Planning is overrated

People tend to glorify planning. Always be prepared; plan the work and work the plan; failing to prepare is preparing to fail; and all that. To hear them tell it, planning is all upside, with no tangible costs.

The unstated assumption is that waiting for problems to arise is worse than preempting them. That may be true sometimes, but it’s not a universal law. Whether it applies in any given circumstance depends on the expected costs and benefits of planning for or fixing the particular problem you’re dealing with.

Planning to party

Here’s an example that’s close to my heart: Partying. Suppose you’re planning on going to a festival that has many parties — like say, Crop Over, arguably the best festival on Earth. You know that the most popular parties will probably sell out. You should plan which ones you’re going to and buy tickets beforehand, rather than waiting until the last minute, right?

Well, it depends. Planning has benefits, but it has costs too. You’ve got to look at the entire festival schedule and decide several weeks in advance which parties you want to go to. Given the number of possibilities, that’s a lot of work. Since your friends may not know their schedule yet, you may also worry about picking the wrong events and being stuck with the tickets or having the hassle of trying to resell them. And you have to come up with the money for your tickets earlier, giving you less time to save. On the other hand, early planning buys you the confidence that you won’t have to scramble later, and might save you a few dollars on ticket prices too.

You have to weigh these costs and benefits against the costs and benefits of just-in-time ticket buying. Waiting until the last minute means that in the meantime you have to live with the worry that you won’t get tickets at all, a sort of psychological penalty. But the bigger cost is the disappointment you may feel if you actually miss a great fete, and have to listen to your friends reminiscing about it after. If you can’t get a ticket to an event you really want to go to, you might even end up with a financial cost — for example, you may decide to pay more than face value to convince a ticket holder to sell theirs.

But notice the two “ifs.” The first “if” is that you can’t get a ticket. This problem may not actually arise. The tickets for your preferred party may not in fact sell out, so getting one may turn out to be easier than you thought. Even if they do sell out, you may be able to get one in the secondary market, since some people who bought early may decide to go elsewhere. Either way, there’s a chance you’re worrying about nothing.

The second “if” is that you really care if you don’t get a ticket. You may not. You might just decide to go to another party, or to stay home that night. You might reason that with several weeks of drinking rum and wukking up to enjoy, one jam won’t make much of a difference. Importantly, you might come to feel that way later even if you don’t now.

The calculus of plans

The calculus of planning now versus fixing later always looks like this. Generally, you should plan for a problem when the net cost of doing so is less than the net expected cost of worrying about it later. Mathematically, that means:

(a) The net cost of planning for a problem (after accounting for the benefits of early planning)

is less than

(b) The chances that the problem will actually happen, times

(c) The chances that you will care enough to fix it, if it does happen, times

(d) The net cost to fix it (after accounting for the benefits of not planning early)

There are a few interesting things about this formulation. For one thing, given the number of moving parts, it’s not obvious that planning is always the wiser choice. The simple acknowledgement that planning has costs and that not planning has benefits is enough to make the decision harder.

The calculation also highlights a key fact that people who overvalue planning often overlook: The cost of planning now is actual, but the cost of fixing later is contingent. In most cases, there’s a reasonable chance that either the thing you’re worrying about won’t come to pass, or that you won’t care enough to fix it if it does. If either happens, your planning will have been wasted.

The fact that the probabilities of these two events are multiplicative can reduce the usefulness of plans considerably. Let’s say you’re relatively sure (say, 70%) that a problem will happen, and as certain that you’ll want to solve it if it does. Even then, the expected net cost of fixing it later is about half what it would be if you were absolutely sure you would have a problem you absolutely needed to fix. That means that the net cost of fixing it later would need to be more than twice the net cost of planning early in order for planning to be the smarter move. More generally, this suggests that low-probability problems, even those with fairly high resolution costs, are often not worth planning for.

A closer look at the elements in the calculation reveals some other insights.

(a) The net cost of plans (after accounting for the benefits)

The main benefit of planning is certainty. Giving some​ thought to the problems you might run into beforehand makes it more likely that you’ll be ready for them if they come up. Viewed this way, a plan is an insurance policy against some future problem.

Of course, insurance policies aren’t free, and therefore they don’t make sense in every situation. In fact, they’re only appropriate when the cost of fixing the problem you’re worried about (like say, replacing your house after it burns down) would be very high relative to the insurance cost.

In the case of planning, what are these “insurance costs”?

(i) Time, energy, and money

The most obvious is effort and time (and therefore, money). If planning is to make any sense at all, you either have to put some work into it, and pay someone else to do so.

(ii) Opportunity cost

That time you spend thinking about problems you haven’t yet run into is also time you’re not spending fixing problems you already have. This is an opportunity cost. In business, it may become obvious if your competitor gets to market before you with a product that does something real people want today, while you were busy solving hypothetical dilemmas.

Or it may show up in delayed revenues. By paying attention to what’s in front of you, you might have convinced more customers to pay for what you were selling, or to pay more for it. Since money today is worth more than money tomorrow, delayed income is really a loss of value.

Either way, focusing too hard on the future may cost you in the here and now.

(iii) Cost of carry

Even if you had infinite resources, and could plan for every contingency and still deal with everything that’s on your plate right now, doing so would very likely make your current project more complicated than it needed to be. By trying to tackle every “what if” question, you risk coming up with overly complex answers that are hard to change and expand. Martin Fowler, referring to software development, calls this the “cost of carry.”

This too is fundamentally a forecasting problem. If you knew what the future held, you could keep your solution simple by just planning for what was actually going to happen.

(iv) Repair cost

Another​ problem with planning for future problems is that it’s easier to figure out how to surmount obstacles that are already in view. You have a firmer grasp of how big the issue is, which parts to prioritize, and the side effects of potential solutions. Without this knowledge, even if you’re right about the problem you think you’ll have, you may be wrong about the fix. If you are, this adds another item to your tab: The cost of eventually redoing what you did in the first place.

(v) Psychological cost

Add to these costs the psychological price of overplanning. In business, and especially when you’re just starting out, it can seem like there’s always some important detail that you’re overlooking​ and some contingency you ought to keep in mind. It’s easy to feel overwhelmed, and easier still if you load your mind with worries that aren’t pressing. Trying to do too many things at once is also a great way to overlook or gloss over the things that really matter.

(b) The chances that the problem will actually happen

On the other side of the equation, there’s the net expected cost of fixing a problem you didn’t plan for. “Expected” just means “weighted by the probability that it will actually happen.”

What’s that probability? Clearly, it depends on the problem. There will be times when we’re almost certain that a significant problem will happen — maybe because we’ve seen it before. In those cases, assuming the cost of fixing the problem is high enough, a plan is probably the right choice.

But we ought to be suspicious of our estimate of the chances that a problem will occur, because as a rule, people are bad at reckoning probabilities. For one thing, we tend to overweight the probability of events that come easily to mind. For example, media coverage of low-probability events like plane crashes or serial murders tends to make us believe that they’re far more likely than they really are.

By the same mechanism, thinking too much about every possible problem that could happen in theory can lead us to worry about things that are unlikely to happen in practice.

(c) The chances that you will care enough to fix the problem, if it does happen

The easiest solution to a problem is to do nothing. Admittedly, this isn’t always the best solution, because ignoring some problems can make them worse. As an example, please consult your doctor immediately if you begin to lose the vision in your left eye while reading this essay.

But sometimes, doing nothing in the face of adversity hits that sweet spot of being both easy and reasonable. There are at least two reasons.

First, the problem may turn out not to be that big of a deal. In my party planning example, you may have been dying to see Machel perform, but by the time the concert came around you were too tired to go, and didn’t mind not having a ticket. In the same way that it’s often hard to know beforehand if a problem will come about, it can be hard to gauge how much of a hassle it will be if it does. If it turns out to be a minor inconvenience, it may not be worth the trouble to fix it.

Second, problems sometimes magically disappear without intervention, because unforeseen events take us in a different direction. You depend on a terrible piece of software and then a wonderful alternative emerges. You hate where you live and all of a sudden you meet the love of your life in another country. You think you’ve missed your flight but by chance it was delayed.

I’m not suggesting waiting around for fate to take care of all your problems. I’m only acknowledging that the probability that fate will in fact take care of some of them is not zero. If you think a problem might just go away on its own, you ought to account for that possibility in your thinking about whether to fix it now.

It’s also worth noticing that if a dollar today is worth more than a dollar tomorrow, then a cost incurred today is more expensive than a cost incurred tomorrow. This implies that, all else being equal, it makes sense to delay costs as far into the future as possible — including costs related to fixing problems (provided they aren’t the kind of problems that get worse with age).

The longer you delay them, the more you can invest your time in other problems that matter more, and the greater the chance that they’ll disappear on their own.

(d) The net cost to fix a problem (after accounting for the benefits of not planning early)

The people who tout the glories of planning often cite the worse outcomes that come from not planning. There’s some truth to that. Failing to plan can sometimes lead to much more work in the long run.

But again, this isn’t always the case. The details of the particular problem matter. Often, and especially in cases where the future in very uncertain, it may turn out that a quick fix after the fact is not much worse than an elaborate plan before the fact.

And we shouldn’t understate the benefits of not spending too much energy thinking about things that haven’t happened yet. A “cross that bridge when you get to it” philosophy allows us to do other things with our time right now. And right now is all we’ve got in this life.

No doubt, a little planning goes a long way. Whatever you’re working on, it helps to think a little about future problems, and what it might take to solve them. A plan trains muscles for the heavy lifting to come.

But planning is no panacea, and its usefulness is directly related to how certain we are about the problems we’ll encounter. The hazier and more distant the future, the more likely we are to plan for problems that won’t happen or won’t be important, or to plan in the wrong way. That has real costs right now. Show me a man with a detailed five-year plan and I’ll show you someone who wasted several hours he could have spent at the beach.

Ambition, workaholism​, and fear all push us to try to plan for everything that might happen. Anything less can feel like laziness. But in projects whose outcome depends on factors over which we have little control and which are hard to predict, we ought to be skeptical of that impulse.

In these cases, not worrying too much about the future and letting the chips fall where they may is often more sensible than it sounds.