Posted on by Rick Brenner

Unrealistic optimism: the planning fallacy and the n-person prisoner’s dilemma

Last updated on July 8th, 2021 at 01:31 pm

In a 1977 report, Daniel Kahneman and Amos Tversky identify one particular cognitive bias [Kahneman 2011], the planning fallacy, which afflicts planners [Kahneman 1977] [Kahneman 1979]. They discuss two types of evidence planners use. Singular evidence is specific to the case at hand. Distributional evidence is specific to similar past efforts. The planning fallacy is planners’ tendency to pay too little attention to distributional evidence and too much to singular evidence. They do this even when the singular evidence is scanty or questionable. Failing to harvest lessons from the distributional evidence, which is inherently more diverse than singular evidence, the planners tend to underestimate cost and schedule. So there’s a tendency to promise lower costs, faster delivery, and greater benefits than anyone can reasonably expect.

Enter the n-person prisoner’s dilemma

Boehm et al. [Boehm 2016] describe a dynamic that exacerbates the problem. They observe that because organizational resources are finite, project champions compete with each other for resources. This competition compels them to be unrealistically optimistic about their objectives, costs, and schedules. Although Boehm et al. call this mechanism the “Conspiracy of Optimism,” possibly facetiously, it isn’t actually a conspiracy. Rather, it’s a variant of the N-Person Prisoner’s Dilemma [Hamburger 1973].

A special property of pressure-induced debt

Hoover Dam, aerial view, September 2017
Hoover Dam, aerial view, September 2017. Under construction from 1931 to 1936, the cost of the dam was $48.8M ($639M in 2016 dollars) under a fixed-price contract. It was complete two years early. Apparently the planning fallacy doesn’t act inevitably. 112 men died in incidents associated with its construction. 42 more died of a condition diagnosed as pneumonia, but which experts now believe to have been carbon monoxide poisoning due to poor ventilation in the dam’s diversion tunnels during construction. There’s little doubt that unrealistic optimism affects more than budget and schedule projections. It also affects risk projections, including deaths. Photo (cc) Mariordo (Mario Roberto Durán Ortiz), courtesy Wikimedia Commons.
Unrealistic optimism creates budget shortfalls and schedule pressures. In turn, they both contribute to conditions favorable for creating nonstrategic technical debt. And this mechanism, or any mechanism associated with schedule or budget pressure, tends to produce technical debt that’s subtle—it’s the type least likely to become evident in the short term. For example, technical debt that might make a particular enhancement more difficult in the next project is more likely to appear than technical debt that creates trouble in the current effort. Debt that creates trouble in the current effort is more likely to be retired in the short term, if not in the current effort. Awkward architecture might be more difficult to identify. It’s therefore more likely to survive in the intermediate or long term.

The bad news of schedule pressure

In other words, the technical debt most likely to be generated is that which is the most benign in the short term, and which is therefore more likely to escape notice. If noticed, it’s more likely to be forgotten unless carefully documented. And that action is unlikely under schedule and budget pressure. In this way, the nonstrategic technical debt created as a result of unrealistic optimism is more likely than most technical debt to eventually become legacy technical debt.

Last words

Policymakers can assist in addressing the consequences of unrealistic optimism by advocating for education about it. They can also advocate for changes in incentive structures and performance management systems. It’s good business to establish organizational standards with respect to realism in promised benefits, costs, and schedules.

References

[Boehm 2016] Barry Boehm, Celia Chen, Kamonphop Srisopha, Reem Alfayez, and Lin Shiy. “Avoiding Non-Technical Sources of Software Maintenance Technical Debt,” USC Course notes, Fall 2016.

Available: here; Retrieved: July 25, 2017

Cited in:

[Hamburger 1973] Henry Hamburger. “N-person Prisoner’s Dilemma,” Journal of Mathematical Sociology, 3, 27–48, 1973. doi:10.1080/0022250X.1973.9989822

Cited in:

[Kahneman 1977] Daniel Kahneman and Amos Tversky. “Intuitive Prediction: Biases and Corrective Procedures,” Technical Report PTR-1042-7746, Defense Advanced Research Projects Agency, June 1977.

Available: here; Retrieved: September 19, 2017

Cited in:

[Kahneman 1979] Daniel Kahneman and Amos Tversky, “Intuitive Prediction: Biases and Corrective Procedures,” Management Science 12, 313-327, 1979.

Cited in:

[Kahneman 2011] Daniel Kahneman. Thinking, Fast and Slow. New York: Macmillan, 2011.

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Cited in:

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