Cognitive biases & decision-making · law 073
Planning Fallacy
By Shivam Bhandari · Reviewed 31 October 2026 · How we write
what it means
People underestimate how long tasks will take and how much they will cost, even when they know past projects ran over.
How Planning Fallacy works
We plan for the best-case scenario and imagine everything going smoothly. We focus on the specific project and ignore what usually happens to projects like it.
The fix is ‘reference class forecasting’: look at how similar projects actually went and plan from that.
where it comes from
Proposed by Daniel Kahneman and Amos Tversky in 1979. Roger Buehler and colleagues confirmed it in 1994 with students predicting thesis completion times. The Sydney Opera House, planned in the 1950s for about A$7 million and finished in 1973 for over A$100 million, is a famous example.
Planning Fallacy examples in business
Store openings
A retailer plans a new outlet in two months; permits, fit-out, and hiring take five.
Software
A three-month app build stretches to nine months.
Budgets
Marketing budgets for launches are routinely exceeded.
How to apply it
- 1Look at how long similar past projects actually took.
- 2Add a buffer based on that history, not on hope.
- 3Break projects into small steps and estimate each.
- 4Track estimates against actuals to improve over time.
common misreading
It doesn't mean planning is useless — it means plans need realistic buffers.
ask yourself
How long did your last similar project actually take compared with the plan?
put it into practice
Frequently asked questions
What is Planning Fallacy?
People underestimate how long tasks will take and how much they will cost, even when they know past projects ran over. We plan for the best-case scenario and imagine everything going smoothly. We focus on the specific project and ignore what usually happens to projects like it.
Who came up with Planning Fallacy?
Proposed by Daniel Kahneman and Amos Tversky in 1979. Roger Buehler and colleagues confirmed it in 1994 with students predicting thesis completion times. The Sydney Opera House, planned in the 1950s for about A$7 million and finished in 1973 for over A$100 million, is a famous example.
How do you apply Planning Fallacy in business?
1. Look at how long similar past projects actually took. 2. Add a buffer based on that history, not on hope. 3. Break projects into small steps and estimate each. 4. Track estimates against actuals to improve over time.
What is a common misunderstanding of Planning Fallacy?
It doesn't mean planning is useless — it means plans need realistic buffers.