From Daniel Kahneman and Amos Tversky (On the Psychology of Prediction, 1973), developed as the outside view by Kahneman and Dan Lovallo (Timid Choices and Bold Forecasts, 1993) and as reference class forecasting by Bent Flyvbjerg (2006).
Starts any forecast from how a class of similar past cases actually turned out, then adjusts only for differences that have evidence behind them.
When to reach for it
When estimating a project's timeline, a deal's success, or a launch's results, and the team's own plan looks better than such plans usually turn out.
How it runs
- Define exactly what is being forecast.
- Find a reference class of at least ten similar cases.
- Gather their outcomes: the median, the range, and the tail.
- Anchor the forecast at the class median.
- Adjust for real differences, by justified amounts.
- Record the class, the base rate, and each adjustment.
Where it sits in SOLVE eX
Go to the source
- On the Psychology of Prediction, Psychological Review, 1973
- Timid Choices and Bold Forecasts: A Cognitive Perspective on Risk Taking, Management Science, 1993
- From Nobel Prize to Project Management: Getting Risks Right, Project Management Journal, 2006