Sunday, October 27, 2019

Optimism and over-runs in time and money

Two books that are paying off just now are "Thinking: Fast and Slow" by Kahneman and "Breath by Breath" by Rosenberg. Each of those books often gives me something to think about after reading a sentence or two.  I have the impression that we are just beginning to grasp the complexity of our minds, let alone the complexity of many minds working together and working in opposition to others.


Recently, in Thinking, I have been reading about the "planning fallacy", which is simply that actually completing a complex plan takes more money and effort and time than expected.  Here is the author's first example:

In July 1997, the proposed new Scottish Parliament building in Edinburgh was estimated to cost up to £40 million. By June 1999, the budget for the building was £109 million. In April 2000, legislators imposed a £195 million "cap on costs." By November 2001, they demanded an estimate of "final cost," which was set at £241 million. That estimated final cost rose twice in 2002, ending the year at £294.6 million. It rose three times more in 2003, reaching £375.8 million by June. The building was finally completed in 2004 at an ultimate cost of roughly £431 million.


Kahneman, Daniel. Thinking, Fast and Slow (p. 250). Farrar, Straus and Giroux. Kindle Edition.


Kahneman and colleagues are in the business of finding patterns and they have many examples of optimistic plans that wound up costing much more than originally estimated.  


I wonder if we knew what we were planning to do and its eventual cost if we would ever do anything.  I often read how much money it takes to have a baby and raise the baby to adulthood. The example above is about the Scottish Parliament Building and here is a link to the article in Wikipedia about the building: https://en.wikipedia.org/wiki/Scottish_Parliament_Building


Closer to home, there are many cases where something is planned, often because existing conditions need to be improved.  It seems likely that first planning, even by energetic, well-educated experts with high ambition will underestimate the final cost of a project. Say, let's be sure to have a health clinic on the ground floor.  We sure need to have our new building near a metro station and let's have a catering office, too. Well, sure, while we are at it, let's not build a new building. Instead, let's build three new buildings.





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