Do you have a friend who always claims they predicted what would happen in elections, your relationships or the stock market? They might be exhibiting hindsight bias. Here’s the transcript for episode 5 season 3 of our podcast How to Choose: ‘I Told You So! (Hindsight Bias)’. You can listen to it here on our website or on your favourite podcast player.
Tessa: Hi, there. This is ‘How to Choose’, the show that helps you make better decisions and improves your judgment. Thanks for joining us. I’m Tessa.
Ken: And I’m Ken. In this, our third season of ‘How To Choose’, we are exploring the topic of thinking problems or biases that impede our decision making.
Tessa: Now, Ken, do you like X Men?
Ken: Look, I have to confess, Tess, that I actually do. I’m not a massive superhero nerd, but I do like the X Men films.
Tessa: Yeah, very nice. I mean, of all the superhero genres, X Men is probably the one I would watch if I had to. Professor X asks a prospective student what her superpower is. She replies that she has hindsight. Professor X shakes his head and says, ‘that’s not going to help us at all’. The student sighs and says, ‘yes, I see that now’.
Ken: That’s awesome. No need to apologise for that Tess. That’s excellent.
Tessa: Okay, Ken, I do apologise for the next one, though, because this is nowhere near as good. Do you know why I hate hindsight? It’s always 2020.
Ken: In retrospect, Tess, I should have realised that it was highly unlikely that you had two funny jokes to tell.
Tessa: Yeah, you’re lucky you got one half decent one. Do you invest in the stock market or at all?
Ken: Look, I’m not really a stock market investor. I have got a few shares in an indexed fund, which is kind of the Simple Man’s way of investing in the stock market.
Tessa: Actually, from what I understand, indexed is the smart person’s way. Unless you’re a super expert. Warren Buffett suggests it’s the best way to go.
Ken: Oh, well, if Warren Buffett says it, yeah. All right. I’m very proud of myself now.
Tessa: So index funds still apply to my question, have you ever kicked yourself for not investing at a certain time when you knew that prices were about to jump up, but you didn’t get around to buying stocks?
Ken: Look, I probably haven’t, actually. I don’t track the stock market that closely. What about you?
Tessa: Yeah, I actually have had this feeling very strongly, and it was actually about that dreaded 2020 time, and it was about not investing after the stock market plunged early 2020 due to COVID. And once the market started to recover a few months later, I was kicking myself for not getting in while prices were so low. I just knew at the time that things had bottomed out, that they would start to recover back to pre-pandemic levels. Or did I?
Ken: Yeah. Well, I wonder then, how accurate was that particular memory Tess?
Tessa: Yeah, I think this is why I find hindsight bias so difficult, because it’s really challenging to trust your own historical memories and judgments. Our mind is so adept at altering our memories and even at things that we think we’re quite confident about. I think that I did know the prices were going to bounce back quickly, but did I really? The world was so uncertain. And in doing this episode, I really reflected deeply and I’ve actually come to change my mind. And I think I was exhibiting a bit of hindsight bias because I was in the US during the pandemic and I had friends that were talking about going out and buying guns because they thought that there would be looting and violence. Other people were hoarding, just like Australia. We couldn’t get toilet paper. People were even buying things like hunting equipment so that they could go get food if there were food shortages. So actually, now I think about it, maybe I wasn’t quite as confident that stocks would recover as quickly as I think I was.
Ken: Well, that’s interesting Tess that with a bit more thought that you are able to recall some of the evidence that challenges that memory of being so certain. And maybe when we get to the part of the episode where we talk about ways to reduce the impact of the bias, we might come back and explore that a bit more. But do you want to talk us through a bit more of what hindsight bias is and when it was first noticed?
Tessa: Yeah, for sure. We’ll explore this slippery bias a little bit further. So hindsight bias is our tendency to look back at unpredictable events and think that they were actually easily predictable. It’s also called the new at all along effect. And Ken, you may know some people who exhibit this tendency. Its formal scientific study started in the early 70s by someone called Fishoff, who was motivated by the seminal work of his supervisors. And ten points if you can tell me who you think they were.
Ken: Yeah, look. Was it Daniel Kahneman and Amos Tversky?
Tessa: Tessa, you are correct. We might have to start playing bingo for whenever we mention them in an episode. I think the hindsight bias can have a negative influence on our decision making as part of what helps us make good decisions is realistically assessing the consequences of our past ones. So this bias can lead to overconfidence in our prediction ability. This can be bad, as our overconfidence may lead us to take unnecessary risks. Things like law, insurance and finance all rely on realistic risk assessments based on similar past events, and this bias can distort those predictions both professionally and personally. According to Neil Rosseste and Kathleen Vo. Apologies for the pronunciation. There are three levels that this occurs. The first is memory distortion, which involves misremembering a past judgment, for example, claiming we said something when we just didn’t. The second is our belief that a past event was inevitable. And the last is foreseeability, which is believing that we could have foreseen the event. So the bias occurs when we misremember our past thoughts, think a past event was inevitable, and subsequently believe that the event was foreseeable.
Ken: Yeah, that’s really interesting. And we’ve talked about the fallibility of memory in our previous episode on availability bias, haven’t we? And I would here again really recommend a book by Lisa Genova called Remember that explores how our memory works. But that tendency of linear thinking is curious too, isn’t it? It’s very hard for us to imagine a nonlinear future that develops in a trajectory beyond the one that we’re observing. And we also apply that same linear interpretation when we look back to the past. We know in geometry, you can join any two points with a straight line, and it’s easier for us to look from the present to the past and think, well, it’s obvious that things were going to end up here, whereas, in fact, there may have been many things that could have produced quite a different outcome than the one that we’re seeing.
Tessa: Yeah, exactly. You need to sort of think of the butterfly effect rather than the inevitable future. Broadly, this bias prevents us from learning from our experiences. If we feel that we knew something all along, it’s unlikely that we’re going to carefully reflect on this outcome and try to understand why our predictions were wrong.
Ken: Yeah, and look, I’d just add here, too, that some people have a very fatalistic attitude towards life. They believe that everything that happens was destined to happen, regardless of what choices they make. Now, unfortunately for those people, we all live in societies that hold us responsible for our actions, not the mysterious hand of fate. And clearly, our show is based on the premise that we can make choices and decisions, and we can get better at doing that as well. Anyway, I digress. Where were we Tess?
Tessa: Look, our next stage, Ken, is me trying to elicit hindsight bias from some of our listeners. Ideally, I would have asked someone a question and then come back three months later and ask them again. But instead, I thought I’d ask them about something we all would have made a judgment about, which is the election. Did you correctly call the last election, Ken?
Ken: Now, Tess, if I wasn’t sitting here talking to you in an episode on hindsight bias, I probably would have said yes, I think that I did. I know there were some aspects of the results that were surprising, like the great success of the teal candidates, but I think I called the overall result.
Tessa: Well, let’s see how you compare to some of our listeners. Did you call the last election correctly?
Vox pop: Yes, I did.
Vox pop: Yes.
Vox pop: Factually? Yes. We’ll see whether correct actually represents what I wanted has now come.
Vox pop: Yes.
Ken: Wow, that is a lot of confident pundits there. Everybody knew what was going to happen.
Tessa: Yeah, exactly. Overwhelmingly, yes. Everyone was very confident that they’d call the last election. Look, and I’m not saying that any of these people are self-delusional. My sample size is just too small to draw any scientific insights. But perhaps one might be suffering from hindsight bias. That or we’ve just got a lot of very astute election callers amongst our listeners?
Ken: Yeah. Look, I don’t want to cast any aspersions on their honesty or their memory, but it’s possible some are misremembering.
Tessa: Okay. In another study, a fair bit more scientific than that little vox pop, college students were asked to predict the outcome of a particular US Senate vote regarding confirming a nominee for the Supreme Court a month after the vote. Participants were then asked to recall their predictions and level of confidence. So before the Senate vote, 58% of students predicted that the Senate would vote to confirm a certain person. But when students were questioned after the successful confirmation, 78% of them claimed that they thought that he would be confirmed. So that’s one in five people were either lying or demonstrating the hindsight bias. This can affect us at work and in our relationships. Have you ever been in a relationship that ended, Ken, and then realised that it was wrong all along? Or seen someone else go through this?
Ken: Yeah. Look, in the spirit of sharing embarrassing stories about myself, Tess, I can. Look, I was in a relationship when I was at university. I can remember. I was smitten at the time, and I took the breakup very badly. But when I’d gotten over the devastation, I realised that it was a really immature relationship. We’d rushed into it. We hadn’t really gotten to know each other properly, and in hindsight, we probably didn’t have much in common.
Tessa: Yeah. It’s so interesting, isn’t it, how we can change our perception of the past. And I’m sure when you were in the relationship, these thoughts never crossed your mind. Perhaps this is an example of memory distortion, Ken, or maybe even foreseeability. Did you come to believe that this relationship was doomed and that there were signs all along?
Ken: Yeah. Look, this is a long time ago, and again, thank you for bringing back to mind this painful memory from a past Tess. But look, I would say that once the dust had settled, I probably did feel that it was inevitable that the relationship would have ended around then anyway. But maybe it wasn’t inevitable. Maybe if I had made some different choices, it might have ended differently. Although I just want to clarify here to my wife, I have no regrets. But one thing I am certain about is that I didn’t have the maturity to think clearly and rationally during the relationship. And I think that I did learn from my mistakes. And in that sense, my hindsight provided some useful clarity that I didn’t have during the relationship. Does that make sense?
Tessa: Yeah, I think so. And I think that’s a great example of just how difficult this hindsight bias can be to assess. To evaluate. We can’t even trust our own memories and our own judgments. And more broadly, when it comes to relationships, finding the right one can involve going through lots of failed relationships. At the start of one. Our judgment can often be clouded by hope and hormones. And when things go bad, we tend to rely on our old mates, the hindsight bias, to show us why we were wasting our time from the start. Whether it comes from ourselves or our friends, feeling that we knew it all along can make us just feel a tiny bit better about things ending badly. But it’s actually no good for informing future decisions. If there were genuine signs, then great, learn from them and don’t make the same mistakes. But maybe there were no concerning signs. It really could have been a genuine case of it’s not you, it’s me, and there was nothing you could have seen or done differently.
Ken: Yeah, and just as you’re talking, Tess, I can imagine that this could lead to a lot of self-condemnation for some people. That sense of, oh, look, it was so obvious, why didn’t I see the writing on the wall? I’ve made the same mistakes again. So I think hindsight bias can particularly if we struggle a bit with our self-confidence and self-esteem, it can just reinforce that negative tape in our heads that tells us we were stupid or we should have known better. Listen, while it might be unhelpful in relationships, it can even be more serious in some professional contexts. I know we’ve spoken before about some of the vulnerabilities of judges and jurors in terms of their decision making and judgments, but let’s just imagine a defendant who is being charged with shooting someone, but who then claims that they didn’t realize the gun was loaded at the time of the incident. It might have been perfectly reasonable for the defendant to have those assumptions because they didn’t load the gun and in fact, they thought they were out of bullets. But from the jury’s perspective, applying some hindsight bias, they can feel, well, the defendant should have known because the juror themselves would never have handled a gun without checking if it was loaded and then they may easily overestimate the likelihood that the defendant did actually know.
Tessa: Look, that’s a great example. Ken and I’ve actually just realised while we’re recording now, that it’s a real life example at the moment because Alec Baldwin is going through the legal system for this. I’m not sure if you’re aware that he shot and killed somebody on set.
Ken: Yeah, that’s right.
Tessa: He didn’t realise the gun was loaded. He assumed that it wouldn’t be with live ammunition. So again, it’s such a tricky one because we could all project our own hindsight onto that situation and imagine what we would have thought and expected. But it’s really tricky. And one way to counteract us projecting this bias in particular is to consider and explain how the outcomes that didn’t unfold could have unfolded. By mentally reviewing all the potential outcomes, an event will seem a little less inevitable and foreseeable as well. And another way you personally can try and go against this bias is to keep track of your past decisions and predictions. Having an unalterable track record of the predictions associated with your decisions might prevent the mistake of thinking you knew it all along if you can go back and see what you actually were thinking six months ago.
Ken: Now, for those who haven’t come across it, the book Superforecasters by Tetlock and Gardner is a really interesting read. I had the chance to meet and chat with one of the authors, Dan Gardner, when I was living in Canada. Essentially, the book describes an experiment that was run to try and understand what made some people better than other people when it came to forecasting the outcomes of things like elections. The subjects included both laypeople and experienced analysts. Now, you have to read the book to learn more, but the key point was that a number of the so called experts were far less accurate than they thought they were, so their memories misled them. There was an element there of hindsight bias.
Tessa: It is such an excellent book, Ken, and one of the key messages in it for me was that the best forecasters are constantly updating their judgments based on new information. And if you have a lot of hindsight bias, you’re actually probably much less likely to update your judgments as you’ll think that you got it right or that the answer was obvious or inevitable. What’s your key takeaway from this episode, Ken?
Ken: Look, I think this is probably similar to the takeaways from my takeaways from some of the other episodes, but I think it’s training myself to pause next time I say I knew that was going to happen, and then asking myself, did I really know? Or could things have panned out in a number of different ways? And instead of assuming that I had this incredible foresight, is there some other lesson I could learn from that event?
Tessa: For me, it’s the idea of keeping track of key decisions. It’s impossible to know exactly what you were thinking when you made a past decision unless you’ve actually written it down. Our memory systems don’t work in the way that we can actually reach back and get a really fulsome answer of what we were thinking at a time. They get distorted. So for me, it’s that idea of writing down key decisions so that I can analyse them later. So, listeners, what’s your key takeaway from this episode once you’ve figured it out? Go out and teach a friend, because there’s great research showing that if you can teach something to someone, it’ll actually help that information stick much better in your mind.
Ken: Yeah, absolutely. And that’s confirmed in the book that I mentioned earlier by Lisa Genova, Remember, she talks about that quite a bit. There’s many examples and experiments that have shown how important that repetition is, and that discussion is for helping us remember and cement those lessons. Well. Listen, if you’ve enjoyed this episode, and we sure hope you have. Please make sure to subscribe to how to choose and visit us at goodbetterwright.com.au, where you will find some other resources that will help you to improve your decision making.
Tessa: And be sure to tune in next week as we’ve got another great episode. We’ll be looking at base rate neglect, which sounds very technical, but it’s not. It’s another important bias to be aware of when you’re making decisions.
Ken: And tell your friends about us. We’d love to meet them too.