Overview & Description:

Hindsight bias entails perceiving events as having been more predictable than they actually were after they have occurred. It’s often referred to as the “I knew it all along” phenomenon and can impact our evaluations and decision-making after the fact.

Example:

Imagine a situation where an investor believes that they predicted the downturn of a stock market, saying “I knew the market was going to crash”, even though they did not act on this supposed prediction beforehand. This alters their future risk assessment and decision-making based on a skewed belief in their predictive abilities.

Implications:

Recognizing hindsight bias is vital in analytical and decision-making processes across numerous domains to prevent skewed understandings and to facilitate objective future planning.

References:

• Fischhoff, B. (1975). Hindsight ≠ foresight: The effect of outcome knowledge on judgment under uncertainty. Journal of Experimental Psychology: Human Perception and Performance, 1(3), 288.