It is August, holiday season and time perhaps to step back and think about the big picture of financial modelling.
As the statistician George Box said:
“All models are wrong, but some are useful.”
Remember that models should never include circular references as nothing should ever depend on itself and we cannot crystal ball gaze. According to nuclear physicist Niels Bohr:
“Prediction is very difficult, especially about the future.”
When building models, aim for neat solutions, like Leonardo da Vinci:
“Simplicity is the ultimate sophistication.”
And don’t include unnecessary areas in a model as, according to Antoine de Saint-Exupéry:
“Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away.”
When under pressure to come up with a good solution, give yourself space to think and remember Albert Einstein’s advice:
“If I had an hour to solve a problem, I would spend 55 minutes thinking about the problem and five minutes thinking about solutions.”
And finally, to paraphrase George Orwell’s advice on writing:
“Never use a long formula where a short one will do.”