Fermi Roi

Fermi ROI

A prioritization framework that replaces spreadsheet ROI with orders-of-magnitude estimation. Use only powers-of-ten values where the two adjacent choices are obviously wrong.

Why

Traditional rubrics produce noise, not signal. A feature scored at 60 impact / 4 effort (ROI = 15) that actually delivers 48 impact / 6 effort (ROI = 8) shows 50% ROI variance from minor estimation errors. Fermi estimation eliminates this noise. Rankings stay stable even when individual estimates shift by 50%.

Process

1. List the Candidates

Name every initiative, feature, or investment under consideration.

2. Define One Impact Metric

Pick a single measure of impact. Constrain it to powers of ten where intermediate values are absurd.

Quantitative options:

Choose the metric most relevant to the decision. Do not combine metrics — pick one.

Qualitative option (multi-factor):

When no single metric captures impact, break it into factors where ALL must succeed together. Multiply the scores.

Define each factor with concrete descriptions at each level — never use generic 1-5 scales.

Example factors:

Each level needs a specific definition. Examples for Intensity:

• 1000 — Mission-critical to project success
• 100 — Serious internal concern we've discussed
• 10 — I'm curious, tell me more
• 1 — Meh
• 0 — Don't waste my time

3. Estimate Effort

Use only three brackets:

Round up. Whatever you think the real estimate is, choose the next bracket. This forces scope clarity and accounts for underestimation bias.

For multi-part projects, group related items into epics and accept or reject them as complete sets.

4. Calculate ROI

Single metric:

ROI = Impact / Effort

Example:

Multi-factor:

Combined Score = Factor1 × Factor2 × Factor3 × Factor4

Multiply when all factors must succeed together. Add when factors represent independent alternatives. Rank by combined score.

5. Break Ties

Most items cluster into 5-10 unique ROI values. When candidates tie, use one of these methods:

Add precision (sparingly). Shift the scale from powers of 10 to powers of 3 (1, 3, 9, 27) or add custom gaps (800 vs. 1000) to signal slight preference.

Run-off. Among tied items, score on a single new dimension:

Filter. Drop all factors except one and rank on that alone.

6. State the Decision

Present the ranked list with a narrative, not just numbers.

Priority 1: Initiative A — $100K/mo impact justifies the 2-month investment. ROI: 2,200. Priority 2: Initiative B — Lower impact but ships in two weeks. Strong fallback if A proves harder than expected. Deprioritized: Initiative C — Lowest ROI. Worth revisiting only if scope shrinks to under a day.

Explain rankings in terms of impact magnitude, not decimal differences. "A has dramatically larger impact; worth the extra time" beats "A scored 15.3 vs. B's 12.1."

Output Template

## Fermi ROI Analysis: [Decision Context]

### Impact Metric

[Metric name and Fermi scale used]

### Scoring

| Initiative | Impact | Effort | ROI | Notes |
|---|---|---|---|---|
| [Name] | [Value] | [2d/2w/2m] | [Score] | [Key assumption] |

### Ranking

1. **[Winner]** — [Why it ranks first]
2. **[Runner-up]** — [Why it ranks second; fallback narrative]
3. ...

### Ties Broken By

[Method used and result, if applicable]

### Key Assumptions

- [Assumption 1]
- [Assumption 2]

Caveats

• Impact only, no strategic fit. Fermi ROI maximizes return per effort. It does not account for strategic alignment, team morale, or market positioning. If those matter more than ROI, use Binstack.
• One metric at a time. Combining multiple metrics compounds estimation error. Pick one or use the multi-factor multiplication approach where all factors are required for success.
• Round up effort. Effort is almost always underestimated. The three-bracket system compensates for this bias.
• Estimation errors don't cancel out. They compound. Fermi estimation works because it keeps estimates coarse enough that rankings remain stable despite individual errors.