Estimating Dreams in a Dead Economy

Ken Follett consultant, estimator, author, president of PreCon LogStrat, LLC An estimator needs to have a vision of what is likely to happen in the future and be able to assign cost information to that vision. But what happens when the estimator loses their grasp on reality and their vision becomes unrealistic? If the estimating is for hard costs, say for a contractor to bid on a construction project, and the contractor needs to understand what the economic risks are if awarded the project, then the estimator needs a solid grasp on reality. This need for a grasp on reality is somewhat less important for an estimator in the case where beneficiaries of the estimate process will not suffer a direct economic loss if the estimate is less precise than for a hard bid on a construction project. Such lesser rigor as required for a conceptual budget for a client who wants to chase after grant or an imaginary “stimulus” fund. Or for an insurance adjuster who seeks to reasonably place a limit on the cost of their payout for damages. In the current economy there are stories all around us of projects being bid and awarded on the basis of what seem to be unrealistic costs. In a few cases we look at the bid results on a project and realize that the winning bid was at less than the cost of the materials specified, and nothing at all for labor. An initial reaction is to think, “They must be insane.” These bidders may well be nutcases, but before we diagnose our competition, we had better look at our own mental condition and see whether we can trust ourselves to function in a healthy manner within our economic society. As we tighten up our numbers more and more, we place ourselves in less and less of a sense of comfort with our cost predictions. Even then, as we witness so many bids at half or a third or less of our increasingly diminished numbers, we wonder if it is we who do not understand something about the reality. There certainly is a tendency to try to adjust, to court a depressed and defeated emotional condition in the midst of a losing streak. If everyone around us takes odds, can it be that the magic we used to have to hit the right win-win number is suddenly gone, vanished, poof, kaput! This can only make our grasp of reality shakier. We begin to wonder not only whether we are out of touch with reality, but whether we will any longer be employed. In a positive move to maintain our own sanity this is a good time to break off from our concentration and numbers and take our quality time to go to the beach in our favorite weather, to go out at night and howl at the moon, or gaze all of one morning at the birds at a birdfeeder. It is also a fine time and go to a bluegrass concert, read a good book, or have a fancy dinner, or return to some place on the planet that is special for us and where in the past we felt more real. It is a time to refresh and renew our spirits. It is time to center, to reach out and touch our inner estimator. It is time to acknowledge that though the economy may be dead, we are not. What gives with the reality?

We may have software to automate mundane aspects of our thought process and apply smart math to help us put our bids together, but the estimator remains human. Despite legendary icons such as Thomas Edison, who attempted to streamline their own relaxation, it remains a reality that humans, and thus estimators, need to sleep. When we sleep we dream. In dreams we humans make unrealistic corrections, to either improve or make worse our grasp on reality when we are awake. In dreams some of us can fly through the air without the need of airplanes. Some of us do try not to jump off of tall buildings. Some of us wake up in the middle of the night. After a dream it occurred to me that the contractor who had slaughtered the field on my last bid had a plan to spend three months of his summer on the project asleep on site and to live out of the camper bed of his pickup truck. Our complex software does not allow for possibilities like this, and in the end we are left to our own human wetware to decide whether we want to go so far as to sleep in a pup tent on the coast of Maine in December. Or we begin to think that there is a form of reality that we have failed to understand. My point here is that we do not now and never did actually know anything at all about reality. Why is it any different today than it was yesterday or last year or ten years go? What we did have was a certain sense of inner comfort, a belief that we could not be all that far wrong in our predictions and in our cost estimates. In a healthy economy it is a whole lot easier to succeed through rational means of calculation and scientific process without our having any clear grasp of reality, just as it is easier to succeed by dumb luck and misinformed decisions. When the economy gets tight our inherent inadequacy to understand what the heck is going on suddenly gets exposed and leaves us naked and we feel alone. We may also feel like wandering into the hills like Rip Van Winkle and to come back on the scene in two decades or so. We are not exactly alone: as there is no human who knows what is going on, there are only humans who think that they know what is going on. And then there are those nutjobs with the really low bids. Whereas before we would have not hesitated to say, “It will cost $12.00,” now we wonder if it should not be $8.00, and if that is not low enough then why not go down to $4.00? Before long we transition to conversations that start out just fine and then somehow jump to zero. Some may conjecture that when our cost estimates hit the sidewalk, it is all over. This need to burrow down through concrete reality could be characterized as out of control, as a futile vision where there is no hope. One reality is that if we too-often practice zero-sum estimates, there will certainly not be any interesting projects for us to do in the future. On second thought, maybe now is another good reason to go for a walk near the ocean and enjoy the sunset. One time I asked my grandfather, he was an electrician by trade, about madness, and his response was, “Yes, there is that, a place that we do not need to go.” All this threat of mental instability in business is nothing new. A book that I do not particularly recommend if one has a penchant to get in the dumps in an attempt to more firmly grasp reality is the Russian novel The Golovlyov Family (1875-80) by Saltykov-Shchedrin.

The novel is about the members of a landowner family in nineteenth-century Russia who in the start are supported in their economy and lifestyle by a system of serfs and servants. Through the course of the story the serfs are freed and the family members, who keep dying off for various thrifty reasons, become more and more isolated and dependent on their restricted capital. All along in the book, characters count what they have and have not. The matriarch of the family, Arina Petrovna Golovlyov, spends a lot of her time and energy estimating the number of pickles in a barrel and the number of barrels in her storage and just how many of those pickles have gone rotten but can now, due to their reduced value, be reasonably doled out to the servants as a delicacy. There is a good deal of irony in the book and it is lesser known classic of Russian literature. What interests me here though is that about 260 pages of the way through the novel the remaining and surviving son, Porphory Vladimiritch, starts to spend his time locked up in his study, where he talks with visions of his deceased servants, the ones that he most respected for their loyalty, doing estimates with them. For half a dozen or more pages, estimating is a core preoccupation of this character. Together he and his visions inspect a forest owned by Porphory and make an assessment of the quality of the trees. It is a little bit absurd in that he estimates that an acre back then in those olden days is now an acre and a half in size. Regardless, there is a count of trees. He “took a piece of paper and multiplied 215 by 315; it proved to be 67,725 trees.” Then there is conversion of all these imaginary trees into rubles. Then he moves on to conversion of raw materials. He “calculated once more in his mind the price of the millshaft, of the smaller shaft, of the beam, of the smaller beam, of the logs and twigs. He added the figures together, and multiplied them, leaving out the fractions in one place and adding them in another. The piece of paper was covered with figures.” “There’s a science brother, called arithmetic... you may be sure it will not deceive you!” It gets worse. Before long Porphory argues with a peasant and steals the man’s imaginary axe in lieu of payment for a downed birch with which the imaginary peasant had intended to make an imaginary axle to repair his imaginary broken horse cart. It is all a waking dream. “The paper was covered with huge columns of figures—rubles, tens, hundreds, thousands of rubles, Iudushka [Porphory] was so exhausted by his work and so agitated by it that he got up from the table bathed in perspiration and lay down on the sofa to rest. But his turbulent imagination refused to stop working and merely selected another and easier subject.” The description of this character of Porphory in his situation may all seem very distant to where we are in today’s economy - but here we have an estimator, though we may not feel inclined to associate ourselves too closely with him due to his slightly shaky ethics, who through a variety of life circumstance, not least the changes in the social structure of economic society, who has lost all connection with reality and is isolated in the midst of a wasteland with nothing but hallucination and dreams to estimate upon.

Nevertheless, in this time of uncertainty, we estimators must continue to apply experience and arithmetic to reality as an act of faith, believing that if we persist, the people who have moved into pup tents to make their estimates come out right will take up other lines of work and our numbers and reality will get back into synch once again. The Golovlyov Family, Saltykov-Shchedrin, trans Natalie Duddington, The New York Review of Books, 2001. Copyright © 2011 Ken Follett www.precon-logstrat.com