3X Time 2X Cost Rule

The Planning Fallacy is a cognitive bias where people consistently underestimate how long tasks will take and how much they'll cost, even when aware of the bias.

Core Concept

• Projects typically take 3x longer than estimated
• Costs usually end up being 2x the initial budget
• Being aware of the bias doesn't prevent it from happening
• Even experts who study planning fallacy fall victim to it

Key Examples

• Kahneman's team underestimated how long it would take to create curriculum about planning fallacy
• Even knowing about planning fallacy, they still fell into the trap
• Elon Musk potentially accounts for this by setting absurdly ambitious deadlines

Potential Solutions

• Set extremely ambitious deadlines (Elon's approach)

  • Knowing things will take longer, start with aggressive targets
  • Even when missing ambitious deadlines, end result may be better than conservative planning

• Create hard deadlines (Burn the boats approach)

  • Make it physically impossible to extend timeline
  • Force completion by removing option of delay
  • Example: Elon's last rocket launch when running out of money - had to succeed

Key Insight

• Easier to see planning fallacy in others than yourself
• Even understanding and studying the bias doesn't make you immune
• May need external constraints or intentionally unrealistic goals to combat it