Your Terrible Memory and the Hindsight Bias

Life can suck sometimes. Just as you’re getting your stuff together, life throws another punch.

Recently, I had a friend start to budget, and she found out her job will be gone in two months. She said, “I knew I should have started budgeting two years ago! I’d have my emergency fund by now!”

Her comments got me thinking about other countless regrets I’ve heard:

  • “I knew I should have bought Apple stock 15 years ago.”
  • “I knew I shouldn’t have thrown away those Star Wars toys.”
  • “I knew that piece of fish smelled funky.”

When you say these regrets out loud, you run the risk of falling into the trap of hindsight bias. Daniel Kahneman says, “A general limitation of the human mind is its imperfect ability to reconstruct past states of ​knowledge, or beliefs that have changed.”

In other words, your memory sucks. When you look back on the decisions you’ve made, hindsight can make you feel terrible. It’s just a trick, so don’t worry about it too much.

Hindsight bias can also trick you into thinking you’re an awesome decision maker. Ever pick the fastest line at the grocery store? You’ll brag to your friends for a week!

My advice? If you are feeling some regret about a past decision, don’t be so hard on yourself. The hindsight bias is tricking you into feeling worse than you should.

If you made a great decision recently, that’s wonderful! But be careful! If you suffer from too much hindsight bias, you could run for president.