I am thoroughly enjoying The Undoing Project, by Michael Lewis, which is a story about the friendship between Daniel Kahneman and Amos Tversky, who essentially invented Behavioral Economics and whose thinking has informed everything I have ever done as a market researcher.
There was one particularly striking passage in the book that talks about the "Hindsight Bias," which refers to our innate tendency to order past events to form a kind of story, specifically one that "all makes sense" to predict a current event. For example, I learned in High School that World War One was started by the assassination of Archduke Ferdinand, but that is a neatly-arranged set of historical Legos that was put together well after the fact, because it made sense--and we all like to make sense. But the truth is, no one at the time the Archduke shuffled off 'is mortal coil would have confidently predicted The Battle of The Somme, Verdun, or Gallipoli.
I also think about this every time I read about a stock going up or down "on news of..." some event that ostensibly would affect the price. We know the stock went up or down. We know that event 'X' happened. But the linkage between the two? Our brain is wired to put those blocks in an order to craft a story that makes sense. Except the stock market is a random walk--consider all of the pundits who claimed the market would tank upon the election of Donald Trump. You'll note the following, which appears to be a depiction of a market not tanking:
There is a particular application of this bias that I, and every market researcher on earth, has heard scores of times in their career after presenting the results of a survey: "We knew that already--this doesn't tell us anything new." In my more intemperate youth, I might have enquired, "if you knew it already, why did you want me to ask it?" Today, I am more likely to point out that no one knew the thing. The thing was suspected--and there is value in confirming the thing. Often, it is uncertainty that prevents a company from allocating sufficient resources to pursuing a strategy. But knowing the thing--especially if your competitors can only suspect the thing--has enormous value.
The truth is, I very often hear "but we already knew that" from entities that, had they in fact known it beforehand, would have acted differently. We are actually crap at predictions, which is why I generally avoid them. We are, however, experts in arranging a narrative, in hindsight, that makes us seem like Nostradamus on coke. And, just as in poker, we don't remember the "bad beats." We remember the times that we nailed it, and then subsequently overestimate our prescience.
OK. I, it turns out, am also a human, and so I will stop beating humans up for this. So here is the action step: know that we all suffer from hindsight bias. So as you encounter a new piece of information in your business, resist the urge to make it fit into the puzzle you already have--to construct, in your mind, how this new fact was inevitable because of past events A, B, and C. Facts are messy, and they don't always fit together into a smooth narrative, the way our brain would like them to. Examine the information on its own merits. Roll it around, independent of what else you know. What else could explains this new fact? Under what other circumstances could this fact exist, or even matter? And, if you can confirm this fact (even if you previously suspected it), what competitive value can you extract from it?
Tversky himself said it best, as quoted by Michael Lewis: "He who sees the past as surprise-free is bound to have a future full of surprises."
They won't all be pleasant. But you knew that already.