COURSE NUMBER: MBA236G.1B
COURSE TITLE: Designing
Financial Models that Work
UNITS OF CREDIT: 1
INSTRUCTOR: Sarah Tasker
E-MAIL ADDRESS:
tasker@haas.berkeley.edu
MEETING DAY(S)/TIME:
Mondays, 2:00-4:00 PM (Fall B, October 20 – December 1)
PREREQUISITE(S):
Intermediate Excel skills along the lines of what is covered in Essential
Workbook Techniques, Power of Calculations, and Data Analysis with Functions at
Haas Computing Services.
CLASS FORMAT: In-class
exercises with some lecture and discussion. Students are required to bring a laptop
computer to every class.
REQUIRED READINGS: None
BASIS FOR FINAL GRADE:
In-class exercises, homework, quiz, class participation
ABSTRACT OF COURSE'S
CONTENT AND OBJECTIVES:
If your goal is to learn how to build big, complicated Excel
spreadsheets employing sophisticated methodologies, STOP – no need to read
further – this isn't the course for you.
The premise of this course is that spreadsheet
financial models are often too big, too complicated, too intimidating, and too
hard to follow (and therefore usually too buggy) to be of much help to real
people in real world organizations. Instead, people need to be able to play
with beautifully clear and elegantly simple representations of the economics of
the project/product/deal/organization they're pondering, with the objective
being insight and shared understanding. In this course we focus on designing
spreadsheet financial models that work because they are small (i.e., fit easily
on one or two laptop screens), simple (i.e., involve only basic arithmetic),
easy to understand (i.e., a non-MBA can follow the thinking shown with no
struggle and no assistance), and fast to build (i.e., in an hour or two, once
you get the hang of it.)
We tackle case studies ranging from pricing a
professional services consulting engagement to costing a semiconductor chip to
opening a B&B to starting a software company. The actual computations are
rarely the challenging part – the challenge is issues like how to get traction
on the problem in the first place, how to make simplifying assumptions, how to
track down estimates for input variables, and then, having identified a
structure and inputs for the model, how to "tell the story" visually
and mathematically in the spreadsheet so that the model is likely to be clear
and bug-free. We draw on many sources of wisdom in this quest for clarity/accuracy/impact,
including the disciplines of information design, software development, and the
sociology of model use. And since good design is emergent, requiring feedback
and iteration, we spend a significant amount of class time doing "triangulation
checks" and "usability testing" during which, in various
combinations, we provide feedback about which aspects of a draft model seem
confusing or buggy.
This is a great course to take if you either
a) are comfortable with Excel but have minimal modeling background and are
looking for a non-intimidating way to get started, or b) have significant
exposure to financial modeling but are frustrated by how confusing and
unhelpful your (or your colleagues') models have been and are looking for ways
to improve clarity/accuracy/impact. Please note: this course is still in
"beta" – meaning that it's new and under development. You're doing a
great service to future students by test driving the material, but be aware
that it's experimental, and your flexibility and understanding if you sign up
is therefore most appreciated!
BIOGRAPHICAL SKETCH:
Sarah Tasker
cares deeply about alleviating perplexity, especially when it comes to
financial modeling. She has spent the last decade teaching modeling to Haas
students, Cornell students, and many new investment banking hires. She won the
Apple Teaching Award at Cornell and the Cheit Award
for Excellence in Teaching at Haas. Her undergraduate and doctoral degrees are
both from MIT.