Planning Fallacy

The tendency to underestimate the time, cost, and risk of future actions while overestimating their benefits.

We plan based on best-case scenarios and our idealized vision, ignoring past experiences with similar tasks. Optimism and poor reference class forecasting both contribute.

• Home renovations consistently taking twice as long and costing twice as much as planned.
• Students consistently underestimating how long assignments will take.
• Software projects going over budget and past deadline almost universally.

• Use 'reference class forecasting': look at how long similar projects actually took.
• Add 50-100% buffer to your time and cost estimates.
• Break projects into small tasks and estimate each one separately.
• Track your estimates vs. actuals to calibrate over time.