By "What we understand to be normal" the author means what we think a person ought to possess or achieve. Some people may think it is normal to own an automobile, and that to lack an automobile means a person has failed in life. Others may consider such an expectation ridiculous or even outrageous.
In this passage pretension is used in the sense of "a claim or aspiration to a particular status or quality" (definition from wiktionary.org). The author suggests that success divided by pretensions equals self-esteem. One's success is a fixed quantity at least for the present; it is whatever it is. So the fewer pretensions one has to divide into it the higher one's self esteem will be. For example, if you don't think it is normal to have a car, your lack of one will not trouble you. But if you think it is normal to have a car, you will be unhappy as long as you don't have one.