They didn't. There is probably more popular mythology about the "Titanic" than any other ship. Some newspapers described the ship as unsinkable, because of the extent of the water tight bulkheads, but neither the builders or the owners ever said this. The myth of substandard steel/iron is offered to explain why the ship broke, or that the rivets broke under impact. The shearing force caused by the weight of water would have made the break occur anyway, as the ship simply didn't have the longitudinal strength to with stand that force. That the water tight compartments were "open" at the top isn't an issue either. Her hull was pierced across five compartments, and her design was to withstand the loss of integrity of up to 4, so she wouldn't have survived anyway. The, quite reasonable, view was that the only danger would have been from grounding or collision. Neither grounding nor collision were likely to damage more than 2 compartments, so a design that allowed for the breach of 4 compartments was allowing even more of a margin of safety than would have been anticipated. That the vessel went down so far by the head suggests that the movement of water into the next compartment over the "open" top wasn't so much of an issue as has been thought. The loss of 5 compartments meant the ship's loss anyway.

They didn't, but it wasn't unwarranted. Olympic survived a collision with a warship that damaged two compartments. It was able to sail under her own power back to Southampton then Belfast with two flooded compartments. The Republic, another WSL liner, took 38 hours to sink. The Suevic was cut in half and dragged back through open water to be rebuilt. They had good reason to believe in their capabilities as shipbuilders.

The threats they had in mind were head on collisions, groundings and ship to ship collisions. Olympic survived with great grace all three circumstances. Titanic's damage was rather unique in that it was very little but spread over 6 (not 5) compartments (fore peak back to Boiler room #6). She did manage to remain afloat on a mostly even keel during her 2 1/2 hour sinking, which is a feat her sister Britannic didn't accomplish.