Eliminating unnecessary thinking time
Your time is expensive. The amount of it you waste on unnecessary thinking increases in proportion to the model's inconsistency and complexity.
One of my objectives in this book is to eliminate, or at least cut-down, unnecessary thinking time.
"Don't make me think" is a classic book on web design. The book's basic message is that what I do next on your website should be obvious without me having to spend a lot of time thinking.
British philosopher Alfred North Whitehead said, "Civilization advances by extending the number of important operations which we can perform without thinking about them".
What are the causes of wasted thinking time in financial models?
- Long, complex formulas. Spending time decoding long formulas with lots of off-sheet references is one of the significant contributors to wasted thinking time.
- Inconsistency. If the model is chaotic and inconsistent, you are required to spend a lot of time just trying to figure out what's happening. If you sometimes call a line item "Revenue", and then elsewhere in the model call it "Sales", and then somewhere else call it "Turnover", - you're causing yourself and your users to waste time trying to figure out if this is all actually the same thing.
- Poor labelling. If there are four different debt tranches and four different interest calculations, don't call them all "interest". You'll cause your users and yourself an annoying amount of wasted time. Be specific in your labelling.
As one of the early readers of this book pointed out, “Aside from wasted time, I also experience the fatigue of increased cognitive load. The brain is essentially in problem-solving mode rather than read and absorb mode.”
Comments
Sign in or become a Financial Modelling Handbook member to join the conversation.
Just enter your email below to get a log in link.