How Hindsight Bias Works: 3 Common Effects of Hindsight Bias

Hindsight bias is a metacognitive phenomenon in which people become convinced they knew the outcome of an event before it happened. In fact, this type of cognitive bias is almost always a memory distortion where people misremember the timeline of their cognitive processes. In social psychology, it is sometimes referred to as the “I knew it all along” effect. It’s similar to sense-making in which someone makes meaning of an experience in retrospect.

Examples of hindsight bias exist in many corners of daily life. When financial markets boom and bust, some financial analysts and reports retrospectively give attribution to past events they did not mention earlier. Sports fans might also express overconfidence in their ability to anticipate events that transpired in a game even though, at the time, they did not criticize the players’ and coaches’ decision processes. This specific brand of hindsight bias is sometimes referred to as “Monday morning quarterbacking.”

People experience hindsight bias when they inadvertently blend outcome knowledge with things they really did know in advance. This is a byproduct of the human capacity for adaptive learning and heuristics, when your mind forms neural pathways to help you remember new knowledge and alter your ways of thinking.

Two particular culprits in hindsight bias are the availability heuristic, where you show a bias toward choosing immediate examples that come to mind, and the representative heuristic, where your mind immediately picks a stock representative for a person or a thing. Even though heuristics can be helpful in day-to-day decision-making, they can throw you off base when it comes to pondering events that occurred in the past. These processes bias you toward picking the first thing that comes to mind, obscuring the more complex, nuanced events that may have actually taken place.

According to business management professors Neal Roese of Northwestern University and Kathleen Vohs of the University of Minnesota, hindsight bias produces three downstream effects.

1. 1. Memory distortions: In 2012 in Perspectives on Psychological Science, Roese and Vohs argued that hindsight bias can tamper with your analysis of your own memories. This has been further explored in subsequent research.
2. 2. Sense of inevitability and determinism: Hindsight can affect decision-making by convincing people that events were inevitable when in fact they were the result of many small factors converging by random chance. Decision makers’ perspectives can be skewed if they cannot properly assess what they knew before an event occurred.
3. 3. Overconfidence in predictive powers: Roese and Vohs’ view that hindsight bias leads to unhelpful overconfidence is not a new one. A 1988 paper titled “Eliminating the hindsight bias” in the Journal of Applied Psychology states that, in retrospect, people overemphasize the likelihood of their ability to predict an event.

By understanding hindsight bias and taking steps to avoid it, a person can make better decisions based on their current knowledge. Consider three ways to avoid hindsight bias in your own cognitive processes:

1. 1. Keep a journal or a diary. By keeping a steady record of your activities on a given day, you create a source you can refer to if memories become hazy. Most journals and diaries are written, but some people prefer keeping audio diaries or even video diaries. A journal becomes a natural check on hindsight bias and keeps you from conflating the outcome of the event with the knowledge you had beforehand.
2. 2. Check yourself against unhelpful heuristics. Everyday heuristics—like the availability heuristic and the representative heuristic—help you quickly process information, but they can also distort your memories. As you recall the past, avoid rushing your memories. Take care to ensure you’re remembering things as they actually happened, even if this involves moving past the first thing that springs to mind. This intentional inhibition may also come in handy when you have to forecast future events.
3. 3. Focus on data, not gut feelings. In the business world, executives use intrinsic valuation methods, quantitative analysis, and qualitative analysis to keep the decision-making process focused on hard data rather than gut instinct. Not only does a data-driven approach help obviate hindsight bias, but it also helps stave off other forms of bias like confirmation bias and personal favoritism.

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