Answers to Judgment Quiz
1. The correct answer is C (63 days). You cannot add together high estimates (40 days + 40 days = 80 days) to get the duration of the project with two activities associated with 90% confidence. It cannot be 50 days (2 × (10 days + 40 days) ÷ 2), which is the mean duration. The actual calculation can be performed using quantitative analysis tools based on Monte Carlo simulations. For more information, please read chapter 16, “What Is Project Risk? Monte Carlo Method.”
2. The correct answer is B (Strategy B is 17% faster than strategy A). A similar example is discussed in chapter 20, “Adaptive Project Management.” Splitting a risky project into smaller phases usually accelerates the project, but not as significantly as 70%. An actual calculation can be performed using Event chain methodology.
3. The correct answer is C (portrait completion times in situations A and B are about the same). The correlation between risk events plays a significant role only if probabilities are relatively high. In this case, the probability that Eden or Garry will not like the portrait is 30%; therefore, correlations will not have a significant effect on the results. See chapter 14, “Choosing What Is Most Important: Sensitivity Analysis and Correlations.”
4. The correct answer is C. This question relates to the notion of expected value. Expected value is a probability-weighted average of all outcomes that is calculated by multiplying each possible outcome by its probability of occurrence and then summing the results. Probability multiplied by outcome is lower in C ($300 M × 80% = $240 M). We will learn about expected value in chapter 4, “What Is Rational Choice? A Brief Introduction to Decision Theory.”
5. The correct answer is A (your forecast will lead to a 5% longer filming time than the official weather forecast). The moment of risk (when the snow falls) may significantly affect duration. See chapter 17, “ ‘A Series of Unfortunate Events,’ or Event Chain Methodology.”
6. Whatever money you have already invested in MC Uglyface’s career is a sunk cost. The high success rate of the ad campaign applies to other rappers, and there is evidence that more ad campaigns will not help MC Uglyface. We recommend answer C (give up with MC Uglyface and start promoting the rapper BadPosture). For more information about sunk cost, read chapter 2, “ ‘Gut Feel’ vs. Decision Analysis: Introduction to the Psychology of Project Decision-Making” and chapter 20, “Adaptive Project Management.”
7. The correct answer is B (1%.) You need to multiply all probabilities:
0.1 (become celebrity) × 1 (married) × 1 (divorced) × 0.1 (choose lawyer) = 0.01.
This question is related to the bias called “overestimating the probability of conjunctive events”: people tend to choose much higher numbers. See appendix B, “Heuristics and Biases in Project Management.”
8. The correct answer is B (love stories). This question is related to the covariation assessment effect. People tend to pay more attention to high absolute values than they do to relative indicators of success or failure. The relative chance that the screenplay will be produced is higher for love stories (11 ÷ 2 = 5.5). See chapter 14, “Choosing What Is Most Important: Sensitivity Analysis and Correlations.”
9. The correct answer is A (short descriptions such as “Bright hues mixed with pale tones” are more general and therefore more probable). The more conditions that you add to a description, the less likely that all of them will be met. This question is related to the representativeness heuristic, and particularly to the conjunction fallacy. These are discussed in chapter 2, “ ‘Gut Feel’ vs. Decision Analysis: Introduction to the Psychology of Project Decision-Making.”
10. The correct answer is C (4 times). The probability always remains the same: 16% (25 trials × 16% = 4 times). This question is related to the gambler’s fallacy. See appendix B, “Heuristics and Biases in Project Management.”
Now score yourself and see where you fall on the table below.