Jared Pickett

How Much Will This Cost? How To Predict The Cost Of A Project Written by Hindsight Most Projects Cost Waaaaaay More Than Expected • The Opera House was forecasted to cost $7 million but ended up being $102 million • The James Webb telescope was forecasted to cost $4 billion but ended up costing more than double at $9.4 billion. • The Montreal Olympics took an enormous toll on the taxpayer. It was expected to cost $300 million but took $1.4 billion! A bill that took almost 30 years to pay Two Common Forecasting Mistakes • Uniqueness Bias: People think their project is unlike any other. Therefore, they can’t make comparisons with similar projects • Optamisim Bias: When people are too optimistic about a project, bad things can happen: Bad forecasts The project goals are vague They ignore better options Problems are not spotted There is no backup plan How Can We Get Better At Making Forecasts? One method is to use reference class forecasting. Here’s how it works: Imagine we’re building a train station and we want to forecast how much it’ll cost. There are two steps to making this forecast: Step 1: Ask How Long Do Projects Like This Tend To Cost? Step 1 is about making comparisons. Look at other train stations or projects that are similar in size. How much do they tend to cost? This number is your anchor point This sounds simple (and it is), but most people don’t make comparisons like this. Step 2: Adjust Based On The Details Of Your Project Step 2 is about using the specific details of your project Take your anchor point and bump it up or down depending on your project. Maybe you anticipate some delays with the project so you add $50,000 on to the cost. But perhaps you can get a deal with some supplies, so you lower the estimate. You’re Probably Not Building A Train Station No stress, you can use this strategy to forecast more normal things. How much will your home renovation cost? How much will hosting Sally’s 5th birthday set you back? How much will I spend at the casino this weekend? You Can Also Use This Method To Forecast A Bunch Of Things How long will this art history essay take? How many CVs will I have to write before I get a job offer? How long will it take me to run my first marathon? Do your projects always cost more and take longer than you thought? Then read the best behavioural science book of the year