WHAT IS PLANNING FALLACY AND WHY YOU TAKE ON TOO MUCH
Every morning, you compile a to-do list. How often does it happen that everything is checked off by the end of the day? Always? Every other day? Maybe once a week? If you are like most people, you will achieve this rare state once a month. In other words, you systematically take on too much. More than that: your plans are absurdly ambitious. Such a thing would be forgivable if you were a planning novice. But you’ve been compiling to-do lists for years, if not decades. Thus, you know your capabilities inside out and it’s unlikely that you overestimate them afresh every day. This is not facetiousness: in other areas, you learn from experience. So why is there no learning curve when it comes to making plans? Even though you realise that most of your previous endeavours were overly optimistic, you believe in all seriousness that, today, the same workload – or more – is eminently doable. Daniel Kahneman calls this the planning fallacy.
In their last semesters, students generally have to write theses. The Canadian psychologist Roger Buehler and his research team asked the following of their final-year class. The students had to specify two submission dates: the first was a ‘realistic’ deadline and the second was a ‘worst-case scenario’ date. The result? Only 30% of students made the realistic deadlines. On average, the students needed 50% more time than planned – and a full seven days more than their worst-case scenario date.
The planning fallacy is particularly evident when people work together – in business, science and politics. Groups overestimate duration and benefits and systematically underestimate costs and risks. The conch-shaped Sydney Opera House was planned in 1957: completion was due in 1963 at a cost of $7 million. It finally opened its doors in 1973 after $102 million had been pumped in – 14 times the original estimate!
So why are we not natural-born planners? The first reason: wishful thinking. We want to be successful and achieve everything we take on. Second, we focus too much on the project and overlook outside influences. Unexpected events too often scupper our plans. This is true for daily schedules, too: your daughter swallows a fish bone. Your car battery gives up the ghost. An offer for a house lands on your desk and must be discussed urgently. There goes the plan. If you planned things even more minutely, would that be a solution? No, step-by-step preparation amplifies the planning fallacy. It narrows your focus even more and thus distracts you even more from anticipating the unexpected.
So what can you do? Shift your focus from internal things, such as your own project, to external factors, like similar projects. Look at the base rate and consult the past. If other ventures of the same type lasted three years and devoured $5 million, this will probably apply to your project, too – no matter how carefully you plan. And, most importantly, shortly before decisions are made, perform a so-called ‘premortem’ session (literally, ‘before death’). The American psychologist Gary Klein recommends delivering this short speech to the assembled team: ‘Imagine it is a year from today. We have followed the plan to the letter. The result is a disaster. Take five or ten minutes to write about this disaster.’ The stories will show you how things might turn out.
The above article is from the book The Art of Thinking Clearly by Rolf Dobelli. The article is only for educational and informative purposes to explain and understand cognitive biases. It is a great book, definitely worth a read!