Planning fallacy
Plans are built on the best case, so projects run late and over budget with striking regularity.
What it means
The planning fallacy is the tendency to underestimate the time, costs, and risks of future actions while overestimating their benefits, even when one knows that similar past efforts ran over. It arises from an 'inside view' that builds a forecast from the specifics of the current plan — imagining a smooth, obstacle-free path — while ignoring the distribution of outcomes from comparable projects. Because the inside view neglects the many unforeseeable ways a plan can slip, optimism compounds with each unaccounted contingency. The documented remedy is the 'outside view' or reference-class forecasting, which bases estimates on how a class of similar projects actually turned out rather than on the felt plausibility of this one. The fallacy persists even among experts and even after repeated experience of overrunning, which is part of what makes it so consequential. It matters because it systematically biases budgets, deadlines, and public-infrastructure costs, and because the correction is cheap once the right reference class is consulted.
Examples
A kitchen renovation budgeted for six weeks and $20k routinely runs to ten weeks and $30k — and the homeowner is genuinely surprised each time.
A team promises a two-week feature and ships in seven, having pictured a clean run of coding with no design rework, no flaky tests, and nobody off sick.
The Sydney Opera House was forecast to take about four years and opened after fourteen — each estimate came from the current plan, not from how such projects usually go.
First described in Kahneman & Tversky (1979); reference-class forecasting, Flyvbjerg.