1. Inside the Planning Fallacy The study of Buehler et al. (1994):Buehler et al. (1994): People often commit a planning fallacy where they are overly optimistic in predicting when they will finish a project. One such planning disaster has been the Sidney Opera House: original estimates in 1957 predicted that it would be completed early in 1963 for $7 million. A scale-downed version of the opera house opened 1973 at a cost of $102 million. © POSbase 2005Contributor

2. Buehler and his colleagues examined the planning fallacy in individual students. In their Experiment 1, they asked students towards the end of their year-long honors thesis project when they expected to submit their thesis. In addition, the students had to provide a worst-case prediction if “everything went as poorly as it possibly could”. Inside the Planning Fallacy © POSbase 2005

3. Inside the Planning Fallacy Although the predicted completion time correlated highly with actual completion time (r =.77), students showed an optimistic bias: Only 30% of the students finished their project by the time they predicted. On average, students took 55 days to complete their theses. This is 22 days longer than they had anticipated, and 7 days longer than the average prediction of the worst case. People are highly confident about their predictions (Buehler et al, 1995). © POSbase 2005

4. Inside the Planning Fallacy Why do people commit the planning fallacy? One reason is that they focus on the different steps they will take in the future to complete the task, but neglect their earlier experience (prior probability) with finishing, or not finishing, projects that early. The authors tested this prediction in their Experiment 3; they let their participants say aloud every thought or idea that came during predicting when they would finish their upcoming project. © POSbase 2005

5. Inside the Planning Fallacy An overwhelming majority (M = 74%) of the students’ thoughts were directed toward the future. Only 3% of the respondents thought about possible problems, only 7% of the thoughts were about past experiences, and only 1% of the thoughts were about past experiences others had with similar projects. Such a neglect of prior probabilities has also been observed in many studies on the representativeness heuristic. representativeness heuristic © POSbase 2005

6. Inside the Planning Fallacy Is there a way to eliminate the planning fallacy? Three ways have been tried:  Regarding distributional information (Griffin & Buehler, 1999; small effects);  Alternative scenarios (Newby-Clark et al., 2000; no effect);  Linking relevant past experience to specific plans for their upcoming task (Buehler et al, 1994, Experiment 4). Let us look at this study: © POSbase 2005

7. Inside the Planning Fallacy  The control group made just a prediction;  The recall group had to recall past experiences before the prediction;  The recall relevant group had in addition to recalling past experiences to answer two questions: (a) when they would finish the project if they do as far before the deadline as in past projects; (b) to write down a typical scenario based on past experience. © POSbase 2005 Three groups of participants made predictions about completion of a computer assignment.

8. Inside the Planning Fallacy ______________________________________________________ ControlRecallRecall Relevant ______________________________________________________ Predicted days 5.5 5.3 7.0 Actual days 6.8 6.3 7.0 Difference 1.8 2.0-0.1 %participants 29% 38%60% completed in predicted time ______________________________________________________ © POSbase 2005 The results showed that the planning fallacy was eliminated in the recall relevant group, but not in the two other groups.

9. Inside the Planning Fallacy © POSbase 2005 In sum, the planning fallacy is a very robust phenomenon, and it is not easy to reduce it. People are overly optimistic in predicting when they finish a project, and the only promising way to eliminate it is making people aware of the likelihood with which they finished similar tasks in the past and to connect this information with the plans for the future.