From the post by Eleizer on Hindsight bias

HindSight Bias

Say you make an investment into a really nice house, with nice roommates. You move after quite a struggle with renting your old house. The investment is high in terms of price as well as period. You move in and realize that people are smoking the fuck out of their lungs around you. People are also not reasonable (in general), that we have a talk with them, and they smoke 12 feet from their house. The real problem being there is ALWAYS smoke in your apartment as the people around the flat take turns to smoke ensuring that if your window is open, smoke always gets in. Its one of those times when they say that the stars will align in the sky to make your life hell (Hell! Not so much). Of course the only thing you are worried about is the continuous passive smoking and the resulting decline in health, i.e., “Hello Cancer Yamadharma”. The day before you moved in, you are excited. The day after you moved in, you fucking hate your life (exaggerated for dramtic effect). You start asking yourself why in the first place you came to this house. You tell yourself, “Instead of coming to this house, you should have stayed in the old house”. You tell yourself you made the worst decision ever. “You paid a huge sum to take this shit of a house?”, you question yourself. In other words you scold yourself that you didn’t predict such a small thing earlier. “Of course it was predictable”, you scold/ your new self.

In hindsight bias, people who know the outcome of a situation believe the outcome should have been easy to predict in advance. Knowing the outcome, we reinterpret the situation in light of that outcome. Even when warned, we can’t de-interpret to empathize with someone who doesn’t know what we know.

In hindsight moving to the new house was the worst decision ever made. With the information I have now, I can make the best decisions in the past. But in the past, I didn’t have the information from the future. “I should have done my masters in India instead of Holland, 3 years ago”. You compare your now, knowledgeable self with the old one, who was not so knowledgeable, to make decisions in the past. You act as though it was obvious. Worst of all, you beat your self about it saying “you should have done it”, when there is no point doing it. You should learn your lesson and move on.

I bought a cycle here 2nd hand, and had to spend 50 euros on repair. I tell this to my parents and they exclamate, “ Why did you buy such a cycle that was prone to repairs”. Of course I shoudn’t have bought it in the past. I definitely know that. But there was no way to know the future in the past. It was a gamble. It looked fine while buying. Shit happened. Deal with it and move on. No point brooding over this shit or even wasting your time, feeling bad or something.

After having done his internship in company XYZ, my friend tells me that he should have chosen the company ABC, instead, as he had the option in the past, and that it would have been much better for him. Of course he is able to make amazing decisions regarding the past, now, with all the information he now has. He didn’t know it before until he actually did the internship. He continues to brood over this despite the knowledge of hindsight bias.

Hindsight bias is when people who know the answer vastly overestimate its predictability or obviousness, compared to the estimates of subjects who must guess without advance knowledge. Hindsight bias is sometimes called the I-knew-it-all-along effect.

I spent 3 days doing an assignment and spent much more time on it before the interview and finally got a job in the company. A few months later, one of my friends applies to the same job, I check his assignment and I guess I did act like I-knew-it-all-along. I am sorry. I was explaining to him the assignment as though it was trivial. I remember spending 3 full days breaking my head over the small small details of the assignment. No wonder it seemed to me, that the discussion was straight forward. I was wrong. It appears I was using my hindsight bias.

Hindsight bias and it’s importance in the real world

Hindsight bias in legal matters is very important, as the judge/jury has to convict someone based on if he/she was legally negligent. An experiment was based on the actual legal case, by Kamin and Rachlinski (1995), where they gave a control group information that was available to the convict before the flood took place. The convict was responsible for taking measures regarding flood. An experimental group was given information that the flood happened and was also provided with the info available to the control group. Another experimental group was provided information as the previous experimental group, but they were specifically requested to not use their hindsight bias. 76% of the control group didn’t see any threat of a flood with the given information, implying no one needed to be convicted. 57 % of the first experimental group concluded that floods were imminent. 56% of the last group behaved just like the first experimental group. This goes to show that whether the people were told or not regarding hindsight bias, it didn’t matter. It appears that they did use their hindsight bias.