Where do Story Points come from and why are relative estimation methods used

In 1907, a statistician named Francis Galton recorded the entries from a weight-guessing competition where people estimated the weight of an ox. Galton analyzed hundreds of estimates and found that, although individual assumptions varied greatly, the median of the entries was surprisingly accurate and within one percent of the actual weight of the ox. When Galton published his findings, he introduced the theory of collective intelligence, or “the wisdom of crowds,” to the public consciousness.

In a new study published in the Journal of the Royal Society Interface, researchers Albert Kao (Harvard University), Andrew Berdahl (Santa Fe Institute), and their colleagues examined the extent to which our collective intelligence is accurate and how individual bias in biased information exchange makes estimates.

“There is growing evidence that the wisdom of crowds can be really powerful,” Kao said. “Many studies demonstrate that the average of estimates can be surprisingly good.”

Additionally, it was also discovered that humans are much more accurate when making relative estimates than absolute estimates.

One of the relevant studies is the work of Kahneman and Tversky on heuristics and biases in human decision making.

For example:

Looking at the following image of whales, one cannot determine the exact age or weight of each whale, but a human can easily compare the size of each relative to the others and make relatively accurate estimations.

In Agile Development, to make estimates, these two effects can be combined with techniques such as Planning Poker and Fibonacci series.

In agile projects, during backlog refinement, development team members arrive at a high-level estimate for each product backlog story typically at story points (Fibonacci series) that helps a finer estimation during sprint planning. This helps the team get started, rather than waiting for all the details of the project to be finalized.

In Planning Poker, it is important to consider effects such as “Anchoring.” Anchoring involves establishing a first impression or reference that can affect how other players perceive the situation and make subsequent decisions.

For example, when a manager communicates an estimate just before all team members make their estimates. This effect can cause significant deviations in the subsequent estimates of team members.