What it is
Base rate neglect occurs when decision-makers focus on the specific details of a situation and discount or ignore statistical information about how often similar situations produce particular outcomes. The specifics of the case feel more informative than they are, and the prior probability - which contains the hard-won pattern from many comparable cases - is underweighted or ignored entirely. The result is that forecasts regress towards optimism rather than towards the base rate.
Where it shows up
In build-vs-buy decisions, base rate neglect most commonly appears in the assessment of custom build complexity and timeline. Teams focus on what makes their requirement unique and conclude that base rates for similar builds do not apply. The relevant base rate - what fraction of comparable custom software projects are delivered on time and on budget - is rarely consulted. Industry data consistently shows that this fraction is below 50 per cent, a figure that rarely features in internal business cases.
What Rubicon Probity does
When Rubicon Probity processes a decision record at the Decide stage that contains project duration or cost estimates without a documented reference class, it raises a CAUTION flag and requests that the team supply an outside view - a comparable class of projects and their historical outcomes - before estimates are confirmed. The inside view and outside view must both be recorded.
Detection questions
- What is the historical success rate for projects of this type, size, and complexity - and where does that data come from?
- Have the estimates in this business case been anchored to internal assumptions, or tested against a reference class of comparable external projects?
- If you applied the base rate for this class of decision to your forecast, how much would the expected outcome change?