The “planning fallacy” is that you make a plan, which is usually a best-case scenario. Then you assume that the outcome will follow your plan, even when you should know better. Daniel Kahneman.
Estimator: An individual who does precision guess-work based on unreliable data provided by those with questionable knowledge.
In 1957, the Aussie government chose Danish architect John Utzon to design the Sydney Opera House, estimating the project to take six years and cost $7 million. The project did complete eventually in 1973, a decade later than its scheduled finish. And it cost $102 million—over 14 times the estimated cost.
Closer to home, the 1989 Loma Prieta earthquake in California caused a portion of the Bay Bridge to collapse and accelerated the need for a more robust suspension bridge. Reconstruction work on the eastern section of the bridge began in 2002. Estimated to finish in 2007, the project was plagued by various delays before it was finally completed in 2013 and ended up being one of the, if not, the most expensive public works project in the world, eventually costing $6.5 billion—a whopping 2500% of its original estimate.
It’s easy to conclude that the reason for large-scale construction project delays such as those above is because construction companies, in their eagerness to win large contracts, over-promise and under-deliver on their bids. While that may be true, the tendency to plan overly optimistically isn’t a malady that just affects construction companies.
We are all susceptible to what scientists refer to as the optimism bias thanks to some hard-wiring in our brains.
In a 2007 article published in the prestigious journal Nature, scientists studied the neural mechanisms that lead to a pervasive optimism bias. According to the study, our neural circuits are typically hard-wired to have a positive outlook.
Humans expect positive events in the future even when there is no evidence to support such expectations. For example, people expect to live longer and be healthier than average, they underestimate their likelihood of getting a divorce, and overestimate their prospects for success on the job market.
There’s more. This misplaced optimism isn’t restricted to major life events either. It is the reason large pockets of time seem to vaporize altogether from our lives daily.
Your planned ten-minute commute actually takes closer to twenty. The 5-minute stand up meeting at work takes an hour because, you know, the boss likes to talk. And, your quick (boredom-relieving) social-media scrolls take, well, all evening! And, before you know it, you are back to the all-too familiar and often asked question “Where did my day go?” It’s no surprise that psychologists felt compelled to study a riddle as universal as this one. And they came up with a name for it—The Planning Fallacy.
The Planning Fallacy
Kahneman and Tversky, the behavioral psychologists who’ve done path-breaking work on cognitive biases, came up with the definition of the term “Planning fallacy.”
The Planning Fallacy is the tendency to hold a confident belief that one’s own project will proceed as planned, even while knowing that the vast majority of similar projects have run late.
We see the phenomenon around us all the time:
Term after term, students consistently underestimate how long they need to study for their exam and end desperately cramming all night before their test.
You sign up for the expensive gym membership, hoping to go five days a week to make up for the cost, even though you’ve never worked out more than twice a week in the past. But this time, you’re optimistic, even though not much has changed.
In a 1994 study, psychologists tested a few key hypotheses concerning people’s predictions of task completion times and found some startling conclusions:
- We underestimate our own, but not other people’s task completion times.
- We discount past experiences and don’t use past times effectively to predict how long a future task would take.
The authors use the example of people in academia who carry home stuffed briefcases full of work on Fridays, fully intending to complete every task, even though they know they’ve never completed beyond one or two jobs on any previous weekend. They write,
The intriguing aspect of this phenomenon (the planning fallacy) is the ability of people to hold two seemingly contradictory beliefs: Although aware that most of their previous predictions were overly optimistic, they believe that their current forecasts are realistic. It seems that people can know the past and yet still be doomed to repeat it.
Why we fall for the planning fallacy
Besides our hard-wired optimism, there are a few reasons we focus on the most optimistic scenario, rather than the more realistic one.
We base our estimates on best-case scenarios and ignore the potential for unforeseen delays or complications. Sure, it may take twenty minutes to drive from your house to work at 8:00 a.m. on a Monday—if—you were the only car on the road. Thinking “Pfft, what traffic?” is planning fallacy in action.
Another reason for the planning fallacy is the unswerving faith we all have in our own abilities, even if we aren’t the boastful kind. The belief that we are better equipped to handle a project than we actually are, failing to consider the complexity of the task and our own limitations, is a recipe for disaster.
So, understanding that we tend to err on the side of optimism, how can we still get things done?
Getting around our planning fallacy
It helps to take the pressure off by knowing we’re not alone. Acknowledging that we’re all susceptible to the planning fallacy is the first step.
Here are a few other tips to be more realistic when planning.
Use three-point estimates to set realistic deadlines
Deadlines are the ultimate inspiration. And they are most powerful when we learn to embrace them instead of treating them with dread. But it’s important to set realistic deadlines.
Temper your optimism by using techniques such as the three-point estimate to set more realistic deadlines. With this technique, you think of the best-case scenario estimate, the worst-case scenario estimate, and the most-likely scenario estimate and then calculate the average of all three to come up with a realistic plan.
Remember Murphy’s law
Anything that can go wrong will go wrong.
Add a buffer to your estimate. Typically, an extra 20% in your schedule can help accommodate contingencies, but if you’re the overly over-optimistic kind, then feel free to pad that buffer even higher.
Take stock periodically
I don’t know of a single person who says, “Yay! It’s time for status updates and progress reports.”
Life happens. Checking in at regular intervals to see how well you’re progressing will allow you time to adjust and course-correct as necessary.
Don’t be like Sabine Moreau who ended up in Zagreb, Croatia 810 miles away instead of her intended destination—a Belgian station 90 miles away, because she was “distracted.”
Work in Sprints
Work expands to fill time.
Working in sprints is an ideal way to create an inherent time pressure to stay focused and get stuff done. For instance, if you just choose to spend 15 minutes each day for a month cleaning, there is no need to fear the closet that hasn’t been touched since Kennedy was assassinated.
We have a tendency to attribute our previous (consistent) failures to external factors.
At an event in 1928, Mrs. Walker, for instance, tried to explain her husband, NY mayor Jimmie Walker’s perennial lateness.
Why is Jimmie always late? “It is due to his good disposition. He gets up in the morning with plenty of time, but the telephone will ring. He will answer it and will talk as long as the other party wishes. Jimmie is never abrupt and is always afraid of hurting somebody’s feelings.”
Mrs. Walker ascribed her husband’s failure to meet deadlines to purely external causes. We’re all like that in some way. Thanks to the planning fallacy and how our brains are wired, we are bafflingly optimistic when it comes to estimating how long it will take for us to get things done. And when things don’t go quite so well, we point to excuses, none of which have anything to with our own poor planning.
By itself, optimism isn’t an issue. But over-optimism, as Duke economist, David Robinson said, can be a bit of a problem.
Doctors tell us that one or two glasses of red wine a day can be really healthy. But no one tells you to drink the whole bottle. It’s the same with optimism. A little bit is really beneficial, but too much can lead to some really bad economic choices.
So next time you see someone consistently late on their commitments, feel free to explain to them how the planning fallacy works. But, also consider the possibility that you are that person. If you’re unsure, ask your friends. They will be more than happy to set the record straight.