These two additional biases — hindsight bias and recency bias — are quite intuitive. When added to false feedback and confirmation bias, we are given a fuller picture of the mistakes that we make in interpreting results. Discussed today are:
- Hindsight is always 20/20, referring to perfect sight. But this is actually not the case. We are more likely to perceive things as 20/20 after they happen. When the result is known, its likelihood of an event seems far more likely than before the event; this is hindsight bias. This, of course, is not an accurate read of the situation — unless the odds were way off, you have just seen one possible outcome. There is an rationalization that happens to make people perceive events as more predictable when they occur. This can lead to a miscalculation in probability as the next related future event is thought of as inevitable. Reality is always probabilistic, never determined.
- Recency bias occurs when you overweigh the most recent events that have happened. We have a tendency to find what happened recently more predictive and more important than older events. Just because something happened more recently does not make it more predictive. This is not to say that recency is unimportant — there could be a reason for the uptick in a particular statistic or metric (and the skilled bettor will sniff out the difference), but for the most part, bettors put undue weight on what has happened in the immediate past, in spite of long-term trends. Instead, we are looking at long-term probabilities and, returning to our coin flip, there is no significance to 3 flips in a row the same–the long-term probabilities (50/50) remain the same.