A Way to Be Wrong Called Hindsight Bias

Your mind projects wrongness on the world via hindsight bias, the sense that what happened was bound to happen.

Hindsight Bias - The tendency to believe, after learning the outcome, that you knew it all alongRandomness does not look random. You overlook the decisive role of chance.  Certainty is an illusion. And this illusion can cover the rocks while you sail right onto them. Wrongness.

Bill Belichick is a lucky so-and so. Have you seen his girlfriend? His New England Patriots’ brilliant success over the last dozen years seems so inevitable now: the future Hall of Fame quarterback; the genius coach; the great organization. How else could it have turned out?

Differently. Their first two Super Bowls wins came from field goals of more than forty yards, kicked in the last ten seconds of each game. The Patriots’ most recent titles came when their opponents pulled defeat out of the jaws of victory. Totaling results from their nine Super Bowls, the Patriots have been outscored by their
opponents by 38 points.

The Patriots’ image is improved by hindsight bias. We remember the past imperfectly. We forget the parts that don’t fit the narrative we have now. We remember the skill but forget the luck. Wrongness. 

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Imagine all the people in the world are sitting in one room. Each holds a coin. They all stand up and begin flipping their coins. They sit down when it comes up tails. The last person standing will have seen their coin come up heads thirty-two times in a row.

There’s no skill involved. It’s a function of base size: We started with seven billion coin flips. But our winner could be forgiven if she thought she were something special. She is not. She is no more likely than you are to get heads next time. (This concept applies handsomely to high-flying mutual funds, by the way.)

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When you see a successful person, you are often looking at the winner of an extended series of coin tosses. Probably smart and hardworking, since those characteristics dramatically leverage the value of luck. A coin-toss winner nonetheless.

Hindsight bias obscures the role of chance in their achievement. As Paul Getty said, the secret to success is to get up early, work hard, and strike oil.

Would Ray Kroc, builder of McDonald’s, have sold billions of hamburgers if the owners of a drive-in restaurant—the McDonald brothers—had not astounded him by purchasing eight of his Prince Castle five-spindle Multimixers? Would George W. Bush have been president if he had been born George W. Guànmù? Do you
want fries with that?

It seems so certain now, but what were the odds that Bill Gates would become the richest man in the world? Gates is brilliant, hardworking, and visionary. He is also lucky.

In 1968, when Gates was in the eighth grade, the Lakeside School Mothers’ Club invested the proceeds from a rummage sale into a computer terminal and a block of time on a mainframe computer in downtown Seattle. This decision dramatically increased the possibility that a kid at Lakeside Middle School could learn computer
programming. Had the mothers’ club bought the sorely needed movie projector instead, Bill Gates might have ended up a lawyer like his father.

A few years later, fledgling Microsoft was working on a programming language for IBM’s first PC. As it happened, IBM was unable to purchase an operating system for the PC from Digital Research, the likeliest vendor. IBM asked Gates if Microsoft could help.

Although Microsoft did not have an operating system, he said they could (you have to take your luck). They bought one from Seattle Computer Products, tweaked it for the PC, and sold it to IBM for fifty thousand dollars. Microsoft kept the rights. Gates’ shrewdness displayed dramatically increased the positive effects of his good luck. But you still could not have predicted Microsoft’s extraordinary success the day before IBM said yes. Bill Gates won more than his share of coin flips along the way.

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Hindsight bias is wrongness that distorts the past. Because common sense learns from the past, hindsight bias is wrongness that weakens common sense. When you look back, don’t forget: things didn’t have to turn out this way.

Learn more about ways to be wrong to get yourself on the path to being right more often.

[i] “Randomness does not look random.” Nassim Taleb, Fooled by Randomness (New York: Random House, 2004),
54.
[ii] “…hindsight bias…” Scott Plous, The Psychology of Judgment and Decision Making (New York: McGraw-Hill,
1993), 138.
[iii] “…by purchasing eight of his Prince Castle five-spindle Multimixers?” Ray Kroc with Ronald Anderson,
Grinding It Out—The Making of McDonalds (Chicago: Contemporary Books, 1977), 6.
[iv] “…a bright kid at Lakeside Middle School could learn computer programming.” Stephan Manes, Paul Andrews,
Gates: How Microsoft’s Mogul Reinvented an Industry and Made Himself the Richest Man in America (Seattle:
Cadwaller & Stern, 2013—Kindle Edition).

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