How can you avoid common biases and heuristics in estimation accuracy and risk management?

1 Anchoring effect

The anchoring effect is the tendency to rely too much on the first piece of information you receive, and adjust your subsequent estimates or judgments based on that anchor. For example, if you receive a preliminary estimate of the cost or duration of a project, you may be reluctant to change it significantly, even if you encounter new information or uncertainties. To avoid the anchoring effect, you should seek multiple sources of information, use a range of estimates instead of a single point, and question the validity and relevance of the anchor.

2 Optimism bias

Optimism bias is the tendency to overestimate the likelihood of positive outcomes and underestimate the likelihood of negative outcomes. For example, you may assume that your project will finish on time and on budget, without accounting for possible delays, risks, or changes. To avoid optimism bias, you should use historical data and evidence to inform your estimates, consider the worst-case scenario and the best-case scenario, and monitor the progress and performance of your project regularly.

3 Availability heuristic

The availability heuristic is the tendency to judge the frequency or probability of an event based on how easily you can recall or imagine similar examples. For example, you may overestimate the risk of a rare but salient event, such as a natural disaster or a lawsuit, or underestimate the risk of a common but mundane event, such as a material shortage or a design error. To avoid the availability heuristic, you should use objective data and statistics to assess the likelihood and impact of different risks, and update your risk register and contingency plans accordingly.

4 Confirmation bias

Confirmation bias is the tendency to seek, interpret, and remember information that confirms your existing beliefs or expectations, and ignore or discount information that contradicts them. For example, you may favor information that supports your preferred design or contractor, and disregard information that challenges your assumptions or preferences. To avoid confirmation bias, you should expose yourself to different perspectives and opinions, test your hypotheses and predictions, and be open to feedback and criticism.

5 Sunk cost fallacy

The sunk cost fallacy is the tendency to continue investing in a project or decision that has already incurred significant costs, even if it is no longer viable or profitable. For example, you may be reluctant to abandon or modify a project that has faced multiple setbacks or changes, because you have already spent a lot of time, money, and effort on it. To avoid the sunk cost fallacy, you should evaluate your project or decision based on its current and future benefits and costs, and not on its past investments or losses.

6 Hindsight bias

Hindsight bias is the tendency to overestimate your ability to predict or prevent an outcome after it has occurred. For example, you may think that you could have avoided a mistake or a problem, if you had known or done something differently, even if it was not obvious or feasible at the time. To avoid hindsight bias, you should document and analyze the reasons and factors that led to the outcome, learn from your successes and failures, and avoid blaming yourself or others for unpredictable or uncontrollable events.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?