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: Tuesday, 4:00-6:00 PM (Spring B, March 19 – May 7)
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.