Forecasting

. Involves subjective confidence as many experts do not know the limits of their expertise and are not judges of accuracy. They have intuitive skills in some of the tasks but have not learnt to identify situations and tasks in which intuition will betray them. The unrecognised limits of professional skill help explain why experts are often overconfident and wrong.

. If an environment is sufficiently regular and somebody has had the chance to learn these regularities, there is a strong chance that their predictions and decisions will be accurate. However, in an irregular environment, there is a strong chance that predictions and decisions will not be accurate.

. Short-term anticipation and long-term forecasting are different tasks.

. Planning fallacy = our estimates are closer to best-case-scenario than realistic assessment be improved by consulting the statistics of similar scenarios. Some examples of planning fallacy include

- the building of the Scottish parliament was estimated to cost 40 m pounds in 1997; yet the final cost was roughly 431 m pounds in 2004

- in 2005 study of railway projects undertaken worldwide between 1969 and 1998, over 90% had overestimated passenger usage

"...The relevant tendency to under weight or ignore distributional information is perhaps the major source of error in forecasting. Planners should therefore make every effort to frame the forecasting problem so as to facilitate utilising all the distributional information that is available..."

Bent Flyvbjerg as quoted by Daniel Kahneman 2012

. This is called "taking the other or outside view", ie reference class forecasting that involves large databases based on information from both plans and outcomes of hundreds of projects all over the world. This helps identify an appropriate baseline plus supplies statistics to generate baseline predictions and use specific information to adjust the baseline predictions.

. Irrational perseverance = sometimeswe know the relevant data/information but do not think of applying it. We tend to ignore procedure that is guided by statistics and checklists, especially if it conflicts with our own point of view.

. Need to be careful of extrapolating in forecasting as unable to predict future events with any degree of accuracy as to be anticipated there is likelihood that something will go wrong.

. Just because something happened in the past, there is no guarantee that it will happen in the future.

. Baseline prediction = the prediction you make about something if you know nothing except the category to which it belongs. It is the anchor to further adjustments.

 

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