The Inside View and The Outside View

Projects are filled with thinking traps. Daniel Kahneman‘s inside and outside view, from Thinking Fast and Slow is a useful model when thinking about projects.

At the start of a project we’re optimistic about our chances of success. We overestimate how much we can do, and we underestimate the time and effort it will take to do it. Kahneman calls this the planning fallacy. Without the planning fallacy we probably would never attempt anything. But it has a downside: Focusing on the end goal blinds us to a lot of useful information when we become trapped in the inside view.

The traps of the inside view:

  • Competition neglect. We fail to take note of what competitors are doing.
  • Above average effect. We ignore the skills of others that are doing the same things, thinking that we are better than everyone else.
  • Sunk cost fallacy. Having invested in a project it is hard to let go, even when chances of success are evidently slim, leading to irrational perserverance where we give up rationality rather than the enterprise.

We become trapped in the inside view because we tend to ignore statistical information that is:

incompatible with one’s personal impressions of a case.

To remedy the effects of the inside view we can increase our chances of success by:

consulting the statistics of similar cases.

Taking the outside view and looking at how others have faired when attempting similar projects can help us make better decisions ourselves.