How ‘hindsight bias’ undermines sound decision-making

The ability to make sound decisions is required in all areas of life, but can be seriously compromised by hindsight bias. Hindsight bias is when people convince themselves after an event that they had accurately predicted it before it happened. It is one of the most researched decision traps affecting many people, from heads of families to company executives.

We all make decision errors, from the small and inconsequential, to those we pay huge costs for; in money, lost time, ruined relationships, or lost jobs. Unless we understand and be cognizant of hindsight bias, it can affect self-leading and leading others.

We often hear or say: “I told you so” or “I knew this would happen”. But have you ever wondered how one could have known that the event would happen? What we forget is that there is really no way to know what’s going to happen. The best we do is guess. Whether the guess happens, it will remain what it was, a guess. As such, we cannot claim to have known that something would happen and we cannot rely on guesses that previously worked, to inform future decision-making. The problem with hindsight bias is that it blinds us from seeing the uncertainly that always precedes the occurrence of something.

What causes hindsight bias?

One of the causes of this bias is the need to protect and enhance one’s self-esteem, by wanting to feel better through credit for success and blaming others for failure. However, alternatively and probably more truthfully, one could admit, “I could not see this coming”.

What are the consequences of hindsight bias?

Blame, regret and unwarranted punishments

Consider a scenario where a manager hires a new employee based on solid credentials and recommendations, but the employee fails to perform as expected. The manager begins to regret, and after a year, the employee is terminated. The manager is blamed and poorly appraised by senior management for not seeing the “warning signs” that were later uncovered. This is typical hindsight bias. It involves a person or group of people getting blamed for causing an undesirable situation. It also involves second-guessing, where people use currently available information to judge someone’s past decision, while he/she might have had less information at the time.

Myopia

Another effect is myopia, a situation where a person fails to locate the true cause of a problem, by focusing on the wrong cause or exaggerating the impact of the right cause. People who think myopically can be called lazy thinkers as they don’t thoroughly and objectively search for explanations. They want to seize the first and easy explanations that comes along. However, by focusing on the wrong cause of a problem, we miss the opportunity to truly learn from experiences. Also, learning from experience happens when knowledge from past events is applied to current and future actions, rather than to making judgements about past decisions.

Overconfidence

Hindsight bias is like the alcohol in the blood stream of a drunk driver. It makes people overconfident in their ability to analyse situations, which may lead to taking uncalculated risks. Hindsight bias makes people exaggerate their own prowess, and reluctant to reassess their past actions because they “knew it all along”. This overconfidence can also result from people using past successes that were based on their abilities, to make future judgements. If someone says “I can remember the names of all my kindergarten teachers, so I can’t forget what you told me last week”, ask them why they think so. Asking ‘why’ is a powerful means to uncover biases and get to the root causes of problems.

Overcoming ‘hindsight bias’

One strategy that has been suggested and applied over the years is to “consider-the-opposite”. Whenever assessing situations, one needs to consider and try to explain outcomes that did not occur. This thinking short-circuits hindsight bias and makes a person more open to alternative reasoning.

Another strategy is to build expertise about the situations we make decisions on. This involves proactive learning that goes hand in hand with frequent feedback. For example, experts in chess, weather forecasting, and insurance receive repeated feedback on their predictions and hence can re-calibrate their judgments accordingly. This re-calibration can happen not only in predicting future events, but also in how we think when assessing outcomes at personal or professional level.

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Ms Kimaro writes about careers, leadership, and personal development, and issues affecting youth and women.