Bias / Overoptimism

I am one of the many who experienced quite a revelation when reading Kahneman’s “Thinking Fast and Slow”. He is a psychologist who received the Nobel Prize in Economic Science for pointing out how little rational people are in decision-making and how big mistakes we all make when we assume they are acting rationally. Thanks, Kahneman, it hurts, but we really needed to learn.

The takeaway related to our topic is that overoptimistic estimates, which are a root cause of complex project failure, are not errors but biases.  Over the last two decades, scientists have identified a number of cognitive biases that contribute to over-optimistic estimates. This is normal human behavior, done with the best intentions. A more ethically questionable bias is the “political bias” that Professor Flyvbjerg points to and calls “Strategic Misinterpretation”. These are the deliberate underestimations made to win a contract. It has become “normal”, but with the knowledge of the damage it does to project performance, it is clearly a malpractice that must stop. We can't establish efficient projects if they are based on deliberate fundamental lies, and as the business case responsible, the sponsor must avoid this structure at all costs.

A qualified outsider must scrutinize estimates to avoid over-optimism.