Planning Fallacy (definition)

The planning fallacy is a cognitive bias that affects our critical thinking and
decision-making abilities. Like other biases, it has detrimental effects and can
negatively impact our lives. We fall into the planning fallacy trap because our
minds use shortcuts to reach conclusions. It was Daniel Kahneman and Amos
Tversky, two behavioral scientists, who identified and defined the meaning of
planning fallacy. Put simply, the planning fallacy is the tendency to predict the
amount of time it will likely take to complete a task. It’s a form of optimism bias
where people tend to underestimate the time taken to complete a task, despite
being aware of the amount of work that needs to be done. Even if similar tasks
took more time in the past, we overestimate our capacity to complete them.
What’s interesting to note here is that we hold both optimistic beliefs, about the
future, and realistic beliefs, concerning the past.
Why do so many of us fall into this trap? The most obvious reason is
wishful thinking. We all have the best intentions to get something done as quickly
and efficiently as possible. Unfortunately, in our excitement, we underestimate
how long it’s actually going to take to cross that finish line. The reason? We just
didn’t take into account external and internal snags — like being stuck in a rut or
having to cut through red tape.
Regardless of the exact reason, the planning fallacy can do some significant
damage. A missed deadline can harm your professional reputation, as well as cost
you financially. It can also throw your schedule out of whack. If you’ve missed a
target date, that means what you have planned next has to get pushed back.

Reasons for the fallacy

1. Overconfidence and Optimism
You and I have a habit of being too confident and optimistic about
our skills. Sure, you might have the talent, but you often believe you need
 less time to complete the job than you actually do. Such an effect is also
called the optimism bias.
2. Considering the best case alone.
When you fix a deadline without any analysis, your prediction ends
up unrealistically close to the best-case scenario. You assume you and
every other person involved will perform at their optimal capacity. You fail
to take into account the possibility of unexpected problems and roadblocks.
In reality, you will face some obstacle or the other. The chances of
the path turning exactly as you expected are as unlikely as winning a
lottery.
3. Discomfort and fear of taking too long.
Sometimes you do not want to face the truth of the delay.
When we were building a product, we estimated a timeline of 3
months to feel good about ourselves. But it took us more than twice the
time to get it done.
Taking 6 months would mean more expenses, a delayed launch, and
a waiting period for revenue. We did not want to accept that because we
were not prepared for it.
Somewhere in the back of your head, you know the task will take
longer. Yet, you don’t want to accept the truth. So, you convince yourself
about finishing the job in the shortest possible time to make yourself feel
better.

Real World Examples of Planning Fallacy

A real-world example of the Planning Fallacy is the construction of Sydney
Opera House, which was expected to be completed in 1963 with a cost of $ 7
million. The actual completion was not until 1973, and the cost ended up being
$102 million (Sanna, Parks, Chang & Carter, 2005).
 Another example is the Hong Kong-Zhuhai-Macau bridge, which was set to
open in 2016. Due to safety issues and construction delays it didn’t open until the
end of 2018, with major cost overruns (Kuo, 2018).

You have probably experienced the Planning Fallacy in your everyday life as well:
● Planning to get in shape in an unrealistic amount of time
● Planning to get all cleaning done on Sunday evening – and failing
● Planning to do a lot of work during the weekend, but ending up not even
looking at it
● Planning to spend a certain amount of money on vacation and ending up
tripling it
● Estimating the cost of home renovations to be significantly lower than the
actual cost
● And the list goes on and on and on..

More examples:

1. 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!
2. 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.