Check the outside view before trusting the inside view

Ask how similar situations have gone before trusting your story about this specific situation.

Why it works

The inside view — the story you tell about your specific situation — systematically overweights vivid details and underweights base rates. The outside view — how comparable situations have actually turned out — is the corrective. Combining both is more accurate than either alone, but the inside view dominates by default, so the outside view must be actively sought.

How to do it

1. Before estimating success probability, find the reference class: "projects like this one."
2. Find how that class actually performed — not your story about why this is different.
3. Start your probability estimate from the base rate, then adjust modestly for specific features.
4. Apply more weight to the base rate when you feel most certain this situation is unique.

Evidence

Reference class forecasting is validated by Kahneman and Tversky’s planning fallacy research and Flyvbjerg’s large-sample analysis of infrastructure projects, which consistently shows overoptimism that base-rate anchoring would have corrected. (observational)

Base rates require a well-defined reference class; defining it poorly imports the wrong base rate, which can be worse than the inside view.

Sources

• Kahneman & Tversky (1979), planning fallacy and the inside view
• Flyvbjerg (2006), "From Nobel Prize to Project Management", Project Management Journal

Common mistake

Finding the base rate, acknowledging it, then adjusting all the way back to your inside view because "this situation really is different."