hindsight bias

Super Thinking: The Big Book of Mental Models

by Gabriel Weinberg and Lauren McCann  · 17 Jun 2019

distorted. We covered some of these biases way back in Chapter 1 with availability bias and the like. One other mental model to consider is hindsight bias, where, after an event occurs, in hindsight, there is a bias to see it as having been predictable even though there was no real objective

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predicted. Monday morning quarterbacking and hindsight is twenty-twenty are formulations of the same concept. Turn on the TV after any major event to see hindsight bias in action. Talking heads will explain why something occurred, and yet, if you had watched coverage before the event, you would not have found many

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predicting it ahead of time. Think of the 2007/2008 financial crisis or the U.S. 2016 election cycles. Hindsight bias arises in many other situations: judges weighing evidence in court cases, historians analyzing past events, and physicians assessing earlier clinical decisions. For example, in negligence

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outcome is, even when the negligent act is the same. In other words, the worse the outcome, the worse the hindsight bias. In the context of leadership and learning new roles, hindsight bias can keep you from learning from past events. If you believe an event was predictable when it was not, you may

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(the event was totally predictable or not) and into more nuanced thinking (considering how predictable it really was). Counterfactual thinking (see Chapter 6) can reduce hindsight bias because it forces you to consider other ways events could have unfolded. Ask yourself how things would have changed if you had done X, Y

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losers as a whole, and not just to one of those subgroups, or else you may take away the wrong message. Another way to counteract hindsight bias is to take notes as events occur in real time. That way you have a more objective record of what happened and are not relying

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sources, and police are increasingly using body cams to document encounters. It is important to realize, though, that hindsight bias can affect you only in instances where the outcome could not be foreseen. Hindsight bias is not a factor when you are reviewing the many instances of predictable errors out there. The key is

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say that your own or your group’s mistakes could not have been predicted (“Who could have known?”) and you are more likely to apply hindsight bias to be critical of others. The mental models from this section can help correct psychological mischaracterizations (e.g., impostor syndrome), artificial roadblocks (e.g., fixed

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mindset), and misinformation (e.g., hindsight bias), all in the service of helping people, including yourself, think objectively about current performance and ways to improve. TOGETHER WE THRIVE So far in this

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hierarchical versus egalitarian, in organizational culture, 274 hierarchy of needs, 270–71 high-context communication, 273–74 high-leverage activities, 79–81, 83, 107, 113 hindsight bias, 271–72 hiring, 258 histogram, 147–48, 150 Hitler, Adolf, 237 HIV, 233 Hoffman, Reid, 7 Hofstadter, Douglas, 89 Hofstadter’s law, 89 hold the

Thinking, Fast and Slow

by Daniel Kahneman  · 24 Oct 2011  · 654pp  · 191,864 words

to underestimate the extent to which you were surprised by past events. Baruch Fischh off first demonstrated this “I-knew-it-all-along” effect, or hindsight bias, when he was a student in Jerusalem. Together with Ruth Beyth (another of our students), Fischh off conducted a survey before President Richard Nixon visited

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of President Bill Clinton. The tendency to revise the history of one’s beliefs in light of what actually happened produces a robust cognitive illusion. Hindsight bias has pernicious effects on the evaluations of decision makers. It leads observers to assess the quality of a decision not by whether the process was

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should have hired the monitor, although they had been explicitly instructed not to let hindsight distort their judgment. The worse the consequence, the greater the hindsight bias. In the case of a catastrophe, such as 9/11, we are especially ready to believe that the officials who failed to anticipate it were

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that you considered the possibility of regret carefully before deciding, you are likely to experience less of it. You should also know that regret and hindsight bias will come together, so anything you can do to preclude hindsight is likely to be helpful. My personal hindsight-avoiding B Th5he ything policy is

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their confidence by the probably mistaken belief that they have learned a great deal from the experience. Gavin Cassar and Justin Craig, “An Investigation of Hindsight Bias in Nascent Venture Activity,” Journal of Business Venturing 24 ( {> influence on the lives of others: Keith M. Hmieleski and Robert A. Baron, “Entrepreneurs’ Optimism and

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; broad framing in; and choice from description; and choice from experience; emotions and vividness in; expectation principle in; in gambles, see gambles; global impressions and; hindsight bias and; narrow framing in; optimistic bias in; planning fallacy and; poverty and; premortem and; reference points in; regret and; risk and, see risk assessment decision

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University of Jerusalem “Hedgehog and the Fox, The” (Berlin) hedonimeter Heider, Fritz helping experiment Hertwig, Ralph Hess, Eckhard heuristic, definition of high school curriculum team hindsight: bias in; regret and historical events hitchhiker question Hitler, Adolf Hogarth, Robin honesty box “How Mental Systems Believe” (Gilbert) How to Solve It (Pólya) Hsee, Christopher

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; duration neglect and; injection puzzle and; memory of; operation experiment and; peak-end rule and; in rats paraplegics parole past: and confusing experiences with memories; hindsight bias and; regret and pastness pattern seeking Pavlov, Ivan peak-end rule persuasive messages physicians; malpractice litigation and piano playing and weight, measuring plane crashes planning

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; broad framing in; decision weights in, see decision weights; denominator neglect and; by experts; and format of risk expression; fourfold pattern in; for health risks; hindsight bias and; laws and regulations governing; loss aversion in; narrow framing in; optimistic bias and; policies for; possibility effect and; precautionary principle and; probability neglect and

Expected Returns: An Investor's Guide to Harvesting Market Rewards

by Antti Ilmanen  · 4 Apr 2011  · 1,088pp  · 228,743 words

forward-looking indicators, as well as numerous theories in an attempt to make sense of the data, I believe it is important to stress humility. Hindsight bias makes us forget how difficult forecasting is, especially in highly competitive financial markets. Expected returns are unobservable and our understanding of them is limited. Even

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it enables self-deception rather than accurate self-assessment. Confirmation bias We seek evidence that supports our view and we interpret ambiguous evidence as supportive. Hindsight bias Hindsight makes past outcomes, even major surprises, appear virtually inevitable after the fact. (“The market crash was bound to happen.”) More personally, memories play tricks

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all along that housing was overpriced.”) Hindsight reinforces overconfidence but may also cause regret. By making the past appear more predictable than it really was, hindsight bias fools us into seeing the future as more predictable than it can ever be. Thus the inevitable disappointments that befall investors from time to time

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the definitive paper is Kahneman–Tversky (1979). Among other works, I allude to Griffin–Tversky (1992) on representativeness/conservatism; Taleb (2001) and Zweig (2008) on hindsight bias; Bordalo–Gennaioli–Shleifer (2010) on salience theory; Shefrin–Statman (1985), Odean (1998), and Frazzini (2006) on disposition effect; Thaler–Johnson (1990) on the house money

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or hyperinflations in advanced countries after the 1940s. Likewise, emerging market returns have been boosted in recent decades by surprisingly few devaluations and sovereign defaults. Hindsight bias makes investors especially prone to being misled by peso problems. The role of luck or randomness in observed outcomes is underappreciated; whatever happened seems predictable

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real-time observability. More complex value indicators exist but involve more specific assumptions (model specification risk), more elaborate statistical estimation (estimation risk), and often more hindsight bias. Carry and value indicators can usefully (if noisily) predict future returns even when we don’t understand the reason for the risk premium and even

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Sharpe ratios 2008 skilled investors tail risks voluntary reporting hedged global government bonds hedging currency HFR index HFs see hedge funds high-yield (HY) bonds hindsight bias historical averages 1990—2009 endpoint year change illiquidity pre-1990 sample-specific results volatility historical records active investing bonds BRP average returns foreign exchange G10

Evidence-Based Technical Analysis: Applying the Scientific Method and Statistical Inference to Trading Signals

by David Aronson  · 1 Nov 2006

. 42 METHODOLOGICAL, PSYCHOLOGICAL, PHILOSOPHICAL, STATISTICAL FOUNDATIONS Self-Attribution Bias Overconfidence, Optimism, Bias Knowledge Illusion Confirmation Bias ILLUSION OF VALIDITY Illusion of Control Biased Secondhand Knowledge Hindsight Bias Illusory Correlation Illusory Trends & Patterns Sample Size Neglect Representativeness Heuristic Bias FIGURE 2.3 Illusion of validity. HUMAN INFORMATION PROCESSING LIMITATIONS Despite its awesome power

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, overconfidence is reinforced by yet other cognitive biases that distort what is learned from experience, including the self-attribution bias, the confirmation bias, and the hindsight bias, which are discussed later. Columbia University psychologist Janet Metcalfe summed up research on human overconfidence with these humbling words:30 People think they will be

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these factors can induce and maintain an unjustified sense of control and an ability to earn market-beating returns. The Hindsight Bias: I Knew Things Would Turn Out That Way The hindsight bias creates the illusion that the prediction of an uncertain event is easier than it really is when the event is viewed

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this very pitfall that scientists are especially careful about defining procedures for making predictions and evaluating their accuracy. Subjective TA is especially prone to the hindsight bias because it lacks clearly defined rules for pattern identification, forecast generation, I wonder if I should bet on the Jets? The other team is pretty

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would win. It was so obvious!! Why didn’t I bet? NY Jets Win Football Game October 1 October 2 Time FIGURE 2.6 The hindsight bias. October 3 52 METHODOLOGICAL, PSYCHOLOGICAL, PHILOSOPHICAL, STATISTICAL FOUNDATIONS and prediction evaluation. In real time, the practitioner of subjective TA faces a task of overwhelming ambiguity

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at a later time, point B. We will look at two different outcomes paths subsequent to point A. This is intended to illustrate how the hindsight bias can obscure the ambiguity that existed at time A, thereby creating an illusion of validity for subjective chart analysis, irrespective of which path prices actually

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with an uptrend tacked on after point A. This observer knows an uptrend took place between A and B. It is my contention that the hindsight bias would encourage the subjective analysts to notice the bullish flag pattern rather than the bearish head-and-shoulder pattern. In other words, the possession of

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. Alternatively, if the price path from time A to time B had been a downtrend, as depicted in Figure 2.11, I contend that the hindsight bias would cause an observer at point B to notice a head-and-shoulders top pattern that predicted successfully, but the observer would not notice the

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bullish and bearish cues. The vague manner in which subjective chart patterns are defined, the lack of objective evaluation criteria, and the operation of the hindsight bias create an illusion of validity for subjective chart analysis. Who among us, upon first learning of the head-and-shoulder pattern, Bearish H&S Obvious

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who among us did not come away with the impression, “This stuff actually works!” Were we merely victims of the hindsight bias? There is persuasive experimental evidence52 that people are afflicted with hindsight bias. In one typical study, students were asked to rate the probability of various outcomes in advance of President Nixon’s

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were. In other words, they were unable to recall their prior uncertainty. After several months, the percentage of students afflicted with hindsight bias jumped from 67 percent to 84 percent. The hindsight bias has been found to operate powerfully in trial testimony. Witnesses believe they are giving accurate accounts, but their recall of the

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order of events and of specific details are altered by knowing how matters actually turned out.53 The hindsight bias infects historical accounts. Historians, having the benefit of hindsight, will often point out that the rise of the Third Reich was quite predictable. They claim

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number of possible paths that history could have taken. Other experimental evidence shows that strategies aimed specifically at reducing the hindsight bias are not effective.54 Even when people are warned about hindsight bias and told to avoid it, it still occurs. It appears to be beyond rational control. Not even professional expertise is

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. Again, outcome knowledge makes the past appear as if it should have been more predictable than it really was. What cognitive processes are responsible for hindsight bias? Though The Illusory Validity of Subjective Technical Analysis 57 the matter is not settled, it seems to go beyond a desire to see ourselves as

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were known all along. This explains why it is so difficult for people to reconstruct prior states of uncertainty. Can subjective TA analysts overcome the hindsight bias? To answer this question we must consider the analyst in the context of two different tasks: (1) pattern research—the search for patterns with predictive

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took biases the analyst’s perception of the predictive power of whatever method is being evaluated. Only objective TA methods offer the opportunity of avoiding hindsight bias because only information known at a given point in time is used to generate signals, and signals are evaluated in an objective manner. In the

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context of current-time forecasting, subjective analysts could protect themselves from hindsight bias if they were willing to make falsifiable forecasts. A forecast is falsifiable if, at the time a forecast is made, the analyst specifies (1) outcomes

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and Biases, D. Kahneman, P. Slovic, and A. Tversky (Eds.) (Cambridge, UK: Cambridge University Press, 1982), Chapter 31. 55. R.F. Pohl. and B. Gawlik, “Hindsight Bias and the Misinformation Effect: Separating Blended Recollections from Other Recollection Types,” Memory 3, no.1 (March 1995), 21–55; D. Stahlberg and A. Maass

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, “Hindsight Bias: Impaired Memory or Biased Reconstruction?,” European Review of Social Psychology (1998). 56. R. Hastie and R.M. Dawes, Rational Choice in an Uncertain World: The

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–369 Heuristic bias, 41, 86–87 availability heuristic, 87–88 heuristic defined, 86 representativeness heuristic, 88–93 illusory trends and patterns and, 93–101 521 Hindsight bias, 50–58 Hong and Stein (HS) hypothesis, 376–377 Hsu, P.-H., 451, 455 Hulbert Digest, 48 Hume, David, 126–128 Hussman, J., 430 Hypotheses

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, 261–264 Out-of-sample testing, as datamining bias solution, 320, 321–323 Overconfidence bias, 45–58 behavioral finance theory and, 361 control illusion, 50 hindsight bias, 50–58 knowledge illusion, 49–50 manifestations of, 47 optimism bias, 48 self-attribution bias, 48–49 Parameter estimation: defined, 217–218 interval estimates, 218

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logic, 113 TT-4-91 rule, 252–253 Tversky, Amos, 41, 88, 91–92, 345 INDEX Ulam, Stanislaw, 238 Uncertainty: inability to recall prior, see Hindsight bias ruling out, see Statistical analysis Uncorrelated investor errors, in Efficient Markets Hypothesis, 343, 344, 346–347 Unfalsifiable propositions, 134–136 Universe size, defined, 256 Validity

Thinking in Bets

by Annie Duke  · 6 Feb 2018  · 288pp  · 81,253 words

jar Reconnaissance: mapping the future Scenario planning in practice Backcasting: working backward from a positive future Premortems: working backward from a negative future Dendrology and hindsight bias (or, Give the chainsaw a rest) ACKNOWLEDGMENTS NOTES SELECTED BIBLIOGRAPHY AND RECOMMENDATIONS FOR FURTHER READING INDEX INTRODUCTION Why This Isn’t a Poker Book When

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. His decision-making behavior going forward reflected the belief that he made a mistake. He was not only resulting but also succumbing to its companion, hindsight bias. Hindsight bias is the tendency, after an outcome is known, to see the outcome as having been inevitable. When we say, “I should have known that would

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happen,” or, “I should have seen it coming,” we are succumbing to hindsight bias. Those beliefs develop from an overly tight connection between outcomes and decisions. That is typical of how we evaluate our past decisions. Like the army

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is a correct answer: “I’m not sure.” “I’m not sure”: using uncertainty to our advantage Just as we have problems with resulting and hindsight bias, when we evaluate decisions solely on how they turn out, we have a mirror-image problem in making prospective decisions. We get only one try

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euphoria) when a particular future happens. Finally, by mapping out the potential futures and probabilities, we are less likely to fall prey to resulting or hindsight bias, in which we gloss over the futures that did not occur and behave as if the one that did occur must have been inevitable, because

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. They could think about ways to increase the probability of getting grants and commit to those actions. They were less likely to fall prey to hindsight bias because they had considered in advance the probability of getting or not getting the grant. They were less likely to fall prey to resulting because

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better at establishing sales priorities, planning budgets and allocating resources, evaluating and fine-tuning the accuracy of its predictions, and protecting itself against resulting and hindsight bias. A more complex version of scenario planning occurs when the number of possible futures multiplies and/or we go deeper into the tree, considering what

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especially—if it included work on futures that did not occur. Forgetting about an unrealized future can be dangerous to good decision-making. Dendrology and hindsight bias (or, Give the chainsaw a rest) One of the goals of mental time travel is keeping events in perspective. To understand an overriding risk to

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mighty trunk. That 2%–3%, in hindsight, becomes 100%, and all the other branches, no matter how thick they were, disappear from view. That’s hindsight bias, an enemy of probabilistic thinking. Judge Frank Easterbrook, a leading jurist and member of the U.S. Court of Appeals for the Seventh Circuit, warned

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explosion at the time the foreman ordered the workers to remove tools from the tunnel, he concluded, “The verdict appears to be a consequence of hindsight bias—the human tendency to believe that whatever happened was bound to happen, and that everyone must have known it. If [the foreman] believed that an

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explosion was imminent, then he is a monster; but of that there is no evidence. Hindsight bias is not enough to support a verdict.” Once we know there was an explosion, it’s difficult to imagine the actions of the parties when

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other branches with a chainsaw and ran them through a wood-chipper. They disappeared and he acted as if they never existed. That’s what hindsight bias is, and we’re all running amok through the forest with a chainsaw once we get an outcome. Once something occurs, we no longer think

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, 164–65 Heider, Fritz, 89 Hellmuth, Phil, 90–91 Hennigan, John, 37–43, 48, 79, 135 Heterodox Academy, 146–49, 153, 172n Hills, The, 119 hindsight bias, 10, 26, 212, 227–31 home buyers, 202 Howard, Ronald, 190n Huxley, Aldous, 78–79 Ignorance: How It Drives Science (Firestein), 27 immigrants, 53, 140

The Joys of Compounding: The Passionate Pursuit of Lifelong Learning, Revised and Updated

by Gautam Baid  · 1 Jun 2020  · 1,239pp  · 163,625 words

outcomes. And if we are not learning effectively from our past experiences, we cannot improve our process to make better decisions. Because of narrative fallacy, hindsight bias, and imperfect memory, it is almost impossible to recall with 100 percent accuracy the reasons why we made a particular decision in the past. Our

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of any event can be reconstituted and is always brilliant. A journal is the most objective way to remain true to yourself and to avoid hindsight bias. More important, it helps you continuously learn from your mistakes, and these insights will be your greatest teachers in life, business, and investing. The significant

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much over time. The process of structuring our thoughts into a journal entry brings clarity to our thinking. Journaling by hand reduces the possibility of hindsight bias. It is hard to look at your own writing and deny your previous thoughts. A periodic review is an important part of the process. This

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on the vital role of checklists in improved decision making. Phil Rosenzweig, Elliot Aronson, and Duncan Watts made me aware of the widespread prevalence of hindsight bias. Michael Mauboussin and Annie Duke taught me how to distinguish luck from skill. Mauboussin also educated me on how to distinguish between knowledge of a

Retirementology: Rethinking the American Dream in a New Economy

by Gregory Brandon Salsbury  · 15 Mar 2010  · 261pp  · 70,584 words

year on their credit card interest or earning small interest on an account, the overall sum that is paid or earned is actually very big. Hindsight bias—People often believe, after the fact, that some event was predictable and obvious when it was not predictable based on the information they had before

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simply have to fall within your risk tolerance and comfort zone. Such a stance can keep you from succumbing to a mind trick called hindsight bias. “People who experience hindsight bias misapply current hindsight to past foresight,” according to Hersh Shefrin in his book Beyond Greed and Fear. The previously held emotion may not

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bigness bias, 180, 183 earned money versus found money, 116-117 effect of the human agent, 10 familiarity bias, 113-115 herding, 66, 70-72 hindsight bias, 180 house money effect, 86-89, 198 illusion of knowledge, 165-167 inheritance, 117-119 layering, 43-50 mental accounting, 42-45, 141-144 myopic

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benefits coverage in retirement, determining, 171 Bernstein, Peter, 13 Best Buy, 4 Beyond Greed and Fear (Shefrin), 13, 74, 182 bias bigness bias, 180, 183 hindsight bias, 180 bigness bias, 180, 183 bird flu, 18 Blackstone, 39 Blake, David, 200 The Book Casino Managers Fear the Most! (Karlins), 88 Bowers, Timothy J

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of healthcare, 156-165 transparent versus opaque, 169 Heath, Chip, 113 herding, 66, 70-72 Hewlett-Packard, 137 HGTV, 83-84 hidden taxes, 134-135 hindsight bias, 180 Home Depot, 83-85 homeownership danger of relying on house appreciation, 88-89, 98 as dominant financial focus, 81-82 drop in home values

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mental budgeting, 170 overconfidence, 22, 26-27, 166-168 overinsurance, 173 rising costs of healthcare, 156-165 transparent versus opaque, 169 herding, 66, 70-72 hindsight bias, 180 homeownership danger of relying on house appreciation, 88-89, 98 as dominant financial focus, 81-82 drop in home values, 7 emotional attachment to

Superforecasting: The Art and Science of Prediction

by Philip Tetlock and Dan Gardner  · 14 Sep 2015  · 317pp  · 100,414 words

good chance you won’t. Not only will you have to contend with ordinary forgetfulness, you are likely to be afflicted by what psychologists call hindsight bias. If you are old enough now to have been a sentient being in 1991, answer this question: Back then, how likely did you think it

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, Bill Clinton. Once we know the outcome of something, that knowledge skews our perception of what we thought before we knew the outcome: that’s hindsight bias. Baruch Fischhoff was the first to document the phenomenon in a set of elegant experiments. One had people estimate the likelihood of major world events

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% or 50% chance. There was even a case in which an expert who pegged the probability at 20% recalled it as 70%—which illustrates why hindsight bias is sometimes known as the “I knew it all along” effect. Forecasters who use ambiguous language and rely on flawed memories to retrieve old forecasts

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the trash can at the back of the gymnasium. And Tim knew it. There was no ambiguity in the language to hide behind, no way hindsight bias could subtly fool him into believing his forecast wasn’t so bad. Tim blew it and he knew it, which gave him the chance to

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they were all dead or taken prisoner. The problem was not one of execution. It was the plan. It was harebrained. And that’s not hindsight bias. The whole sorry saga has been dissected, and there is rare consensus among historians, left and right, that the plan was riddled with problems that

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and other pioneers of modern psychology have revealed that our minds crave certainty and when they don’t find it, they impose it. In forecasting, hindsight bias is the cardinal sin. Recall how experts stunned by the Gorbachev surprise quickly became convinced it was perfectly explicable, even predictable, although they hadn’t

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it would be a then-unknown colonel in the United States Army, Dwight Eisenhower, you may be afflicted by one of the worst cases of hindsight bias ever documented by psychologists. Of course, triage judgment calls get harder as we come closer to home. How much justifiable confidence can we place in

Rationality: From AI to Zombies

by Eliezer Yudkowsky  · 11 Mar 2015  · 1,737pp  · 491,616 words

has an excellent track record compared to anecdote, religion, and . . . pretty much everything else. Do we still need to worry about “fake” beliefs, confirmation bias, hindsight bias, and the like when we’re working with a community of people who want to explain phenomena, not just tell appealing stories? This is then

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-898X.6.3.171. 5. Buehler, Griffin, and Ross, “Inside the Planning Fallacy.” 6. Ibid. 8 Illusion of Transparency: Why No One Understands You In hindsight bias, people who know the outcome of a situation believe the outcome should have been easy to predict in advance. Knowing the outcome, we reinterpret the

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the total length. The real sneakiness was concealed in the word “it” of “A witch did it.” A witch did what? Of course, thanks to hindsight bias and anchoring and fake explanations and fake causality and positive bias and motivated cognition, it may seem all too obvious that if a woman is

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the world. Day after day they discover that people’s behavior is pretty much what you’d expect.” Of course, the “expectation” is all hindsight. (Hindsight bias: Subjects who know the actual answer to a question assign much higher probabilities they “would have” guessed for that answer, compared to subjects who must

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one the truth’s opposite.3 In both sides of the pair, students rated the supposed finding as what they “would have predicted.” Perfectly standard hindsight bias. Which leads people to think they have no need for science, because they “could have predicted” that. (Just as you would expect, right?) Hindsight will

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same cognitive data format. But the human mind does not automatically detect when a cause has an unconstraining arrow to its effect. Worse, thanks to hindsight bias, it may feel like the cause constrains the effect, when it was merely fitted to the effect. Interestingly, our modern understanding of probabilistic reasoning about

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, just correct bookkeeping of the belief network. (Sadly, we humans can’t rewrite our own code, the way a properly designed AI could.) Speaking of “hindsight bias” is just the nontechnical way of saying that humans do not rigorously separate forward and backward messages, allowing forward messages to be contaminated by backward

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there are, I guarantee they’re not labeled “fake explanation,” so polling your thoughts for the “fake” keyword will not turn them up. Thanks to hindsight bias, it’s also not enough to check how well your theory “predicts” facts you already know. You’ve got to predict for tomorrow, not yesterday

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, you would find a pot of gold—which just proves my point!” (Updating on evidence predicted, but not observed, is the mathematical mirror image of hindsight bias.) The brain has many mechanisms for generalizing from observation, not just the availability heuristic. You see three zebras, you form the category “zebra,” and this

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all the occasions in your life when you didn’t change your mind? Are they as available, in your heuristic estimate of your competence? Between hindsight bias, fake causality, positive bias, anchoring/priming, et cetera, et cetera, and above all the dreaded confirmation bias, once an idea gets into your head, it

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on things. Try to put yourself in the shoes of the hunter-gatherer who’s never had the “Aha!” of information-processing. Try to avoid hindsight bias about things like neurons and computers. Only then will you be able to see the uncrossable explanatory gap: How can you explain angry behavior in

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, or the player in the other room. It’s this last specification that makes the classic visualization, in my view, fake. You can’t avoid hindsight bias by instructing a jury to pretend not to know the real outcome of a set of events. And without a complicated effort backed up by

Misbehaving: The Making of Behavioral Economics

by Richard H. Thaler  · 10 May 2015  · 500pp  · 145,005 words

had worked with two guys whose names I had never heard: Daniel Kahneman and Amos Tversky. Baruch told me about his now-famous thesis on “hindsight bias.” The finding is that, after the fact, we think that we always knew the outcome was likely, if not a foregone conclusion. After the virtually

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the Democratic Party presidential nomination, many people thought they had seen it coming. They hadn’t. They were just misremembering. I found the concept of hindsight bias fascinating, and incredibly important to management. One of the toughest problems a CEO faces is convincing managers that they should take on risky projects if

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project works out badly, the manager who championed the project will be blamed whether or not the decision was a good one at the time. Hindsight bias greatly exacerbates this problem, because the CEO will wrongly think that whatever was the cause of the failure, it should have been anticipated in advance

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available at the time they were made, even if they turn out to lose money ex post. Implementing such a policy is made difficult by hindsight bias. Whenever there is a time lapse between the times when a decision is made and when the results come in, the boss may have trouble

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to buy (if they hadn’t managed to secure tickets) yet would also be unwilling to sell at this price. Chapter 3: The List 21 “hindsight bias”: Fischhoff (1975). 22 “Judgment Under Uncertainty: Heuristics and Biases”: Tversky and Kahneman (1974). 24 twice as many gun deaths by suicide: DeSilver (2013), reporting on

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), 110 beta (risk measurement), 226–27, 228, 229, 348 biases, 6, 23, 24, 25, 35, 46 confirmation bias, 172, 355 in financial markets, 203, 251n hindsight bias, 21–22, 190 status quo bias, 154 timid choices and bold forecasts, 186–87 “big peanuts” hypothesis, 303, 341 Binmore, Ken, 50 “Binmore continuum,” 50

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’s Revenue and Customs (HMRC), 334–35, 337n heuristics, 22–23, 25, 35, 46 Heywood, Jeremy, 332 Hicks, John, 44 Hilton, Steve, 331, 332–34 hindsight bias, 21–22, 190 Hogarth, Robin, 159, 162 Home Depot, 133 home equity, 77–79 Homer, 99–100 homo economicus, see Econs Hong Kong, 232 horse

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