Forecasts¶
Forecasts are never perfect.
Forecasting projects is like steering a car using the rear view mirror.
Flaw of Averages¶
Fundamental problem in design and evaluation of projects on the ‘average’/‘most-likely’ future forecasts
Due to misunderstanding of probability and systems behavior
Jensen’s Law¶
\[ E[ \ f(x) \ ] \ne f( \ E[x] \ ), \\ \text{if } f(x) \text{ is convex curve} \]
where
- \(E[ \ f(x) \ ]\): Average of possible outcomes of \(f(x)\)
- \(f( \ E[x] \ )\): outcome calculated using average of \(x\)
- Convex function example: \(x^2 + c\)
The equality holds true when \(f(x)\) is linear, but in reality, most systems are non-linear