The Planning Fallacy is a cognitive bias that causes people to underestimate the time, costs, and risks associated with a future project, while overestimating the benefits. The planning fallacy is also known as the optimistic bias or rosy outlook.
There are several reasons why the planning fallacy occurs:
– People tend to base their estimates on best-case scenarios rather than average or worst-case scenarios.
– People are overconfident in their abilities and underestimate how long it will take to complete a task.
– People focus too narrowly on the task at hand and don’t consider all of the factors that could impact the project.
The planning fallacy can lead to problems when people make decisions based on their unrealistic estimates. For example, a company might underestimate the costs and time required to develop a new product, leading to delays and cost overruns.
The planning fallacy can be mitigated by using techniques such as risk management and contingency planning. It’s also important to encourage people to think about worst-case scenarios and to make their estimates public so that others can point out flaws in their thinking.