First proposed in 1979, the Planning Fallacy says, in essence, that we underestimate how much time and cost will be required to complete a task when we're the ones performing that task, and we overestimate both metrics when someone else is performing it.
We demonstrate a bias toward optimism when we're writing a paper or building a house, in other words, but if we were asked to estimate how long that paper would take someone else to write, we'd be more likely to overestimate: to bias our assumptions toward pessimism.
These under- and over-assumptions are also often applied to perceived risks associated with various undertakings: so if we're betting on a stock, we'll tend to underestimate the risk, but if someone else is betting on that same stock, we'll tend to overestimate how risky that investment might turn out to be.
Interestingly, this fallacy seems to apply even if we're experienced with the task in question.
Even if we've written a bunch of other, similar papers, or built gobs of other, similar houses, we'll still tend to err toward the optimistic in our assumptions about time, cost, and risk when we're the ones performing the task or making the investment or taking the risk, and we'll still tend to lean toward the pessimistic when it's someone else doing the same.
There are several explanations for why this fallacy might be so pervasive, ranging from broad-based wishful thinking, to a sort of self-serving bias—we overestimate our own capabilities in order to feel good about ourselves, and underestimate the capabilities of others to feel good about ourselves in comparison—to an issue with our capacity to think non-linearly that keeps us from accurately scaling up or down to account for variables that arise mid-paper-writing or mid-house-construction.
It's also possible that project-related variables influence our perception of such things because we may need a project to be finished within a certain amount of time.
The client wants us to build this thing in this many months, so we tell them, yes, we can do that. Our professor wants us to write this paper by next Monday, so we tell ourselves, okay, yes, this is possible. We've got this. And we do so even if those goals aren't particularly practical based on the reality of the task.
A small collection of research and analysis conducted in and around 2015 supports the existence of both polarized fallacies, and indicates that our best bet, in most cases, is not to assume that we can overcome these fallacies ourselves—we'll tend to succumb to them even while attempting to dodge them—and implementing systems and introducing tools into spaces in which this fallacy can be especially pervasive and harmful (construction, for instance) is typically the best way to correct for over- or under-estimations.
That includes work done at the planning stage, so the premises upon which projects or ideas are predicated are not themselves steeped in assumptions that are flawed at their foundation.
Enjoying Brain Lenses? You might also enjoy my news analysis podcast, Let’s Know Things and my daily news summary, One Sentence News.
The Brain Lenses podcast is available at brainlenses.com or wherever you get your podcasts.