When life provides us a buffet of choices, we often find ourselves debating the pros and cons. The truth is we can only make a choice based on the information we have at that moment, and for this reason we shouldn’t necessarily regret our decisions. However, as humans we tend to always look back when we think the decision we made wasn’t quite right. We often say to ourselves, “had I known then, what I know now…”
Well these thoughts are often captured by the phrase that “hindsight is 20/20.” Although the truth is, it isn’t! Let’s look at why that is using basic economic game theory.
First let me explain what game theory is; it’s a concept not only used by gamers, but also by economists to make decisions that hopefully guide a desired result. In layman’s terms, it is the strategy used to manipulate an opponent’s move towards your desired outcome. We can simply see this interaction with a game of checkers, forcing our opponents to jump us, but only to set them up to where we jump them twice.
Using game theory can also be significantly more complex. Take a look at this clip from “The Dark Knight” where the Joker has used his manipulation skills to have a bank robbed without ever setting foot in the bank. Or in this video where he runs a social experiment typically referred to by Economists as a prisoners dilemma.
Going back to our situation though, game theory principles can help explain why hindsight is or is not 20/20. In order to engage in strategy, it is best to know and understand all the options available to us. We can describe these choices in 2 ways; 1) we have perfect information, or 2) we have imperfect information.
Your instincts are likely correct, perfect information means that each player has the same information, or that we have all the information. Meanwhile, imperfect information means that one party has more information than the other, much like a car salesman does over the buyer. Ideally this is how casinos make their money, if there was perfect information, you’d know the outcome before ever making a bet.
When it comes to us making decisions, it is really us against life. True, we have families to consider, but I’m just thinking in the most basic sense. We must make our decisions to guide our life, or we sit and let life dictate how we operate. Thus, we have imperfect information! Depending on your spiritual level you may argue that there is a larger element to life, but again it is still imperfect information because you aren’t living with all the cards being shown to you, and you still have to make a decision.
So, is hindsight really 20/20? Well in the game of checkers, had I not pushed my piece to the left to force you to jump me, you wouldn’t have been able to jump me. Thus, I wouldn’t have the opportunity to jump you twice. As such, you might have made a different move that would never allow me to even jump you once.
What I am getting at, is that without perfect information we may never know what would have happened. Hindsight is only 20/20 if ALL ELSE IS CONSTANT! Meaning, if the only thing we did was change one single decision, but everything else remained in place.
Going back to checkers, hindsight being 20/20 would be as though I never forced you to jump me once, but yet I still jumped you twice in that exact position. This just isn’t possible; we can’t expect that we could have changed one thing in life without the rest of life being altered.
I could go as far as to say, “I wish I did XYZ differently when I graduated high school because I would have been more prepared for today.” However, had I invested more time with doing XYZ I might not have met my wife, I might not have done ABC, I might not be…
In the end, hindsight can only be 20/20 for simplistic choices and those with perfect information. But life doesn’t present these opportunities frequently. We therefore need to be more mindful of what matters most to us and be more logical/realistic with our decisions. We are all going to make mistakes, but we can try our best to make the right choice with what we know in the moment, no regrets.