If we are certain that our past selves were amazing predictors of the future, we believe our present selves to be no worse.
This might also be because they’re hired for their charisma and vocalness, not accuracy.
Once we know the outcome of an event, we connect the dots in the past that make the outcome seem inevitable and predictable.
Learn why the hindsight bias in psychology is an issue and how to overcome it. We’ll look at hindsight bias examples that make the above definition clearer. Hindsight bias is a problem because it inflates our confidence about predicting the future. Hindsight bias is the tendency to believe you have predicted events or outcomes that were unpredictable. What is hindsight bias? How does it work, and how can you avoid it?
Like this article? Sign up for a free trial here. Shortform has the world's best summaries of books you should be reading. That way you will be more willing to try out new ideas, but more honest when thinking through reasons of what to do next.This article is an excerpt from the Shortform summary of "Thinking, Fast and Slow" by Daniel Kahneman. It is important to continually be aware of these biases. When having a retrospective about why something happened (which usually only happens when something goes won’t, but is also a good idea when celebrating why something was successful), actively thinking about whether and how an alternative hypothesis could be correct, or how other circumstances could have arisen with the information available at the time. Researchers have shown that this bias is deeply ingrained in us humans and almost impossible to eliminate, but there is one thing which can reduce its impact: And many would probably even convince themselves that they predicted the rise but there was some other reason they shorted the stock and lost money. Looking backwards, investors will surely be able to explain the reasons why the stock rose, even though at the time all the classic metrics said it should fall. The car maker’s shares increased in value by almost 700% this year, while at the same time being the most shorted stock (meaning a huge number of investors were expecting the stock to decrease). Let us take an example: the rapid rise of Tesla Motors share value in 2020.
People can easily explain the success of other previous innovations, but in advance, other cognitive biases like loss aversion will make people less likely to want to try out ideas which are different from what has previously worked.
One danger of the hindsight bias is that people end up ignoring the impact of luck or external factors in the outcome, and instead remember the events in history as if they happened as a series of logical steps.Īs you can imagine, this has a large impact on people’s ability to make decisions, especially when it comes to predicting the outcome of unpredictable ideas and innovations which are yet unproven.
Of course that happened, it’s obvious, all the evidence pointed to it. I knew that was going to happen the whole time. The classic examples of something someone with hindsight bias would say are: