The inside view
When forecasting, people tend to focus on the specifics of the project and build a mental scenario of how it will proceed. This inside view neglects how often similar projects have been delayed. Buehler, Griffin, and Ross found that students' predictions of when they would complete academic work were overly optimistic, even when they had been asked for a highly conservative estimate.
Contributing factors
The error appears to have several sources. People attribute past delays to unusual circumstances, and they tend to be better at predicting others' completion times than their own.
- Planning for a best-case scenario
- Overlooking interruptions and unforeseen problems
- Motivation to finish soon
- Social or financial incentives to promise a quick delivery
Reducing the error
Reference class forecasting asks how long comparable projects have taken and starts the estimate from there. Breaking a task into components helps in some studies and not in others, and the result can depend on whether the items listed are relevant. Underestimation is not universal, as very short tasks are sometimes overestimated. Large public projects also suffer from strategic misrepresentation by interested parties, so cost overruns cannot be blamed entirely on a psychological bias.
Further reading
- Kahneman, D., & Tversky, A. (1979). Intuitive prediction: Biases and corrective procedures. TIMS Studies in Management Science, 12.
- 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).