We systematically underestimate how much time and cost it will take to complete a task.
Almost anyone who has led a project knows from experience that deadlines are rarely met. Even so, when planning the next project, they calculate the most optimistic scenario all over again. The planning fallacy is the tendency to underestimate the time, cost, or risk of a future task, even while knowing about past cases that took much longer than expected.
In 1957, the Australian government estimated that building the Sydney Opera House would cost 7 million Australian dollars and take 4 years. The project was finished in 1973, cost 102 million Australian dollars (almost 15 times more) and took 14 years, 10 more than planned. The winning design from the competition didn't even specify how the roof would be built, that problem got solved along the way.
When planning, we tend to build an ideal scenario centered on the current plan (the "inside view"), ignoring the real distribution of outcomes from similar past projects (the "outside view"). We focus on what we want to happen, not on what historically tends to happen.
Source: Buehler, R., Griffin, D. & Ross, M. (1994). Exploring the "Planning Fallacy": Why People Underestimate Their Task Completion Times. Journal of Personality and Social Psychology, 67(3), 366-381.
Before approving a schedule or a budget, comparing it against similar projects already completed (the outside view) usually corrects the estimate better than asking the planning team to be "more careful".
Related concepts
