Range: Why Generalists Triumph in a Specialized World

by David Epstein

For a unique 2012 experiment, University of Sydney business strategy professor Dan Lovallo—who had conducted inside-view research with Kahneman—and a pair of economists theorized that starting out by making loads of diverse analogies, Kepler style, would naturally lead to the outside view and improve decisions. They recruited investors from large private equity firms who consider a huge number of potential projects in a variety of domains. The researchers thought the investors’ work might naturally lend itself to the outside view. The private equity investors were told to assess a real project they were currently working on with a detailed description of the steps to success, and to predict the project’s return on investment. They were then asked to write down a batch of other investment projects they knew of with broad conceptual similarity to theirs—for instance, other examples of a business owner looking to sell, or a start-up with a technologically risky product. They were instructed to estimate the return for each of those examples too. In the end, the investors estimated that the return on their own project would be about 50 percent higher than the outside projects they had identified as conceptually similar. When given the chance at the end to rethink and revise, they slashed their own initial estimate. “They were sort of shocked,” Lovallo told me, “and the senior people were the most shocked.” The investors initially judged their own projects, where they knew all t...