From the outside view of Daniel Kahneman and Amos Tversky (1979), developed with Dan Lovallo (2003) and turned into a forecasting method by Bent Flyvbjerg (2006).
Forecasts cost, time, or odds by starting from the actual results of a set of similar past projects and adjusting only modestly for what makes this one different.
When to reach for it
Whenever an estimate has been built from the inside out by the people closest to the work, since that view tends to run low on cost and time.
How it runs
- Choose a reference class of projects similar in structure and size.
- Gather their actual outcomes: medians and spreads.
- Anchor the forecast on that distribution.
- Adjust modestly for what is truly different here.
- Report the forecast together with its reference class.
Where it sits in SOLVE eX
Go to the source
- Intuitive Prediction: Biases and Corrective Procedures, TIMS Studies in Management Science 12, 1979
- Delusions of Success: How Optimism Undermines Executives' Decisions, Harvard Business Review, 2003
- From Nobel Prize to Project Management: Getting Risks Right, Project Management Journal 37(3), 2006