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Hindsight Bias

After an outcome is known, we can't help but see it as having been predictable, underestimating how uncertain it was beforehand.

In Depth

Once we know what happened, we reconstruct the past to make the outcome seem inevitable. 'I knew it all along' is the signature of hindsight bias. This creates the illusion of understanding (we think we understand the past better than we do) and the illusion of control (we think we could have predicted it). Hindsight bias makes us overconfident about future predictions because we systematically underestimate how surprising past events were. It's nearly impossible to reconstruct your prior state of uncertainty after learning the outcome.

Example

After the 2008 financial crisis, many claimed they 'saw it coming,' but few took positions that would have profited from their supposed foresight. The outcome makes the crisis seem more predictable in retrospect than it was at the time.

Common Misconception

You can accurately remember how uncertain you were before learning the outcome—knowing the outcome fundamentally changes how you reconstruct the past.

Source

Thinking, Fast and Slow

Daniel Kahneman

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Related Concepts

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Test Your Understanding

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What makes hindsight bias particularly difficult to overcome?

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The signature phrase of hindsight bias is: '___________'