Meaning
A cognitive distortion leads individuals to view past events as having been more predictable than they actually were before they occurred. When retrospective bias affects founders, they tend to rewrite their own history to make successful outcomes seem inevitable and failures seem obvious. This phenomenon governs how post-mortem analyses of business failures are conducted and how equity disputes are recalled.
It stops applying when contemporaneous daily records are used to reconstruct the decision-making process.
Evidential Distortion
The reliance on memory over records introduces substantial errors into retrospective reviews. When partners fall out, they recall their initial contributions and risks differently based on the venture’s current status. This distortion can make a passive founder’s early contribution seem smaller or larger than it was.
It creates an obstacle to fair settlements.
Contemporaneous Protection
The best defense against this distortion is the maintenance of dated logs. Written records of decisions, hours, and goals made at the time of the event prevent the revision of history. This documentation provides a hard baseline that cannot be altered by later emotions.
It preserves the original intent of the parties.
Decision Review
Reviewing decisions using contemporaneous logs reveals the actual uncertainty that existed. This practice helps teams learn from their true mistakes.
