Lessons - Why You Can't Learn From Your Mistakes (Hindsight Bias)

Welcome to Lessons Episodes of Success Story, part of the HubSpot Podcast Network. These lessons episodes will be shorter conversations with past guests, valued members of the success story community, and myself. They'll be focused on teaching you actionable, insightful takeaways that you can use to upskill your personal and professional life. This is the number one reason why you can't learn from your mistakes. It's hindsight bias. Let's start with a story to paint a picture. The year is 2005, after dating your partner or your spouse for two years, you finally popped a question for marriage. All signs point towards a lifetime of happiness together. But you flash forward to 2008, you've been divorced for months. You're going to look back and you're going to tell all your friends, even in 2023, you're going to tell all your friends that it is so easy to reimagine the path that led you here. You recall all the red flag that your relationship with doomed from the start. And you can say things like, we clearly weren't right for each other, I knew deep down it would end. But in the moment, when you were proposing to that person, the future was way less certain. But at the time of the proposal, divorce was never on the table, it was unfathomable. But fast forward, how could you not see the red flags? This is hindsight bias in action. And according to psychologists, it distorts our memory far more than we realize. Here's an experiment. In 1975, the psychologist Baruch Fischoff published a study where he asked participants to estimate the likelihood of various outcomes for known historical events. And the participants routinely estimated the actual outcomes as being over three times more likely than the objective measures suggested they were at the time. And then to double down on this and to make sure that there was a bias here, he then gave people short basic accounts of historical events like the Vietnam War with fictional potential outcomes. So he said things like after the Vietnam War, there was a long protracted war that ensued or during the Vietnam War, there was a swift resolution within a few months or there was a troop withdrawal and then there was a stalemate or there was nuclear weapons used in the Vietnam War. Across the board, people routinely overestimated how likely the given outcome was when they were told it occurred. And the results are crystal clear. Since we as humans know the finale, we can't help but feel that we saw it coming all along, even if the finale never happened. Hindsight bias gives us what's called an illusion of predictability. We assume we should have known it was going to happen all along. And we see this distortion play out frequently. So investors kicking themselves for not betting on the obvious, say that in air quotes, NX, stock, doctors who feel like a tricky diagnosis should have been clear based on the symptoms and maybe their peers are just idiots, historians that we've events into an inevitable narrative and outcome or sports coaches that take credit for brilliant coaching decisions even if they were just luck. But if we were in any of the original moments, when we had the option to make the decision that these people should have made, in most cases, there was no real way to know what we should have done. There are too many variables and unknowns. Now like all things that are modern and wise and insightful, a lot of them have been discovered for thousands of years. Hindsight bias is no difference. It was noticed by philosophers way, way, way back even without the official name. So the Roman philosopher, Seneca, he warned us that we suffer more from imagination than from reality. The imagined clarity of Hindsight bias fits this narrative perfectly. Confucius taught students that things that are done don't talk about, but things that are passed don't blame. But when we're calling the past, we talk and blame a lot. And then Buddhism's idea of the beginner's mind means approaching things without assumption to see clearly Hindsight bias pollutes our mind with the opposite narratives that distort reality. And modern psychology has made these intuitions into formal theories which are precursors to Hindsight bias like confirmation bias, memory reconstruction and cognitive dissonance, which I'll explain about in a second. So as both ancient wisdom and current science show, the future holds more uncertainty than our memories say. The confidence we place in Hindsight proves predictability is an illusion. And it's one that humanity keeps falling for. Let's look at some of the cognitive underpinnings of Hindsight bias. It arrives from normal functions of human cognition and memory. So Hindsight bias, it's wired into how our minds work. Studies have uncovered key processes that steer us towards these distorted Hindsight biases. So there's memory reconstruction. As humans, we don't record and replay memories like video recordings. We actively reconstruct them each time from whatever information is available. The reconstruction process of our memories, at least our memories open to huge changes, errors, biases. In one study, the psychologist Daniel Shafter showed participants a list of words that all related to a common theme but did not actually contain the theme word itself. Just words associated with it. Later, when he was asking the participants to recall the list, people wrongly, quote unquote, remembered the missing theme word being included due to associating it so strongly with the other words. It's just one example of how we artificially reconstruct memories. Cognitive dissonance is another theory that applies to Hindsight bias. So when our actions and beliefs don't line up with our desired self-image and values, it causes mental discomfort known as cognitive dissonance. Now to reduce this discomfort, we subconsciously rewrite our memories of the situation to make our actions seem more aligned with our self-image. So if we do something that we didn't like, we sort of make up our own history because we wanted to fit what we would have done because we want to feel good about ourselves. So another study, psychologist, Leon Festinger. He ran an experiment where he had participants perform a really boring, tedious task for an hour in exchange for a payment of either $1 or $20. Afterwards, the $1 per hour group actually rated the task as more interesting and engaging than the $20 per hour group did. The $1 group rewrote their memory of the task as less boring in order to make their cheap compensation better fit their negative experience because they suffered cognitive dissonance. They didn't want to admit in their head. They did a boring thing for no money. So the very wiring of human memory leaves it full of potential for Hindsight bias. The future is cloudy, but it's funny because Hindsight always seems 2020, even though it's not. And Hindsight bias is a very real problem. It plagues major societal institutions in the legal system. Studies show Hindsight bias affects judgments. People, so the courts, judges, jury, they see harmful events as more foreseeable and preventable when they know the negative outcome of that event. In organizations, in businesses, leaders evaluate past decisions differently based on results. So strategies that were seen as successes were, you know, these guaranteed winners all along and failures were doomed from the start despite there was a massive amount of uncertainty at the time and there was potentially no way to really tell if something was going to be a success or a failure. See across society, narratives formed that overemphasize the inevitability of past events. With Hindsight bias, we see things like financial crises, political upsets, social changes as pre-ordained. And the downstream effects of this bias are super concerning. It promotes massive amounts of overconfidence in predicting complex events and it allows poor decisions made under uncertainty to be rationalized and it also inhibits learning from our mistakes. On a personal level, Hindsight bias prevents growth by making all of our choices seem predestined. On a societal level, it entrenches all these polarized narratives that really resist compromise. So by recognizing our shared Hindsight biases, we can approach our future and society's future with more humility and openness. There are simply too many variables and unknowns to ever be 100% certain of what lies ahead. Here's a story. Imagine you're the coach of a football team and you have to make a crucial decision in the final seconds of the game. You have two options. On the ball, throw pass. Which one do you choose? And you may think that the answer depends on the outcome, right? If you run the ball in score, you made the right decision. If you throw pass and it gets intercepted, well, you made a bad decision. But this is not true. See, the outcome is not the only thing that matters. The process is also important. You have to consider the probabilities and the information you have at the time. You have to weigh the risks and rewards of each option. And you have to make the best decision you can with the facts that you have. See, the football scenario is not a hypothetical situation, but a real one that happened in Super Bowl 49 between the Seattle Seahawks and New England Patriots. Now this is one of my favorite examples that I found in the book thinking in bets by Annie Duke. The Seahawks coach Pete Carroll decided to throw pass in the final seconds of the game instead of running the ball. The pass was intercepted by Malcolm Butler and the Seahawks lost the game. Now, many people criticized Carroll's decision as the worst in Super Bowl history and blamed him for the outcome. But was it really a bad decision? It actually wasn't. See, it was a reasonable decision based on the probabilities and the information that he had at the time. According to a study by Brian Burke, there was actually a study done on this particular play. Throwing a pass in that situation had a slightly higher chance of winning than running the ball. Moreover, throwing a pass had a lower risk of losing time or being stopped by the defense. The interception was a rare and unlucky event, not an inevitable one. Judging Carroll's decision by its outcome is an example of resulting in hindsight bias. It's unfair and irrational to blame him for something that was beyond his control. It's also unproductive and unhelpful to learn from this kind of feedback. To avoid resulting in hindsight bias, we have to focus on the process, not the outcome. What we can actually do, I'll get into some more very tactical things later. We can ask ourselves questions when we review our past mistakes. I guess our past decisions, some of the mistakes, some of them not. What information did I have when I made the decision? What alternatives did I consider? What assumptions did I make? What criteria did I use to evaluate the options, how confident it was on my decision? What feedback did I get after the decision? These questions can help us assess the quality of our decision making process and then we identify areas for improvement. They can also help us separate skill from luck and recognize when we were right or wrong for the right or wrong reasons. When we do this, we can improve our thinking, make smarter decisions when we don't have all the facts. Now, although hindsight bias is ingrained in our minds, there is some research and there's some strategy that shows us how we can counteract it. We leverage wisdom from philosophy, process and psychology and let's draw some inspiration from some major players that proactively have to deal with it. So the United States Army, they do something called a pre-mortem analysis. So groups in the Army imagine all these potential failure options to identify flaws in the decision before they make a commitment to the strategy. Google incentivizes effective processes over outcomes and they reward decision quality itself rather than the resulting success and this prevents distorted evaluations and post-mortems. NASA promotes psychological safety and encourages open discussions of failures and it reduces defensive hindsight distortions because you're going to have all these different opinions coming in. The British intelligence agencies convene an accountable task force which is an outside unbiased group of experts that review operations and it really counters any personal hindsight biases or agendas and a last example would be award winning journalists. They mandate fact checking or they really should and they verify memories against their documented records to help control biases. Now you'll notice a common theme and obsession with recording the true conditions, data, facts, in the moment a decision is being made to counter the brain's natural tendencies to create alternate realities and facts with biased historical data. Now on a micro scale you're wondering how do I remove hindsight bias from my own life? Well here's some strategies that I use and hopefully you can use as well. So one strategy is to envision multiple histories when you evaluate the past. You have to fully immerse yourself in how events could have unfurled and come about differently. So you think through all these different possible outcomes. A lot of philosophers do this to counter overly simplistic narratives. Another thing you should always do in life is to cultivate a beginner's mindset. You can do this through meditation. There's certain exercises that can help you with your clarity of thought and your ability to approach a situation with a beginner's mindset. But basically you go into a situation getting rid of all assumptions and you have to see the situation in its reality in its clarity in the moment. So you remove all these preconceived notions going into a situation and you just focus on what you're observing, what you're seeing, what you're witnessing. You can focus on your decision making process. So you're vetting all the alternatives, all the information, you're weighing all the information so that you do make the best possible decision in the moment with all the pieces of information that you have access to. You can also reframe disappointments as growth opportunities. So say you made a bad decision in the past. Instead of just saying, oh my god, I should have known, you're using it as fuel for learning. So you're not letting that become a wasted opportunity. You're actually letting it be this educational moment where you can now expand your skills cut, your wisdom, your decision making process so that hopefully you don't make the same mistake again. You can also record your thoughts and your decisions daily. Obviously it's hard to do this with everything, but with major decisions, work, family, relationship, health, wellness, record your thoughts and facts available on major life-altering decisions so that you ground your memories in documented facts, not just biased recall. Journalists do this all the time to defeat distortion. And lastly, you should surround yourself with mentors, peers, friends, family that can challenge your assumptions and provide external perspective both during a decision making process, as well as after a decision may have knock on so well, I bet you your closest friends, peers, mentors can pinpoint exactly why it didn't go well and maybe you do know internally but you just don't want to admit it. And then lastly, you have to really, really rigorously assess decisions on the process. So where choices thoroughly vetted was data appropriately weighted, you have to ask the hard questions. There's actually a concept that I refer to as behind-site horizon when you're thinking about this bias. So the idea is that we each have a horizon dictating how far we can objectively see into the past. And there's things that limit our horizon, that are fixed so our cognitive wiring are the culture that were born into other uncontrollable events, but much of our hindsight horizon is within our control. So when we do some of the things that I just mentioned, our habits and our behaviors or lack thereof can cloud our horizon which will obscure the past behind bias. Or if we action some of the things that I just brought up, they can't expand our horizon, bringing objectivity into clearer view. And those that are overcoming hindsight bias regularly and learning from their mistakes, they really grasp this. They question their assumptions when recalling the past and they focus on sound decision processes over the results. They view failures as chances to widen their horizon and in essence, they've engineered an expansive hindsight horizon and their view of the past can now be more objective and accurate. So your really your goal is to in the context of this horizon, this hindsight horizon, you want to reduce fog, you want to watch for ego, dogma, pessimism, anything clouding this unbiased inquiry and then you want to amplify clarity, you want to seek diverse views, you want to document facts, you want to reward good processes, anything bringing objectivity into focus. Remember, with the hindsight bias and the hindsight horizon rule that you can use when battling hindsight bias, if you're trying to choose a path in your day to day and your habits and your processes, take the one that offers the clearest view of the path. Ask yourself, where is my vision most objective and head there, it'll allow you to learn from the past and make better decisions for the future.