Category: DartCannon

Cross Posted from https://dartcannon.com/blog/2018-estimating-at-the-grocery-store

To understand probability in forecasting, we can take a trip to the grocery store.

What We’re Going To Do

• Demonstrate Estimation by shopping for produce
• Look at reducing uncertainty
• Explain reducible vs irreducible uncertainty

The Basic Scenario

Lets say we’re going to shop for ingredients for a fruit salad consisting of 2 apples, 1 banana and some grapes.

Without going any further, you probably can make a reasonable guess about how much things will cost. I’d say we’d spend roughly the following:

• Apples: Between $2 and $4, but most likely $2.50
• Bananas: $1 – $2, most likely $1.50
• Grapes: $2.50 – $4.00, most likely $3.00

Plus, at my store apples are on sale ~20% of the time which could take between .25 an .75 off. We can plug these estimates into DartCannon giving us the following model:

We can plus these numbers into DartCannon to get the following distribution:

One thing DartCannon does for us immediately which might not have been obvious otherwise is while our full range of estimates are between $4.75 and $10, a range of $5.25, the 90% range is only $2.

Reducing uncertainty

For some projects this level of estimation is good enough to make decisions, but perhaps we need more accuracy. For our grocery example, instead of relying on our existing feelings about prices and the historic chance of a sale, we could look up current prices and sales. Also finding average weights of the fruits.

While finding current prices would reduce much of the uncertainty, while fruit (at least where we’re based) is priced by weight, it is sold by unit. Since no piece of fruit is exaclty the same weight, if we need 2 apples we can’t say precisely how much that will weigh, so we still have some uncertainty.

Lets say we went through this process

• Apples: Between $2.20 and $3, but most likely $2.60
• Bananas: $1.25 – $1.50, most likely $1.30
• Grapes: $3.50 – $3.60, most likely $3.50

We can see that the range is greatly reduced and the central 90% range is now only $0.50.

While not a huge effort for making fruit salad, it may not always be worth it depending on the decisions we need to make and how much improving those estimates cost

Reducible vs. Irreducible uncertainty

The exact price of the produce is called a reducible source of uncertainty. We were able to eliminate that source of uncertianty by putting in the effort to eliminate it completely.

Not knowing the exact weight of our produce is irreducible as we can’t know what it will be until we actually go to the store to buy them.

In most endeavors there are always a mix of reducible and irreducible sources of uncertainty. For reducible uncertainty, the question is always how much reducing the risk costs or can you live with it for the decisions you need to make.

For irreducible risk, there are similar questions only instead of spending to reduce the uncertainty, the question becomes one of buying insurance or mitigating the risk if it is difficult to live with.

Dartcannon can help guide discussions of risk by exposing the range of risks and helping focus on the most likely range of outcomes rather than the unlikely extremes.

Cross-posted from https://dartcannon.com/blog/2018-where-we’re-going

We’re so exited to see the response to our launch, we wanted to let you know what you can expect from us in the coming months. To fulfill out mission of bringing advanced tools to leaders at all levels, we launched with just the basics in place and have so much more planned.

While we can’t commit to a specific date, here is some of what we’re working on:

Shared Simulations

To keep things simple, we currently do now allow sharing simulations. Our first major feature is to allow sharing simulations for collaboration and in a read-only mode. This will also allow you to share simulations publicly so anyone with the link can view it.

Scrum Simulations

We know that not everyone runs their projects in the same way and while we’ve always planned on supporting agile methodologies, finding the right general approach has delayed our first implementation. In the coming months we’ll be releasing a third simulation type to support people using scrum/agile methods for projects.

PowerPoint Export

While we don’t expect anyone to immediately turn around and project our presentations, we do want to provide slides people can use to share plans and progress in easily editable formats.

Correlated Items

A major assumption of our overall approach is that individual tasks or line items are independent of one another. In practice however, actual outcomes tend to all run low or high. This feature will be as easy to use as the rest of DartCannon and will truly provide insights unavailable from other easily accessible tools.

Combined Schedule / Budget

While many projects have the benefit of only needing to worry about budget or schedule independently, if you don’t have that luxury you’ll need to see how they both come together.

When You can expect them

We’re still working on prioritizing all these features and would love to hear from you in what would be most beneficial to your work. We’ll always continue with new tutorials and guides to getting the most out of DartCannon along with bug fixes and minor quality of life improvements.