Wednesday, January 21, 2009

More on Estimates

Yesterday’s post seemed a little harsh, and I want to make sure no one thinks I’m mad. I am a little frustrated, because I failed to get my point across. Let me give you two examples:
How much time does it take a modern factory to make a car? How many cars does a factory turn out per year? Therefore how much money does a car company make in a year? Starts kind of easy you think, right. The engineers know how fast the assembly line moves, and the cost accountants can tell you how much labor goes into each car. Nope, they can’t. They use averages. and that doesn’t consider all the different options which also alter the time needed. They can tell you how many they made this year. They can give you an assumption of how many they hope to make next year, but it is only an assumption. As to how much money they will make, sorry! lose, hat’s anybody’s guess. Guys work full time trying to estimate those tings, and these are cars made to exacting specifications.
More appropriate example - Our most basic: You plant two bushels (total of 120lbs) of wheat seed on an acre and you get eight bushels (480lbs) of wheat at harvest. The whole book is based on this formula. What happens if there isn’t as much rain this year? What is the result of manuring the fields? Will that result change if you fertilize with compost or with ox manure? Is this the right soil for wheat? Is this the year the locusts come through? A volcano blew its stack 120 miles away sending all sorts of volcanic ash into the air, and some settled on the farm. Is this a good thing or a bad thing? Has this field been properly prepared? Are the farmer’s children weeding the field? What if they are mostly playing and only weeding half heartedly? Are the yields different in Texas and California?
The point is that we believe in the Chaos Theory, or at least in some variation of it. There are too many variables that affect the outcome for us to ever properly understand the formula. We gave the best estimates we could based on the research we had and then explained it in the best manner we could at the time. Some mistakes were made, mainly in the style of explanation. Hope you liked it anyway!

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