"Modelling" has to be the biggest misnomer in this industry.

I remember back when I was still a student, being intimidated by the idea of having to form "models" - despite my undergrad being in physics.

It turns out in finance, "modelling" just means dividing one excel cell by another, saying "yeah sure, that growth will obviously continue for a good 3 years and then errr, it'll drop to x%", use a few sums and then boom, "model".

What a joke.

I cannot believe the mystique around this industry, if society actually knew what a joke this job was - we'd get the same level of respect as the guy in the street handing out junk leaflets.

Comments (72)

Apr 4, 2019

Agreed with @Elite_Bulge dick move by the Synergy

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Apr 4, 2019

consulting sounds like a meme job

excel is my canvas, and data is my paint - new york - brunch conesseiour - atheist - centrist - ENFP - TCU alum

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Apr 4, 2019

banking also sounds like a meme job - how much of the shit you do in banking actually is necessary? aren't you putting together decks for stuff you aren't going to win a lot of the time? and aren't you putting stuff in those decks that no one is going to read?

excel is my canvas, and data is my paint - new york - brunch conesseiour - atheist - centrist - ENFP - TCU alum

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Apr 5, 2019

I mean, that's my impression and I tried unsuccessfully to get it lol. I was less successful at reading Victor Cheng slides than the other candidates so what do I know?

Most Helpful
Apr 5, 2019

"The majority of the workforce is stupid and lazy". You're an ass for saying that. The majority of the workforce didn't have the privileges you likely had growing up, never mind the opportunity to get paid 6 figures out of school for performing glorified third grade math between reading articles on ESPN. Open your eyes dude. You sound like the type of kid who thinks being rude to waiters is cool and loves to hit the elliptical at Equinox. I'm picturing Pete Campbell from Mad Men - just a twerpy WASP taking his insecurities out on the world.

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Apr 4, 2019

SB for that (was hard to choose between helpful and funny), you're 100% right and I retract my statement fully. Was in a bad head space yesterday. I woke up and read my comment and was like, "Jesus Christ what's wrong with me"

I award myself no points, and may God have mercy on my soul.

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Apr 5, 2019

Love the Pete Campbell reference - although I feel like he'd fit in just fine at any BB, even today.

At some point during college I realized that IB is way more about soft skills and acting WASPy than actual technicals. I did a group project with an "incoming EB analyst" who didn't know what WACC was.

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Apr 10, 2019

(oops i replied to wrong person)

Apr 12, 2019

Alright, but thats a bit irrelevant. Sure he should maybe be a bit more thankful for being so fortunate, but does that mean he has no right to criticize the industry for what he sees it to be?

Apr 12, 2019

So no, it's never okay to be rude to waiters (ironically the rudest person I met to service staff also loved reposting stuff on Facebook about equality or social justice or what not) and you're a tool if you use an elliptical.

That said, I'm going to push back on your statement. Let's be honest, 80% of the value in any organization comes from 20% of the people. Is it politically correct to say? Absolutely not. Is it true? Well, have you worked in a corporate environment? How alive are your peers, really? How alive are your back office staff? If you don't see this, I wonder how long you've worked in any large organization.

It's not a matter of "privilege" as it is ambition. I have way more respect for someone who came from poverty, now owns a convenience store that he works his ass of in and makes $50,000 than someone in a corporate 9 to 5 job where half the time he's just checking social media, makes more money than the convenience store guy, but really he's just watching Game of Thrones or other people play sports and just passing the time between now and death.

I'm not naive enough to think that there isn't inequality but at the same time, there's more opportunity now than there has been, ever. Look, if you want a 9 to 5 corporate job and have a "work life balance", it's a free country so do what you want, but let's not glorify this as they're just some poor underprivileged dude who otherwise could be making Excel models with us if only he had the privilege.

Back to OP's post:

[quote]I cannot believe the mystique around this industry, if society actually knew what a joke this job was - we'd get the same level of respect as the guy in the street handing out junk leaflets.[/quote}

You may not quite understand this yet, but if you're successful, the opinions of others don't affect you. If you really don't like finance and it's not what you find interesting, just leave. We get these threads every now and then. It's not for everyone. But also keep in mind, the grass is always greener.

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Apr 4, 2019

Also to add on to this, almost all of the models I've used have been templates with preset calculations and input spots that I made very little manual changes to. It's really not that intensive.

Dayman?

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Apr 4, 2019

I think this is really it. Not many people really have to build soup to nuts models anymore, their employer already has the models they use and the job is 90% populating the preformed model. That said, if you take a step back and look at the model itself/have a chance to contribute to a new feature, you might be surprised at the breadth of their functionality. This isn't to say it's rocket science, but it does certainly take a lot of logic and attention to detail to tick and tie a book with 50 sheets and thousands and thousands of rows all fitted with various tables/macros.

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Apr 4, 2019

I agree with simple LBOs to get a quick IRR calc. Just need to update 5-10 variables and you're golden.

But you'll put in a ton of effort pulling together a full operating model in an M&A process. You'll spend several days developing a template based on company SKU data and fixed v. variable expenses. Then you'll spend a couple weeks tying all historical data to the QoE and stress testing assumptions with management.

While two companies may have a similar go-to-market strategy / business model - each one will have a different opinion on how to best position the business in a sale process. This could be looking at price v. volume analysis, tying revenue to publicly available industry stats for credibility, or focusing on the company's OE v. aftermarket mix in relation to the perceived state of the market.

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Apr 4, 2019

I unfortunately don't really touch M&A. You are right though about building out operating models. Those usually take more effort. I almost wish I had to do more from scratch just to get the experience. I hear varying levels of intensity and modeling from my friends across the street. I think my place sits slightly on the lower end.

Dayman?

Apr 5, 2019

I've built multiple REPE models from scratch - in doing these projects I gained 10x the experience and skills I did in the sum of all my time spent running hundreds of stupid iterations of broker pro formas for my old MD...

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Apr 4, 2019

Wow this guy gets it!

@Leonardo-Cope is Value Add!

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Apr 4, 2019

Dude, just do your data entry job and take that fat pay check.

Learn to own the catwalk and then we'll talk about modeling. model

Apr 4, 2019

It's not the math that's hard, it's the zero tolerance for error. Trust me, I updated a model for FY around when I first started that had about 500 assumptions that I needed to change, and I had maybe 2 small mistakes. Barely changed the output but I got absolutely reamed by my boss

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Apr 10, 2019

So true. In many ways, that's much of the value of the financial services industry.

Apr 5, 2019

Who hurt you?

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Apr 5, 2019

Think about a hard solid number on the valuation of a company. When everything is done - we will never get that number. I believe that financial modeling is a framework - a baseline to say on how we want to move ahead with the deal process. Of course, not everything will be free to errors, but it gives us something to fall back on.

Nevertheless, imagine the alternative.
We take a napkin and write:
Revenue - USD 100 Million
Net Profit - USD 10 Million
PE Multiple - 8x
Valuation - USD 80 Million
If things don't go well, where do we start the process.

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Apr 5, 2019

That's why you should start your own ibanking boutique and change the world with Sobolev Spaces and discrete mathematics.

Show those losers what real business is all about!

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Apr 5, 2019

Are all of these quantitative hedge funds using ridiculously complicated algorithms really creating alpha or is it a big dog and pony show for fees?

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Apr 5, 2019

Stop complaining and figure out your own insecurities, because this is what this cry is really all about.

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Apr 5, 2019

Bof

Apr 5, 2019
SanityCheck:

Bof

Not good with these, what does it mean?

Apr 12, 2019

he just sounds annoyed tbh, where you getting the insecurity part from

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Apr 5, 2019

Sell-side modeling is bullshit - no one on the buy-side takes serious stock in your crap assumptions. Modeling on the buy-side is critical to understand projected return sensitivity to certain variables. You build the model to test for which variables are most critical, and then discuss the certainty of assumptions behind these variables. Everything is an educated guess, but the goal is to invest in idea with higher certainty than the average while achieving the same targeted return.

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Apr 6, 2019

Grow ERV by 3% per year and get to 18%. Done. If this can't be done increase occupancy to 99% over the hold and you get to 18%. Done.
Who are we kidding? We have to deploy cash for the management fees no matter what. Carry is icing on the cake.

As long as you got a half assed proposal and manage to bull shit through your IC you are gold. Let's not kid ourselves. Sell side modelling is bull shit and so is buy side modelling. I respect bankers just as I respect my peers on the buy side, but as OP mentioned it's not rocket science - what differentiates you from the rest is your network and your ability to sell whether you are on the buy side trying to source or on the sell side trying to get deals done.

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Apr 5, 2019

I imagine somewhere over on NASAOasis they can be this reductionist about the work the bottom 80% do there. Not saying I disagree with you but I'm still impressed by most bankers/consultants etc.

Apr 5, 2019

The NASA's job is basically to look at rockets being launched to space on a big TV.

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Apr 5, 2019

Not sure why but imagining a NASAOasis was the exact laugh I needed on this Friday. SB to you!

Apr 5, 2019

Ehhhh I don't know. I left IB to work in a so-called quant shop that hires a lot of aerospace PhD's, and I laughed at their "models" the same way you laugh at the IB models. They thought pulling in thousands of rows of data and scrubbing the shit out of it just to calculate a reliable standard deviation was a "model". I remember they would flex hard about using the right st.dev formula in excel (I'd get shit for using the population one instead of the sample one) even though the end result would be the same regardless of which formula you use.

I don't pretend an LBO is complicated but at least there's some logic in understanding how it flows and which parts of it are more important for which kind of business.

Outside of Renaissance Technologies, I have yet to see a quant jock do anything impressive in finance. Most of them seem to be really into factor-based investing and smart beta which is all snake oil.

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Apr 4, 2019

Not a huge fan of quant myself here, but to say that "outside of ren tech, you've set to see a quant jock do anything impressive in finance" is ridiculously idiotic. Jane Street, Two Sigma, and DE Shaw are all quant shops that absolutely crush it, to name a few. And there are many more that you've just not aware of

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Apr 5, 2019

I should've known some douche would latch onto the literal meaning of what I said and interpret it tightly just so they could call me an idiot. Well played.

I see a lot of quant jocks, and most of them are full of shit. Happy now? Thanks.

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Apr 5, 2019

This is 100% accurate.

people don't understand "quant" roles so they think it's all smart people when really it's a bunch of glorified IT guys running the same backtests on data that everyone else is doing. i would argue that creativity and raw fluid intelligence is more prevalent on the discretionary side than on the systematic side.

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Apr 5, 2019

In interviews, when kids flex about their modeling skills, it's a sign that they have no idea what we actually do on the job.

Apr 5, 2019

Two observations:

  • The math in models is definitely not complicated. What's harder, I'd say, is finding the self discipline to go through the literally thousands of cells and make sure that every single one is correct, that the calcs are consistent, etc. That it doesn't require quantitative genius doesn't make it easy
  • Anyone who has worked in banking can tell you a story or 10 about some analyst with mind boggling academic credentials - STEM degree from an Ivy, for example - who can't find his/her way out of a paper bag. I still don't understand how that can happen, but it does.
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Apr 5, 2019

I feel like I'm the only person in the world who actually appreciates the value of models over time lol... The math isn't hard, it's the creative and conceptual side that's challenging. If you're just playing with old templates, you're missing out on the real critical thinking aspect.

I think people are too caught up in the technical nuances of modeling and get disenchanted realizing all the work is based on pie-in-the-sky ideas. At the end of the day, modeling is about building simulations that rationalize an idea being executed.

Models are meant to be wrong because they can only capture a limited amount of moving variables but that's a good thing! It's a means to benchmark your thinking against actual results and pinpoint what in the real world you're not factoring in or didn't consider.

It's a visual language meant to communicate a idea in one straightforward medium: Excel, and it goes far beyond just financial returns and numbers. I've modeled out dance routines, execution timelines, and entire supply chain flows. Not many other tools in the world can summarize life on a spreadsheet.

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Apr 5, 2019

Keep in mind that the distribution of M&A wisdom among CEOs and CFOs is incredibly varied. There are some who don't know a thing about it, then there are people like John Malone - probably one of the best capital allocators of the past century - who literally sketches out prospective M&A deals on a single sheet of paper with a pencil. And that's not as a starting point. That's the sum total of the financial analysis he does.

Apr 5, 2019

Warren Buffett looks at a FCF/EV yield as the primary jumping off point for an investment.

Lots of people confuse complexity with usefulness.

Apr 4, 2019

Lol what? How do you possibly know that?

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Apr 10, 2019

More napkin / back of the envelope than piece of paper I'd say

Apr 5, 2019

"Adding value" is a bigger misnomer.

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Apr 6, 2019

The math isn't the hard part.

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Apr 8, 2019

Best answer on the thread. Sadly, this will likely go overlooked...

Apr 10, 2019

I love how people talk about how "basic" the math in finance is. Outside of literal quantitative financial analysis, I dare someone to name ONE job in the real world that actually uses math more advanced than IB. Even engineers don't use math.

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Apr 10, 2019

I think you're mistaken about engineers not using complex math. Some of them maybe don't, but not the majority. A family member is a chemical engineer and he uses advanced math on a regular basis.

Apr 12, 2019

Wouldn't actuarials?

Don't beat yourself up on this, Eric. Some people like taking the long way home. Who the fuck knows?

Apr 12, 2019

Is learning how to sacrifice gigantic parts of your life and dealing with your own and peoples sleep deprivation from working 90hrs a week the hard part?

Apr 6, 2019

Modeling is so easy, even OP can do it, and he's so stupid he spells it "Modelling" with two L's. Sad!

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Apr 8, 2019

Supposedly the only thing you model is the wall in front of your head. Two "L"s might not be common in the US, but it's not wrong per se. Don't be so ignorant.

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Apr 6, 2019
danpo:

model.

*Modell.

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Apr 9, 2019

Nice tweet!

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Apr 8, 2019

Banking and finance have been throwing 1000s of capable kids at this kind of garbage work for decades now - why hasn't there been a move to automate it more - so people can actually go out and work on some real problems?

This is particularly endemic in NYLONKONGSING - not so much in the Bay Area for obvious reasons.

It makes me wonder, is it just lethargy? When former analysts make it to senior ranks they prefer not to disrupt things too much and continue to collect their paychecks?

Apr 5, 2019

Banking is automated in the bay area but not in other major cities? I think this will come as a surprise to a lot of bay area bankers.

Apr 8, 2019

I meant the brain drain from stem to finance is a lot less prevalent because the wages for those sectors are far more competitive in the BA unlike NYLON (and other financial centers) specifically where engineers scientists may take a pay cut to work in their respective sectors (this is especially true in Europe) versus a job finance.

Apr 10, 2019

No one in the corporate world works on "real problems".

Apr 9, 2019
Leonardo-Cope:

I remember back when I was still a student, being intimidated by the idea of having to form "models" - despite my undergrad being in physics.

It turns out in finance, "modelling" just means dividing one excel cell by another, saying "yeah sure, that growth will obviously continue for a good 3 years and then errr, it'll drop to x%", use a few sums and then boom, "model".

What a fucking joke.

I cannot believe the mystique around this industry, if society actually knew what a joke this job was - we'd get the same level of respect as the guy in the street handing out junk leaflets.

Apr 10, 2019

But why male models???

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Apr 10, 2019

Welcome to every job on the planet.

Apr 12, 2019

That's generally true in banking and why the smart people move on to PE or a hedge fund where you do actual modeling.

Apr 12, 2019

Weird thought but I find myself very similar to my grandma on a sewing machine when I model, especially when I type really fast or hit enter really hard. Different era different skill set I suppose.

Apr 12, 2019

.

Apr 13, 2019

This thread has definitely "triggered" some folks here.

Apr 13, 2019

oh well.. it triggered me as the one who used to be the lead modelling contributor for my company. Well, I guess if you show me your model and let us run it in front of the client 'on time' let me see if it can work seamlessly (if you do and you can build it in less than 5 hours - then I give you a thumbs up (just a simple corp val with few assumptions)).

I have seen those who admittedly are 'good' to the point of 'putting a book about modelling'. One day one of these persons shows me his model (for an interview) and oops.. just when I took a glance look, it cant even change the start date of the model seamlessly. Try building up a real working operating model from scratch my friend and those who think this way don't understand how your model can work in the first place.

True, modelling is not a rocket science - yeah it is not like trying to discover a black hole and interpreting its image, but what the 1st year analyst OR the older bosses who never work on one dont appreciate is the fact that it has to be able to be 'running seamlessly' with logic that is working (and represent the image of professionalism of the company). and as it is a client-driven model, you have to put your full thoughts on how to make sure it is error free, logically explainable and make sense. I have seen those that also cant model well and dont even understand the numbers they put - as they have this mindset - "ohh.. just putting this input cells and assumptions here and there and Shazam - there you go the NPV, the IRR, the EM, etc" - unfortunately, that is the worst way of learning.

To answer your question whether IB is a stupid job.. oh well.. go and ask yourself - if you are smart enough, you should not be even working for a job. I know it sounds harsh - but I have thought all along that - all jobs are a bit dumb anyway - see your friends who work in big corporations, are they doing something great? those at the upper echelons play politics, and those who are below rarely contribute in meaningful way. I guess, unfortunately, working life is like that. The question is just coming back to you - if you are smart, help us to be smarter then - help those in IBs on even elsewhere to work smarter - put features to your model, streamline your research so that proposals can be done faster, create ways to reduce redundancy / reinventing the wheels, and if you are smart and have time to complain here (I also think I need to stop now) - please use your time better to think of the 'smarter world' you dumb *ss

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Apr 13, 2019

Be thankful you don't work in F500 Corp Dev.

Or maybe I should be thankful for "your service" so that I can go home at 6 pm.

Apr 15, 2019

I use to think this too, but I got placed into the M&A group. Modeling is much more than what you've described, and I know you were being hyperbolic.

Apr 19, 2019
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