumptions. The gun is usually not loaded and the safety is usually on. Yet, this was not the case, which can lead the jury to hindsight bias.
From the jury’s perspective, the defendant should have known, and they may overestimate the likelihood that the defendant did know. This is a perfect example of hindsight bias that can have severe legal consequences.
(Juries also often exhibit unconscious bias when making decisions.)
10. Political Mistakes
It’s almost a national sport to call politicians incompetent. We look at the ballooning expenses in infrastructure projects, broken promises, and poor decisions.
We can sit back and roll our eyes at their incompetence, but it turns out that no one can really do a great job at running a country too well. If we were to do it, we’d likely do no better. And it’s hard to find a perfect politician in history. Most get voted out and leave office with their tail between their legs.
This national sport of saying “all politicians are incompetent” is probably frustrating from the position of the politician who is making imperfect decisions with imperfect information and relying on all the cogs in the machine to function perfectly, even though it’s outside of their control.
11. Teacher Reprimanding a Student
Teachers often reprimand students for decisions they made which appeared silly at the time, but that the child just didn’t know better about.
As a child, you have less experience and knowledge to rely upon to make your decisions. You’re still at a lower developmental stage, and you need to make decisions on the run!
Teachers often yell condescendingly at children nonetheless, and the child has to sit there and take the reprimand despite, likely, having tried their hardest to do the right thing in the first place.
The teacher, meanwhile, has probably made countless mistakes in their life. Now, they’re standing there passing judgement on the poor child as if they were perfect their whole lives!
12. Winners Attributing their Success to Skill
While we usually think of hindsight bias as someone looking back and thinking “you could have done that better”, it also works in the opposite direction: a person looking back and attributing luck to skill.
For example, a winner of a contest might look back and attribute their success to skill. This might help them sleep easy at night with all their amassed money, thinking they’re somehow superior to everyone else.
But that winner may have had a whole lot of luck in their lives. Here, hindsight (“I made such a clever decision back then!”) may have just been in the right place at the right time, given that they really were unable to predict the future.
Hindsight bias is a very common cognitive distortion of our ability to foresee the future. Examples of this bias can be seen in our friends, colleagues, and recognized experts in a wide range of domains.
Sometimes the consequences are minimal, such as the Monday morning quarterbacking from fans. However, there are other instances in which the hindsight bias can lead to serious outcomes, such as when a courtroom jury uses hindsight to reach a verdict.
This bias serves a purpose. It helps human beings maintain the illusion of a world that is predictable and stable. When confronted with circumstances that are inconsistent with this world-view, it is adaptive to utilize a relatively simple unconscious twist of logic to restore order.
The cost is minimal, but the result is invaluable.
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