Decision & ChoiceBias #33

Planning Fallacy

We underestimate how long things will take.

The tendency to underestimate task completion times and costs, even when past experience shows similar tasks took longer.

Why it matters: Kahneman's classic example: a textbook team predicted 18 months for completion; similar teams took 7-10 years. He called it the planning fallacy.

Watch for

Planning based on best-case scenarios rather than past performance.

Try this

Use base rates: how long did similar tasks actually take?

Real-world example

Assuming a project will take two weeks when a similar one took four, because "this time will be different."

Key researchers

Daniel Kahneman, Amos Tversky

First described in 1979

Psychological mechanism

The "Inside View." When mapping out a project, individuals plan based on an idealized, step-by-step narrative of how the future will unfold under perfect conditions. They fail to look outward ("the Outside View") to consult historical distributional data regarding how long that exact type of task usually takes for other people.

Seminal research

Daniel Kahneman and Amos Tversky (1979), "Prospect Theory: An Analysis of Decision under Risk," published in Econometrica.