In this blog post, we will examine how hindsight bias distorts our judgment and decision-making.
Hindsight bias refers to the phenomenon of believing that the outcome of an event was inevitable after the fact, as if one had known it would happen that way from the beginning. The key element of this bias is believing that one could have predicted something that happened around them, even though it was actually impossible to predict. Another result of this bias is that historical events that can be explained by chance are often interpreted as inevitable after their outcomes are known. This bias causes people to mistakenly believe that they knew the outcome from the beginning.
Explanations for the causes of post-event overconfidence bias can be divided into motivational and cognitive explanations. Motivational explanations are primarily related to the pursuit of “sense of control.” Sense of control refers to “the belief that one can understand and explain events that occur around oneself and predict future events.” It is believed that post-event overconfidence bias occurs because of the motivation to confirm this sense of control. Another motivational explanation cites the desire to present oneself as intelligent. It is believed that post-event overconfidence bias occurs because people want to appear capable of predicting the outcome of events.
The cognitive explanation is also known as “insinuated determinism” and has received stronger support than the motivational explanation. This theory views the results of an event as “insinuating” themselves into people’s mental representations. In other words, once the results are known, information about the results is immediately and automatically integrated into people’s representations. This new representation changes the causal model of the preceding events and possible outcomes, strengthening the causal relationship between the given outcome and the preceding events, but weakening the causal relationship between the outcomes that did not occur and the preceding events. As a result, in the representation that is formed after the fact, only the outcomes that occurred exist, and other possible outcomes do not exist. Therefore, people rarely think about other possible outcomes and only think about the outcome that occurred.
According to this cognitive explanation, when people learn the outcome of an event, they try to explain why it happened, and the easier it is to come up with an explanation, the stronger their post-event overconfidence becomes. Causal reasoning is deeply involved in the occurrence of post-event overconfidence, and the degree of post-event overconfidence is determined by the ease of post-event explanation.
Post-decision overconfidence bias has the potential to distort the accuracy and quality of judgments and decisions. For this reason, it is considered an important bias in judgment and decision-making, and is known to be very difficult to reduce. Currently, there is active research on how to reduce this bias. In particular, psychologists are seeking ways to reduce this bias through education and training. For example, methods such as asking people to predict the outcome of an event before informing them of the actual outcome and encouraging them to consider various possibilities are being studied.
Post-decision overconfidence bias has a significant impact not only on individuals but also on organizations. If management falls prey to post-decision overconfidence bias, it is more likely that wrong decisions will be made, which can have a negative impact on the company’s performance. Therefore, efforts are needed at the organizational level to recognize and reduce this bias. To this end, it is important to gather diverse opinions during the decision-making process and utilize objective data when analyzing results.
Hindsight bias is a phenomenon that is commonly encountered in everyday life. In various situations, such as sports games, the stock market, and political events, people often behave as if they had predicted the outcome from the beginning once they know the result. To reduce this bias, it is necessary to reflect on oneself and objectively evaluate how accurate one’s past judgments were. This will enable us to recognize post-decision overconfidence bias and make more careful and objective judgments.
Hindsight bias is an important example of the limitations of human cognition. Recognizing and reducing this bias plays an important role not only in personal growth but also in organizational development. Through continuous research and education, we must overcome hindsight bias and find ways to make better judgments and decisions.
