Why hindsight can damage foresight

WHAT IS HINDSIGHT BIAS? In 1972, President Richard Nixon made a historic trip to China, which had become virtually a closed country following the 1949 revolution. There was intense speculation on what Nixon might achieve. In a now-famous study, Baruch Fischhoff and Ruth Beyth (1975) asked their students to estimate probabilities for events relating to his visit. An example: “The USA will establish a permanent diplomatic mission in Peking, but not grant diplomatic recognition.” The students were not told that, after the visit had been concluded (and widely reported), they would be asked to recall their estimated probabilities. The study found that if an event had occurred, most believed they had assigned it a higher probability than was actually the case. When an event had not occurred, the opposite was true. This is hindsight bias: the tendency to believe that our forecasts were more accurate than they were. In retrospect, things often appear to be much more predictable than at the time of our forecast. The credit crunch, the Democratic victory in 2008, and the recent success of my favourite soccer team – all now seem inevitable, with the benefit of hindsight.