The fallacy of the best case

Last week I went to a meeting where a team exposed their plan to build a big stadium.

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Here, where I live now, in Auckland, New Zealand.

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No offense, but I love these meetings.

Observing.

Learning.

Laughing sometimes.

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They presented other successful cases.

Beautiful stadiums…

Detroit, Los Angeles, Hong Kong…

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You know, great stadiums, with fantastic real estate developments around.

Successful cases.

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The guys presenting have experience.

Years and years…

They said that these projects can take 10, 12 or 22 years to be completed.

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But still…

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They say that they want it finish by 2029.

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You count.

2025

2026

2027

2028 and

2029…

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That’s the fallacy of the best case… well… almost the ideal case.

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Ignoring experience.

Ignoring what dozens of similar asset class projects have shown you.

That you should aim for 10-12 years… instead of 5.

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If you don’t do it, you’ll depart from the wrong premises and assumptions.

You’ll buying all the tickets for lottery of disasters, frustrations, failures, and all series of cost overruns.

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And I see this all the time.

Big and small projects.

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When I talked to my more trusted contractor for one of my projects in Spain, his message is clear:

“This apartment, in 2 months, is ready”.

Yeah…

Two months…

Yeah…

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The reality is that the shortest similar flip took me 4 months and a half…

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You say this to him and the answer is…

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“Yeah, but in that case… what happened is that the materials didn’t arrive, and then the electrician went on holidays and then we needed to change the layout of the kitchen, and…”

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Yeah…

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Look.

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There is no project with “something happening”.

No project without excuses.

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The average I get for any similar full renovation like that apartment is 6 months…

Of course, it could be done in an ideal world in 2 or 3 months, but data tells me a different story.

That ideal worlds are just that… ideal.

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Another example. ?

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One of my projects, for a full building, was going to be finished in 9 months.

They started well.

Very well…

But the invoices arriving to me were only 40 to 45k€ a month… I was expecting at least 100k€.

Suddenly, we needed to stop works in a small section of the building for analysis. It took us 3 weeks.

Remember, a small section of the building, they were still working in the rest of the building.

After we finished, with no additional works required, the contractor told us that he needed 3 extra months… additional time…

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Of course, they were late before.

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How did I know?

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First, cash.

Second, data.

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These projects take a year in average.

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Materials don’t arrive.

A subcontractor goes bankrupt.

We need to adjust design for unexpected conditions.

A client requests a small change somewhere.

The guy of the kitchens gets delayed.

Etc.

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Every project has some funny stories…

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But, let me more precise.

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Any project, any, all projects have some of those stories.

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So, imagining yourself being able to deliver in ideal conditions, with no issues, no room for unexpected things… is a fallacy.

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And this fallacy can get you into trouble as an investor very, very soon… and those troubles are terrible if you are playing with cash flows and having multiple projects.

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In publics projects, the answer is like this: “Vicente, but if I had to tell that this project cost $1bn more and 10 years instead of 5, it won’t go forward…”. This interesting answer is for another email or article.

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So, don’t think of rainbows in the sky but data in your Excel file.

What’s data telling you?

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I’d love to hear your thoughts about this. Answer back, I love reading you.

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Stories, learnings and much more like this in my mentorship.

www.theantagonist.co