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Hindsight Bias: Why We Overestimate Our Ability to Predict Events

Hindsight Bias: Why We Overestimate Our Ability to Predict Events

They say hindsight is a wonderful thing, but don’t you just hate it when people say things like ‘I told you that would happen’ or ‘I just knew it all along’? Are they particularly gifted in their ability to see into the future or predict the past? I’m afraid not.

They are more likely to suffer from something called hindsight bias. Simply put, it is a psychological phenomenon that explains why people overestimate their ability to predict an outcome they had no chance of predicting. In hindsight bias, we either revise the probabilities after the event, or we exaggerate the extent to which an event could have been predicted. In other words, people overestimate how predictable an event is and subsequently believe they predicted it before it happened. When an event or experience is occurring we can guess to the possible outcomes. However, there’s no way we can possibly predict what is going to happen. We might get a gut feeling or hope for a particular result, but there’s no way of really knowing. Research in 2012 from psychological scientists Roese and Vohs from the University of Minnesota suggests there are three cognitive factors that contribute to hindsight bias. ‘I said that would happen.’ We distort or misremember the event and our predictions at that particular time. When we look back we think we knew the outcome all along. ‘It had to happen.’ We believe the event was inevitable and that it would happen. When assessing something that has occurred, we assume it was bound to happen. ‘I knew it would happen.’ We assume that we could have foreseen the outcome of the event. It is when the above three factors occur together that you are likely to see the hindsight bias. So what is actually going on in our minds when we fall for the hindsight bias? Let’s examine each one of the three cognitive factors: When we look back at an event, our minds subconsciously cherry-pick the information we know to be true. We then create a whole new narrative that is different from the actual event, thus allowing us to remember it the way we want to. Now we have processed the event with our cherry-picked bits of information we have our story that backs up our prediction. Now the narrative is simple to understand it is much easier for us to see the outcome. So we have doctored our memories to make sense of the event. This allows us closure. Once again, we have made sense of the chaos of ordinary life. Balance is restored and the world is ordered again. As a result, ultimately, hindsight bias makes us feel good about ourselves and the world around us. We feel safe in our own knowledge. Our judgement was right. We predicted what was going to happen and it did happen.

The world is back to normal again. But there are problems with this cognitive bias. “If you feel like you knew it all along, it means you won’t stop to examine why something really happened,” says Roese. “It’s often hard to convince seasoned decision-makers that they might fall prey to hindsight bias.” Hindsight bias can also fool us into thinking we know more than we do. We can become over-confident in our own abilities and judgments on the world. When we think ‘we knew it all along’, we don’t stop to ask pertinent questions. It can stop us from examining additional evidence. We’ve already predicted the outcome. Why do we need further investigation? The problem with hindsight bias is that it can lead to poor decision-making, over-reliance on past results and simplifying outcomes. As with all biases, these are the mental shortcuts we take every day to make sense of the world. But these shortcuts in our thinking can have dire consequences. Including, as Vohl’s states: “A myopic attention to a single causal understanding of the past (to the neglect of other reasonable explanations) as well as general overconfidence in the certainty of one’s judgements”. People can follow the same path as before because they believe they already know the outcome. For example, in the business world, it can be difficult to know what exactly makes a successful enterprise. Investors will fund similar markets because they made money before. CEOs will back a certain product because its predecessor did well and made a profit. In addition, judges in the courtroom can come up against the same defendant and assume they will follow a particular criminal path as before. In all of the above examples, no one is examining the situation before them at that present moment.

They are basing their decision on past events.

The trouble with doing this is that they are misremembering what happened. So the information they are using to make future decisions is tarnished.

There are ways you can avoid this type of bias. Start from scratch – When you come up against a situation you have encountered before, analyse from the beginning. Don’t use past events to influence you. Get constant feedback – Studies show that those who receive continual feedback on their work are less likely to fall for hindsight bias. Use all the information you have – This is known as Bayesian Thinking after the 18-century English statistician Thomas Bayes. His idea was that all information is relevant, but some information has more value. Your job is to weigh up what is important and what is not. You do not have a crystal ball – Make decisions on the actual data in front of you. Not what you think might happen. Whatever the evidence says pay attention to it. Not your gut feelings. We all like to think we are special and have amazing talents.

The truth is we are just ordinary people trying to make sense of the world. References:.

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