Planning fallacy - AbsoluteAstronomy.com

The planning fallacy is a tendency for people and organizations to underestimate how long they will need to complete a task, even when they have experience of similar tasks over-running. The term was first proposed in a 1979 paper by Daniel Kahneman

Daniel Kahneman

Daniel Kahneman is an Israeli-American psychologist and Nobel laureate. He is notable for his work on the psychology of judgment and decision-making, behavioral economics and hedonic psychology....

and Amos Tversky

Amos Tversky

Amos Nathan Tversky, was a cognitive and mathematical psychologist, a pioneer of cognitive science, a longtime collaborator of Daniel Kahneman, and a key figure in the discovery of systematic human cognitive bias and handling of risk. Much of his early work concerned the foundations of measurement...

. Since then the effect has been found for predictions of a wide variety of tasks, including tax form completion, school work, furniture assembly, computer programming and origami

Origami

is the traditional Japanese art of paper folding, which started in the 17th century AD at the latest and was popularized outside Japan in the mid-1900s. It has since then evolved into a modern art form...

. The bias only affects predictions about one's own tasks; when uninvolved observers predict task completion times, they show a pessimistic bias, overestimating the time taken. In 2003, Lovallo and Kahneman proposed an expanded definition as the tendency to underestimate the time, costs, and risks of future actions and at the same time overestimate the benefits of the same actions. According to this definition, the planning fallacy results in not only time overruns, but also cost overruns and benefit shortfalls.

Demonstration

In a 1994 study, 37 psychology

Psychology

Psychology is the study of the mind and behavior. Its immediate goal is to understand individuals and groups by both establishing general principles and researching specific cases. For many, the ultimate goal of psychology is to benefit society...

students were asked to estimate how long it would take to finish their senior theses. The average estimate was 33.9 days. They also estimated how long it would take "if everything went as well as it possibly could" (averaging 27.4 days) and "if everything went as poorly as it possibly could" (averaging 48.6 days). The average actual completion time was 55.5 days, with only about 30% of the students completing their thesis in the amount of time they predicted.

Another study asked students to estimate when they would complete their personal academic projects. Specifically, the researchers asked for estimated times by which the students thought it was 50%, 75%, and 99% probable their personal projects would be done.

13% of subjects finished their project by the time they had assigned a 50% probability level;
19% finished by the time assigned a 75% probability level;
45% finished by the time of their 99% probability level.

A survey of Canadian tax payers, published in 1997, found that they mailed in their tax forms about a week later than they predicted. They had no misconceptions about their past record of getting forms mailed in, but expected that they would get it done more quickly next time. This illustrates a defining feature of the planning fallacy; that people recognize that their past predictions have been over-optimistic, while insisting that their current predictions are realistic.

Explanations

Kahneman and Tversky's original explanation for the fallacy was that planners focus on the most optimistic scenario for the task, rather than using their full experience of how much time similar tasks require. One explanation offered by Roger Buehler and colleagues is wishful thinking
Wishful thinking
Wishful thinking is the formation of beliefs and making decisions according to what might be pleasing to imagine instead of by appealing to evidence, rationality or reality...

; in other words, people think tasks will be finished quickly and easily because that is what they want to be the case. In a different paper, Buehler and colleagues suggest an explanation in terms of the self-serving bias

Self-serving bias

A self-serving bias occurs when people attribute their successes to internal or personal factors but attribute their failures to situational factors beyond their control. The self-serving bias can be seen in the common human tendency to take credit for success but to deny responsibility for failure...

in how people interpret their past performance. By taking credit for tasks that went well but blaming delays on outside influences, people can discount past evidence of how long a task should take. One experiment found that when people made their predictions anonymously, they do not show the optimistic bias. This suggests that the people make optimistic estimates so as to create a favorable impression with others.

Some have attempted to explain the planning fallacy in terms of impression management

Impression management

In sociology and social psychology, impression management is a goal-directed conscious or unconscious process in which people attempt to influence the perceptions of other people about a person, object or event; they do so by regulating and controlling information in social interaction...

theory.

One explanation, focalism, may account for the mental discounting of off-project risks. People formulating the plan may eliminate factors they perceive to lie outside the specifics of the project

Project

A project in business and science is typically defined as a collaborative enterprise, frequently involving research or design, that is carefully planned to achieve a particular aim. Projects can be further defined as temporary rather than permanent social systems that are constituted by teams...

. Additionally, they may discount multiple improbable high-impact risks because each one is so unlikely to happen.

Planners tend to focus on the project and underestimate time for sickness, vacation, meetings, and other "overhead" tasks. Planners also tend not to plan projects to a detail level that allows estimation of individual tasks, like placing one brick in one wall; this enhances optimism bias

Optimism bias

Optimism bias is the demonstrated systematic tendency for people to be overly optimistic about the outcome of planned actions. This includes over-estimating the likelihood of positive events and under-estimating the likelihood of negative events. Along with the illusion of control and illusory...

and prohibits use of actual metrics, like timing the placing of an average brick and multiplying by the number of bricks. Complex projects that lack immutable goals are also subject to mission creep

Mission creep

Mission creep is the expansion of a project or mission beyond its original goals, often after initial successes. Mission creep is usually considered undesirable due to the dangerous path of each success breeding more ambitious attempts, only stopping when a final, often catastrophic, failure occurs...

, scope creep

Scope creep

Scope Creep in project management refers to uncontrolled changes or continuous growth in a project's scope. This phenomenon can occur when the scope of a project is not properly defined, documented, or controlled...

, and featuritis. As described by Fred Brooks

Fred Brooks

Frederick Phillips Brooks, Jr. is a software engineer and computer scientist, best known for managing the development of IBM's System/360 family of computers and the OS/360 software support package, then later writing candidly about the process in his seminal book The Mythical Man-Month...

in The Mythical Man-Month

The Mythical Man-Month

The Mythical Man-Month: Essays on Software Engineering is a book on software engineering and project management by Fred Brooks, whose central theme is that "adding manpower to a late software project makes it later"...

, adding new personnel to an already-late project incurs a variety of risks and overhead costs that tend to make it even later; this is known as Brooks's law.

Another possible explanation is the "authorization imperative": Much of project planning takes place in a context where financial approval is needed to proceed with the project. And the planner often has a stake in getting the project approved. This dynamic may lead to a tendency on the part of the planner to deliberately underestimate the project effort required. It is easier to get forgiveness (for overruns) than permission (to commence the project if a realistic effort estimate were provided.) Such deliberate underestimation has been named strategic misrepresentation

Strategic misrepresentation

"Strategic misrepresentation is the planned, systematic distortion or misstatement of fact—lying—in response to incentives in the budget process...

Methods to curb the planning fallacy

Daniel Kahneman, Amos Tversky, and Bent Flyvbjerg developed reference class forecasting

Reference class forecasting

Reference class forecasting is the method of predicting the future, through looking at similar past situations and their outcomes.Reference class forcasting predicts the outcome of a planned action based on actual outcomes in a reference class of similar actions to that being forecast. The theories...

to eliminate or reduce the effects of the planning fallacy in decision making.

Demonstration

Explanations

Methods to curb the planning fallacy

See also

Further reading