Last week, I held another free webinar on probabilistic estimation. This time, it was on Monte Carlo simulation.
A lot of project managers and businesspeople have heard about Monte Carlo simulation, but not nearly as many people know exactly what it is (and what it isn’t), or how to use it to inform decision-making.
I created this spreadsheet and used it during this month’s webinar. In it, I explain how we can calculate the probability of rolling a “7” using a pair of dice just by simulating the problem.
Now, we know that the probability of getting a “7” is 16.7% (6 possible ways of rolling a “7” divided by 36 total possible outcomes from rolling a pair of dice). But what if we didn’t know how to solve the problem using a math formula? What if creating a math formula was too complicated? What if it were impossible? That’s when Monte Carlo simulation comes into play.
By simulating complex problems thousands of times, we can learn the probabilities of all kinds of possible outcomes. Then, we can use that information to help make decisions about what to do today.
I included some instructions inside the spreadsheet, and I also have an included worksheet that shows how to simulate a single project task, too.