It’s astounding how often probabilities are misused.

One of my favorites is a common way to make sure we consistently overestimate the odds of something coming to fruition.

Say, for example, we want to know the odds that we’re going to win a contract.

In many markets, it’s easy to focus in on your company and your biggest competitor/rival. Assuming neither company has a clear leg up in the specific situation at hand, the odds of winning the contract is 50%. Right?

Wrong. Dead wrong.

There’s a 50% chance of you winning…

If the company chooses to go forward with the project.

And they choose to outsource the work rather than keeping it in-house.

And they can’t think of any option other than you and your rival.

And they don’t go bankrupt or change direction before hand.

And the market doesn’t crash.

And…

The problem is that we focus in on the things we know, and develop probabilities without planning for anything outside of our narrow window of influence.

But that’s not how it works.

Companies change plans and strategies all the time. Assuming, conservatively, that there’s a 25% that the project doesn’t go forward at all, then suddenly each company’s odds of winning already drops to 50% x 75% = 37.5%.

And that’s before accounting for any of the many other reasons why the project might not move forward as envisioned.

If we want to have accurate predictions, we need to realize that we live in a complex world.

-Brandon