Imagine this …
You check the news and see that a story about a tech stock that has quadrupled in value over the past 6 months.
You recall checking out the stock a few years ago but decided not to invest.
“Ugh, I knew I should have invested! It was so obvious that a blockchain DTC fitness wearable was going to be a hit!”
You might feel like you missed out, but in reality, there was no way you would have been able to predict that stock’s success.
In today’s edition of Why We Buy, we’re taking a look at Hindsight Bias – why we always end up saying: “I knew that was going to happen.”
Let’s get into it.
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The Psychology of Hindsight 🧠
Have you ever thought: “I knew it all along”?
If you have, then you’ve been influenced by hindsight bias.
Hindsight bias is a common tendency for you to perceive past events as being more predictable than they actually were.
It’s easy to look back and say that it was inevitable that Amazon was going to be as big as it currently is.
But if you were a shareholder from 1997 to 2007, you were probably considering selling off your shares in the unprofitable, cash-burning startup.
Hindsight bias is a type of memory distortion: new information received after the fact influences how you remember the actual event.
This kind of memory distortion can lead to false memories, modified memories, or even overconfidence in your ability to predict the outcomes of future events.
Inside Your Buyer’s Mind🧐
Researchers have found that individuals selectively recall information that reinforces what they already know to be true. We do this to try to create a narrative that makes sense out of the limited information we have access to.
If the narrative is easy to generate, we interpret that to mean the outcome was foreseeable.
- They were clumsy, so it makes sense they got in a car crash
- That business was always late on payments, so it makes sense they went out of business
- That neighbourhood was always nice, so it makes sense that the housing prices have shot up
In reality, each observation only makes up a tiny part of the bigger picture. But because you want the outcome to align with your mental model of how the world works, you simplify the story to make it seem like it was obvious the whole time.
How To Apply This 🤑
Alright, so how can we apply this right now to sell more?
Recognize your own hindsight bias
When making decisions, recognize that previous experiences are influencing your current reality. Strategies of the past might not work anymore. Be alright with being wrong.
Provide your customers & team with data
Providing your customers with unbiased data will help them make a narrative that fits well with their previous experiences. (Ex. Typical shipping times, amount of money saved, time spent)
Set expectations early and often
By documenting results and decisions, you’ll be less likely to fall to hindsight bias. Be clear with what you expect and what your customer can expect from you. Better to under-promise and over-deliver than to fall short.
The Short of It 💥
Customers and decision-makers will always look at outcomes and try to fit them into their existing worldviews.
By setting expectations early and often, you can reduce the amount of bias in the decisions you and your customers make.
Until next time, happy selling!
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