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: Monday, 4:00-6:00PM, during Spring B
(March 31 – May 12)
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 still somewhat 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.