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Excel

More lies have been told on Excel than in Word. That’s the joke told to highlight the power of data and numbers to manipulation. On a serious note, is Microsoft Excel the most powerful software made available to the everyday person?

Sure, knowing how to code is pretty powerful but nothing is as accessible as Excel. Small-business owners can balance books in seconds with guaranteed accuracy. Stock price models can be built on a single page. Now 36 years old, excel still runs the world as it passes 750million users.

A Microsoft commissioned study found their suite of Office 365 offerings saved workers an average of 90 minutes a week. But this isn’t an ad for Microsoft. Aggregated small gains can quickly be wiped out with big losses.

In 2010, a paper called Growth in a Time of Debt  was published by two Harvard Professors. It concluded that economic growth stagnated once debt reached 90% of GDP. A finding supporting austerity (cuts in government spending and increase in taxes). The paper was heavily referenced and influenced government policy decisions. Except all the modelling was wrong. Local student Thomas Arnherst tried for a whole semester to replicate the results and couldn’t. Until he found, the Harvard professors had failed to include 5 data points in a mean calculation. A simple Excel click and drag error. Read the full story and its implications here.

In 2012, JP Morgan infamously booked a US$6.2b loss. After building US$157b in Credit Default Swap positions, a market turn caused significant losses for the bank. It turns out, one of the contributing factors was a misconfigured Value-at-risk model. VaR tests how much a trade is positioned to lose based on moves in the market. This model depended on copying and pasting data across spreadsheets. You can guess what happens next. The model underreported risk which contributed to the loss. This is known as the London Whale affair.

Again in 2010, British spy agency MI5 accidentally tapped the wrong phones due to a formatting error. The expected conversations about crime probably revolved around football results instead. The spreadsheet included ‘000’ as the final digits of all number. All collected material was promptly destroyed.

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