The Perfect WACC

After I finish my first read of a MBA case, there's nothing I like to do better than to break out Excel and start building a model. Whether it's a forward P&L statement, a discounted cash flow model, or the economics of customer loyalty, I feel most comfortable once I have the numbers modeled and moving. And so far, that approach has paid off.

And now I'm going to stop doing that.

Quantitative factors matter. Accuracy matters. But they aren't everything; as Professor Blemaster said during one Mergers and Acquisitions case: "The (Weighted Average Cost of Capital) in your (Discounted Cash Flow) valuation is important. But getting the perfect WACC doesn't mean you'll make the right decision."

I am going to spend more time pulling apart the larger strategic implications, underlying assumptions and potential execution of these business challenges. In group settings, I'm going to stop leading the charge against the quantitative hills and instead volunteer for the qualitative ones. There will still be math involved, but I'm comfortable enough now with the frameworks and models that I can do most of the calculations by hand. By forcing myself to do so, I will avoid constricting my field of vision and will be able to better target my quantitative skills to the specific calculations that need it. In short, I can make better decisions.

After all, as Professor Homa reminded me, I only have another 6 months of paying to play; after that I'm playing for pay. And on a day when the world has changed for the better, it seems only appropriate that I try to better myself along with it.