"Modelling" and false precision
Hey team,
I'm in consulting but would love your thoughts. I do a lot of reasonably heavy model building and I often get the feeling that there's a lot of 'false precision' in the modelling done in consulting, and have heard anecdotally the same of IB, PE. Seems to be some excitement when there is e.g. a forecast, but it is often totally dependent on inherently unknowable variables. The old adage of garbage in garbage out. Obviously, the answer is not don't model anything, but I do sometimes feel like the balance is not right.
Do those of you in IB/PE ever/often feel like the modelling work you're doing is overzealous/not justified based on the uncertainty faced and what's required to make a decision? How do you think about this when/if you are spending a lot of your time modelling?
Curious. Thanks
Thoughts?
I work closely with a professor of finance at Columbia / NYU Stern. He says just slapping a multiple on EBITDA is actually mathematically more accurate than any DCF. Bankers just try to make everything as complicated as possible to justify their fees.
https://en.wikipedia.org/wiki/Overfitting
With a name like Pussy Galore I’ll believe anything you say
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