Podcast Summary
Projects face unexpected challenges leading to delays and increased costs: Acknowledge potential challenges, establish realistic timelines, and be open to adjusting plans to improve project management
Projects, especially large-scale ones, often face unexpected challenges that can lead to significant delays and increased costs. The Second Avenue Subway in New York City serves as a famous example, with the project being shelved multiple times due to financial crises and poor rock quality, resulting in a 40-year delay. Psychologist Roger Bueller's research suggests that humans have an overconfidence bias, leading us to underestimate the time and resources required to complete projects. To improve project management, it's essential to acknowledge potential challenges, establish realistic timelines, and be open to adjusting plans as needed.
Underestimating Project Completion Time is a Common Phenomenon: People tend to underestimate project completion times due to an inside approach to thinking, idealized mental simulations, and optimism bias, leading to significant overestimation of completion times in various domains.
The planning fallacy is a common phenomenon where people underestimate the time it will take to complete a project despite knowing that similar projects have taken longer in the past. This optimistic prediction is due to an inside approach to thinking that focuses on the unique case at hand, creating idealized mental simulations, and ignoring alternative scenarios. Additionally, people's wishes and desires to succeed contribute to the planning fallacy, known as the optimism bias. Research shows that this bias exists in various domains, from academic projects to everyday activities, leading to significant overestimation of completion times. Understanding and addressing the planning fallacy can help individuals and organizations plan more effectively for the future.
The Complex Nature of Optimism Bias: The optimism bias, rooted in neuroscience, reduces stress and anxiety but can lead to underestimating risks and not taking necessary precautions, adapting to different environments as an evolutionary insurance policy against hopelessness and depression, and playing a role in human progress.
The optimism bias, our natural tendency to expect positive outcomes, is a complex phenomenon with both benefits and drawbacks. It's rooted in neuroscience and drives us forward, improving physical and mental health by reducing stress and anxiety. However, it can also lead us to underestimate risks and not take necessary precautions. Research shows that the optimism bias is flexible and can adapt to different environments, making it an evolutionary insurance policy against hopelessness and depression, yet also playing a role in human progress. The optimism bias, while not a design flaw, is a nuanced trait that requires awareness and consideration.
Understanding the Planning Fallacy in French Cuisine Projects: The planning fallacy, caused by overconfidence and coordination neglect, can lead to project delays and cost overruns in French cuisine projects due to increased team size and procrastination.
While French cuisine may be delightful, it's essential to understand and address the planning fallacy to ensure projects are completed on time and on budget. The planning fallacy, a phenomenon studied extensively by Katherine Milkman, stems from individual biases like overconfidence and coordination neglect, especially in group projects. Overconfidence arises from societal rewards for self-assuredness, while coordination neglect overlooks the challenges of integrating work done by multiple team members. From an economic standpoint, the larger the team, the greater the potential for the planning fallacy due to increased coordination complexities. Moreover, procrastination, rooted in impulse control, can exacerbate the planning fallacy by delaying project starts and, ultimately, completion.
The digital age brings distractions and productivity losses: Co-founder of Asana, Justin Rosenstein, shares his experience of managing workflows and administrative tasks in the digital age, leading to the creation of Asana for effective project management solutions.
The digital age has brought an overwhelming amount of communication and distractions, leading to productivity losses and information overload. Justin Rosenstein, co-founder of Asana, shared his personal experience of this issue while working at Google and Facebook. Despite his initial expectations of working with world-class engineers and innovating, he found himself spending most of his time on administrative tasks and managing workflows. Unsatisfied with existing solutions, he started building a tool for himself to manage team projects within Google, which later grew virally. This experience led him to Facebook, where he faced similar challenges and eventually developed an internal tool to manage workflow, which later became Asana. The success of these tools highlights the need for effective project management solutions in today's digital work environment.
The Complex Relationship Between Technology and Distraction: Technology can contribute to distractions, but the solution isn't to abandon it. Instead, acknowledge the issue and design solutions that combat distractions while minimizing their own impact.
Creating technology solutions, especially those aimed at increasing productivity, can come with unintended consequences. Dustin Moskovitz and Justin Rosenstein, co-founders of Asana, discovered this firsthand when they developed a productivity tool at Facebook, which is still in use today. Despite leaving Facebook to start Asana due to the belief that it was a significant opportunity, they initially estimated it would take a year to launch the first version of the product, but it took three years instead. They attribute this to the constant distractions of the digital age, which their software was designed to combat. However, they acknowledge that technology itself can contribute to these distractions. Despite the challenges and unintended consequences, Moskovitz and Rosenstein believe the solution is not to abandon technology but to acknowledge its unintended consequences and design through them. Asana is now a successful productivity software company, but the founders remain aware of the complex relationship between technology and distraction.
Learning from past experiences for effective planning: To mitigate the planning fallacy, organizations can use historical data from similar projects to adjust estimates and improve planning processes, reducing costly errors.
Effective planning involves learning from past experiences rather than focusing solely on the unique aspects of current projects. This concept, known as the planning fallacy, was identified by psychologists Danny Kahneman and Amos Tversky. To mitigate this fallacy, they proposed reference class forecasting, which advises looking at historical data from similar projects to adjust estimates. While this approach may not be consistently practiced, it is increasingly being adopted by companies and governments. Tracking performance and comparing planned versus actual outcomes is a fundamental first step in overcoming the planning fallacy. Meteorologists, for instance, have shown significant improvement in their predictions through this method. Ben Fupia, a professor at Oxford University, has researched infrastructure mega-projects and found that many go awry due to the planning fallacy. By acknowledging this issue and using historical data, organizations can improve their planning processes and reduce costly errors.
Mega projects face significant cost overruns and schedule delays: Nobel Prize-winning economist endorses strategic misrepresentation of project costs and benefits, but governments and organizations adopt empirical data to combat this issue, raising concerns about contractor incentives
Mega projects often face significant cost overruns and schedule delays, with up to 90% of projects experiencing these issues. And the reasons for this trend are complex. Some planners intentionally misrepresent project costs and benefits to increase their chances of getting funded. This strategy, known as strategic misrepresentation, is even endorsed by Nobel Prize-winning economist, Daniel Kahneman. To combat this issue, some governments and organizations have adopted a mandatory methodology that accounts for historical underestimation of budgets and schedules for similar projects. By using empirical data, they can more accurately estimate costs and adjust budgets accordingly. However, this approach also raises concerns about perverse incentives for contractors, who may not be motivated to work efficiently if they know the project budget and schedule are expected to be exceeded.
The planning fallacy: Underestimating project time and cost: Despite using methods like incentives, optimism bias pricing, and reference class forecasting, the planning fallacy persists. A more radical solution is using algorithms and data, but implementation can be challenging. A combination of human judgment and data analysis may be the most effective approach.
The planning fallacy, or underestimating the time and cost required to complete a project, is a common issue that can lead to significant problems. To combat this, some methods have been suggested, such as incentivizing contractors, pricing in optimism bias, and using reference class forecasting. However, these methods may not be foolproof, and there is ongoing debate about their effectiveness. A more radical solution proposed is the use of algorithms and data to make forecasts, as seen in successful companies like Amazon. However, implementing this solution can be challenging due to the difficulty of identifying similar projects and gathering necessary data. Ultimately, it seems that a combination of human judgment and data analysis may be the most effective approach to tackling the planning fallacy. As Roger Bueller, a researcher on the topic, noted, despite his personal experiences and years of study, he still struggles with the planning fallacy himself. Therefore, it is an ongoing challenge that requires continuous attention and effort.
Overly optimistic plans for infrastructure projects lead to cost overruns and delays: Elected officials initiate large infrastructure projects with aggressive schedules and optimistic budgets, but unexpected developments and deception can lead to significant cost overruns and delays, making it unlikely for the entire project to be completed by the initiator, and the next leader may face unexpected costs to finish it.
Overly optimistic plans and deadlines for large infrastructure projects, like the Second Avenue Subway in New York City, often lead to significant cost overruns and delays. This is due in part to unexpected developments, but also deliberate deception by elected officials who start these projects with aggressive schedules and optimistic budgets to show constituents progress. As a result, it's unlikely that the entire project will be completed by those who initiate it, and the next leader may face unexpected costs to finish it. Despite this, the second phase of the Second Avenue Subway line is currently under construction and is projected to open between 2027 and 2029, but it remains to be seen if it will be completed on time and budget.
How to be open to change in deeply held beliefs: By the age of 35, there's a 95% chance that if you don't eat sushi, you never will. Changing deeply held beliefs is difficult, but staying open to new ideas can increase the chances of being receptive to change.
Changing our minds on deeply held beliefs can be incredibly difficult. According to a forthcoming episode of Freakonomics Radio, by the age of 35, there's a 95% chance that if you're not eating sushi, you never will. This stubbornness can even apply to significant matters, like political or moral beliefs. So, how can we give ourselves a better chance of being open to change? Stay tuned to the next episode of Freakonomics Radio for more insights on this topic. Freakonomics Radio is a podcast produced by Stitcher and Dubner Productions. It is hosted by Stephen J. Dubner and Steven D. Levitt and covers various topics related to economics and behavioral science. The podcast is available on Apple Podcasts and other podcast platforms, and transcripts and show notes can be found on Freakonomics.com. For ad-free listening and bonus episodes, subscribe to Stitcher Premium. You can also follow Freakonomics Radio on Twitter, Facebook, LinkedIn, or via email at radio@freakonomics.com. The podcast airs on many NPR stations.