#30in30 – Why Everyone Thinks he’s Smarter than You

The next time you hear the words “Had you asked me, I could have told you that would happen” you will remember: There is no rational reason to be annoyed. Our brains cannot help but think this way: Tricked by the Hindsight Bias, people tend to rate the likelihood of events higher when already knowing the actual outcome.

What is annoying in our everyday lives can turn hazardous when giving legal advice to your clients. Moreover, both judges and juries are likely to be misguided into applying a much higher standard of proof – especially in cases involving unresolved questions of negligence.

Ex Post ≠ Ex Ante

In 1975, B. Fischoff conducted seminal research that is serving up to today as one of the most vivid examples of what was formerly known as the “Knew-it-all-Along Effect”. Five groups of participants learned about a random historical event of minor importance. It was unknown enough that none of the participants had ever heard of it. One group was asked to evaluate the likelihood of four different outcomes. All other groups were told that one of these outcomes actually happened. Each of the four groups was significantly rating the outcome of their respective scenarios higher than the control group did at the beginning.

Twenty years later, Kim A. Kamin and Jeffrey J. Rachlinski researched the implications on the legal profession by asking three groups of participants whether they considered the precautions of a municipality against flood damage to be negligent. The first group was given exactly the information the municipality had when making the decision of whether they should increase their precautions against floodwaters. A blunt 75 % of participants of this group concluded that the costs were too disproportionate given the estimated likelihood of a flood. The second group however was given the facts plus information that the flood damaged a riparian property. It will not surprise you that this group gave higher weight to the unfortunate outcome and thus found the evaluation of the municipality with a majority of 57 % to be negligent. It is quite interesting that the third group was concluding the city to be legally negligent at 56 %, although they were expressly told about the risks of hindsight distortion.

To sum it up: The Hindsight Bias has a major impact on our judgement. Even if we know that there is a significant risk of misjudgment based on knowledge of an outcome, we cannot change our analyses without an efficient debiasing technique. More on debiasing techniques and their impacts on the legal profession coming soon!

PHILIP HATTEMER

(Picture with courtesy of Pixabay)