The Planning Fallacy: How to Be Productive and Efficient

Do you underestimate the time it will take you to get to work in the morning? Have you ever raced to meet a deadline? Do you struggle to keep your monthly budget?

If your answer to any of these questions is “Yes,” then you know what’s it’s like to fall for the planning fallacy.

And you’re not alone. Research shows that we all tend to underestimate the time and resources needed to finish things.

The Planning Fallacy

A great illustration of this comes from a study in which students were asked to estimate when they would complete their personal academic projects.1 The results showed that less than half of them finished by the time they were 99 percent sure they would be done.

Even when they were asked to make “highly conservative forecasts,” predictions the students were pretty much certain they would fulfill, their estimates were still way too optimistic.

And the planning fallacy doesn’t just occur in individual tasks. It also affects group projects, which can magnify its consequences dramatically. Consider, for example, the following massive construction overruns:

  • The Denver International Airport opened sixteen months later than scheduled with a total cost of $4.8 billion—over $2 billion more than expected.2
  • The Eurofighter Typhoon, a joint defense project of several European countries, took six years longer and cost €8 billion more than initially planned.3
  • The Sydney Opera House, originally estimated to be finished in 1963 for $7 million, was completed ten years later for a grand total of $102 million.3

I know, crazy, right? Why are we so terrible at estimating the time and resources needed to finish projects?

A clue to the underlying problem comes from a study4 where the researchers found that asking people for their predictions based on realistic “best guess” scenarios, versus hoped-for “best case” scenarios, produced indistinguishable results.

It turns out that when we’re asked for a “best guess” scenario, we envision that everything will go exactly as planned. As a result, we end up with a vision that is exactly the same as our “best case.”

And since reality is full of unforeseen delays, this way of thinking creates a lot of problems, delays, and stress.

Go With Your Gut Data

A much more useful approach to planning is what researchers call “reference class forecasting”: predicting the future by looking at similar past situations and their outcomes. In other words, instead of guessing, you base your plans on available data.

  • When planning how much time you need to get ready in the morning, don’t imagine what tomorrow morning will be like. Consider how much time you usually need every morning and use that as your estimate.
  • When scheduling a project at work, don’t guess how long it will take you to complete. Find out how long this kind of project typically takes and plan accordingly.
  • When creating your monthly budget, don’t just write down what you would ideally like to spend. Look at what you’re typically spending each month and start from there.

Planning this way will give you an accurate understanding of the time and resources needed. That will make your plans realistic and useful. As a result, you’ll be remarkably productive and efficient.

This article is an excerpt from my book The Decision-Making Blueprint.

Footnotes

  1. It’s About Time: Optimistic Predictions in Work and Love
  2. Denver International Airport: Information on Selected Financial Issues
  3. The Hourglass Is Half Full or Half Empty: Temporal Framing and the Group Planning Fallacy
  4. People focus on optimistic scenarios and disregard pessimistic scenarios when predicting task completion times