The main one is forcing people to justify their judgements and think about alternative ways in which things could have turned out. So psychologists have looked at ways in which we can correct for the hindsight bias. If trainee doctors think a diagnosis was obvious all along, how will they learn to consider alternatives? If the entrepreneurs knew how biased their estimates of success were, would they have done things differently? The hindsight bias can be a problem when it stops us learning from our mistakes.

Our memories aid us in this endeavour of proving ourselves right. People naturally look for information that confirms their view of the world - we all want to be right. When you know you team won, it seems inevitable.

The hindsight bias occurs because we revise our estimation of an event’s probability after the fact. The hindsight bias is stronger when you are you less surprised by what happened. For example, your bag was stolen because you’re a tourist. The hindsight bias is stronger when you can easily identify a possible cause of the event. Under some circumstances, the hindsight bias is particularly strong: The research into entrepreneurs nicely demonstrates the hindsight bias. With hindsight, then, the actual outcome had become more predictable. For example, after attending a baseball game, you might insist that you knew that the winning team was going to win beforehand. In other words the failure of their business had made them revise their original estimate downwards. The first time they estimated their chances of success, before their business failed, they guessed, on average, 77.3 percent.Īfterwards they recalled this figure to be 58.8 percent. This 40 percent were then asked: what did you think your chances of success were before you started? When the researchers got back to them a while later about 40 percent had quit their new business. One study asked 705 entrepreneurs who were about to start up a new business how they estimated their chances of success ( Casser & Craig, 2009). Still many manage to convince themselves that their venture will be different.Īs you might expect, as a group entrepreneurs are remarkably optimistic about their chances of succeeding (otherwise why bother?). Going into business for yourself is scary.ĭespite all the potential rewards, compared with getting a safe job with a big firm, being an entrepreneur means accepting huge risks.Īll entrepreneurs know that there are no guarantees and that new businesses fail at a frighteningly high rate. Example of hindsight biasĪn example of the hindsight bias from the world of business is the best way to understand it. This is partly because of our drive to make sense of the world it’s comforting to feel we can predict what is happening to us and why. The things that happen to us seem more like they were meant to happen.

Examples of hindsight bias