Hindsight bias
Why does an outcome that looks obvious in retrospect feel like something that should have been predicted?
In plain words
Hindsight bias is the tendency to believe, after an outcome is known, that it was predictable or that one expected it all along. The knowledge of the result reshapes the memory of the uncertainty that existed before it.
Why it matters
It distorts judgement of decision quality and risk. A loss that looks obvious afterwards can be mistaken for a foreseeable one, which overstates the signal in the event and understates the genuine uncertainty that any position carried at the time.
In a real week: BTC, week of 29 July 2024
BTC opened the week of 29 July 2024 at 68249.88 and closed at 58161.0, a return of -14.78%, ranking in the 4.0th percentile of 337 weeks of history. The week's high of 70079.99 came on Monday, 2.68% above the open, and the prior four weeks returned -11.01, 8.84, 12.12 and 0.12 percent. With the fall now visible, it can look inevitable, though the direction from the open was not settled.
A common mistake
Treating an outcome that seems obvious afterwards as one that was knowable beforehand. Reviewing decisions by their results alone rewards or punishes the outcome rather than the information available when the choice was made.