Have you ever noticed how often plans — both others’ and your own — play out not-so-well?
A common reason behind this is something that you, like most of us, have plenty of first-hand experience with: a cognitive bias known as the planning fallacy. It describes how we tend to estimate the completion of a task with an unreasonably optimistic view. For example, someone may overestimate time after time how well they’ll do on an exam, despite the fact that they’ve usually done worse than expected in the past.
In this article, we’ll explain in detail how and why it occurs, and what you can do to overcome it.
What Is the Planning Fallacy?
Amos Tversky and Daniel Kahneman, two renowned researchers in the fields of behavioral economics and cognitive psychology, coined the term “planning fallacy” in their 1977 paper. They proposed that people have a psychological tendency to make unrealistic, intuitive estimations about the time they’ll need for completing a task or project.
Importantly, this bias can lead us to poor judgments even when our previous experiences clearly point to a certain direction.
Sydney Opera House
Construction is rife with examples of overly optimistic estimations, which mainly stem from reliance on intuition-based forecasting.
The most famous example is the construction of the Sydney Opera House that was estimated to take 4 years and cost AU$7 million. This turned out to be far from reality: it took 14 years to build with a final price tag of AU$102 million.
Jim has an exam coming up in a week’s time. He thinks that he should probably study extra hard for this one; he has always done worse in the subject than he’d wished for.
However, since Jim has already gone through the whole study material, and he feels quite optimistic about his abilities, he decides there’s nothing to worry about; he will ace the exam this time!
A Night Out
Sarah is meeting with her friends tonight. She knows it takes her 30 minutes to get ready. But, there’s a couple of other things she would like to get done first, so, this time, she gives herself 10 minutes to prepare for the night out. She quickly finds that only 10 minutes is not enough and, as a result, ends up being around 20 minutes late.
Why it Happens
Over the years, several researchers have put forth different theories to explain this bias:
- Kahneman and Tversky argued that the planning fallacy is a result of the optimism bias. We want that things turn out positively for us, so we put more weight to optimistic views over negative ones.
- According to one view, people think they need less time to finish tasks because they wish it was true; it’s the desirable outcome. In essence, it happens due to wishful thinking.
- Another theory is that it happens because one thinks “this time” will be an exception. Even though all our past experiences point the other way, we believe this time will be an exception to the rule. This is also a form of over-optimism.
- When we simply choose to trust our own instincts and don’t account for external information we encounter, it is called having an “inside view.” Accordingly, this effect may be inflated if the “inside view” is positive and “outside view” negative.
In summary, it’s often caused or exacerbated by optimism bias and other psychological phenomenons.
For individuals, planning and making projections about the future is not an easy task, especially if we have to rely solely on our intuitions. There is a variety of things we need to be wary of, such as being realistic of our own skills, making the right assumptions, and, of course, how you approach the possibility of random, highly impactful events.
Why it’s Bad
The planning fallacy can ruin our plans for a number of reasons:
- We make estimations that are impossible to meet.
- We ignore or underestimate the impact of various risks.
- We allocate too little resources due to overly optimistic view.
Now, you may think that not always meeting deadlines or overestimating the time it takes to finish your to-do list is not such a big deal. But, this can — and often does — have far-reaching effects, both on an individual as well as societal level. For example, one poorly planned project may put someone’s career at risk or even bankrupt a company.
How to Overcome it
Naturally, the first and most important step in overcoming the planning fallacy is to be aware of its existence and understand why we fall prey to it.
Secondly, it’s good to have a healthy level of skepticism, especially when faced with more serious decisions. Don’t take all assumptions and personal opinions — others’ and your own — for granted, but instead look for more concrete validation, as well as leave room for errors. Also, be mindful about the fact that, more often than not, even the certain-looking plans you feel particularly confident about still have a possibility of yielding negative results.
Now, to help you approach your plans more rationally next time around, here are a few tips and techniques you can try.
Take an Outside View
As noted earlier, an “inside view” is when we only rely on inside information — our own intuitions, opinions, and understanding. The problem here is that we tend to be overconfident about the scope of our capabilities and knowledge.
An “outside view”, on the other hand, is when we consider external information, such as the results of previous, similar instances. This is crucial for educated decision-making. Whenever external information contradicts your personal views, it’s a sign that there is likely something more to it that should be examined.
So, always seek external information if possible; look how the past has played out, find relevant data and statistics, and seek counsel from experienced people. For a quick reality check, simply ask someone you trust what their thoughts are.
Remember Murphy’s Law
Murphy’s law states that everything that can go wrong, will go wrong sooner or later. Granted, it’s a rather pessimistic view, but it can be an effective way to ensure you take that extra time and effort to map out your plans.
Taking a bit pessimistic viewpoint helps you consider more seriously the obstacles you may face down the road, which, in turn, enables you to better think of ways to overcome them.
Break it Down
Breaking down a large project into smaller parts is a great way to make accurate plans. The fewer factors are involved, the easier it is to estimate how much and what resources a task will take. Then, put it all back together for a broader outlook.
This also helps you think clearly and feel less overwhelmed.
- Buehler, R., Griffin, D. & Ross, M. (1994) “Exploring the “Planning Fallacy”: Why People Underestimate Their Task Completion Times“
- Pezzo, M. & Litman, J. (2006) “On the distinction between yuppies and hippies: Individual differences in prediction biases for planning future tasks“
- The Planning Fallacy: Cognitive, Motivational, and Social Origins – Science Direct