In my house, there are two adults, four kids, a dog, two cats, and 16 chickens.
Six humans living together with active lives in the muddy English countryside is a recipe for a lot of laundry.
In particular, there are a lot of socks.
We each have around 20 pairs. With six of us, and each of us thankfully having two feet, there are about 240 socks in the house. Half of those socks, those belonging to me and my two sons, look very similar.
With my wife and I both running businesses and dealing with the logistical complexity of managing a rural taxi service for socially active teenagers, sorting socks into pairs is not something we can make time for. And it's not that we haven't tried.
And so, my sock drawer was always a mess of random, unmatched socks.
My random unmatched socks, my sons' random unmatched socks. And occasionally, a random unmatched sock belonging to my 10-year-old daughter.
Every morning, I'd open my sock drawer and sigh. I knew if I wanted two socks the same, I'd have to hunt through the drawer, hoping to find two that looked alike.
I know. First world problems.
However, every day, I was wasting time on the process.
Not a lot of time, but enough to annoy me.
Even if it was 3 minutes a day spent on sock frustration, that's 18 hours a year. A whole day a year spent looking for socks. One whole day. Every year of my life.
And more than that, it meant starting every day with an irritation.
When you live with four kids, a dog, two cats and 16 chickens, there are already enough irritations.
Being an utter geek when it comes to workflow and productivity, I realised that this was a systems problem.
A systems problem with three components.
- How to tell my socks from those of other people in the house
- How to keep matching socks together through the laundry process
- How to find those matching socks in a jumbled drawer of socks
Here is my solution.
I threw away all my existing socks and bought ten pairs of identical, bright orange socks.
My problem was instantly solved.
It's now possible to look at any pile of laundry and immediately see my own socks.
And because they are all the same, keeping pairs together no longer matters. Any of my socks will match with any others.
My workflow has gone from 3 minutes of frustration to 10 seconds. I put my hand in the drawer and pull out any two socks.
I have saved a day a year by eliminating unnecessary thinking time.
And I have bright orange socks into the bargain.
What does this have to do with financial modelling?
You didn't buy this book to learn about my socks.
You bought this book to get better at financial modelling.
And here's what I've learned about that over the years:
- Good modelling is about having a smooth and easy workflow.
- Workflow is one part of a good system. Good structure is the other part.
- Standardising key components of a system helps to eliminate unnecessary thinking time.
- Eliminating unnecessary thinking time leaves more time for what really matters.
- In our case, that means more time for analysis and supporting better decision making.
- Which is why we build models in the first place.
These elements underpin everything I'm going to teach you in this book. And everything I've been teaching to analysts in the world's leading banks, project developers and corporates for the last 10+ years.
This is not a grand unified theory of financial modelling.
My aim is to share the components of a modelling system that I've found useful and that I've seen others benefit from.
Having a good system will help you build better models, in less time, with fewer errors.
You might find that the system works for you right out the box. If so, great. If not, feel free to adapt it to suit your style.
There are many modellers who would tell you to do the exact opposite of many of the things I'm recommending in this book. And that's OK. There are lots of ways to create a good system.
My hope is that you'll come up with ways to improve the system.
When you do, I'd love to share them at the book's website - https://www.financialmodellinghandbook.org
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