Did you know that –

• Terror attack on Charlie Hebdo was imminent?
• Google Glass was destined to be a failure given the privacy concerns and high price?
• India outperformed other emerging economies in the recent past?
• The information technology sector is the primary driver of India’s economic growth?

Given our past experience and things we know or read, all the above seems fairly obvious and unsurprising. Just with common sense we can clearly see and easily explain why the above happened. Right?

Let us analyze the above statements a bit more and see if our common sense served us right –

• Like any other democratic country, France values freedom of press and freedom of speech. Political satire is a very common style of many publication houses in France. The risk of attack on Charlie Hebdo was as likely as attack on any other publication houses.
• Google Glass was introduced to the market more as an experiment. When it was introduced, press and media hailed it as “Google’s Glass is a fascinating innovation and has more potential than any new device category we’ve seen in years” – engadget.com
• There are 9 more countries ahead of India with higher average living standards – Albania, Armenia, Bhutan, China, Equatorial Guinea, the Maldives, Mozambique, Sudan, and Vietnam (source)
• The information technology sector contributes only ~7.5% to India’s Gross Domestic Product (source)

Our problem with common sense is that we activate it after we learn the facts. Given the hindsight advantage, we see events from the past as more predictable than they really are. This cognitive tendency is known as ‘Hindsight Bias’ or ‘I knew it all along’ phenomenon.

“The Hindsight Bias reflects a tendency to overestimate your own ability to have predicted or foreseen an event after learning about the outcome.”

We try to make connections, find patterns and create meaning to explain what happened. We see forces and play of events that brought about the outcome and feel unsurprised. This ability to rationalize a given outcome based on hindsight advantage creates a sense of empowerment to say we knew it all along and makes us socially look smart and intelligent.

In Thinking Fast and Slow – Daniel Kahneman writes –

 “Everything makes sense in hindsight, a fact that financial pundits exploit every evening as they offer convincing accounts of the day’s events. And we cannot suppress the powerful intuition that what makes sense in hindsight today was predictable yesterday. The illusion that we understand the past fosters overconfidence in our ability to predict the future”

Why is this important to know?

Of all the mental blocks I may have that limit my learning and understanding of the external world, Hindsight Bias is probably the worst. Think about it, it gives us a sense of overconfidence, false sense of knowledge and perhaps creates arrogance for our perceived intellectual powers to predict.

In The Black Swan, Nassim Taleb points out –

“Our tendency to construct and believe coherent narratives of the past makes it difficult for us to accept the limits of our forecasting ability”

Here are some ways I see Hindsight Bias in action –

• As a student, few subjects seemed easy/obvious and later during exams, I was unable to recollect what felt easy/obvious.
• In work situation, I have gotten into trouble for heuristically assuming a cause without actually examining what really caused the problem.
• Thinking that good returns on some of my stocks were due to my sound judgment, which later realized was nothing more than sheer luck.
• On a daily basis, giving too much attention to news that is nothing more than Hindsight Bias in all its grand glory (just search for “Google Glass failure” and you will see tons of articles that explain why it failed. I am sure the same guys wrote glowing reviews when the product was launched as you just read a quote above)
• I have seen this bias resulting in blame game. After the 9/11 attack, CIA and FBI were blamed for ignoring all the obvious cues. After the financial crisis of 2008, banks and regulators were blamed for bad policies and ‘stupid mistakes’. Most of the political blame game is based off of Hindsight Bias.

How do we overcome this bias?

Apparently it is very hard to overcome this bias. We are hardwired to make sense of the past, minimize uncertainties, believe in our abilities to know the obvious and predict outcome with high degree of success. Few things I do to keep this bias in check are –

• I catch myself when I get into this trap. For example, today morning when I read about a 13 years old boy building a braille printer, I was aware of my hindsight bias that made me feel the news being obvious and unsurprising.
• Sometimes, I try to think of events that could have resulted in an alternative outcome. For examples, what sort of events had to occur for Google Glass to be successful? This immediately humbles me and exposes my lack of relevant knowledge.
• More deeply examine my decision-making ‘process’ than the success/failure of the outcome. For example, in my work, I try to focus more on building a robust problem solving ‘process’ than just focusing on the solution/end state.

We don’t learn that we don’t learn… by understanding the consequence and adverse impact of Hindsight Bias, we can hope to be better learners and decision makers.