Two approaches to prediction: the inside view focuses on the specific case and your detailed plan, while the outside view considers how similar cases have actually fared.
The inside view is our natural mode—we focus on the specifics of our situation, construct a detailed plan, and imagine how it will unfold. This feels informative and leads to confident predictions, but it's systematically optimistic and ignores base rates. The outside view treats your case as an instance of a reference class and uses the statistical distribution of outcomes for that class. While the outside view feels less informative (it ignores your specific plan), it's more accurate because it incorporates the actual track record of similar endeavors, including all the unforeseen obstacles that typically arise. The key is to start with the outside view (base rates) and only adjust based on genuinely differentiating factors.
Inside view: 'Our software project will take 6 months because we have a detailed plan, experienced team, and clear requirements.' Outside view: 'Similar software projects at our company have taken an average of 14 months, with 30% running over 18 months. We should plan for 14 months unless we have strong evidence we're different.'
My detailed plan and specific knowledge make the outside view irrelevant—actually, everyone thinks their case is special; the outside view should be your starting point, and you should only deviate with strong evidence.
The slow, deliberate, effortful mode of thinking that allocates attention to complex computations, self-control, and conscious reasoning.
Mental ModelThe fast, automatic, intuitive mode of thinking that operates effortlessly and generates impressions, intuitions, and feelings without conscious control.
Mental ModelJudging the frequency or probability of events by how easily examples come to mind, leading to overestimation of vivid or recent events.
Mental ModelJudging probability by how much something resembles a typical case while ignoring base rates, sample size, and statistical principles.
Mental ModelThe tendency to rely too heavily on an initial piece of information (the anchor) when making subsequent judgments, even when the anchor is arbitrary or irrelevant.
Mental ModelThe principle that losses loom psychologically larger than equivalent gains, with losing something feeling roughly twice as bad as gaining the same thing feels good.
PrincipleA descriptive model of decision-making under risk showing that people evaluate outcomes relative to a reference point, are loss-averse, and weight probabilities non-linearly.
FrameworkSystem 1's tendency to construct the most coherent story possible from currently available information without considering what's missing or questions not asked.
PrincipleTwo approaches to prediction: the inside view focuses on the specific case and your detailed plan, while the outside view considers how similar cases have actually fared.
Inside view: 'Our software project will take 6 months because we have a detailed plan, experienced team, and clear requirements.' Outside view: 'Similar software projects at our company have taken an average of 14 months, with 30% running over 18 months. We should plan for 14 months unless we have strong evidence we're different.'
My detailed plan and specific knowledge make the outside view irrelevant—actually, everyone thinks their case is special; the outside view should be your starting point, and you should only deviate with strong evidence.
Inside View vs. Outside View is explored in depth in "Thinking, Fast and Slow" by Daniel Kahneman. Distilo provides a deep AI-powered analysis with key insights, audio narration, and practical frameworks.