The Golden Rule of Being a Contractor
The fallacy that makes us bad at time estimates and how to fix it
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There is one thing that all contractors (especially new ones) are very bad at. It’s one of the most challenging things to do properly, and the error is committed by both individuals and monolithic institutions — always and probably forever. Contractors are notorious for underestimating the amount of time it takes to complete a project.
I’ve been contracting for over seven years, and I — to this day — still make this mistake. It wasn’t until a few years ago, when I read a book that explains this false-estimation tendency in scientific terms, that I understood the phenomenon known as the “planning fallacy.” Here, we’ll look at how contractors can use it to their advantage to get paid more fairly, increase their income, and start providing better estimates based on the information at hand.
The inevitable problem: imperfect estimates
Unless you are some divine contracting guru, chances are you’ve been late on a project, and more than once. Late projects, especially in the professional world, are one of the biggest reasons business relationships go sour. Often, it’s not because of the client’s distaste for the late work (if you’re doing a fixed-price contract), but that you — the contractor — realize you spent way too much time on a project and feel, at the end, that the transaction wasn’t fair. Even worse is that you are really the one to blame, which can further damage your self-esteem as an independent person trying to make a living. Late projects and fast estimates inevitably cause considerable psychological pain. They can burn you out.
We imagine everything in a project going perfectly and use our impression as an anchor for our prediction.
If this has happened to you, the good news is you’re not alone. Everyone makes this mistake. In fact, even Nobel Prize–winning scientists do. In his brilliant book, Thinking, Fast and Slow, Daniel Kahneman documents his own bout with overly optimistic estimates, even after discovering the bias that’s to blame, the planning fallacy. The planning fallacy was first articulated in 1979 by…
