Effect of Self-Relevance of an Event on Hindsight Bias: The Foreseeability of a Layoff

Past research has led to conflicting predictions about how hindsight bias is influenced by the self-relevance of an event. Some research suggests that self-relevance will increase hindsight (a) as individuals are motivated to restore a sense of predictability and (b) as self-relevant outcomes elicit sense making, which in turn leads to hindsight. Other research suggests that self-relevance will reduce hindsight, at least in the case of negative outcomes, (a) as individuals seek to avoid blame and (b) as the memories of the reaction to the self-relevant outcomes serve as a memory cue that inhibits hindsight bias. These contrasting predictions were tested by examining retrospections about the foreseeability of a job layoff. Responses were obtained from laid-off workers, from survivors of the layoffs, and from community members. Community members reported more foreseeability than survivors, who in turn reported more foreseeability than laid-off workers. The results held across several analyses, including a regression-discontinuity analysis of survivors and laid-off respondents. The self-relevance of an event such as a layoff seems to reduce hindsight.