Why Are Estimates Always Wrong: Estimation Bias and Strategic Mis-estimation

by Dan Galorath

Officially an estimate is “the most knowledgeable statement one can make regarding cost, schedule, effort, risk and probability.” That is an excellent definition.  However, research shows people are generally hardwired to misestimate. These misestimations are nearly always on the low, extremely optimistic side. This is a disaster because viable estimates are core to project success as well as ROI determination and other decision making.

After decades of studying estimation, it has become apparent that:

  • Most people don’t like to and/or don’t know how to estimate.
  • Those who estimate are often optimistic, full of unintentional bias and sometimes strategically misestimating.

While many of us spend time on model errors, the biggest source of estimation error usually comes from people, either accidentally or strategically.  There is little we can do except provide reality checks via things like parametric models, analogy data, and process rigor.

This presentation discusses the issues of estimation bias and strategic misestimation. It discusses how to mitigate these issues.  Both the results of Nobel prize winning work and subsequent discoveries by researchers and the author will be discussed.

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