“I will be there in 10 minutes,” you say. One hour later, you are nowhere in sight.
Have you expected to finish a task quickly but it took you much longer? It happens quite often. The time you need to complete a job turns out higher than you anticipated.
In this article, we will cover:
- What the planning fallacy is
- Real-life examples and how it affects you
- Tips to make the right estimates
Here is my story of bad estimation. When I started this blog, I expected to have a specific number of users by the end of 3 months. “I will achieve the goal with ease,” I told myself with my chest flared and fists pumped.
It took me close to a year to meet the target. I came across some unforeseen scenarios which caused a minor delay. But, the true reason was, I was simply too optimistic.
Today, when I look back at my targets, I realize how unrealistic they were.
What is the planning fallacy?
The planning fallacy is the tendency to overestimate our skills and underestimate the time required to complete a task. It is of the many cognitive biases of the human brain which affects all kinds of tasks, big and small. You make wrong estimates with simple tasks like sending an email and larger projects like setting up a new business.
Reasons for the fallacy:
Though different factors can influence the problem, the effect stems from 3 reasons:
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 lesser time to complete the job than you actually do. Such an effect is also called the optimism bias.
2. Considering the best case alone:
Here is a visual which explains how the plan and reality differ.
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.
Research and experiments conducted:
The planning fallacy was first proposed by the Nobel prize winning psychologists, Daniel Kahneman and Amos Tversky.
Empirical evidence from the tests in 1994 further proved their theory. The experiments in social psychology involved asking 37 students to estimate the time they would require to complete their thesis. On average, students mentioned they need 34 days to get the job done.
If everything went smoothly, students believed they could complete the thesis in 27 days on average. If things went bad, the students anticipated needing about 48 days. How accurate do you think the estimates were?
On average, students took 55 days to complete the job. That figure was beyond their worst-case estimate. Only 30% of them managed to meet their own timelines.
Real life examples of planning fallacy:
You might assume that students made a poor guess because of their lack of experience. But planning fallacy applies to experts and novices alike. Here are 2 major examples of the planning fallacy bias in project management:
1. The Sydney Opera House:
When it comes to the most beautiful buildings in the world, the Sydney Opera House deserves a mention. Such a marvelous structure must have involved some of the best architects, top managers, and meticulous planners. So they must have anticipated every detail to the dot, right?
The first estimate to complete the building was 4 years, with a cost of $7 million AUS. Do you know how far off that estimate was? Take a wild guess, just for fun.
It took 18 years and $107 million AUS to finish the project. It took more than 4 times the time and 15 times the cost estimate. Phew, speak about optimistic planning.
2. The Boston Big Dig:
The Boston Big Dig runs through the heart of the city, Boston, as the chief highway. The planning of this mega project underwent the same planning fallacy as the Sydney Opera house.
In 1991, experts estimated the project to complete in 1998 with a cost of 2.8 billion dollars. The construction came to an end 8 years behind schedule with a cost of 15 billion dollars. Counting the interest on the debt, the final tally totaled up to roughly 22 billion dollars.
The project encountered many unforeseen problems such as weak soil, hazardous material, archeological discoveries, and more. But the failure to make room for uncertainties cost them 10 times their estimate.
3. Other examples:
You can find many other similar cases where estimations went awfully wrong.
- The estimated cost for the Concorde supersonic plane was $95 million. The final cost – 1150 million.
- The plan for the Scottish Parliament building in Edinburgh anticipated a cost of 40 million pounds. The actual total cost – 431 million pounds.
- Other projects like the Denver International Airport, Copenhagen Metro, Channel Tunnel have also gone off the mark by over 100 percent.
The book Freakonomics also provides more examples and perspectives on the planning fallacy.
But you must know about another possible angle. Getting approval on an expensive goal can be a challenge. Making a low first estimate is a finance tactic to get a sign-off. Once the work has begun, convincing the decision-makers to pool in more money to complete the job is more manageable.
Due to the sunk cost fallacy, dropping the project and wasting all the effort already put in hurts. As a result, more time and money is spent to finish the project, no matter how astronomically high the additional cost is.
Whether such techniques influenced the delay behind any of the above examples is unknown.
How the planning fallacy affects you in life:
You might have had a hearty laugh at the stupidity of the expert planners. You believe you would never make such mistakes. Hold on to that thought. You make similar mistakes in your day to day life.
Most of us may not have the responsibility of executing a project worth tens of millions of dollars. Our mistakes may not have severe consequences, but the magnitude of our planning fallacy errors is no different.
1. Time taken to reach a place or get ready
One of the most common lies you utter in daily life is the time taken to finish some of your daily activities. Men lie about how soon they will reach the destination, and women lie about the time they need to get ready.
“I will be there in 30 minutes” or “I need 30 minutes to get ready”, you say. But how often do you stick to your words? I doubt if you’ll want to admit the number of times you have faltered.
2. I need 5 minutes
Yet another blatant lie we say every day is, “Give me 5 minutes”. Such incorrect estimations happen when the task is simple, and you’re already on it. For example:
- The time required to finish an ongoing phone call
- The time required to finish setting the food on the table
- The time required to finish the email you’re typing
Such tasks have a high margin of error. The phone call you expected to finish in 5 minutes goes up to 30 minutes at times.
3. Your daily to-do list
You have a long to-do list which you plan to shorten each day. Your pull up your socks each morning intending to make the day productive.
When you start the day, you feel like taking it easy for 20 minutes. By evening, you have wasted time on social media, phone calls, reading the news, answering meaningless text messages, and so on.
Most people overestimate what they can do in a day and underestimate what they can do in a yearBill Gates
4. New year resolutions
The plans at the end of each year are the most significant proof of unrealistic optimism and poor planning. If I had a dollar for every missed new year resolution for losing weight, quitting smoking, eating healthy and saving money, I would be sleeping over a pile of billion dollars by now.
People believe they can introduce a drastic change at the start of the year. After a few days, the effort required to pull off the goal seems so overwhelming that most of them quit before they even get started.
5. Long term goals
Most people have a habit of setting a generic goal without enough details.
- I want to start my own business
- I want to grow rich and famous
- I want to achieve career growth
Such vague goals lack details. When your goal isn’t broken down into more straightforward tasks and plans, you will have a hard time achieving it. The more generic your goal is, the harder it is to make a realistic estimate.
Your dreams can be unrealistic but if your plan to get there isn’t realistic, you will never make it.
The factors which cause the incorrect estimation:
1. The details of the plan:
The less detailed the plan, the higher the chances of a mess up. During our venture, the timeline of 3 months was a guesstimate. I had not spent enough time breaking down the job into phases or setting milestones with deadlines.
Even with a plan, delays can still occur. But the more you pull a timeline out of thin air, the more off the mark your estimate will be.
2. The time required to finish the job:
The longer you need to complete a task, the higher the chances of unexpected scenarios.
Writing an email will take you 10 minutes. Even if you make a poor judgment of the time required, you might need an extra 20 minutes. You can have only a few unexpected things happen in that short duration.
In comparison, a project which needs 6 months to complete can run into all sorts of trouble. People might leave, the market might collapse, an emergency might pop up, your supplier might back out and whatnot.
If you consider the percentage of time wasted, both small tasks and bigger projects end up with equivalent values. But the consequences of delay in a massive project are much higher. The impact of taking 6 years to complete a building instead of 3, is far more significant than taking 20 extra minutes to draft an email.
Interestingly, your belief in the timeline follows a trend as shown below.
When you begin, you are full of confidence. Your spirits can even rise further initially. After spending some time on the task, you realize the actual duration necessary.
As you get deeper into the task, you can no longer lie to yourself. As a result, you inch closer to the actual timeline.
How to overcome the planning fallacy:
Even with careful planning, you cannot foresee every single obstacle that might pop up. Your best approach is to minimize the gap between your estimate and reality.
Here are a few ways to combat the problem:
1. Use a reference point
The best way to combat the planning fallacy is to use a good reference point before making an estimate.
If you want to start a business, you should not randomly say, “I will begin in 6 months.” Identify an appropriate comparison to the task or project you’re aiming for.
If you plan to open a restaurant, find out another business that is similar to your idea in terms of size, location, and other relevant factors. Gather as much data as possible to get an idea of the cost and time.
You can talk to other restaurant owners, research on the internet, and look for possible pitfalls. As much as possible use numbers and past data to come up with a benchmark.
Starting from the baseline, tweak the plan to suit your needs and circumstances. For example, if you’re planning to have a luxury seating arrangement, account for the additional cost and time for supply. Identify all such differences from the benchmark estimate and come up with a final figure.
2. Make a step by step plan
When you start working on a detailed plan, you realize some of the problems well in advance. The deeper you go, the closer your estimate will be to reality.
That said, going down to the extreme details is not always feasible or fruitful. At some point, you have to get off the planning table and get the work done.
3. Break significant projects into smaller tasks
As much as possible, break bigger goals into smaller tasks. Anticipating the time required for a smaller task is far simpler than predicting the work involved for a massive project.
For example, guessing the time required to make 10,000$ is more straightforward than setting a timeline to become a billionaire. If you have a goal you believe requires 2 years to accomplish, break it down to simpler chunks. Rinse and repeat until you have tasks for the current week.
Smaller tasks help you set milestones and measure progress. When you miss some or achieve some faster, you can make the necessary adjustments to reach your final goal.
4. Allow buffer for unexpected problems
No matter how detailed your plan is, you can never predict every single scenario that might pop up. The world around you is a complicated place full of random events. Someone might knock at your door, the market can crash, a natural calamity can occur, your motivation might falter, and so on.
Keep some room to accommodate such unexpected problems even if you don’t know what they are. If the task involves a cost, account for the additional budget too.
I wish I could tell you a benchmark buffer figure like 15%. Unfortunately, every task and situation has a variety of influencing factors, making one fit for all number impossible.
5. Reverse the outcome
Assume that your estimate went wrong and identify reasons. Such a method is called inversion.
For example, if you plan to save 10,000$ in 3 months, take a step into the future and imagine it took you over 6 months to save that money.
Now, ask yourself what the reasons for the plan to go wrong were. You might come up with answers like:
- Buying unnecessary things
- Emergency expense
- Job lost
Make a reasonable plan to handle all the reasons you can think of.
Making an optimistic plan is ingrained with us. Do not try to break your head to have every corner covered.
Spend enough time to make a plan which avoids horrendous errors. At the same time do not dive into the level where you expect perfection in every little aspect. Planning too much is a form of procrastination in itself. Draw a line somewhere and strike a balance.
Successful execution involves a good plan, disciplined execution, and the required improvisation.
What I am not:
What I am:
Continuously improving self-learner
Productivity/Time Management Obsessed