What Is the Planning Fallacy? | Definition & Examples

The planning fallacy occurs when we underestimate how long it will take us to complete a future task. Despite knowing that similar tasks have generally taken longer than planned, we hold overly optimistic expectations and believe that next time will be different. Because we make unrealistic plans, we often end up running out of time, money, or energy.

The planning fallacy can impact any type of task and lead to several issues, including missed deadlines, increased costs, and frustration for both individuals and organizations.

What is the planning fallacy?

The planning fallacy refers to a phenomenon in which people underestimate the amount of time needed to complete a project or task because they are too optimistic about how things will unfold. The planning fallacy occurs due to two main errors: overestimating positive outcomes and underestimating time, costs, or risks of future actions.

Despite being aware that our past predictions were too optimistic, we often insist that our current predictions are realistic, and we don’t adequately anticipate the possible setbacks that can arise. In other words, when it comes to planning, we tend to repeat our mistakes.

The planning fallacy applies to both small and big tasks, as well as individual and group projects. It also generalizes across personality traits and cultures. For example, even though conscientious people tend to manage their time better than procrastinators, both groups typically underestimate how long it will take them to get things done.

It is important to note that actor-observer differences, similar to the actor-observer bias, are at play when it comes to estimating time: people will generally anticipate that they will finish their own tasks earlier than they actually do, while they are more realistic and accurate when it comes to the tasks of others.

Why does the planning fallacy occur?

The planning fallacy occurs due to a combination of different factors, including:

• Optimism bias. People tend to overestimate the likelihood of positive events and underestimate the likelihood of negative events. When we start a project, we are more likely to think that things will go well because this helps us to stay motivated.
• Self-serving bias. When we think about our past failures to complete a task or project as planned, we are more likely to blame our shortcomings on external circumstances rather than personal factors (i.e., we focus on reasons that had nothing to do with us). The opposite happens when we recall our successes: we tend to believe that we are solely responsible. Because of this, we tend to focus on our successes and downplay or ignore our failures when estimating how long future tasks will take.
• Taking the “inside view.” When we are planning, we tend to focus on the fine details of the specific project (the inside view), rather than the big picture (the outside view). For example, when preparing to write a research paper, we will start listing all the subtasks that need to be accomplished (e.g., the sources we will use, the people we need to contact). Since this paper is different from others we have written before, we may not see the previous assignment as being relevant. However, our failures to meet our deadlines in the past come from more general factors, like falling ill or scheduling difficulties with our interviewees. If we recognized this, we would be able to preempt some of these obstacles in the future.
• Social pressure. Individuals may feel pressured to provide overly optimistic estimates due to a desire to impress others, meet expectations, or avoid appearing incompetent. This is especially true in fast-paced, competitive work environments where showing enthusiasm is prized over being critical. Organizations often strive to project a positive image externally, creating a culture of unrealistic optimism that leads to missed deadlines and budget overruns.

Planning fallacy example

Large scale projects often overrun their projected costs and timelines due to the planning fallacy.

How to avoid the planning fallacy

Overcoming the planning fallacy is not easy. However, we can try to mitigate its effect in the following ways:

• Take the “outside view.” Instead of getting absorbed into the details of the task at hand, we should consider how similar projects fared in the past. Data from comparable projects can serve as a base rate that you can use to make a more realistic plan. For example, you can pinpoint patterns of delays and challenges and adjust your estimates accordingly.
• Ask for objective third-party feedback. When we are deeply engaged in a project it might be difficult to take a critical standpoint. For this reason, we need to seek input from individuals unrelated to the project. They can help us identify potential pitfalls that might have been overlooked or check how realistic our plans are.
• Create contingency plans. Instead of assuming everything will go smoothly, identify various scenarios that could arise and develop strategies to address them if they occur. By factoring in potential obstacles and delays, you increase the likelihood of staying on track.

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Frequently asked questions about the planning fallacy

What is a real-life example of the planning fallacy?

A real-life example of the planning fallacy is the construction of the Sydney Opera House in Australia. When construction began in the late 1950s, it was initially estimated that it would be completed in four years at a cost of around $7 million.

Because the government wanted the construction to start before political opposition would stop it and while public opinion was still favorable, a number of design issues had not been carefully studied in advance. Due to this, several problems appeared immediately after the project commenced.

The construction process eventually stretched over 14 years, with the Opera House being completed in 1973 at a cost of over $100 million, significantly exceeding the initial estimates.

Is the planning fallacy the same as procrastination?

The planning fallacy and procrastination are not the same thing. Although they both relate to time and task management, they describe different challenges:

• The planning fallacy describes our inability to correctly estimate how long a future task will take, mainly due to optimism bias and a strong focus on the best-case scenario.
• Procrastination refers to postponing a task, usually by focusing on less urgent or more enjoyable activities. This is due to psychological reasons, like fear of failure.

In other words, the planning fallacy refers to inaccurate predictions about the time we need to finish a task, while procrastination is a deliberate delay due to psychological factors.