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The Brainy Business | Understanding the Psychology of Why People Buy | Behavioral Economics

Aug 21, 2020

Today, we are going to be digging in on a particular aspect of optimism bias called the planning fallacy. Essentially, we humans are pretty much doomed with underestimating how much something will cost or how long it will take, even if we have evidence showing otherwise. This is why projects like the Big Dig come in years late and billions of dollars over budget, or why you constantly have a to-do list more ambitious than can actually be completed. 

In today’s episode, Melina will spend a little bit of time telling you about how it works and what studies have found, as well as tips for overcoming this bias (and let me tell you, this is one of my personal biggest challenges so these are tips I can provide from experience!) 

Show Notes:

  • [00:53] Essentially, we humans are pretty much doomed with underestimating how much something will cost or how long it will take, even if we have evidence showing otherwise.
  • [03:02] I’m a big victim to planning fallacy. As an ambitious and optimistic person, I am confident I can do things quickly and perfectly each time, and I am prone to underestimate how long something will take me to complete.
  • [03:42] I’ve been able to identify this tendency in myself. Understanding planning fallacy helps me adapt and do better in practice than I would naturally.
  • [05:10] We fall victim again and again because success is so much easier to imagine the successful scenario than the failure.
  • [07:26] Melina shares about the Big Dig in Boston, Seattle viaduct project and Sydney Opera House. 
  • [08:57] It is important to know that planning fallacy is more than mere procrastination. Having deadlines doesn’t necessarily help either because people are expecting things will go smoother than they will and aren’t planning to fail.
  • [10:34] The focusing illusion shows us that as you look at or consider something, it feels like it is more important than it really is. Fundamental attribution error is about when you attribute external or internal motivation onto a situation incorrectly.
  • [12:22] You have that optimism bias saying you have learned from your past projects and this is really similar to the project you did for XYZ company so you can capitalize on some of that work so that internal dialogue and story of your own skill is played up.
  • [13:03] Your brain likes to think it is constantly getting better, so it feels good to predict you will be faster than before.
  • [13:49] When you don’t plan for those external pieces and factor them into your time budget, you are falling victim to planning fallacy.
  • [13:59] One helpful option is to have people determine their timing as if a coworker was taking on the project. If you were to consider the coworker you will have less of the intrinsic stuff and can see the external pieces a little more clearly. Especially if you choose a coworker who you think is slower than you.
  • [14:55] Ather brain trick to watch out for is bikeshedding, where your brain will look for smaller things to work on and make you think you need to do those in this exact moment and you can’t work on the thing you really should be working on until this other thing is complete.
  • [15:34] This may mean planning for breaks to give your brain a little bikeshedding treat to keep working.
  • [18:17] My advice: to plan your day’s commitments using the worst-case scenario.
  • [19:35] One of my suggestions to stay on task and keep my brain organized is using a Time Timer.
  • [20:09] I want to stress that your brain is going to tell you that you don’t need to do this. That you don’t need as much time as other people or that you won’t get distracted. That is the optimism bias and planning fallacy talking.
  • [20:54] Every task can be sorted by whether it is urgent or important and falls into one of four quadrants (check your freebie worksheet to try it out).
  • [22:08] Planning for distractions will help you keep to your projected timelines and overcome planning fallacy.
  • [24:23] Narrowing your goals and priorities to what matters and being present when you are doing those things has helped me to tackle the planning fallacy and I think it can for you too.
  • [25:32] Sorry to tell you this, but groups are worse at predicting how long things will take or how much something will cost.
  • [26:02] One way to get around this for groups is to have each person or department do their forecast on their own and then have someone add them all up behind the scenes instead of having a group discussion.
  • [27:06] The plan is only as good as the tracking.
  • [28:20] If you don’t include the external stuff in the calculation there is no tracking system or project management tool that can overcome planning fallacy.
  • [30:21] Another tip that studies have shown can help people overcome planning fallacy is to intentionally think about setbacks.
  • [31:45] When planning for how long something will take, we often look at the full elephant instead of all its components. When you don’t break a project into small enough subtasks, you are going to underestimate how long things will take.
  • [33:49] Unpacking the project into those minutia tasks will allow you to more properly see the full scope and allocate enough time to get it all done.
  • [34:36] Remember not to get down on yourself about planning fallacy. It is a natural human tendency that spans across gender, culture and personality type. Knowing how your brain may try to trick you and using the tips in this episode can help you be less likely to succumb to it in the future, which can make you happier, less stressed, and living up to your commitments more often.

Don’t Forget Your FREE Planning Fallacy Worksheet!

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