Think you knew it all along?

The culprit in last night’s whodunit … that was obvious. The neighbor busted for embezzling money from work … you knew he was up to no good. The outcome of last weekend’s Packers-49ers game … real fans know that good defense always trumps a flashy quarterback.

Maybe you have an incredible level of insight – it’s possible – or perhaps you’re simply suffering from what psychologists have termed “hindsight bias.”

Hindsight bias means that while we felt as though we “knew it all along,” chances are our minds are simply tricking us into believing as much. Despite being armed with little information, the luxury of knowing both plot and conclusion triggers our minds to subconsciously fill in the cracks with our own narratives, allowing us to believe in the end that, without a doubt, “I saw that coming a mile away.”

According to a recent article in Medical News Today, hindsight bias is “one of the most widely studied decision traps that has [sic] been recorded in a variety of disciplines, such as athletic competitions, medical diagnoses, political strategy, and accounting and auditing decisions.”

This is interesting and all, but why all the hubbub? According to the article, which references a study recently published in the journal “Perspectives on Psychological Science,” hindsight bias can alter our learning experiences – and certainly not in a good way.

“If you feel like you knew it all along, it means you won’t stop to examine why something really happened,” said Neal Roese, a psychological scientist at the Kellogg School of Management at Northwest University and co-author of the study. “It’s often hard to convince seasoned decision makers that they might fall prey to hindsight bias.”

This includes overconfident entrepreneurs, who in studies have been shown to take on high-risk ventures based on a perceived level of intuition and insight that, in reality, may not be completely supported by reality.

“All entrepreneurs know that there are no guarantees and that new businesses fail at a frighteningly high rate,” stated a post that appeared this summer over on PsyBlog. “Still, many manage to convince themselves that their venture will be different. As you might expect, as a group, entrepreneurs are remarkably optimistic about their chances of succeeding (otherwise why bother?).”

To illustrate this point, PsyBlog points to one study (Casser & Craig, 2009) that asked 705 entrepreneurs – those who were about to start up new businesses – to estimate their chances of success. (They guessed around 77.3 percent.) After a stretch of time, when about 40 percent of the businesses had failed, researchers asked again: what did you think your chances of success were before you started? This time, armed with an outcome, they recalled the figure to be 58.8 percent – a “hindsight bias” drop of nearly 20 percent.

“The hindsight bias can be a problem when it stops us from learning from our mistakes,” PsyBlog concluded. “If the entrepreneurs knew how biased their estimates of success were, would they have done things differently?”

Great question.

By taking care to consider the possibility of alternative outcomes, even when the result may already be known, we can counter what researchers describe as “our usual inclination to throw out information that doesn’t fit our narrative.” In other words, it’s when we’re able humbly challenge ourselves and question our own knee-jerk conclusions that true learning (and hence, more thoughtful decision making) can take place.