Modeling as art or science?

Okay, has anyone else been in this situation? The associate has you modeling. He doesn't like the end output of the model, so he sends you back again and again to look for more things that might influence the number in the direction he wants it to go. He says, go back and pro-forma it for X, Y, and Z. Oh, that didn't do it? Exclude that weird thing. Include this other weird thing. That didn't do it either? Go back and decrease the interest rate on the revolver. Assume synergies of blah blah blah.

Has anyone else just wanted to ask the guy what he wants the number to be so they can make the model spit out what's wanted the first time? It would save so many turns if they would just SAY what they want the output to be so that we could just massage the data and be done with it. But instead, they try to be all honest and upstanding at first, even though they know they're not going to send the model to the MD until it tells the right story.

Thoughts?

 

that's when you use your brain after the first turn and see what the associate is trying to accomplish.

DCF model producing too low a price per share? then adjust accordingly yourself..if you do it reasonably then you should be able to do it in fewer turns.

 

I'm already doing that, but I hate it when I massage it too far and the associate looks at me like I'm an idiot. If they don't want us to be 100% conservative and straightforward in our models, I do at least wish we had some guidelines as to exactly how far we needed to go. It can be tough to guess. I imagine it's a pretty fine line even for the associate/VP.

 

i'm still an undergrad and totally new to investment banking, but i've modeled many times before including modeling jobs for j. crew and express for men... i'd say it's definitely more of an art than a science... if it was a science, then just about anyone would be able to look this good... what do you all think my chances are of landing an analyst position with a bulge bracket I-bank? i don't have that great of a gpa and i'm an education major, but does my past modeling experience help out at all?

 

Quite possibly. Try out this phrase at the interview: "I'm just too pretty for jail." See if the guy gets the reference.

N.B. I have to assume you're pulling a Glamorama-style joke here. I hope you haven't literally confused the kind of modeling that takes place in front of cameras with the kind of modeling that takes place in Excel.

 
Mis Ind:
It would save so many turns if they would just SAY what they want the output to be so that we could just massage the data and be done with it. But instead, they try to be all honest and upstanding at first, even though they know they're not going to send the model to the MD until it tells the right story.

Thoughts?

I hate it. It defeats the whole purpose of modeling and staying market-neutral. Effectively, the deal is done, either implicitly or explicitly, before the whole modeling gag. A lot of times the valuation output is given only a cursory look, especially if you're safe in the "consensus" valuation range... This makes me sick to my stomach. Apart from long hours and flashy power points, which are template-based anyway, I don't see a lot of value-added an investment banker brings.

 

I think, as an analyst, one's best bet is not to spend too much time moralizing and trying to change the industry. We should remember that we're not doing deals, we're producing sales materials for deals. The model is just there to cover somebody's ass. And the powerpoint is just there to show the client that we're not idiots. We won't be seriously value-added until we're at least associates, in my opinion.

 

Nah, I wasn't moralizing. Neither am I trying to change the industry. I'm just a small cog in huge machinery, so it's nothing short of probability 1 that the cog will break down, not the machinery. It's just one of the pet-peeves, as it were, that really brought me down to earth when I started.

P.S. Ind, the last time I saw your post, you had about 40(?) bananas... You're prolific :-D

 

Yep. Just found this place; am glad to have the chance to talk about the profession with people I don't work with.

I had the same coming-down-to-earth experience. Definitely a pet peeve of mine as well.

 
Best Response

I think most people get brought down to earth with that same bump - one of the most over used phrases springs to mind: "its not rocket science". What we do isn't particularly difficult and part of the difficulty involved (read: good scores/schools) in getting placed is a factor of how popular a career choice it is rather than actually needing the smarts first off. What you do need are street smarts though - being able to adapt and work in any situation, particularly under pressure and to tight deadlines are skills that not everyone has....

Mis Ind - I think you shouldn't be putting off opportunities to be value add until you're an associate, you'll have plenty of opportunity before then. Its hard as a first year, granted, but there are ways where you can be creative. More so if you're in an industry group as you'll gain market knowledge that you can apply (harder if you're getting thrown into random industries three times a day). I think the most important thing to remember as a junior analyst is to never lose the will to think (will to live goes a few times a day, i remember) and to question. There were times in my 1st/2nd years that I honestly felt stupid, like i hadn't had a thought of my own in years and had become a robot. That goes evenutally, but can be quite demoralizing...

 

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