What is the planning fallacy?
We're not all as rational as we'd like to believe. The majority of our decisions are based on mental shortcuts. These mental shortcuts are known as cognitive biases, and they cause mistakes in how our brain gathers and uses information.
What's that got to do with the planning fallacy? Well, back in 1979, Daniel Kahneman and Amos Tversky were surprised to note that their colleagues were routinely underestimating how long a project would take to complete. Not only that, but their colleagues were failing to learn from their mistakes; they would continue to miss deadlines even after missing deadlines on similar projects in the past. After much research, Kahneman and Tversky discovered that we all suffer from a cognitive bias which they coined the ‘planning fallacy’.
The planning fallacy is the tendency to underestimate the amount of time (or other resources) required to complete a future task, due partly to the reliance on overly optimistic performance scenarios.
In other words, our predictions on how long it will take us to reach our goals are likely to be far too optimistic. Even if we are aware of similar goals taking far longer or tasks we've done ourselves taking much longer, we will still underestimate the time it will take.
How does the planning fallacy work?
When we are subjected to the planning fallacy, our brain uses mental shortcuts. These shortcuts alter our usual rational thought process. Here are some of the ways the planning fallacy modifies our thinking:
- We discount past experiences because this is a "new" project, and therefore past experiences somehow don't count.
- We don’t consider distractions and challenges that might stop us from achieving our goals because we're too focused on planning the specific actions or tasks (the elements that we have more control over).
- We don’t try to estimate the number, or consequences, of small individual distractions because there are too many possibilities.
- We have a false sense of security that 'everything will be fine' because we meticulously planned our actions and tasks.
- We only look for evidence that suits our goals because we want to feel confident that we will reach them by a specific date and with less effort, leading us to ignore or dismiss clues that it might take longer.
- When we reflect on previous experiences, we remember all the things we did right and blame delays on external influences or even other people. We do not like to think that we are not in control, so we disregard these external factors.
What are the consequences of the planning fallacy?
The most significant consequence of the planning fallacy is that we do not give ourselves enough time to complete our goals and tasks. The planning fallacy lures us into a false sense of security, feeling like we have allowed plenty of time. We’re confident and relaxed initially, feeling like we have plenty of time, but we soon become stressed and discouraged as our timelines begin to derail.
We may even want to give up on our goals due to what we may believe is a lack of progress. When we become discouraged, our productivity and motivation dwindles, and we're more like to procrastinate, making it even harder to achieve our goals.
It is not just time required that the planning fallacy causes us to underestimate; it's also the same for budgets. If you've ever planned events or home improvements that have gone over budget it's likely that you fell victim to the planning fallacy. So the second consequence of the planning fallacy is blown budgets or worse - running out of money.
What are some examples of the planning fallacy?
There are many examples of the planning fallacy in action, from large government projects to our own individual experiences.
Take a look at HS2 for example, the first phase was due to be completed in 2026, but is now expected between 2029 and 2033. The current estimated cost is between £72bn and £98bn compared with an original budget of £55.7bn. It's no wonder the decision has been made to scale back the project.
Other large scale projects that have suffered at the hands of the planning fallacy include:
- The Sydney Opera House - initially budgeted at around $5 million - ended up costing nearly $70 million and was completed ten years late.
- The Channel Tunnel - initially budgeted at around £4.9 billion - ended up costing over £10 billion and was completed a year later than expected.
It's not just those planning large scale projects that fall prey to the planning fallacy. How often have you left your Christmas shopping until it's almost too late or rushed around to get your tax return filed on time? The reason we find ourselves in these predicaments time and time again is due to the planning fallacy.
You may have fallen prey to the planning fallacy when deciding:
- How much work you can get done today/this week
- How many social and family obligations you can keep up
- How much money you will need to budget
- How long it will take you to get somewhere
How can we avoid the planning fallacy?
We have seen that there can be dire consequences when we fall victim to the planning fallacy. All is not lost though - we can use the following techniques to stop the planning fallacy from ruining our 2023 goals. These techniques can also be used when planning your working week, 12 week year, or an upcoming project to help you stay on schedule and on budget.
Recognise
Recognise that everyone is susceptible to the planning fallacy - even you (sorry).
Be vigilant
Be vigilant to keep optimism, ego, and the "but it will be different this time" mentality from creeping into your plans. Refer back to the 'How does the planning fallacy work' section above and be mindful of when your brain might be using these mental shortcuts. Are you estimating how much time and effort you want it to take?
Compare
Think back and compare goals and tasks that had similar effort requirements, risks of distraction, or amount/complexity of work. Ask yourself how much time/effort did it really take? How many distractions were there? Were there any hidden costs? Did anything unexpected crop up?
Consider
Intentionally consider setbacks so you can plan realistic deadlines. A great way of doing this is to consider three different scenarios, giving each one a time estimate:
- Best-case scenario - We know that the planning fallacy makes us overly optimistic when estimating the time it will take to reach our goals or complete our tasks. It therefore makes sense that this estimate will be your initial estimate.
- Worst-case scenario - This is where you need to channel your inner pessimism. How long will it take if everything that could go wrong goes wrong?
- Most-likely scenario - This will be your estimate after carefully considering past goals and tasks. If you haven't been able to recall any similar scenarios then look at your best and worst-case scenarios and estimate from there (you'll likely end up somewhere in the middle, but remember the optimism bias - side on the edge of caution).
Imagine
Imagine you are six months past achieving your goal. Now imagine it went horribly wrong. Did you miss your goal? Did you achieve your goal but miss the deadline? How late were you in achieving it? Ask yourself what went wrong, what were the problems, mistakes or oversights? You can now review your goal and use these insights to overcome any optimism bias that may have occurred during your initial planning.
Reframe
The way we think and talk about time can affect our perception of it. Days are more immediate; we know exactly how one day feels. Conversely, we often misjudge how one year feels. How many times in your life have you found yourself saying 'I can't believe it's December already'. Reframing your deadline in terms of days can change the way you think about it. Six months may seem like a long time, but it's only 182 days. It can also be helpful to use time-motion words instead of ego-motion words. For example, instead of 'I've still got two weeks to hit this month's goal', try 'I've only got 14 days to hit this month's goal'.
Share
The planning fallacy only affects our own time estimates. That's to say it does not provide others with an overly optimistic view of how long it will take us to reach goals. Try sharing your goal with others and ask for feedback on how long they think it will take you to achieve it. You can use this feedback to review your plan and make any necessary changes.
Now that you're familiar with the planning fallacy, how realistic are your 2023 goals? What needs to change in your schedule, resources or routines to ensure you achieve your goals by the deadline you have set yourself? If you would like a helping hand to meet your business goals, or you wish to free up some time to focus on them, get in touch and find how we can support you.
