An ex-colleague of mine once worked for one of the world’s best known private equity funds as an analyst after graduating from Harvard.
His job was to make financial models for billion-dollar acquisitions that the fund would typically do. For one such deal in the education space, he build an elaborate ground-up model, school-by-school.
Based on that, he came up with the value of the company being acquired. But when he presented it to his team, the partner (his boss) came up with a different number.
And then, my ex-colleague reverse-engineered his model to come up with the price that his partner wanted to see.
When I heard this, I was wondering — what’s the point of hiring Harvard undergrads to do this?
Of course, these transactions require intuition and judgment, and spreadsheets alone can’t tell you anything. But why this pretence of building a model? It is not even like they were uncovering the assumptions underlying their number.
And by the way, while this may not be routine, it is also not as rare as you might think.
I have often wondered, after acquiring world’s most coveted degrees, why do people do such meaningless work? I don’t have an answer.
If you are graduating from top schools, watch out — big brands and salaries are really good to have. But if your work is meaningless, at some point, you might have a burn out.
Because we can fool everybody but our own mind can’t be fooled.
– Rajan