So said John Kenneth Galbraith, the Canadian-American economist (1908 to 2006). I love this quote.
Don’t forget the true purpose of a model: it is merely a tool and should never be viewed as entirely accurate. But I repeatedly come across modellers who remain convinced that their model is giving them “the answer”. This search for certainty is pointless and also leads to circularity in Excel models.
As those who have been on my financial modelling courses know, I fully believe that no circularity is ever justifiable. Sadly, my view is an unusual and perhaps radical position. Many financial models include these horrors of modelling (and logic) in one form or another.
If you are one of these proponents of circularity, if you switch your calculation method to iteration, or if you live through the fog of copy paste iterative macros, please think again. I would suggest that you are in the category of forecasters “who don’t know they don’t know.”