Step 6: Make Smarter Decisions without Hindsight Bias

Step 6: Make Smarter Decisions without Hindsight Bias

The hindsight bias, or the “we knew it all along” phenomenon, says that when more time passes, the more likely we are to think we could have predicted the eventual outcome. After an event occurs, we feel we knew what was going to happen. Much like when you ‘re not surprised when a glass falls off the table after you saw it sitting on the edge. Our hindsight bias can lead us to believe that an eventual outcome was more predictable than it actually was. We have a tendency to oversimplify the cause and effect. The problem with hindsight bias is that it makes us believe that we can predict future outcomes, which can lead to overconfidence in unknown outcomes.

People tend to believe they should have been able to anticipate outcomes better than they actually could have. You hear leaders tell direct reports who’ve made a poor decision, “You didn’t think this through.” That may be the case, but it may also be the leader’s perspective when using hindsight bias. The direct report may have made the best decision he could at the time with the information available. When chastising the direct report, the leader should remember that she has the benefit of hindsight.

You cannot overcome hindsight bias, but you can minimize it by:

1.  Being aware of the bias and taking into account your perspective and the level of data available. Hindsight bias is a form of overconfidence bias. We become overconfident when we have the benefit of hindsight. That overconfidence limits our decision-making ability.

2.  Write down anticipated outcomes at the onset of a decision, and then reference your list later. Doing so will remind you what you were thinking prior to making a critical decision. By analyzing why you were/were not accurate, you can improve your decision-making abilities. Look at prior assumptions and forecasts. See how actual results compare to previous predictions/forecasts. What can you learn and improve?

3.  Do not use your historical perspective (e.g., the northeast sales team will never meet their quotas) as a single outcome. There are infinite possibilities (e.g., the northeast sales team will bring in the biggest client ever). Don’t let history dictate your future.

4.  Validate your hindsight perspective by conducting an After Action Review (AAR). Here is an AAR template. An AAR can help you identify outcomes you did not anticipate. Maybe you really did “think it through.”

5.  Employ unbiased, third-party experts. Outsiders bring a fresh perspective. They do not have the same reference points or emotional attachments to investments and projects. They also lack your preexisting hypotheses and the political egocentrism.

Smarter People Planning protects you from falling into cognitive traps by offering an outsider perspective and alerting you to potential pitfalls.

How will you handle your own natural hindsight bias with future decisions?

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