The Planning Fallacy

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What is the Planning Fallacy?

The planning fallacy is a term used by psychologists to describe our tendency to underestimate the amount of time it will take to complete a task. The term was first coined in 1977 by psychologists Daniel Kahneman and Amos Tversky.

Kahneman and Tversky explained that people have a tendency to disregard historical data when making predictions. Instead of forming estimates based on historical evidence, we focus solely on the upcoming task.

Prof. Kahneman, in his 2011 book Thinking Fast and Slow, argued that estimation mistakes can usually be attributed to two key factors:

  1. Failing to consider how long it's taken us to complete similar tasks in the past
  2. Assuming that we won't run into any complications that will cause delays

Secondly, we tend to believe the future will be better than the past, a psychological phenomenon known as the optimism bias. Or, as it relates to the planning fallacy, the belief that things you do in the future won't take as long as things you've already completed.

Therefore, our optimism makes us believe we won't face any issues that would result in delays. Whenever we estimate how long something will take, we tend to use the best-case scenario. We tend to ignore historical data that proves that the best-case scenario is unlikely.

Unfortunately, it's possible that we can't help feeling optimistic when we imagine future tasks. As Tali Sharot, professor of cognitive neuroscience and author of The Optimism Bias, writes: "A growing body of scientific evidence points to the conclusion that optimism may be hardwired by evolution into the human brain."

Estimation Techniques to Avoid Underestimating

To avoid the negative consequences of underestimating you have to make an effort to stop estimating using intuition only. The following estimation techniques are all designed to help you avoid underestimating when you're trying to determine how much time a task will take.

1. Use Historical Data

Use that information to find out how similar tasks have taken, or compare your original estimation with the actual time it took. Add all of the actual time values together. To calculate the error margin, divide the total estimated hours by the total active time. This, in turn, will give you the error margin you use when estimating similar tasks.

2. Have Someone Else Estimate for You

Although we aren't very good at estimating how long tasks will take us to complete, American Psychological Association's Journal of Personality and Social Psychology published five studies that found we are pretty good at estimating how long it will take someone else to complete a task.

3. Estimate in Ranges, or Build in Time for Delays

Reflect on the cone of uncertainty. By plotting the stage you feel you are at on the cone, you can develop an estimate. In cases where you are unsure what the project entails, multiply or divide your estimate by four to get the low end of your range. Then, divide it again to get the high end. Afterward, give a ranged estimate (for example, I expect it to take between one and 16 days). If you don't think a range will be acceptable, you can use the high end of the range (e.g., I think it will take 16 days) to account for unknowns. After all, your original estimate was probably optimistic in the first place.

4. Use Three-Point Estimations

Come up with a best-case scenario estimate, a worst-case scenario estimate and a most likely scenario estimate. Since we tend to be optimistic when we estimate, the best-case scenario is likely the same as the initial estimate. The most likely scenario might be based on the historical data you have for completing similar tasks. And the worst-case scenario should consider how long something might take if everything goes wrong. Then, take the average of the three estimates and use it.

5. Estimate During the Low Point of Your Day

A study by Scott A. Golder and Michael W. Macy analyzed people's moods using data from millions of Twitter messages. Found out that people's messages tend to be less positive when they hit their low point in the day. Which, for most people, is mid-day, right after lunch. In that case, you may be feeling less optimistic, which could help you create more realistic estimates.

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