“How dumb I could be to not know this”, “I told you so”,” I didn’t see this coming”— how to avoid bias when learning from past decisions?
We all made some of the below statements on our decisions or on someone else decision, after outcomes were known
“I told you so”
“I knew it”
“I should have known this”
“How dumb I could be to not know this”
“I didn’t see this coming”
An important aspect of high-quality decision making is learning from experience but there are two aspects to watch out for when learning from experience,
- Outcome bias — tendency to judge the decision as good or bad based on whether the result was good or bad can influence your learning process.
- Hindsight bias — tendency to feel like you should have known about one of the several outcomes because after the fact you became aware of of new information that you didn’t know at the time decision making
Outcome bias
“It leads observers to assess the quality of a decision not by whether the process was sound but by whether its outcome was good or bad. This outcome bias makes it almost impossible to evaluate a decision properly — in terms of the beliefs that were reasonable when the decision was made.”
— Thinking Fast and Slow by Daniel Kahneman
Outcome bias — It can have unintended consequences of learning wrong lessons
- Continue to make low-quality decisions. For instance, driving drunk and arriving safely, since the result was good, your experience says it’s safe to drunk and drive!!!
- Reducing empathy in treating others and ourselves — For instance, if someone starts a company and fails, we would say he is a bad decision maker he left a cushy corporate job to fail, we blame them saying, he should have known he doesn’t have entrepreneur skills just because the outcome was bad, and if in case he is successful we reward him as the most risk taker we knew, he is a brave person to leave a well-paying corporate job. And we can be harsh or praise ourselves too in such situations
How to overcome Outcome bias — To be a better decision-maker understand that decision quality and decision outcome can have all four possible outcomes and luck which you don’t have any control has a part to play.
Hindisght bias
A general limitation of the human mind is its imperfect ability to reconstruct past states of knowledge, or beliefs that have changed. Once you adopt a new view of the world (or of any part of it), you immediately lose much of your ability to recall what you used to believe before your mind changed.” — Thinking Fast and Slow by Daniel Kahneman
Hindsight Bias — tendency to feel regret that one should have known this that feeling when you say “God, how could I not know this?”. This could happen because you don’t remember what it was when you decided.
If you don’t remember what you knew at the time of decision
- you will not be able to analyze your decision to learn from experience
- you feel regret forever that you should have known it
“Actions that seemed prudent in foresight can look irresponsibly negligent in hindsight.” — Thinking Fast and Slow by Daniel Kahneman
To learn from your choices and their outcomes, you need to strive to be accurate about what you knew at the time of your decision. — How to Decide by Annie Duke
How to overcome hindsight Bias — Use a knowledge tracker (from How to decide by Annie Duke) to track the information you had at the time of decision-making to understand what you know and what you don’t know preventing you from believing that the new piece of after that fact information was known before
A knowledge tracker (from How to Decide) a simple journal with the following entries
- Info knew at the time of decision making –
- What was the decision -
- What was the outcome -
- New info available after the decision -
Summary
Learning from past decisions and experience can help improve our decision-making process but watch out for Resulting/outcome bias and hindsight bias to identify which decisions are worth repeating and which are not.
“Although hindsight and the outcome bias generally foster risk aversion, they also bring undeserved rewards to irresponsible risk seekers, such as a general or an entrepreneur who took a crazy gamble and won.” — Thinking Fast and Slow by Daniel Kahneman
Notes from two books “How to decide by Annie Duke” and “Thinking Fast and Slow by Daniel Kahneman” on two important aspects of high quality decision making process.
