Watch out for hindsight bias when making sense of an event. Hindsight bias, or the Monday-morning-quarterback effect, is believing that we had better knowledge of the outcome of an uncertain situation before it occurred than we really did. For example, assume that an economist projects that mortgage rates will remain level or decrease in the near term. Several years later when rates increase, the economist falls prey to hindsight bias when she expresses, “The recent rise in mortgage rates was no surprise; we were
expecting it.” To minimize the susceptibility to this, keep notes of how and why you made your decisions.