Do you know what “hindsight bias” is? It’s the principle that once we know something has occurred, it’s difficult, if not impossible, to understand the thinking of people who didn’t see that event happening.
In practice, hindsight bias is what drives us to look back history and exclaim: “How could they have been so dumb?”
Here are some examples of seeming human folly that I’ve collected over the years:
- Filling passenger-carrying dirigibles (think Goodyear Blimp) with highly flammable hydrogen gas (Google: “Hindenburg Disaster”).
- Dumping toxic waste into the ground and/or waterways (Google: “Love Canal”).
- General George Armstrong Custer dividing his 7th Calvary and attacking a village of 10,000 Sioux/Cheyenne with 240 troopers (Google: Little Big Horn).
- Designing car interiors with metal dashboards and protruding toggle switches (Google: ouch).
- Decorating indoor Christmas trees with lit candles on their drying branches (Google: house fires in the 19th Century).
- Believing that the Sun revolves around the Earth (Google: Nicolaus Copernicus).
- Twelve publishers turning down the Harry Potter books (Google: J.K. Rowling net worth).
- Decca Records turning down the Beatles because they “weren’t sellable” (Google: Rock ‘n Roll Hall of Fame, and 2.3 billion albums sold).
- Russia selling Alaska to the United States for 2 cents an acre (Google: Alaskan Gold Rush, Prudhoe Bay oil field, Kodiak bears and Sarah Palin).
- And since Super Bowl LI occurs this coming Sunday, how about the six quarterbacks picked ahead of Tom Brady in the 2000 NFL draft (Google: 450 touchdown passes, and 201 games won, including 20 playoff games and 4 Super Bowls, and counting).
I’m sure you can come up with an equally depressing list of your own. Yet the thing I find the most puzzling is that despite these myriad examples of questionable thinking, it never seems to occur to us that in 20, or 50 or 100 years from now, people will be looking back at some of things we do today and scratch their heads, too.
For some years now, I have suspected that one of the things that will elicit the “They did what!” response from people in the future will be our use of technology: specifically, our digital data that’s accessible via the Internet.
Most of us have everything from our medical records and credit cards and banking and investment accounts to our Social Security numbers and various passwords all residing somewhere in the virtual world. And for advisors, with all their client data, this problem is exponentially more troubling.
A quick Google search for the “World’s Biggest Data Breaches” reveals that even the largest—and what one might presume to be most secure databases on the planet—are subject to hacking: AOL, Home Depot, EBay, JP Morgan Chase, Morgan Stanley, Medicaid, the IRS, the U.S. Office of Personnel Management, the Department of Defense, the Australian Immigration Department, the U.K. Ministry of Defence, the State Department/U.S. Embassy cables, the Department of Veterans Affairs, multiple state court systems and the recently widely reported Clinton campaign emails, to name but a few.
I suspect that most of us (and probably more than a few advisors) try to take some comfort in the notion that we’re really too small of a target for serious hackers. And we cling to this belief despite that fact that all too frequently, we get one of those “phishing” emails, requesting our user names and passwords to avoid having our emails blocked or our checking accounts frozen. All it would take is one distracted moment to send a response that could cause some real hardship.