May 14

Hindsight Bias: “I knew it all along” and other such fairy tales

After a catastrophe occurs, you might hear someone say, "I knew all along this was going to happen." When you hear those words, you don't need to get all worked up and let go of your otherwise calm, unflappable demeanor! Instead, you only have to say to the one-who-knew-all-along, "No, you didn't. You are exhibiting a classic case of hindsight bias." And you'd be right. (As always.)

But, first, an anecdote.

A story about search engines

While there are many reasons to be grateful to the last decade of the 20th century, one stands out. That's when the internet, as we know it today, started to take firm roots; when the term "dot com" went mainstream. In this startup boom, Ivy league grads (and college dropouts!) preferred to work in garages than in the comfort of Fortune 500 corporate offices.

Here's a short story about two such startup ventures.

You may have heard of the first one—more a verb (symbolizing search) than a company name—Google. The second one may be familiar to those who are not afraid to date themselves—a somewhat popular search engine in the 90s called Excite.

David v Goliath

Here's the interesting bit. Before the millennium we're in now, Google was a fledgling, a la-David (in the David v Goliath analogy), a bit-player in the search engine market dominated by more prominent players like Excite and Yahoo. Excite, for its part, went from being a garage startup in the early 90s to a public listed company by the late 90s.

In just a couple of years since they had started, Google's founders Sergey Brin and Larry Page had made substantial progress in search algorithms. They were looking to capitalize on this progress and hoped to exit through a buyout.

Google's founders approached Excite's then CEO, George Bell, with a $1 million offer to sell their company to Excite. Bell simply was not interested in the proposal.

Other industry insiders urged Google to drop their price down to $750,000. Bell still refused. He found the deal terms unfavorable and rebuffed Google's 750K offer. Google remained an independent company.

The rest, as they say, is history. Google's market cap, as of this writing, is 1,580 billion—yes, with a 'B.' Excite, on the other hand, didn't survive as an independent entity much longer into the new millennium, becoming the target of multiple mergers and takeovers.

Rushing to judgment

What's the first thing that comes to your mind when you hear the Excite v Google story? Is it that George Bell was a shortsighted CEO for giving up on what could have undoubtedly been the most incredible corporate deal ever?

I'm with you. It is hard not to judge Bell harshly. He had the opportunity to buy the "Google brand" for today's equivalent of chump change and yet did not.

But isn't it equally likely that George Bell couldn't have known what the future held for Google? Or, would Google in its current form have even existed had it merged with another company in its infant years?

These are rhetorical questions with just one honest answer: We don't know. We can speculate all we want. But in the end, we're simply swimming in hypotheticals.

What we know for sure is this—a random sequence of events occurred. These events favored Google and were unfavorable to Excite. Period.

Beating ourselves up

This post is not just about a corporate case study involving George Bell, Google, or Excite. Here's where the story becomes significant and personal to every single one of us. As much as we like to point fingers and pass judgment on others, we are at our worst when it comes to beating ourselves up about past decisions.

Almost all of us have a should've, could've, would've voice within us. Sometimes this can run in our minds in a loop and run loud enough to drown out the voice of reason.

When we pin the blame on George Bell in the above story or kick ourselves in the foot with a case of "I should have known better," what we're exhibiting are some fundamental cognitive biases.

Hindsight bias

No one could have foreseen that Google would turn from just being a search engine company into a verb to symbolize online search. To do so would have required phenomenal prescience.

So, when people say, "I knew all along this was going to happen," they're exhibiting a classic case of Hindsight bias—using recently acquired knowledge to make historical actions appear more predictable.

We know Google eventually stormed the search engine charts and is now the undoubted leader in that space. But without those flashy 20/20 lenses, Bell could not have predicted Google's phenomenal success.

Simply put, Bell took a bet against a nascent company. His bet failed. These same odds can make risks succeed sometimes. It is usually a random set of circumstances, players, and environment that determine the outcome. Also known to the faithful sorts as fate or destiny.

Yes, I agree. It sounds very harsh to replace the fairytale inspirational material about youthful brilliance and hard work with pure randomness.

But for every Google-like success, hundreds of startups never make it out of the garage. Yes, some are stinted to fail because they are just not good enough or don't put in the requisite effort. But there are bound to be a few that are purely victims of circumstances. And because they don't make it eventually, they aren't even part of the cause-effect relationships studied to determine what contributes to success.

This is where survivorship bias is seen.

Survivorship bias

Survivorship bias is when we only select successful outcomes (and ignore failures) to come to conclusions about causality. The most prominent (and oft-repeated) example of survivorship bias has to do with WWII planes.

A mathematician, Abraham Wald, was asked to analyze planes to see how they could be reinforced for protection from enemy gunfire. It was impractical to strengthen the entire aircraft since that would make the plane too heavy to fly. Therefore, Wald evaluated the planes that came back from combat and looked at where the bullet holes were to determine which parts could be reinforced.

But, here's the thing: Wald hadn't considered the planes that did not make it back from combat—the ones that truly did not survive the enemy gunfire. Of course, analyzing those "lost" planes would have provided the most accurate analysis of the parts that needed reinforcement!

In restricting his analysis to survivors, Wald missed the point altogether.

Miscalculated causality

Catastrophic failures have as much to teach us about causality as successes do. But due to our selection bias (focusing only on survivors or wins), we miss a lot of learning.

Take the case of using college placements as a metric to determine the best feeder high school. Just because three people from the class of 2021 made it to Harvard or Stanford (not that it really matters where you go for your undergrad; but that's a different discussion altogether) from ABC high school, we conclude ABC must be an excellent school.

We fail to see what proportion of students from ABC school applied to Stanford and didn't make it. And also, what about the selection bias of the students already enrolled in ABC school? Were they already part of a high academic success pool who would have done well in any school, and therefore, it is not necessarily the ABC school system that led to the kids going to reputed colleges?

So many questions with no clear answers, complicated by our cognitive biases that cloud our judgment.

The impact of biases

The process of short-circuiting our cognitive processes through these biases creates interesting results and outcomes; some good, some bad.

The good

In truth, with most things, there is no way to predict exact outcomes. But we construct good stories to fill in the gaps simply to satisfy ourselves.

When luck becomes the central character in a story, learning ceases. We don't like that. As humans, we are profoundly searching for meaning in everything. It is instead much more enjoyable when we make it a David v Goliath story. We want heroes and villains—the brilliant and hardworking vs. the foolish and lazy.

Nonevents aren't great storytellers.  So, we make up patterns, even where there is none, since it makes us feel complete and competent. Like we are in control of things.

You know what I'm talking about, right?

Rituals such as wearing the same tie to every major presentation or assuming your team will win if you sat in a specific chair for the entirety of the game. While they seem weird when described in black and white here, I bet every one of us has constructed stories in our own minds—some of these stories could even make these rituals above seem outright rational!

And that kind of delusion is perfectly fine, as long as we are aware we're doing it. Unfortunately, the biases also have an unfortunate side.

The bad

Hindsight bias, especially, causes us to be caught in an endless cycle of what-if.

The result: No closure whatsoever. How can we move on if we keep feeling we could go back and fix every mistake we made?

Here are some flavors of what-ifs:

  • I could have made a million dollars had I invested in meme stock X when it was $6 share instead of the now $350!
  • If only I had taken my parent to the hospital sooner, I may have been able to prevent his/her death.
  • Something told me all along not to trust this person, but I still did. See where that got me!

Not so obvious

All those phrases such as, "How did I miss this?", "How could you not have seen something so obvious?" result from such retrospective vision. The fact of the matter is a lot of things that seem "obvious" to us are only apparent after we know both the process and the outcome. Hindsight bias is everywhere.

It's like not being able to see something at all, but then once you see it, it becomes impossible to unsee.

For instance, check this out:

Can You Find The

The Mistake?

1 2 3 4 5 6 7 8 9 10 11

Once you do find the mistake, you're not going to be able to forget it. But it isn't obvious the first time, is it?


If there is only one thing you remember from this article, then remember this:

No. It was not obvious! 

Allow yourself and others the benefit of the doubt. Don't second guess every decision after it's made. We are people, not prognosticators. We are all experts in hindsight bias.

Skill is when you can repeat a process and get comparable results every time. One-off successes, on the other hand, are more likely to be the result of dumb luck caused by a random chain of events.

Marvel at the fortune of one-hit wonders! But, learn from skilled people.

British prime minister Ramsay McDonald once said,

When the road is made, and the facts are settled, the historian comes along, in a charabanc, as it were, informing the world—when the road maker is dead or forgotten—whether the passage was smooth or bumpy.

We need to be aware of our biases, especially hindsight bias before we rewrite history.

Stop beating yourself up. Nobody could have predicted the outcome, even if they say so!

Finally, if you need a reminder on prescience, sing along with Doris Day:

Que sera, sera
Whatever will be, will be
The future's not ours to see
Que sera, sera
What will be, will be
Que sera, sera



{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}
Get a FREE detailed step by step guide to build a practical to-do list to achieve all your life goals. 
You'll also get weekly actionable tips based on science for a healthy, productive and happy life!