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But then it doesn’t happen again and you wonder what happened.” “It happens in business a lot when you think that something that has happened before is going to happen again. “When you have ambiguity like that… people can come up with a mental causal pathway in which they believe they can see how something would have occurred - ‘oh, I can see very clearly how that would have happened’ – you have a higher level of hindsight bias,” she says.ĭrew Boyd, executive director of the University of Cincinnati’s MSc Marketing programme, says one direct result of hindsight bias is something called stereotypy. Much of the business world, though, is unclear in terms of what causes success or failure – which is often due to multiple factors. If, for example, you are in the kind of profession where you receive a lot of timely and clear feedback before you render a decision, like accounting, you’ll tend to show a smaller level of hindsight bias. Vohs says some are more prone to hindsight bias than others. Kathleen Vohs, a social scientist at the University of Minnesota's Carlson School of Management, co-authored a 2012 paper on hindsight bias which found that its consequences included “myopic attention to a single causal understanding of the past (to the neglect of other reasonable explanations) as well as general overconfidence in the certainty of one’s judgements”. “Memorialise the fact that the CEO and the other people that have approved this decision all have the same assumptions, that no competitor has a similar product in the pipeline, that we don't expect a major financial crisis.” “Any company that can learn to distinguish between bad decisions and bad outcomes has a leg up,” he says. Thaler says a simple fix could be to write things down to make a record of how a decision was made at the time so that companies can learn lessons after the event. In an interview Thaler gave to business magazine McKinsey Quarterly, he said if a CEO decided to gamble on an idea that looked good, then a few years later it turned out a competitor came up with a better product, “the CEO is going to remember, ‘I never really liked this idea’”. After they failed, only 58% said they had originally believed their company would be a success. In one study, researchers found that 77.3% of entrepreneurs in charge of failed start-ups believed that – before the failure – their company would grow into a successful business. In fact, hindsight bias is one of the most widely studied of what are known as ‘ decision traps’, in which people routinely employ mental shortcuts to simplify decisions when they're not certain decisions that are often skewed by cognitive biases: we guess something improbable will happen and it does, but those probabilities never changed – and, believe it or not, nobody possesses supernatural abilities.Īccording to Nobel Prize-winning American economist Richard Thaler, businesses may be more prone to hindsight bias than other entities. Politics doesn’t have a monopoly on this: we’re guilty of hindsight bias when we talk about the weather (there’s only a 20% chance of rain, but you say it’s going to rain and it does, and suddenly you have better forecasting ability than the experts) it happens at sporting events, in court rooms, in medical decisions and in business. This is hindsight bias – a phenomenon in which we revise probabilities after the fact or exaggerate the extent to which past events could have been predicted beforehand. But just because he won didn’t change his odds of winning prior to his victory. When he won, you may well have been one of those who ‘knew’ that was going to be the outcome, and imagined that his odds of winning had been much, much higher.

After accepting the Democratic nomination three months earlier, his chance of victory hovered around 60%. To a lesser extent it happened in November 2008 too, when Barack Obama won the election. By the following morning, he'd managed to pull off a feat many thought impossible, but that didn't stop the I-told-you-sos – friends, family members and even online soothsayers – who claimed to have known all along that Trump would triumph despite such bad odds.

On 8 November 2016 – US election night – the betting odds of Donald Trump winning the presidency had narrowed to five to one.