Why We're So Bad At Estimating

And What We Can Do About It

We, as humans, are bad at estimating.

I remodeled our laundry room a little while ago. It was a project that I had on my list for a long time, so I was excited to get it done. We didn’t have any storage in that room, and too much wasted space, so it seemed like a good project.

I estimated at the beginning it would take me three days to finish.

It took me 12 days of work over the course of a month. I was off by a factor of 4.

What I may have looked like after the fourth trip to the hardware store…

Unfortunately, this isn’t unusual. I am always off in my estimates of home projects.

I did the same thing with a deck for our backyard I built last summer. I estimated it would take a month, but it really took six. And I’ve built a deck before! It wasn’t even the first time I’d done a similar project.

Fortunately, I’m not alone in being bad at estimating. We, as people, are all bad at estimating. Consider the story of the Sydney Opera House.

The original estimates for construction of the Opera House were made in 1957. The planners estimated it would cost around $7 million USD to build and would be completed in 1963 (4 years after construction began). In reality, the cost was over $102 million USD and construction wasn’t completed until 1973. So the planners were off by 10 years (a factor of 3.5) and off by $95 million USD (a factor of 14.5).

There were many reasons why this happened, including a rush to get started, unforeseen issues that arose, incomplete initial plans, and general optimism regarding the timeline and budget.

We like to pick on the Sydney Opera House because it is such a great example, but the same thing happens for many projects, large and small.

So why are we so bad at estimates?

Planning Fallacy

Everyone falls victim to the planning fallacy. We consistently underestimate the time it will take to complete something.

Why do we underestimate?

Overoptimism

We are too optimistic, especially with our own abilities. As humans, we have a bias toward optimism, no matter how irrational it might be.

From an HBR article on this topic:

Most people are highly optimistic most of the time. Research into human cognition has traced this overoptimism to many sources. One of the most powerful is the tendency of individuals to exaggerate their own talents—to believe they are above average in their endowment of positive traits and abilities. Consider a survey of 1 million students conducted by the College Board in the 1970s. When asked to rate themselves in comparison to their peers, 70% of the students said they were above average in leadership ability, while only 2% rated themselves below average. For athletic prowess, 60% saw themselves above the median, 6% below. When assessing their ability to get along with others, 60% of the students judged themselves to be in the top decile, and fully 25% considered themselves to be in the top 1%.

It’s not just college students either. Executives and leaders have the same problem:

One study of letters to shareholders in annual reports, for example, found that executives tend to attribute favorable outcomes to factors under their control, such as their corporate strategy or their R&D programs. Unfavorable outcomes, by contrast, were more likely to be attributed to uncontrollable external factors such as weather or inflation.

With our own abilities, we have incredible difficulty being objective. Whether you are a project planner, a college student, or an executive, it is always the same. We are overoptimistic, especially in ourselves.

Plan for Best-Case Scenario

When we are planning, we frequently plan for the best-case scenario and disregard any risks or potential delays.