The #1 Reason You Can't Learn From Your Mistakes

Mental Models, Performance, Business & Entrepreneurship | newsletter.scottdclary.com

Oct 04, 2023

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The #1 Reason You Can't Learn From Your Mistakes

The year is 2005. After dating your partner for two years, you finally pop the question for marriage. All signs point towards a lifetime of happiness together.

But flash forward to 2008 - you've been divorced for months.

Looking back, it's easy to re-imagine the path that led you here. You recall all the red flags that your relationship was doomed from the start.

"We clearly weren't right for each other - I knew deep down it would end," you think.

But in the moment, the future was far less certain. At the time of the proposal, divorce seemed unfathomable.

This is hindsight bias in action. And according to psychologists, it distorts our memory far more than we realize.

The Unpredictable Nature of History

In 1975, psychologist Baruch Fischhoff published a study where he asked participants to estimate the likelihoods of various outcomes for historical events where the results were already known.

The participants routinely estimated the actual outcomes as being over 3 times more likely than objective measures suggested they were at the time.

He then gave people short, basic accounts of historical events like the Vietnam War with fictional potential outcomes.

Things like:

A long protracted war ensuing
A swift resolution within months
Troop withdrawal and stalemate
Nuclear weapons used

Across the board, people routinely overestimated how likely the given outcome was when told it occurred.

The results were clear as day - once we know the finale, we can't help but feel we saw it coming all along, even if the finale never happened.

Hindsight bias gives us an "illusion of predictability."

We assume we should have known it was going to happen all along.

We see this distortion play out frequently:

Investors kick themselves for not betting on the "obvious" 10X stock.
Doctors feel a tricky diagnosis should have been clear based on the symptoms.
Historians weave events into an inevitable narrative and outcome.
Coaches 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 we “should have”, in most cases there was no real way to know what we should do.

There are simply too many variables and unknowns.

Ancient Wisdom Meets Modern Psychology

The tendency for hindsight bias has been noticed by philosophers for thousands of years, even without the official name.

Roman philosopher Seneca warns us that “we suffer more from imagination than from reality.” The imagined clarity of hindsight bias fits this perfectly.

Confucius taught students that “things that are done, don't talk about; things that are past, don't blame.” But when recalling the past, we talk and blame a lot.

Buddhism's idea of “beginner's mind” means approaching things without assumptions to see clearly. Hindsight bias pollutes our mind with the opposite - narratives that distort reality.

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 more about in a moment).

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 - one humanity keeps falling for.

The Cognitive Underpinnings

Hindsight bias arises from normal functions of human cognition and memory - it's wired into how our minds work.

Studies have uncovered key processes that steer us towards distorted hindsight bias:

Memory Reconstruction

We don't record and replay memories like video recordings - we actively reconstruct them each time from whatever information remains available.

This reconstruction process leaves memories open to change, errors, and bias.

In one study, psychologist Daniel Schacter showed participants lists 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 asked to recall the list, people wrongly "remembered" the missing theme word being included due to associating it so strongly with the other words.

Cognitive Dissonance

When our actions and beliefs don't line up with our desired self-image and values, it causes mental discomfort known as cognitive dissonance.

To reduce this discomfort, we subconsciously rewrite our memories of the situation to make our actions seem more aligned with our self-image.

Psychologist Leon Festinger ran an experiment where he had participants perform an incredibly boring and tedious task for a full hour in exchange for a payment of either $1 or $20. Afterwards, the $1 group actually rated the task as more interesting and engaging than the $20 group did. The $1 group rewrote their memory of the task as less boring in order to make their cheap compensation better fit the negative experience.

They suffered cognitive dissonance because 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 riddled with potential for hindsight bias.

The future may be cloudy, but hindsight is always 20/20.

The Domino Effect

The hindsight bias is a very real problem. It plagues major societal institutions.

In the legal system, studies show hindsight bias affects judgments. People (courts, judges, jury) see harmful events as more foreseeable and preventable when they know the negative outcome.

In organizations, leaders evaluate past decisions differently based on results. Strategies seen as successes were "guaranteed winners" all along. Failures were "doomed from the start" despite uncertainty at the time.

Across society, narratives form that overemphasize the inevitability of past events.

With hindsight, we see things like financial crises, political upsets, and social changes as preordained.

The downstream effects of this bias are concerning.

It promotes overconfidence in predicting complex events. It allows poor decisions made under uncertainty to be rationalized.

And it inhibits learning from our mistakes.

On a personal level, hindsight bias prevents growth by making our choices seem predestined.

On a societal level, it entrenches polarized narratives that resist compromise.

By recognizing our shared hindsight biases, we can approach the future with more humility and openness to connect.

There are simply too many variables and unknowns to ever feel certain of what lies ahead.

Will You Run Or Pass?

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: run the ball or throw a pass.

Which one do you choose?

You might think that the answer depends on the outcome.

If you run the ball and score, you made a good decision.

If you throw a pass and it gets intercepted, you made a bad decision.

But this is not true.

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.
You have to make the best decision you can with the facts you have.

The football scenario is not a hypothetical situation, but a real one that happened in Super Bowl 49 between the Seattle Seahawks and the New England Patriots.

This is one of my favorite examples that I found in Thinking in Bets, by Annie Duke.

The Seahawks coach, Pete Carroll, decided to throw a 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.

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? (Hint. No, it was not.)

It was a reasonable decision based on the probabilities and the information he had at the time.

According to a study by Brian Burke, 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 and hindsight bias.

It is unfair and irrational to blame him for something that was beyond his control.

It is also unproductive and unhelpful to learn from such feedback.

To avoid resulting and hindsight bias, we should focus on the process, not the outcome.

We should ask ourselves questions like:

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 was I in my decision?
What feedback did I get after the decision?

These questions can help us assess the quality of our decision-making process and 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.

By doing so, we can improve our thinking make smarter decisions when we don’t have all the facts.

Overcoming Hindsight Bias

While hindsight bias is ingrained in our minds, research shows we can counteract it by leveraging wisdom from philosophy, process & psychology.

First we can draw some inspiration from how a few major players deal with this.

The United States Army utilizes pre-mortem analyses - groups imagine potential failure modes to identify flaws before commitment.
Google incentivizes effective processes over outcomes - rewarding decision quality itself rather than resultant success prevents distorted evaluations.
NASA promotes psychological safety - encouraging open discussion of failures reduces defensive hindsight distortions.
British Intelligence Agencies convene accountable task forces - requiring unbiased experts to review operations counters personal agendas.
Award-winning journalists mandate fact-checking - verifying memories against documented records controls bias.

You’ll notice a common theme, an obsession with recording true conditions/data/facts to counter the brain's natural tendencies to create alternate realities and facts with biased, historical data.

Now on a micro scale, here’s some strategies I’ve included into my own life (and that you may like to include into yours), to help negate Hindsight Bias, as much as possible.

Envision multiple histories when evaluating the past - fully immerse in how events could have unfurled differently. Philosophers leverage this to counter simplistic narratives.
Cultivate a beginner's mindset through meditation - shed assumptions to see reality clearly in the moment.
Focus analyses on sound decision-making processes - properly vet alternatives and weigh information. Stoic philosophers exemplified this principle.
Reframe disappointments as growth opportunities - failures expand our skills and wisdom if viewed as fuel for learning.
Record thoughts and decisions daily - ground memories in documented facts, not biased recall. Journaling defeats distortion.
Seek counsel from mentors and peers - challenge assumptions and provide external perspective. Feedback is key for addressing blind spots.
Rigorously assess decisions on process - were choices thoroughly vetted? Was data appropriately weighted? Ask the hard questions.

There's a concept I refer to as the "hindsight horizon" when considering this bias.

The idea is that we each have a horizon dictating how far we can see objectively into the past.

Some factors limiting our horizon are fixed:

Our cognitive wiring
The era and culture we're born into
Uncontrollable events

But much of our hindsight horizon is within our control.

Our daily habits and behaviors can cloud our horizon, obscuring the past behind bias. Or they can expand our horizon, bringing objectivity into clearer view.

Those overcoming hindsight bias grasp this:

They question assumptions when recalling the past.
They focus on sound decision processes over results.
They view failures as chances to widen their horizon.

In essence, they've engineered a expansive hindsight horizon. Their view of the past is more objective.

You can broaden your horizon in two ways:

Reduce Fog - Watch for ego, dogma, pessimism - anything clouding unbiased inquiry.
Amplify Clarity - Seek diverse views, document facts, reward good processes - anything bringing objectivity into focus.

Remember the Hindsight Horizon Rule when battling with Hindsight Bias.

When choosing a path, take the one offering the clearest view of the past. Ask yourself: Where is my vision most objective? Head there.

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