COURSE NUMBER: MBA236G.2B
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, 4:00-6:00 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.