D·01
Decisions & Judgment
Start From the Base Rate
Ask what usually happens to cases like this one before you consider what is special about this one.
- Evidence
- proven
- Topic
- Decisions
- Things to do
- 3
- Read
- 1 min
provenHow strong is the evidence?
Tested again and again, by different people, and it keeps coming out the same. You can lean on this.
- Kahneman & Tversky, 1973
- reference-class forecasting, Flyvbjerg, 2006
Why it works
Vivid detail about the specific case crowds out the statistics of the class, and the statistics of the class are the better predictor.
What to do about it
- Define the reference class: “projects like this, by teams like us”. Get its actual distribution.
- Start your estimate at that number, then adjust — sparingly — for what is genuinely different.
- For business plans, restaurants, startups, second marriages: look up the survival rate first.
Where people go wrong
“But our case is different.” It usually is, by less than it feels, and in both directions.
Where this fits in your day
Before deciding
Find a third option, name the base rate, and ask whether the door is one-way.
Read next
- The Planning FallacyYour estimate of how long this will take is an estimate of the best case, and you know it is not the best case.proven
- It Will Matter Less Than You ThinkWe badly overestimate how long any outcome — good or bad — will affect our happiness.solid
- The Pre-MortemBefore committing, assume it is eighteen months later and the project has failed. Write the story of why.solid
- Sunk Costs Are Not CostsMoney and years already spent are gone whatever you now decide. The only question is forward value.proven