The Hindsight Bias: I Knew It All Along!


Going into business for yourself is scary. Despite all the potential rewards, compared with getting a safe job with a big firm, being an entrepreneur means accepting huge risks.

All entrepreneurs know that there are no guarantees and that new businesses fail at a frighteningly high rate. Still many manage to convince themselves that their venture will be different.

As you might expect, as a group entrepreneurs are remarkably optimistic about their chances of succeeding (otherwise why bother?).

One study asked 705 entrepreneurs who were about to start up a new business how they estimated their chances of success (Casser & Craig, 2009). When the researchers got back to them a while later about 40% had quit their new business. This 40% were then asked: what did you think your chances of success were before you started?

The first time they estimated their chances of success, before their business failed, they guessed, on average, 77.3%. Afterwards they recalled this figure to be 58.8%.

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