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Friday, September 05, 2008

Assumptions versus Facts

I have a couple of Dr. Ireland's books and admire his project management intellect. He published the following article about the differences between assumptions and facts. Great article!

Poker anyone?

Project Planning: Assumptions versus Facts
© 2003 by Dr. Lewis Ireland, Clarksville, TN

Introduction - The difference between an assumption and a fact is often subtle and confusing. Some organizations, and individuals, view assumptions and facts in the same light. This approach causes confusion in managing both the assumptions and facts as well as communicating accurately the situation during planning and execution of projects.

The American Heritage Dictionary defines both words in the context of planning as:• Assumption – a statement accepted or supposed as true without proof or demonstration.• Fact – something presented as objectively real or something that has been objectively verified.

Planning a project using the wrong term can convey a different meaning to fact or assumption with catastrophic results. Facts do not change whereas assumptions are typically about a future state that may or may not come true. Listing both facts and assumptions as assumptions can also cause confusion because the project manager does not know which assumptions to track to ensure they are converted to facts.

Facts and assumptions in a poker game - Herbert O. Yardley, a noted mathematician and code breaker from the late 1920s and author of The Education of a Poker Player, gives some insight as to facts and assumptions. His explanation of poker is instructive and is used here to give examples of facts and assumptions. Yardley used mathematics to explain poker and the human element associated with playing a very competitive game.

Some of Yardley’s advice included rules that guided a person to play poker in realistic terms. Some rules are:

• Don’t play any games that you don’t understand. Luck does not favor the person with the least knowledge of the rules or who doesn’t understand the game.

• Use facts to determine your best odds of winning and discipline yourself to stick with the facts.• Don’t assume that something good will happen if you ignore the facts.

• Don’t drink alcoholic beverages or engage in any practice that reduces your mental ability.

• Don’t talk to try to sway the opposition, but play your cards.

Editor's note: the same rules apply to projects!

If we take facts as “absolutes” and assumptions as “maybes” in managing projects, we have a distinct difference in information. Facts are what we know and assumptions are what we hope will happen. Remember, assumptions are always stated in a positive framework. Both facts and assumptions have a positive or negative impact on the project.

Following Yardley’s instruction in his book, let’s use poker as an example of facts and assumptions as work. First, we need to review the rules of the game of seven card stud – a card game where a player may draw as many as seven cards for a hand, four face up and three face down.

Typically, there are from three to five players in the game. The sequence for the game play is that all players ante (place a nominal amount in the pot just for the privilege of seeing the first three cards). Three cards are dealt to each player – two down and then one face up. The highest face up card starts the betting. Players may “call” (match the bet), “fold” (remove self from the game), or “raise” (call the bet and make another bet). This sequence continues until only one player remains and is the winner of the pot or the last card is dealt face down. This leaves the hands with seven cards, three down and four up. The final betting takes the same sequence as prior bets, but the high hand wins when all betting is concluded.

How does this help us understand facts and assumptions? Let’s take a look at the game in progress.

1. Five players ante a dollar each and are dealt three cards, the first two face down and the last face up. With fifteen cards in front of players, we know, or the facts are, that we can see seven cards (fact) and there are eight hidden, for which we must make an assumption. Based on our three cards and the other four hands we can bet, call, or fold. An opponent may give us some indication of his/her cards by the betting – high bet, medium bet, no bet, call, fold, raise.

2. Say that a medium bet of one dollar is made and all players call. The pot is now at $10 with each player contributing a dollar for the ante and a dollar for the first bet. Therefore, we have five players who have neither shown a strong nor weak hand. We make the assumption that our chance to win is still viable based on seeing seven cards and the betting. We can make the assumption that no player has a totally worthless hand or he/she would have folded.

3. The fourth card is dealt face up to give each hand two up and two down. We can now see 12 cards -- all face up cards and our two “hole” cards. Yardley tells us that if another play has a higher card hand showing in his/her two cards, we should fold. The fact is that we would be beat by the cards showing. To make an assumption that we can out draw this other hand is against the odds. Actually, we have the highest hand showing, but the other players are not folding when we make a modest bet. The facts are that we have the highest showing hand, but must make the assumption that at least one other player has a higher hand in his/her four cards.

4. The betting is over and the fifth card is dealt. The facts are that we can see 17 cards. Our hand is still high and starts the betting. Two players fold and two opponents call the bet. With 17 cards known and three players remaining, we make the assumption that the two opponents have a better hand than our three cards showing. Therefore, we need to have a better hand with our two hole cards than just the values of the three face up cards.

5. The sixth card is dealt face up to the three active players. We now have two pair with one pair showing and a face up card matching a hole card. The other two players each have a pair showing. The facts are that either of the opponents could have a third card matching the pair for three-of-a kind, which always beats two pairs. Further, all players may draw the seventh card down, which could improve any of the hands.

6. The seventh card is dealt face down. The only change to the facts is that we now know the full extent of our hand. It has changed in that we have three pair and can only use the highest two pair. The opponents have given no indication that they have better hands. It is a fact that we cannot bluff by making a high bet. This group has always covered bets just to see what the other person’s hand is. So, the betting starts with one dollar and the two opponents call. As the first bettor, we show all of our cards and declare two pair – aces and nines. The second player shows two pair – kings and tens. The third player shows three fours as the winning hand.

The game of seven card stud shows that we have continually building facts and changing assumptions. Each player sees the same number of card values at each play as facts. Each player does not see the same number of card values at each play and must make some assumptions about the probable worth of each hand. Weighing the facts and assumptions at each play gives us a relative worth of our hand compared to the cards that we can see around the table and the probable hole cards.

Projects are similar in that we need to assess our progress to successful completion of the work and that each day changes the relative worth of the end product. We deal with the facts and analyze the assumptions to arrive at the best solution.

Our example of a card game gives us several lessons about facts and assumptions.

• Facts are what we can see and what we know about the future, e.g., we have a number of cards available.

• Facts only change with the situation, e.g., each new card dealt to the players changed the actual situation and the parameters of the game.

• Facts are what is visible and real, but do not give a complete picture.

• Assumptions are used to assess the unknown and to make judgments for future actions.

• Assumptions bridge knowledge gaps, but are not necessarily true situations.

• Assumptions are necessary to make decisions about the future.

Conclusions - It is concluded that a more rigorous approach to developing facts and assumptions in project planning can enhance the quality of the plan and the probable success rate for projects. There are some rules that help in developing and working with facts and assumptions. Facts are real and have more weight in our decision process that assumptions.

Developing guidelines for the use of facts and assumptions will give a better solution that random application during critical times. Facts are real and assumptions are what we think will happen. Assumptions should never be made because we want them to happen – this is an emotional approach rather than a logical approach.

Know the rules for developing facts and assumptions and use them rigorously. Be consistent in the use of the objective evidence (facts) and the subjective evidence (assumptions).

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