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The Planning Fallacy

Ramit Sethi

Eliezer Yudkowsky joins us from Overcoming Bias, an econblog devoted to human rationality and the cognitive psychology of mistakes. And if you think that’s interesting, you should see his day job.

The Sydney Opera House is among the most epic construction overruns of all time. Initially slated to be completed in 1963 for $7 million, it was finally completed in 1973 for $102 million. But don’t look down on them: Experiment shows that, deep in our hearts, we all have an inner home improvement contractor.

One study asked students when they thought they’d complete their academic projects. Specifically, the students were asked for times by which they thought it was 50%, 75%, and 99% probable they would’ve finished already.

Care to guess how many students finished on or before their estimated 50%, 75%, and 99% certain delivery dates? If so, better guess now, because I’m about to tell you:

  • 13% of the students finished their project by the time they had assigned a 50% probability;
  • 19% finished by the time assigned a 75% probability;
  • and only 45% (less than half!) finished by the time of their 99% probability.

This phenomenon is more generally known as the “planning fallacy”. Roughly, the planning fallacy is that people think they can plan.

A clue to the underlying problem was uncovered by researchers who found that asking subjects for their predictions based on realistic “best guess” scenarios, versus asking subjects for their hoped-for “best case” scenarios, produced indistinguishable results.

See, when you ask someone for a “realistic” scenario, they envision every event happening the way they think is normal – which usually means, just like I planned it. No unexpected delays, no unforeseen catastrophes – what people envision by default is the best-case scenario.

Reality, it turns out, usually delivers results somewhat worse than the “worst case”. When you ask people to envision everything that can possibly go wrong, their schedule gets a lot closer to reality – but still not close enough.

Unlike most cognitive biases, the planning fallacy has a simple remedy – though I’ll warn you, you’re not going to like it.

The same researchers asked another group of students to describe highly specific plans for their Christmas shopping – plans that described where, when, and how. Another group was simply asked when they expected to finish their Christmas shopping. The first group, with the detailed plans, expected to finish shopping more than a week before Christmas – the second group expected to finish an average of 4 days before Christmas – and in reality, both groups finished an average of 3 days before Christmas. That’s right: detailed planning made the students more optimistic.

Why? Another study, done in Japan, helps to illuminate the answer: A group of Japanese students expected to finish their essays, on average, 10 days before the deadline. They actually finished 1 day before deadline. Asked when they’d finished previous essays, they said: “One day before deadline.”

You see, you do have a reliable source of information about how well you’ll do. It’s how well you did last time. But the more details you visualize, the more chance you have to be optimistic – to visualize everything going exactly as planned – instead of remembering how long it took last time, when things didn’t go as planned.

A similar finding is that experienced outsiders, who don’t know all the details and all the special reasons why this project is bound to do unusually well, but who do have a lot of experience on projects in that area, tend to be a lot less optimistic and a lot more accurate than the actual planners and implementers.

The “inside view” is when you generate your predictions and time estimates by thinking about all the unique details of how it’s going to go this time – planning where, when, and how.

The “outside view” is when you deliberately avoid thinking about the special features of this project – deliberately avoid fine-tuning your estimate – and remember how long it took you to finish broadly similar projects in the past.

The inside view has its uses. There’s a certain amount to be said for, like, actually planning things ‘n stuff. But figuring out how long your project will really take, is not one of those uses. For schedule estimates, the outside view beats the inside view, hands down, every time.

So there’s a reliable way to fix the planning fallacy, if you’ve got the strength to stomach it. Just ask how long it took you the last few times, without considering any of the special reasons this project will be different. Better yet, ask an experienced outsider how long broadly similar projects have taken (and be sure not to tell them the details).

You’ll get back an answer that sounds hideously long, and clearly reflects no understanding of all sorts of important particulars. This answer is true. Deal with it.

This has been Eliezer Yudkowsky, Research Fellow of the Singularity Institute for Artificial Intelligence. Some say he may be the mad scientist who destroys the world, others say he may be the mad scientist who saves it, a few say he’s just plain mad – but not many people say he’s boring. He’s still blogging at Overcoming Bias; check it out!

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  1. avatar

    I imagine this is part of the reason, project managers experience conflict with developers and the actual “doers” when it comes to scheduled time frames and critical deadlines…

  2. avatar
    AJC @ 7million7years

    … and, as one of the “7 Wonders of the Modern World” the Sydney Opera House is probably worth billions today. Sometimes, you have to go with your gut …

  3. avatar
    Brant Sears

    The technical part of estimating can be done. It is hard but not impossible. The real problem is that if you want to build something really good like the Sydney Opera House, it is going to take serious time and resources. But if you estimated correctly to begin with, you wouldn’t have been given the go ahead to do the project which would be a shame because some things like the Sydney Opera House, the Washington Monument, or the Macintosh computer are worth building even if they take longer and cost more than you originally thought they should.

  4. avatar

    Iconic buildings such as the Sydney Opera House are priceless. Without that building I doubt Sydney would be what it is today.

  5. avatar
    Ashish Kulkarni

    You know, actually linking to the original article on Overcoming Bias or at least acknowledging that it is a very slight rewrite of an article published elsewhere would be more honest.

  6. avatar

    Oh wow, thanks Ashish for pointing this out. This kind of blogging is completely unacceptable. I thought the last two sentences were nice but they are just a copy/paste (as is the most of the post).
    Ramit, I used to like your blog a lot and I have learned a few things from it. I haven’t visited much for the last half a year though and two times I did visit, I got very disappointed. First was a few weeks ago when you had that guest blogger fiasco with IRA article. Second time is today reading through this post. I am not planning on coming back again. Good luck with everything.

  7. avatar

    The original article was linked – it’s in the third paragraph.

  8. avatar

    This fallacy has an interesting implication for product marketing:
    Avoid promising customers products by a certain date, because you’ll probably be late (because we’re all poor planners)

    Take the delayed launch of Vista. Lots of people mocked Microsoft because they missed their deadline by… lots.

    Whereas Apple’s system is generally (not always) kind of ‘promise nothing’. They just have a big conference where Job’s is like, ‘Yo, check out this crazy thing, bet you didn’t see that coming.’ And this approach works because we didn’t have any expectations raised by (fallacy filled) estimates.

  9. avatar
    The Planning Fallacy < Monotasker

    […] The Planning Fallacy [I Will Teach You To Be Rich] Post a comment | Trackback URI […]

  10. avatar
    Sudeep D'Souza

    Most times estimates go wrong due to inherrent risks in every project. If one can manage the project by managing the risks in the project and keeping it in control I think most tasks can be accomplished within a reasonable estimate.

    I have written more on this on my blog

  11. avatar

    Like Sudeep said, manage the risks. Gather as much historical data that one can for a similar project within your own organization and external ones if possible. FMEAs can provide visibility into which risk factors are most costly should the risk become reality, and a team can plan contingencies for these.

    Something else to consider when scheduling: time is lost when an output doesn’t meet a customer’s requirement, and an iteration must occur. When customers can become part of the design process early, iterations are rapid during the design cycle and the resulting output is quality.

  12. avatar
    Ramit Sethi

    Um, Ashish and Dima, you know that Eliezer himself submitted this article to me as a guest post, right?

  13. avatar
    Study Hacks » Blog Archive » 5 Articles That Will Change The Way You Think About Personal Productivity

    […] #3. The Planning Fallacy […]

  14. avatar
    Some summer reading

    […] The Planning Fallacy […]

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  16. avatar

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