I am a huge “fan” of the work of psychologist and winner of the 2002 Nobel in economic science Daniel Kahneman and his book Thinking, Fast and Slow is arguably one of the most valuable books I have ever read. And for those that think 499 pages of psychology is a little bit too much, there is Michael Lewis’ book The Undoing Project: A Friendship That Changed Our Minds which is the story of how two Israeli psychologists Kahneman and friend Amos Tversky working together can up with this comprehensive look at the decision-making process in humans like us.
I was googling around this morning looking for something by Kahneman on the assumptions we make about expertise and I ran across this quote in Jim Holt’s New York Times Book Review of Thinking Fast and Slow…
Some cognitive biases, of course, are flagrantly exhibited even in the most natural of settings. Take what Kahneman calls the “planning fallacy”: our tendency to overestimate benefits and underestimate costs, and hence foolishly to take on risky projects. In 2002, Americans remodeling their kitchens, for example, expected the job to cost $18,658 on average, but they ended up paying $38,769.
The planning fallacy is “only one of the manifestations of a pervasive optimistic bias,” Kahneman writes, which “may well be the most significant of the cognitive biases.” Now, in one sense, a bias toward optimism is obviously bad, since it generates false beliefs — like the belief that we are in control, and not the playthings of luck.[…]
What the planning fallacy relates to our tendency to systematically underestimate the time & resources required to complete projects or as Daniel Kahneman: has said:
“The planning fallacy is that you make a plan, which is usually a best-case scenario. Then you assume that the outcome will follow your plan, even when you should know better.”
As builders and remodelers, I think we all know that nothing ever goes as planned but what do we do to take this into account and correctly plan for uncertainty?