The term planning fallacy is closely related to something we have seen earlier – the Dunning–Kruger effect. If the latter is all about overestimating own abilities, the former is about underestimating the amount of time it takes to complete tasks. The story of the Sydney Opera House is a classic example. Located at the foreshores of Sydney Harbour, the iconic building is a venue for performing arts.
As per the initial planning in 1957, the cost was about 7 mln dollars and was expected to finish by 1963. Eventually, the building was completed 10 years later than the plan (1973), after spending about 102 mln dollars!
History is full of stories of such mega projects running late and over budget. Yet planners keep missing deadlines and have optimistic estimates of costs. Theoretical analyses propose people who focus on singular information (personal experience) and concentrate on how to complete their task are bound to make errors compared to those who study distributional information (others’ experience).
Three features are typical among people who commit the planning fallacy: 1) too much focus on forward prediction, 2) discounting of issues with personal performances and 3) failure to incorporate relevant knowledge or ‘base rates’ from other projects. Another two personal characteristics associated with poor planners are conditionality and anchoring. In the former case, the assessor focuses on normal operating conditions and ignores the possibility of adverse situations, e.g. war, depression or societal interventions. Anchoring happens when the person sticks to the best guess ignoring the extreme probabilities.
References
Sydney Opera House: Wiki
Buehler, R.; Griffin, D.; Ross, M., Exploring the “Planning Fallacy”: Why People Underestimate Their Task Completion Times, Journal of Personality and Social Psychology, 1994, 67(3), 366-381.
Kahneman, D.; Tversky, A., Intuitive Prediction: Biases and Corrective Procedures, TIMS Studies in Management Science, 1979, 12, 313-327.
