A Ground Breaking AI Generated Podcast on Financial Modeling with Paul Barnhurst

This week we have a special episode for you. AI Generated Podcast. We'll go ahead and roll that clip.

You learn from your mistakes. Scott told this story about a model he built.

What did he learn from that experience?

Simplicity.

What are the secrets to building models that are not only technically sound, actually useful?

Scott breaks it down to four key pillars. Business acumen. Accounting Fundamentals. Corporate finance. Basic Excel Mastery.

What else makes a modeler stand out?

In Ian's book, it's about seeing the big picture. Asking the right questions is so, so important. People have strong opinions about vba. Ian's take its days are numbered.

From Notebook ln AI Generated Podcast. Will I be replaced? Well, let's roll the second one.

Basically, finance pros are ditching these like corporate gigs. So instead of feeling trapped, these fractional FPA folk, they're building their own businesses. Are robots going to take over our finance jobs?

It is a big one. And the good news is we've got some answers.

Hot topic in the modeling world.

Oh, I know what's coming. Circular references. Some people, they swear by them. Others, they're like plague.

So which is it?

Well.

Welcome to Financial Modelers Corner, where we discuss the art and science of financial modeling with your host, Paul Barnhurst. Financial Modelers Corner is sponsored by Financial Modeling Institute. Welcome to the Financial Modelers Corner. I am your host, Paul Barnhurst. This week we have a special episode for you that I'll be explaining here in just a minute, but as I've mentioned before, this podcast is where we talk all about the art and science of financial modeling with distinguished financial modelers from all around the globe. The Financial Modelers Corner podcast is brought to you by the Financial Modeling Institute. FMI offers the most respected accreditations in financial modeling. And that is why I earned my advanced financial modeler from the Financial Modeling Institute and it made me a better modeler. This week we do not have a guest for the show. We're going to have a little bit of fun. I had a guest cancel and I was trying to think, what could we do that would be different? For this episode, what I came up with is Notebook lm. That's a learning model that Google has come up with. NotebookLM allows you to load different content, YouTube videos, transcripts, whatever else, documents, and you could ask it to create a podcast episode from those documents. So I tried it several times. I did probably seven or eight different episodes. They're relatively short. Most of them are 10 minutes, maybe up to 20 or 30 sometimes. But I picked two that I thought would be interesting for you as a guest to listen to, and I'd love your feedback. Am I going to be replaced anytime soon or is my job safe based on these episodes? Let me know. Unfortunately, I couldn't train it to do my voice. So you get to listen to a man and a woman that are AI generated. The first episode we're going to listen to is a summary from an episode with Scott Rostand of training the street and in Bennett from PwC in Australia. So we'll go ahead and roll that clip and this, these two guests are talking about the highlights from that episode.

All right, so if you're the kind of person who, you know, practically dreams in spreadsheets, if Velocup is like music to your ears, you speak our lang. This deep dive, this is for you. We are going deep into the world of financial modeling with, get this, not one, but two absolute veterans in the field.

And we're going to uncover those career changing insights that they don't teach you in school.

Forget the textbooks. So our guides on this journey. First up, we've got Scott Rostand. He cut his teeth building models on Wall street, then went on to found training the street to teach the next.

Generation how it's done.

Exactly. And our second expert, we've got Ian Bennett. He leads a team of over 50. That's right, 50 modelers at PwC Australia.

And if that's not impressive enough, he's also achieved the. Think of it like the holy grail of modeling certifications.

Okay, hit me with it.

The master financial modeler designation. It's like the black belt of spreadsheets.

All right, so we're talking serious credibility here. From Wall street hotshot to a master modeler, these two have seen it all. And you know what they say, sometimes the best lessons.

Oh, absolutely. You learn from your mistakes. And let me tell you, both Scott and Ian had some doozies to share.

Oh, I bet. Lay it on me. What kind of modeling mishaps are we talking about?

Okay, so Scott told this story about a model he built. Now, this thing was so complex, so.

Tangled, like a bowl of spaghetti coat.

Even worse, trying to track down a single assumption in this thing was like navigating a maze blindfolded. You're clicking through endless tabs, following cell links, just praying for a miracle.

Been there. It's enough to make you tear your hair out.

Tell me about it. And for Scott, it was a real wake up call.

What did he learn from that experience?

Simplicity. Even in the world of complex finance, sometimes the simplest approach is the best approach.

Keep it simple, stupid. It's a classic for a reason. Alright, so that's Scott's horror story. What about Ian? What kind of modeling monster did he encounter?

Okay, get this. A 50 megabyte model.

Wait, 50 megabytes? That's like bigger than some of the programs I use.

No, you heard that right, 50 megabytes. This thing had been cobbled together over years, passed down from analyst to analyst.

Like some kind of digital heirloom.

And the problem was, nobody really knew how it worked. Not even the people who were supposed to be using it.

Talk about a recipe for disaster. What happens when a model becomes that unwieldy? What are the risks of letting something like that just fester in an organization?

Well, according to Ian, they were almost paid double their usual fee just to audit the thing, let alone rebuild it from scratch.

Oof, that's expensive.

Can you imagine the chaos? Wrong decisions being made, resources wasted. All because of this Frankenstein model that had spiraled completely out of control.

So a cautionary tale for sure. It makes you realize that a model's purpose, it can really morph over time. And if you're not careful, careful, things.

Can go sideways fast.

Exactly. So how do we, as either aspiring or seasoned modelers, avoid these pitfalls? What are the secrets to building models that are not only technically sound, but, you know, actually useful?

Both Scott and Ian agree that a strong technical foundation, that's crucial. We'll get into some Excel specifics later.

So the good stuff.

But those skills, they're just the starting point.

So it's like having a toolbox full of shiny new tools, but if you don't know how to actually use them, you're not going to build anything worthwhile.

Yeah.

So what separates, let's say, the tool user from the true craftsman, the master builder in the world of financial modeling.

Okay, so Scott breaks it down to four key pillars. Four essential skills for aspiring financial modelers. First up, business acumen.

And I'm guessing this goes beyond just, you know, knowing how to read a balance sheet.

Oh, absolutely. Scott stressed that you need to truly grasp how a company actually makes money. You know, what's their business model, who are their competitors, what are the trends in their industry? It's about seeing the story behind the numbers.

Okay, so connecting those financial figures to real world operations strategy.

Exactly.

What's the second pillar?

Accounting fundamentals. Now, before you tune out.

Yeah, because not everyone's an accountant.

You don't need to be a CPA to excel at financial modeling, but you do need to understand the language of business? How do assets, liabilities, equity, how does it all fit together? How does money flow through a business?

It's like learning the grammar of a language before you can write a novel.

Precisely. Now for pillar number three. Corporate finance basics. This is where we get into things like growth rates, interest rates, dividends.

The levers that drive a company's value.

Exactly. Understanding how those factors can impact businesses financial performance. And finally, Scott's personal favorite, we have Excel mastery.

All right, let's talk spreadsheets.

Now, Scott admits that he's not an Excel wizard in the sense of knowing every single function.

Sure, sure.

But he emphasized the importance of being incredibly fast and efficient. You know, keyboard shortcuts, mastering those core formulas.

Time is money, right?

Yeah.

Especially when you're billing by the hour.

Exactly. So those skills, they free up your mental bandwidth to focus on the more strategic aspects of modeling. The analysis, the insights, the stuff that truly adds value. Now, while Scott focuses on building those individual skills, Ian's expertise lies in managing large scale modeling projects.

Right, because he's leading this whole team over at PwC.

Exactly. And making sure that those models truly meet the, let's face it, often complex needs of his clients.

Which brings us to what I'm personally most fascinated by. That human element. Because it's not just about the numbers.

It's about the people behind the numbers.

Exactly. So how does Ian approach that side of things?

Well, he had some really insightful things to say about that. He believes one of the most important skills for a financial modeler is. Wait for it, Curiosity.

Curiosity. Okay, I'm intrigued. How does wanting to learn new things translate to, you know, building better spreadsheets?

So for Ian, it's about being eager to explore new tools, new approaches. You know, never shy away from a challenge. For example, he's incredibly excited about some of the recent advancements in Excel. Things like power query, power pivot, even something called lambdas.

Yeah, hold on. You know our listeners, we can't just drop a term like lambdas without at least a little bit of unpacking. What are those? And why should we care?

You're right, you're right. We can't just gloss over that. So, lambdas. Think of them as Excel's secret weapon.

Okay.

For making your models super flexible without, get this, without writing a single line of code. Yeah, they're pretty powerful. Maybe we'll save a deep dive into those for another episode. Fair enough, but trust me, game changer.

Okay, so, curiosity about new tools, new techniques. Got it. What else makes a modeler stand out.

In Ian's book, he really emphasized problem solving prowess. And I'm not just talking about, you know, fixing a broken formula here and there.

Right?

It's bigger than that. It's about seeing the big picture, right? Understanding your clients needs, even those unspoken ones.

Oh, I see. Reading between the lines.

Exactly. And then using your modeling skills to actually craft a solution, not just a spreadsheet.

So less Excel monkey, more strategic advisor.

A hundred percent. It's about using your skills to guide better decisions.

Got it.

And that's where you know those communication skills, that client management, all that comes into play. And actually, Ian shared a really interesting story that kind of highlights this point perfectly.

I'm all ears. Lay it on me.

So he had this client, right? And he built this, like, crazy complex model for them.

Okay.

And. And technically, it was flawless. Like, it did everything they asked for down to the last detail.

Sounds like a well done. What's the problem?

The client refused to pay for it.

Hold on. Wait. Why? What happened?

Because. And this is the key. Ian hadn't fully grasped what success actually looked like for this particular client.

So the model, it. It missed the mark somehow.

They had this secondary objective, something they didn't explicitly say, but it was really important to them.

It's like writing a beautiful symphony, but in the wrong key, you know, perfect analogy.

And that's why Ian stresses this. Asking the right questions is so important. It's not enough to just be like, okay, what do you need model to do?

Right. Right.

You got to dig deeper. Ask them, what does success look like for you?

Subtle shift in language. But it could make all the difference, because you're right. Sometimes, just by reframing the question that way, you unlock all this gold mine, this gold mine of information totally. And it's about understanding, really, their motivations, what's driving their decisions. Sometimes even those things that they're not saying out loud, you know?

Yeah.

It reminds me of this one time I was in this meeting.

Oh, you got a story. Tell me, tell me.

It wasn't quite as exciting as, you know, running into DMX at Denny's, but it was eye opening. We were talking about this new product launch.

Okay.

And on paper, the numbers looked fantastic, right? But there was this tension in the room.

Interesting.

This hesitation, unspoken. And finally, someone just kind of paused the conversation, and they're like, hey, what's keeping us up at night about this? And that's when the real conversation started.

There it is, Right?

It turned out there were all these underlying fears about competition, about the market, that no one had voiced until that point.

Wow. That's a perfect example of what Ian calls the silence technique.

The silence technique. Okay, now you have to tell me more.

Okay, so it's so simple, but it's powerful. So, you know, after asking a client about their definition of success. Right. Ian, he deliberately pauses. He embraces the silence.

He just sits there quietly.

He lets the client fill that space. And it's amazing what comes out in those moments. You know, the client's true priorities, their concerns, those unspoken needs.

It's like they say, sometimes you have to stop talking to actually hear what someone is saying. So with all this talk about, you know, client whispering and sock skills, we can't forget about the engine that's driving all of this. We got to talk about Excel itself.

Yes. And buckle up, spreadsheet fans, because Ian had some pretty exciting things to say about the future of Excel. He's really hyped about this thing he calls the Power Stack.

The Power Stack. It sounds intense.

It is. It's like imagine Excel as this command center.

Okay?

Right. But now it's hooked up to all of these other powerful tools. We're talking Power Query, Power Pivot, Power bi, Power Automate, Power Apps.

Wow, that's a mouthful.

And now there's this new thing, this potential game changer called Fabric.

So Excel's gone from like a solo act to having a full band backing it up.

Exactly. And these aren't just flashy add ons. These tools can fundamentally change how you work. Automating tasks, visualizing data, even building, like, custom applications all within Excel.

I'm not gonna lie, this is getting me kind of excited. What else got Ian buzzing about the future of Excel?

He's a huge fan of those dynamic arrays and lambdas we were talking about earlier.

Right, Right.

He sees them as transformative for building really sophisticated, adaptable models.

Like Excel's been hitting the.

And. And here's what I love. It wasn't all just, you know, flashy new stuff. He also geeked out about this, like, seemingly small feature, something called the Stale formulas indicator.

Stale formulas. That doesn't sound very exciting. I mean, it sounds kind of technical.

It is, but it's like genius in its simplicity. Imagine this. You can instantly see which cells in your model have actually calculated and which ones haven't.

Okay, now that you put it that.

Way, Lifesaver for debugging, especially for those massive models Ian's working with.

Right, right. I can see how that'd be super helpful. Now, I know both Scott and Ian are you Know, bullish on the future of Excel.

Oh yeah.

But they also had some pretty strong opinions about specific modeling practices.

Oh, absolutely. Some hot takes in there. Like Ian, he has a strict no circular references policy. A hard line in the sand.

Interesting, because I know a lot of modelers who swear by a well placed circular reference. What's his reasoning there?

He's all about keeping things clean. Circular references, they might seem convenient in the moment, but they can make your model a real pain to audit and understand later on. Especially when you come back to it after a while.

Right. Transparency and auditability, super important. Especially with, you know, model risk being a bigger and bigger deal these days.

Exactly. And speaking of things, people have strong opinions about vba.

Oh boy. Yeah. Love it or hate it, right?

Ian's take its days are numbered.

Really?

With the rise of cloud based modeling and things like Office scripts, that old school macro language, it's starting to look a little prehistoric.

So maybe if you're just starting out, focus your energy on those newer technologies.

Probably a good bet. Now another debate that always gets people fired up. Horizontal versus vertical models. Which layout is king?

Oh, the age old question. What our experts have to say.

Scott, being the educator, he leans towards horizontal models, at least for teaching.

Makes sense.

Easier for beginners to wrap their heads around, you know, but he's not dogmatic about it. Both layouts have their place, depending on the model who's going to be using it.

All that it's about having the right tool for the job.

Exactly. Speaking of the right tools, those dynamic arrays we talked about earlier, the ones Ian was so excited about.

Yeah, yeah. Starting to think those are a pretty big deal.

They are. Ian is all in on them. Thinks they're game changers. Simplifying calculations, making models more flexible.

It's like the difference between building a house brick by brick versus using like prefab walls.

That's a good way to put it. And you know what else they both agreed on? No external workbook links.

Oh really? I'll be honest, I've been guilty of using those in the past. What's the issue there?

They introduce way too much risk. What happens if one of those linked workbooks books gets moved, renamed or deleted? Oh, your whole model goes kaput.

It's no good.

Plus auditing becomes a nightmare.

So keep those workbooks self contained.

Got it. What about named ranges? Ian's a big fan. Says they make formulas way easier to understand, easier to audit. Especially in those monster models he's dealing with.

Yeah, that makes sense. Especially when you're Trying to decipher a formula six months later. Any specific tips on using them effectively?

He did have one Reserve those named ranges for multi cell ranges, not single cells for jumping between sheets. He's got a whole system with cell references.

It's those little details that can make a big difference for sure.

Now how about this? Formal modeling standards essential or just nice to have?

What do experts think?

Ian? He's all about standards. PwC, they have their own whole set of modeling guidelines, very comprehensive. And he believes in that strongly. Whether it's your company's own standards or an industry recognized one, it just, it makes everything cleaner, you know, reduces errors, makes models easier to understand, easier to audit.

It's like having a common language, right? Makes collaboration smoother.

FPA guy here. And as you know, I am very passionate about financial modeling in the Financial Modeling Institute's mission. I have been a huge fan of the FMI for years and I was super excited when they decided to sponsor the Financial Modelers Corner. I recently completed the Advanced Financial Modeler certification and loved the entire experience. It was top notch from start to finish. I am a better modeler today for having completed the certification. I strongly believe every modeler needs to demonstrate they are a qualified financial modeler. And one of the best ways to do that is through the FMI's program. Earning the accreditation will demonstrate to your current and future employers that you are serious about financial modeling. What are you waiting for? Visit www.fminstitute.com podcast and use code PODCAST to save 15% when you enroll in an accreditation today.

Okay, so the big question, Will Excel ever die?

Both Scott and Ian agreed, not anytime soon. New tools will come along, sure, but Excel's just got so much going for it. It's flexible, everyone uses it. It plays well with other programs.

The cockroach of software. It'll outlive us all right.

But that got us thinking. What about AI? Will robots be building our spreadsheets for us someday?

Ooh, getting futuristic, right?

It's a valid question. Both Scott and Ian, they acknowledged AI is advancing fast. And yeah, it's going to have an impact.

But they don't see it like replacing humans entirely.

Exactly.

Yeah.

Ian's take is that AI, it'll get really good at those more technical tasks. Cleaning up data, maybe running some basic forecasts.

But that just frees us humans up to focus on the stuff that requires, you know, that human touch, the creativity, the critical thinking, the emotional intelligence, interpreting.

The data, telling the story. All of that.

Exactly. It's not man versus Machine. It's more like, how can we use these tools to, you know, enhance our own abilities, deliver even more value?

I like that. So a few more rapid fire questions before we wrap up. Self protection. Yay or nay?

Ian says it depends. Who's the audience? What's the purpose of the model? If you need tight control over the inputs, lock it down. But if you're collaborating, a little freedom can be good.

Finding that balance. All right, last one. Do our experts believe that financial models are the number one corporate decision making tools?

Ian's answer surprised me. He's like, models are essential, but they don't make the decisions. The number one tool in his book, storytelling.

Because the numbers are just part of the equation. Being able to communicate those insights in a way that resonates.

That's what drives action.

Exactly. So as you build your next spreadsheet masterpiece, remember, it's not just about the numbers. It's about understanding the why behind the what. It's about those human connections, but asking the right questions and sometimes just being quiet and letting the answers come to you. And as we look to the future, it's about embracing those new technologies like AI, and figuring out how we can leverage them to enhance our own skills and become even better, more valuable financial modelers. So keep learning, keep experimenting, and who knows, maybe someday you'll be the one sharing your modeling wisdom with the world.

Let me know what you thought of that first episode from Notebookln AI generated podcast. Will I be replaced? Well, let's roll the second one. I loaded probably 10 or 15 different clips into NotebookLM, sometimes full episodes, sometimes short clips from different guests, and it randomly would just come up with different topics that it thought made a good podcast. Based on the episodes, this one is about fractional CFOs and how that's a growing area, how a lot of finance people and financial modelers are going into work for themselves to be a fractional CFO. It's only about 10 minutes long, and so we'll go ahead and roll that clip here, and I hope you enjoy it.

Ever feel kind of stuck at work, like just going through the motions?

Yeah, that rut.

Exactly. So today we're diving into this world of fractional fpa. Basically, finance pros are ditching these, like, corporate gigs for more freedom and apparently more impact too.

Right, right.

We've got a ton of clips from that FP and a guy YouTube channel. Are you familiar?

Yeah. Love their stuff.

So they've been interviewing a lot of these seasoned finance professionals, the ones who've actually Made that leave.

It's a hot topic. And it's interesting because it's not always just about wanting more flexibility. Although, I mean, who doesn't want that?

For sure.

But there's this, like, deeper shift happening, how we view work, especially in finance.

Yeah, big time. And we keep hearing about this whole great resignation thing. Apparently finance people are leading the charge.

It's true.

One stat that really blew my mind. 70%, 7 0% of people think the whole budgeting process is, like, totally broken.

Yeah, I've seen that.

So what's the deal? What's going on there?

Well, it's not just budgeting. Right. It's the whole system.

Okay. Okay.

Traditional finance roles, they can be so rigid, hierarchical, you know the drill.

Stuck in a silo, churning out reports.

Exactly. You rarely see the impact.

Right.

And it made me think of Randy Brown's story. You know, he was one of the professionals interviewed.

Oh, yeah? What'd he have to say?

So he was talking about, like, literally escaping his tiny office. It was like a utility room. Ductwork in the background, the whole bit.

Wow. So glamorous.

Right? And now he's thriving as a fractional consultant. Loves it.

So instead of feeling trapped, these fractional FP and A folks, they're building their own businesses, Right. Choosing their own clients and actually having, like, a direct impact on the bottom line.

Yes. And you know what comes up again and again in these interviews?

What's that?

Even with the perfect financial model, can't force a bad deal to be profitable.

Ooh. Can't squeeze blood from a stone. Right?

Exactly. Randy Brown, he actually refuses to work with real estate clients for this very reason.

Oh, interesting. Why is that?

He's tired of being the fall guy. Trying to make deals work on paper when, like, the fundamentals are flawed from the start.

Right. I can see that. It's tempting, though, right? Especially with real estate. A financial model can seem like this magic wand. Just make the problems disappear.

And that's where real expertise comes in. You have to understand the business, what drives it. And sometimes you just got to tell the client straight up, this isn't going to work, no matter how we model it.

Be the voice of reason.

Yes. A trusted advisor, not just a number cruncher.

Speaking of numbers, let's talk about everyone's favorite spreadsheet. Excel.

Ah, yes, Excel, the bread and butter.

But here's the thing. I get the feeling these experts, they don't just use Excel. They've got these, like, Jedi Master skills, unspoken best practices that, honestly, most of us haven't even considered?

Absolutely. And not your typical format, your cells, tips either. We're talking next level stuff that can make or break your model. Like one expert, he was adamant about never ever sending VBA code to anyone outside your team.

Oh, smart. I've been on the receiving end of some VBA nightmares, let me tell you. What's the workaround there?

Create a separate version, VBA free, just for sharing. It's a little extra work, but trust me, worth it.

Good tip. And what about linking to external workbooks? That's gotta be up there on the danger list, right?

If you're preaching to the choir, never do it. At least not directly to a workbook you don't own.

Why is that?

The owner, they reformat, add a few rows, delete some columns, whatever, boom, your model's toast.

Makes sense. So how do you avoid that?

Copy the data you need into your own workbook and then link to that. You're in control that way.

Control. I like it. Another thing that stood out was starting with like fixed values in your model. Why is that so crucial?

This was a big one for Ian Schnorr, another expert they interviewed all about starting with what you know, those fixed values and working backward. It gives you a solid base.

Yeah, like building on solid ground, not quicksand. Gotta have that foundation.

Exactly. And once you've got that, resist the urge to overcomplicate things.

Oh, so true.

No need for these crazy complex models just to show off your Excel skills.

Keep it simple.

Exactly. And another thing, be your own worst critic. You know.

Well, even experts make mistakes.

Of course. Which is why you always going to double check your work, scrutinize your assumptions and approach your models with a healthy dose of skepticism.

Catch those errors before they snowball.

Yes, and that ties into another key thing. Understanding your audience.

Oh, right. Who are you building this thing for?

Exactly. Listen to your users. Figure out what they need and then make sure your model answers those questions clearly and simply. Sometimes that means pushing back a little, offering them a better solution than what they initially asked for.

Be an advisor, not an order taker. Kind of like that 8020 rule. Focus on those key drivers, the ones that actually move the needle.

Couldn't have said it better myself. Speaking of the big impacts, what about AI David Brown? He even compared ChatGPT to having a really smart personal assistant.

That's the million dollar question these days, isn't it? Are robots going to take over our finance jobs?

It is a big one. And the good news is we've got some answers. But first Well, I can tell you, no need to polish up those resumes just yet.

Oh, good. So no robot overlords?

Not quite. Look, AI, at least for now, it's more like a really powerful assistant.

Okay, so what kind of assistants are we talking here?

Think about this. Instead of spending hours and hours, you know, just gathering data, historical data, right? Painstaking AI tools could pull all that in seconds. Or say you need a basic model, a base build, AI could potentially, you know, just generate it, and then you're free to focus on the really interesting stuff. Customization, analysis, that kind of thing.

That's amazing. But doesn't all this automation, I don't know, make those core modeling skills kind of obsolete?

That's the million dollar question, right? Finding that sweet spot. How do we leverage AI to streamline things, but make sure humans are still in the driver's seat for the critical thinking, the big decisions?

So it's more like humans teaming up with robots?

Exactly. And it's not just AI that's shaking things up, by the way.

Oh, right. What else?

Excel itself is evolving like crazy.

Oh, right. We were just talking about all the cool AI stuff, but you said Excel's got some tricks up its sleeve, too.

Yeah, dynamic arrays, lambda functions, they're game changers.

Okay, those ring a bell. But remind me, why should I be excited about dynamic arrays?

No more dragging formulas down a million rows.

Oh, hallelujah.

Seriously, Dynamic arrays, they auto resize those formulas for you. No more clunky workarounds.

No more errors either. Okay, but lambda functions, those still sound a little intimidating, to be honest.

It's simpler than it sounds. Think of it as building your own custom formulas.

Wait, so I can go beyond what Excel already has?

You got it. It's all about building more powerful, more efficient models tailored to exactly what you need.

So we're not limited by Excel anymore. That's huge.

That's the thing, right? The whole financial modeling world, it's always changing, evolving. And to stay ahead, you've got to be learning constantly. And it's not just about, you know, keeping up with the Joneses. It's about unlocking new levels of, I don't know, efficiency, insight. Ultimately, it's about having a bigger impact.

Which is what it's all about, right? Making a difference. But before we get too far ahead of ourselves, there's one more thing we got to address. Bit of a, I don't know, a hot topic in the modeling world.

Oh, I know what's coming. Circular references.

Buckle up, listeners. Things are about to get a little Circular.

Some people, they swear by them, others they're like the plague.

So which is it? Useful tool or recipe for disaster?

Well, like most things in life, it depends.

So, about these circular references, they sound kind of scary, honestly. Like one major spreadsheet's fine, the next, meltdown.

Yeah, you gotta be careful. But they can be really useful too, really, for solving those, like, really intertwined problems, when the values, they depend on each other.

You know, Give me the example.

Like calculating interest that compounds on itself.

Right.

Circular reference. That's the elegant way to do it.

So it's not just about being fancy with your formulas. Sometimes it's the best, most efficient way to model something.

Exactly. But, and this is important, you gotta use them carefully. Like really carefully. Otherwise things can get messy fast. Inaccurate numbers, and your model's all over the place.

Yikes. So how do you walk that line? How do you know when the circular reference is like, justified? And then how do you even use it safely?

Think about the why first. Before you even start building. Ask yourself, is this a situation where something truly depends on itself, or am I just trying to be clever?

Right, right.

If it's the second one, find another way.

Don't get too cute with it. Okay, but let's say you've thought it through and you're like, yep, circular reference is the way to go. What then? How do you avoid disaster?

Transparency and control. Document everything, why you're doing it, how it affects the calculations, the whole nine yards.

So someone else can follow your logic.

Exactly. Plus it'll remind you later when you've completely forgotten what you did.

Like a trail of breadcrumbs. Good idea.

And don't forget, Excel has those built in tools for this stuff. Iterative calculations, they give you way more control over how those circular references are handled.

So they're powerful, but you got to treat them with respect.

Exactly. And that actually reminds me of like the biggest takeaway from all these interviews.

What's that?

No matter how technical we get with the AI, the fancy formulas, the human element, that's still the most important.

A model is only as good as the person building it, right?

100%. We talked about AI, dynamic arrays, all this stuff, but nothing replaces really understanding the business, critical thinking, asking the right.

Questions, seeing the story behind the number.

Yes, and that's a skill that never goes out of style.

So true. Well, that about wraps up our deep dive into fractional, FP&A, and the whole world of financial modeling. I don't know about you, but I'm feeling pretty inspired. It's like you need that technical side for sure, but you can't forget about the human element.

Couldn't agree more. The future is for those who can do both. You know, embrace the new tools but never lose sight of those fundamental principles. That's what drives good decisions.

Absolutely. So to all our listeners out there, we'll leave you this. What's the one question, the most important question, that every financial model, no matter how simple or complex, should be designed to answer? Think about it. Let us know what you come up with over on social media. Until next time, Happy Modeling.

Thanks for joining me for this special episode showing how AI continues to advance and hopefully convincing you that, at least for the time being, it's worth having a host and actual humans interacting versus the machines. They may be coming for jobs, but I found it's not there yet. I still kind of found it fun to see how they thought about these episodes. Hope you enjoyed it. And if you enjoy AI and technology, check out Future Finance podcast by Glenn Hopper and myself where we talk a lot about AI and technology. And also remember, these shows are brought to you by the Financial Modeling Institute, the most respected accreditation globally in financial modeling. You want to show your employers that you're a great financial modeler? Go ahead and earn your afm, the Advanced Financial Modeler, and let me know in the comments. Email me, reach out to me what you thought of this episode. I'd love to hear your feedback. How did AI do? Was it good? Was it terrible? Was there any new takeaways you got from this episode or please just don't do it again. Let me know in the comments. And thanks for joining me and humoring me as we tried something new this week. Thank you. Financial Modeler's Corner was brought to you by the Financial Modeling Institute. This year I completed the Advanced Financial Modeler certification and it made me a better financial modeler. What are you waiting for? Visit fmi fminstitute.com podcast and use code PODCAST to save 15% when you enroll in one of the accreditations today.