Episode 10 - Mastering Finance: Navigating CFA Institute and CFA Program Changes with Rob Langrick

Written By Paul Barnhurst

Show Notes

Welcome to Financial Modeler's Corner (FMC) where we discuss the art and science of financial modeling with your host Paul Barnhurst. Financial Modeler's Corner is sponsored by Financial Modeling Institute (FMI)  the most respected accreditations in Financial Modeling globally. In this episode, Paul Barnhurst is joined by Rob Langrick.

 

Rob Langrick, CFA, CIPM, is the General Manager of the CFA Program. He was previously Head of Practice Analysis, overseeing annual curriculum updates to the CFA Program.

Before joining CFA Institute, he lead Bloomberg’s finance education division, where he built and launched Bloomberg’s certification product. He began his career as a sell-side equity research analyst in London and, after earning his MBA from Dartmouth worked in the private equity diligence unit of Bain & Company in New York.

List to this episode as Rob Shares:

  • His learnings from the worst models he has seen in his career  

  • His experience as an Equity Analyst

  • The CFA Program and why they modified the program to include new content

  • The value of FMI's financial modeling content to the new CFA Program

  • The importance of learning about Financial Models

  • His views on why financial models as one of if not the most important corporate decision making tool

Sign up for the Advanced Financial Modeler Accreditation or FMI Fundamentals Today and receive 15% off by using the special show code ‘Podcast’.

Visit www.fminstitute.com/podcast and use code Podcast to save 15% when you register. 

Go to https://earmarkcpe.com, download the app, take the quiz and you can receive CPE credit. 

Quotes

“Often the best way to learn something is to teach it to others.”

“Modeling is just another branch of logic, reason and rationality.”

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In today’s episode: 

(00:22) Intro;

(00:48) Welcoming Rob;

(01:00) The worst financial model Rob has ever seen;

(02:33) Rob’s key learning experience from the worst financial model;

(04:20) Rob’s background;

(06:28) Rob’s experience as an Equity Analyst;

(08:53) What motivated Rob to move into Education;

(10:27) What lead Rob to join the CFA Institute;

(11:55) Roles Rob had at CFA;

(14:33 - 15:19) Validate your Financial Modeling Skills with FMI’s Accreditation Program (ad);

(15:20) Changes to the Practical Skills Modules;

(16:43) People’s response to change;

(19:20) Changes apart from Practical Skills;

(22:22) The main benefit to Charter Holders;

(24:55) Experience with FMI;

(26:24) Why is it important for everyone in finance to learn the basics of financial modeling;

(28:33) Rapid Fire;

(32:47) Advice to college students;

(34:27) Connect with Rob;

 Transcript

FMC_S1Ep10_Rob Langrick_Transcription

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Host: Paul Barnhurst

Welcome to Financial Modeler's Corner, where we discuss the art and science of financial modeling with your host, Paul Barnhurst. Financial Modeler's Corner is sponsored by Financial Modeling Institute.

Welcome to Financial Modelers Corner. I am your host, Paul Barnhurst. This is a new podcast where we talk all about the art and science of financial modeling with distinguished financial modelers and educators from around the globe. The Financial Modeler's Corner podcast is brought to you by Financial Modeling Institute.

FMI offers the most respected accreditations in financial modeling. For this episode, I'm really excited to welcome Rob Langrick to the show. Rob, welcome to the show.

Guest: Rob Langrick

Thanks, Paul. Delighted to be here.

Host: Paul Barnhurst

Yeah, no, really excited to have you. So we like to start every episode off with a fun question.

During your career, I'm sure you've seen a few financial models. Tell me about the worst model you've ever seen.

Guest: Rob Langrick

I started my career inauspiciously in a way it was the dot com boom. And I was on the telecoms team, lucky me. One thing that was hot at the time was the alternative network providers, the altnets, as they were called.

And so all this fiber was being laid around the world, getting ready for massive internet traffic, which did appear, but 10 years later. And so obviously they were spending a lot of money on CapEx, but then the revenue wasn't coming in for these providers. And so what you had happening was mergers, reorganizations, write-downs, restructurings, and so on.

The nightmare of analysts. And that was me, a new analyst. Trying to model them not realizing this was not normal. And so I inherited a model and I couldn't figure out what was going on, I was kind of punching in all the historic numbers and getting the balance sheet to balance. It always kind of seemed to miraculously balance and then finally I realized that that was because the assets was equal to the liability plus equity as in it had been coded to balance so, yeah, that was, you know, maybe the person who used to have the model that was their best solution to this conundrum where they couldn't make the numbers add up.

So that was the worst model I've ever seen.

Host: Paul Barnhurst

Yeah, I could imagine trying to model in a time when there's low revenue and lots of investment. Is challenging. And then get a model where they've just plugged it and you're always like why is this always balancing? Usually, I have a problem with it balancing.

Guest: Rob Langrick

Exactly.

Host: Paul Barnhurst

So what was the takeaway from that experience? What was the learning for you?

Guest: Rob Langrick

Well, it was a baptism of fire to equity research, that's for sure. And I think the big lesson for me was when you're analyzing a company, going through the K's and Q's, and you just can't make it work, there's a reason for that.

They don't want you to understand what's going on, essentially. I was too sweet and innocent though, I didn't realize that. I thought there was something wrong with me. The other thing I learned as well was that the firm I was at wasn't much of a training shop. And so it was really at that point that I became an autodidact, a kind of self-learner.

And that was the start of my kind of journey into lifelong learning.

Host: Paul Barnhurst

Great. I like the lifelong learning and I agree with you. There are times when you're reading something and you're like, all right, they're trying to keep me from understanding this, they don't want to make it transparent because there's something underneath that they want to keep as quiet as they can for whatever reason.

Guest: Rob Langrick

Yeah. I mean, one of our more popular readings actually was we had Howard Schillet's book, which is about accounting shenanigans in the CFA program for many years. There was also a really famous book actually by a guy called Terry Smith in the UK. And he's got this classic anecdote where it was a British airports authority, many years ago, they managed earnings by extending the depreciable life of the runways, because he just had these classic stories in there. And so, yeah, accounting shenanigans are some of the things that people love the most about the CFA program. When we teach you about the tricks that companies can play and kind of how to be on your guard against them.

Host: Paul Barnhurst

Yeah, no, I remember, you know, speaking of that over my career, I had a time where a leader told me you have to pick and choose what payments you recognize. I don't think that's how accounting works. And another one, you know, we're doing an accrual and trying to finish out the year and they're like, they asked me, well, what do you want the number to be? Well, what's an accurate estimate that we can support for accounting purposes.

So why don't you tell us a little bit about your background? We'd love to get to know you a little bit better and how you ended up where you're at today.

Guest: Rob Langrick

So I was a, let me say, I was a scientist at high school, physics, chemistry, biology. I kind of almost did a law degree by mistake. I didn't know what I wanted to do type thing. And it became very clear, I was, I love reading the Financial Times, I was in Europe at the time. And so it was pretty clear I wanted to do finance. So I actually got my lucky, my first lucky break, which is always the most important one, actually for youngsters. I was a foreign student in Norway and Oslo, and I was interviewing for the banks in London for an internship. It was Morgan Stanley's first summer internship in Europe. That was summer 1998. And they flew me there from Oslo to London. And lo and behold, my interviewer was a Norwegian guy.

And I'd done this kind of, it's called "Norsk for utlendinger" Norwegian for foreigners class. So I could speak some very basic Norwegian, and, you know, he took a shine to me. I really do credit that lucky break to getting my foot in the door in finance. I then went into equity research. I wanted to be more client-facing than being a junior banker.

I did my CFA, kind of got obsessed with the Bloomberg terminal as an equity research analyst, and then ultimately wanted to go corporate. So I wanted to go to business school, go to consulting. I went to Bain & Company here in New York City, doing private equity diligence, and then at Bloomberg was looking for someone to work in the CEO's office, who'd been working in a strategy consulting firm.

So lo and behold I'd obsessed with the Bloomberg terminal, Bain & Company, working in consulting, it was a great fit for the role. Joined Dan Drost team, the CEO of Bloomberg on his team working on strategy, and it was really there that I got the bug for finance education. There was an education unit looking to offer products and services to universities worldwide from Bloomberg.

So that was kind of my big focus area. And then the last thing I did at Bloomberg actually was build a tool mapping the Bloomberg CFA program, which I'd done many years earlier. And that's when CFA took an interest in me and reached out and the rest is history.

Host: Paul Barnhurst

Cool. Thank you for sharing a little bit about your background. Sounds like you went from the analyst to the corporate world and found yourself in education as you went along the journey, so great.

So, you know, you mentioned you started your career. You've talked a little bit about it in the previous questions as an equity analyst, can maybe you talk a little bit more, what did that experience teach you and how did it kind of help you prepare for the rest of your career?

Guest: Rob Langrick

You know, the life of an equity research analyst goes a bit like this. You start by initiating coverage on a universe and they've got a very fixed view of how many stocks they want to cover. So you publish these initiation, we call them Bibles. And that's a lot of fun going really deep into a company.

And then what happens is you've got to cover that company every quarter, join the quarterly treadmill, and really your life is kind of dictated by earning season, essentially four times a year. And so that's kind of the life of an analyst with some really big thrills occasionally. Sometimes you get it wrong and that's, you feel pretty bad. But when you get it right, you're kind of on top of the world.

So I remember it was December 2002, I was covering a Norwegian video conferencing company called Tanberg, now owned by Cisco. And I was the only, I switched to a negative recommendation just before their first-ever profits warning. And that was a, that was a real thrill, I can tell you.

But then of course you, you have times when you get it wrong as well, occupational hazard. The market will humble you. I'd say the big things you learn in equity research from a modeling perspective that you certainly learn- how to build a three-step financial model, how then that feeds into valuation and how to do a stock pitch.

So you also learn the workings of the buy side and sell side. So how to portfolio managers work with analysts and so on. And then I think the biggest thing I took away from it was how you work on the fundamentals with your model. But then macro will do what macro wants to do. So right now, here we are in October 2023 with the bond yield spiking which is going to affect PE's evaluations, and that's not actually in the model of the company at all. So that's a huge lesson as well from equity research.

Host: Paul Barnhurst

Yeah, I think the last one there is applicable in today's world, right? Those interest rates, those macro things. Just look at the last three years since COVID, you know, war over in Europe, the oil prices and what they've done, inflation, interest rates. I mean, just one right after another, big macro events that can really wreak havoc on a business.

Guest: Rob Langrick

Yeah, absolutely. It's, you know, you can never kind of predict what's around the corner and then as an analyst, though, you've got to cover things like profits, warnings, things like big exceptional events, and so on.

So yeah, I've seen my fair share of it.

Host: Paul Barnhurst

I'm sure you have. You mentioned you moved over to education, taking the head of education role at Bloomberg. I think that was 2013, so about 10 years ago. What motivated that move? Why move into education? What kind of triggered that?

Guest: Rob Langrick

You know, it goes back to kind of being an autodidact. So very curious, I'm very curious about how things work. And so I really like to learn things myself. So one of my proudest achievements really at Bloomberg was taking that learning of how to use the Bloomberg terminal from I had years earlier, build a certification product which now launched that in 2015, BMC Bloomberg Market Concepts now had a million learners go through it which is not my motivation.

My motivation was actually to teach myself the Bloomberg terminal. And if other people enjoy it, that's great. And it just so happens it's been a while of success. That's great to see. But really, it's my curiosity to know how things work. So for instance, you know, today you'll have people saying, you know, I think the Federal Reserve will lift interest rates by this much over this next period.

You're like, how in the world do they know that? And the answer is it's kind of baked into the Eurodollar futures market. And so knowing how these kind of things work is really kind of quite rewarding for me. So that's really my motivation to get into finance education was really a curiosity about how the financial markets work.

Host: Paul Barnhurst

That's great. I love that. And as you mentioned, often the best way to learn something is you have to teach it to others. Cause that's when you figure out if you really know it or not. There are times when I've been teaching something, I'll get asked questions and I’d be like, I'm going to have to come back to you and go research it. I just don't know the answer.

Guest: Rob Langrick

Yeah. That's the top of the Bloom's taxonomy pyramid, they call it right.

Host: Paul Barnhurst

Exactly. So that's great on the education and the Bloomberg. And I think you were there for about five years in the education role. And then in 2018, you joined the CFA Institute. So first let's start with what led to you joining CFA Institute. Maybe talk a little bit, how you ended up there.

Guest: Rob Langrick

Sure. Yeah, so, I mean, look, the Bloomberg role was a lot of fun. It was the middle of the kind of laboratory boom, the finance laboratory boom, when schools, every time a school opened a business school, they'll pour concrete and build a lab. So they'd like to kind of have these terminal laboratories there on campus to help enroll people, whatnot.

While I was there, that was when I built that, the matrix to link the Bloomberg terminal to the CFA program, because I realized lots of schools were also not just having these Bloomberg terminal labs, but they also were CFA partners, university affiliation partners. And so I realized they were interested in both things.

And so knowing the CFA program from years earlier and the Bloomberg terminal inside out, I was in a good position to kind of map the two together. So I launched a function on the Bloomberg terminal, which did that kind of map over, and I had to work with CFA Institute in order to, you know, get that approved from an IP perspective and so on.

And that was really it. That was when I kind of got the bug thinking, wow, the CFA program is itself this other kind of a rocket ship program, like the Blimbo Terminal. And I got to know the team really liked them and they really liked me.

Host: Paul Barnhurst

That makes sense. And I could totally see if you're at a school that's heavy on investment banking and the markets and, you know, that area of finance, why you'd want to be with Bloomberg and CFA, totally makes sense why you'd have both of those and how there would be, there's a lot of integration there because they're both serving similar type customers. I could see that, so that's cool, that's fun.

Can you talk a little bit about just the roles you've had at CFA, a little bit about what you've done and how the experience has been so far?

Guest: Rob Langrick

Sure, I've had really only two roles there. So I joined as what's called head of practice analysis. So what that really means is I oversaw the skeleton of the CFA program which is the main credential on Wall Street.

And so that's the whole curriculum outline, what should we teach what is too advanced for the CFA program, what new areas are breaking and so on. So I spent, it was a good two, two plus years essentially meeting with investors around the world to think about how we need to develop and advance the CFA program.

So I would do deep dives into things like ESG, artificial intelligence, fixed income, quantitative methods, quantitive finance and I would every year update that skeleton. So my proudest achievement doing that was in late 2019, you know, geopolitics was really becoming a big force to be reckoned with in the financial markets, and so I inserted that into the skeleton, which then came to fruition into a new reading in the CFA program, a year or so later. So that was my first role, which was advancing the content of the CFA program. And it was funny, the person who used to run the CFA program was there when I joined. She retired in April of 2020. So just as the global pandemic kind of got kicked off for the way that the junior kid was covering the telecom section at the wrong time. I then ascended to lead CFA program and tackle the pandemic, which was a very kind of fulfilling challenge, taking a huge paper based exam into the electronic era in a hurry.

And in that role, really I oversee the kind of commercial strategy of CFA program, looking for how we need to position it, how we need to develop it. What new features does the market demand and so on and so forth, and then how do we promote that around the world? So that's my current role, leading the CFA program.

Host: Paul Barnhurst

I see, when you said paper-based to remind me, I did level one before I decided, you know, didn't make sense for where I was at in my career. I didn't do levels two and three, but I can remember sitting in a big, huge room flying out cause I was living in Arizona at the time, flying out to California and paper-based with the calculator, grinding through, you know, level one for I don't know how many hours it was, whatever the time was, so yeah.

Guest: Rob Langrick

Everybody remembers it, that's for sure.

Host: Paul Barnhurst

Yeah. No, I remember just thinking that was grueling, like, I probably failed. I passed level one, but like I said, never did level two or three, so.

Guest: Rob Langrick

It's never too late, Paul.

Host: Paul Barnhurst

That is true. I could, we'll see. Since I don't do much in the investment world and I already got, you know, I just did the FP&A certification and I'm going to be doing FMI this year. We'll see if I'm going to add another one to that.

 

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Host: Paul Barnhurst

You know, kind of speaking about the program and you mentioned some of the things you did, the geopolitical and different changes, you know, one of the major changes they announced earlier this year to the program, one of the biggest in a long time is the practical skills modules. And one of those included financial modeling.

So talk to me a little bit about that. What brought about that change? That was a big change.

Guest: Rob Langrick

You know, let's go back to that kid in London a long time ago, right? I would be working by day doing the models of all the telecom companies. And then at night I'd walk home and I lived in central London at the time, and I would study for the CFA program. And it struck me that I'm studying all about these accounting ratios and the CFA program about multiples and comparable companies and so on, and then in the daytime I'm doing modeling. I thought to myself, even then it's kind of peculiar. Why am I not learning financial modeling with the CFA program?

And that was really the spark that sparked the idea, which is, what, hang on, we should have financial modeling in the CFA program itself. So that was the inspiration was essentially, yes, we need to teach academic finance, but we also need to make sure it's practical. So it kind of, it comes to them in the form that they're going to be used to doing it on Wall Street itself.

So that was the inspiration to put financial modeling into the CFA program. Really happy to work with FMI to incorporate that into CFA program level one.

Host: Paul Barnhurst

Yeah, no, FMI is a great organization. I know you work quite a bit with them to incorporate that. You know, a couple of questions- first is what's been the response so far? How have people responded to that change?

Guest: Rob Langrick

It's been overwhelmingly positive. We've been very pleased that our research ahead of time to our surveys, talking to employers, talking to candidates, certainly indicated, yeah, financial modeling would be very welcome. And that's certainly been the case looking at the usage data.

I'm looking at the comments of people coming through the modeling exercises in there as well, has kind of proven out that, you know, that this was what the candidates actually wanted. So we're very pleased with the uptake on the modeling side. I think what's really cool about it is the fact that it really does start with a blank Excel spreadsheet, and go all the way to having a balance sheet that balances without, you know, having assets equal liability.

Host: Paul Barnhurst

Yeah, without a plug. Exactly.

Guest: Rob Langrick

So the response has been overwhelmingly positive. And I think that the marketplace may be sending us signals. They want us to do more things like this.

Host: Paul Barnhurst

Yeah, that wouldn't surprise me at all, that is sending signals of wanting more. I don't know if you know, Andy Tempte, who used to be at Kaplan, but you know, I had him on the show and we were talking and I asked him what he thought about the changes and his face just lit up and he was like, long overdue, one of the best things they've ever done type of thing. Just super excited.

I did a poll on LinkedIn when it first came out, asking people what they thought, and you know, 80-90% was positive. There's always a few, but it was overwhelmingly, like you said, people were like, about time.

What are the other changes? I know there's the financial modeling, but there's also, I think, two or three others. There's, I believe, a couple choices you have, and they're in levels one and two. So can you talk about some of the other practical skills that you added?

Guest: Rob Langrick

Oh, sure. Yeah. So there are lots of enhancements beyond practical skills, but on the practical skills side, we've also introduced Python training with the CFA program.

So at level one, you can do modeling and you can do intro to Python with a full Jupyter notebook. So hands-on training. And then at level two, you can go into Python use cases, so things like web scraping, natural language processing, and so on. And so there's some of the other choices, and then at level two as well we have an analyst skills training program done by a guy called Jim Valentine, another CFA charter holder and essentially he used to run research training at Morgan Stanley and so he's written a book about best practice for equity research analysts and he's built a course around that. And so that's at level two which is when analysts learn about valuation and so on. It's essentially, okay, you learned the valuation in the CFA program, now you learn how to actually put that into your research notes and how to promote valuation ideas to portfolio managers.

Host: Paul Barnhurst

Makes sense. And you mentioned there are a number of changes beyond the practical skills. What were some of those other changes that you made?

Guest: Rob Langrick

So we realized that, you know, things are getting earlier and earlier in terms of this kind of arms race in terms of getting credentials, getting things ready before you hit the ground running on Wall Street, so we've opened up eligibility to CFA program earlier. So now, here in the USN on a four year degree, you can do the CFA level one as a rising junior, so two years before you graduate. Which is great because then you can use that success on that exam for your internship applications.

That was one big change. Another change is we recognize that private equity private credit and private wealth have been booming in terms of not just the actual asset classes, but also the available jobs in the marketplace. But we wanted to add more to the CFA program, but at 9, 000 pages, you kind of restrain from adding another thousand pages, right?

So what we did instead, we said, okay, let's have three flavors of level three. So you can choose the vanilla flavor, just portfolio management, which is what we've always done, or you can choose a private equity flavor, private markets flavor, rather, or a private wealth flavor. So that's the way we kind of squared that circle on the page count restriction.

So that's one change we're really excited by given the fact there's a lot of interest in those two specialties. The other things we've done, we have also baked in Bloomboat training into the program as well. So, level one you have, with all the 90 plus learning modules, you have very specific tips on use of the Bloomboat terminal relevant to that area.

And the other thing I'll just mention briefly is curriculum streamlining. So, the curriculum's very long. And what we realized was lots of people coming to it are actually doing an accounting. I've done an accounting bachelor's or an econ bachelor's or a finance bachelor's or STEM. And so there are some basic things, they actually don't need to learn again from us essentially.

So we have a pre-read, and so if they've already learned the basics of accounting, for instance, they don't need to study that again and we're not going to test them on it again either. So we've actually shortened the level one of the program by about 15%. So for those people who have already mastered those basics, they don't need to kind of go through that again.

So we think that'll be a welcome change for people who already, you know, mastered some of the basics in CFA level one.

Host: Paul Barnhurst

Yeah, I agree. That makes a lot of sense. You know, when I did the FP&A certification, they said, look, the level one test, if you have a CPA, you already tested on, so you don't have to take that.

Then we'll move to level two. Similar type thing to what you're doing there. Hey, if you have certain degrees and certain experience, let's pre test you, let's save you the time, let's not, you know, make you spend a bunch of time on something you already know.

Guest: Rob Langrick

Exactly. So it just lifts the return on investment of time spent, essentially.

Host: Paul Barnhurst

And then I think it's a great idea. I didn't know you opened it up now to juniors. Makes a lot of sense, right? If you're looking for an internship and you can say, hey, look, I completed level one or I'm taking it already, you show that initiative to the companies that you're looking at. They can see you're serious. It's just one more checkbox that will help you in that process.

Guest: Rob Langrick

Yeah. And they all know what CFA program is as well. So we think it's a really nice fit for internship recruiting, essentially.

Host: Paul Barnhurst

Exciting. So just, you know, as you talked about all those changes, what do you think is kind of the main benefit of all that for the charter holder?

I mean, how does that help them?

Guest: Rob Langrick

Well, it's more practical. They're going to need to learn financial modeling anyway. And so learning it in sync with when they're actually studying the concepts, I think it probably reinforces learning, so they get to kind of settle that knowledge down more firmly, I'd say, hit the ground running, so let's say they are applying for an internship. Unlike me going to Morgan Stanley in the summer of 1998, as a law student, I didn't really know accounting. So, you know, being able to go to internships with those basics under your belt would be a huge benefit and help people convert those internships to full-time offers.

So hitting the ground running certainly or, you know, helping them get internships. And then of course, if they've already done an accounting bachelor or finance bachelor, it lowers time spent studying. So it's a higher ROI essentially. They spend less time studying for CFA and yet get the same credentials.

Host: Paul Barnhurst

Yeah, no, I think that's great. I can't even really think about how many hours I spent studying, and, you know, it was the year I had my first daughter. So there were a lot of very early mornings trying to study as a very tired person, but that's another story. So anything to shorten it would have been appreciated.

Guest: Rob Langrick

That is not uncommon, not uncommon, what you mentioned.

Host: Paul Barnhurst

No, I'm sure it's not. The other thing you kind of mentioned, you know, when you were first early in your job and not, you know, having been taught maybe modeling or knowing it well, and I think that's one of the biggest challenges I've seen in corporate finance.

I think investment banking in general does a better job of helping people understand modeling, depending on the role, but you know, where people are modeling a lot, giving them that training, but I know for me, you know, it was all just figured out as you go. Nobody taught me the importance of design or you should use colors, you should think about how you structure your model. I just started building, and usually, it was frankly a mess early on.

Guest: Rob Langrick

You know, I don't think much has changed. It is an apprenticeship market out there. So there are obviously some innovators now in the space trying to professionalize it clearly, but it's still largely an apprentice model, and so it's really down to the individual to take care of their own learning is one of the big lessons for me, there are some really good package courses now in terms of, you know, getting your feet wet, but still, I'd say on the whole, Wall Street is still an apprenticeship training model.

Host: Paul Barnhurst

I think that makes a lot of sense. I would say it's true, you know, even in, you know, corporate finance, when it comes to modeling as well, you just kind of, you'll learn it on the job. As you mentioned, there are a lot of programs out there that are trying to help people gain greater experience, you know, take control of that education.

And one of those is, obviously we talked a little bit about, is the Financial Modeling Institute and the work that they're doing. So maybe can you talk a little bit about how that relationship came about and your experience working with FMI and what you, kind of what you think of what they're doing.

Guest: Rob Langrick

Sure. Yeah. So I first got to meet Ian Schnoor. It was 2019. I met him in London. He came to the CFA Institute conference. So that was great getting to know Ian, he's a ball of energy, he's a force of nature and he's clearly extremely passionate about financial modeling. So he's got this really authentic kind of you know kind of lovable nerd vibe, I would say.

He clearly knows his stuff in financial modeling, he's thought about it for 20 years, and so when the time came for us to think about program innovation during the pandemic, it was logical to reach out to him to think about including his intellectual property with the CFA program. So yeah, we have a great working relationship, he built the companion course for the practical skills module for level one, and you know, he's got a playful character as well. He put an Easter egg into that for me. So, I was working with a lady on my team called Joy, who I worked with at Bloomberg for many years. And obviously, my name is Rob. At the very end, there's a little Easter egg there, if people listen carefully about, you know, if you do all his techniques in the course then it won't rob you of the joy of building a perfect financial model. So of course, no one's going to notice that unless they've listened to this podcast, but yeah, he's a fun guy to work with.

Host: Paul Barnhurst

That's funny. Yeah. I didn't know about that one, but yeah, I know I've had a great relationship with Ian and I've really enjoyed working with him and I can see that, him having a little bit of fun with that.

The next question I wanted to ask you about is just why is it so important that everyone in finance learn the basics of financial modeling. Why is that really a core skill that we all need to have?

Guest: Rob Langrick

You know, I thought about that long and hard over the years, and when you think about the financial system in its totality, you know, governments take money from society and redistribute it, right? Where does the wealth actually come from? It comes from corporations. How do they generate wealth where you can model that in a three-state financial model? And so it's kind of at the very heart of capitalism three state and financial modeling. And so I think it's really important to learn, if you're interested in the financial markets and how wealth is generated, then it makes a lot of sense to learn modeling.

I think also that kind of humbling I talked about, realizing that earnings estimates are just that, earnings estimates and actually if you give it a try yourself on a quarterly basis, you're going to be precisely wrong all the time. And so that kind of humbling realizing that the sands are always shifting in this kind of, in the reflexive financial markets, understanding that rates and inflation and currencies will always mean that companies drift away from whatever guidance or estimates they have. That's a really good lesson. And then I'd say understanding news flow as well. So when you hear about the latest news about Apple or the Magnificent Seven and so on, you really, knowing financial modeling really helps you interpret that news flow better, and see what the companies say every quarter, what the CEOs say, and especially when there are things like profit warnings as well, or what drove that, why is that. You really have an edge if you understand how the actual corporate finance works.

Host: Paul Barnhurst

Yeah. I really liked the first part you said there about the capitalist society, really, you know, the statement model helps you understand it. It really is incredibly valuable if you're going to work in finance and you want to understand how wealth is generated because at the end of the day, in that three-statement model, you get to see the cash that's coming out and you get to see what's being generated from operations.

You know, what is a business actually able to spin off? Because at the end of the day, they always say cash is king or queen or, right, cash rules. The rest of it is, I like to say, just accounting games to a certain extent.

Guest: Rob Langrick

The rest is opinion, yeah.

Host: Paul Barnhurst

And there's plenty of those.

All right, so this next section, this is one of my favorite. We got a couple questions for you here. We call it rapid fire. So we do this with everybody. So you get about 10 seconds to answer, and then at the end you can pick one or two to elaborate on. And so, first question I have for you here, this is kind of a fun one, helps us get to know you a little bit. If you could meet one person dead or alive, who would you meet?

Guest: Rob Langrick

Can I meet mystery people?

Host: Paul Barnhurst

Sure!

Guest: Rob Langrick

Satoshi. Mr. Crypto.

Host: Paul Barnhurst

Got it!

Number two. Do you agree with the phrase, financial models are the number one corporate decision-making tool?

Guest: Rob Langrick

Probably.

Host: Paul Barnhurst

Number three. Will Excel ever die? Yes or no?

Guest: Rob Langrick

No.

Host: Paul Barnhurst

Will AI ever build the models for us?

Guest: Rob Langrick

Yes.

Host: Paul Barnhurst

And the last one is, we're going to ask you here, what's your favorite Excel function or feature? Favorite thing about Excel?

Guest: Rob Langrick

Oh, wow. That's an easy one for me. When you highlight a part of the model with numbers in it and just hit the F11 key, it immediately makes a chart. That's a killer feature.

Host: Paul Barnhurst

I don't think I've actually used that one.

Guest: Rob Langrick

Oh wow, you'll be addicted. Go and do it and you'll be like, yeah, Rob was right.

Host: Paul Barnhurst

And I've used Excel for a lot of things, and I think I know now that you mentioned that, I think I've done it by accident a couple of times, but I just never realized that did it, so.

Guest: Rob Langrick

It'll become your favorite function the moment you do it one time.

Host: Paul Barnhurs

That's funny. All right. So you could pick one or two of those to elaborate on for your answer.

Guest: Rob Langrick

I think the "will Excel ever die" is an interesting question and I think about like Sam Altman, you know, being asked about ChatGPT and is it going to do away with lots of swaths of society and so on, and his answer there is, well, did the calculator do away with learning math? Of course, the answer's no. And that's his kind of, that's his stop come back on will ChatGPT do away with A, B, C, D, and E, right? I think at the end of the day, Excel is just an abacus, right? It is a calculator. And so, in the way ChatGPT won't do with learning math and calculators, you know, what's going to do away with Excel when Excel is just basically elegant math? You're always going to have to do it, right?

And so, no. Could it be a different company that wins? Sure, we saw the word processing companies in the 80s switch horses. We did see different spreadsheet applications, your Google Sheets, whatever. But no, conceptually spreadsheets are just mathematics. And so, unless and until mathematics will be done away with by the robots, I think it's here to stay that one.

Host: Paul Barnhurst

No, I definitely agree with you. I mean, I love spreadsheets and they're the perfect form factor for certain things. I mean, if you look at it, whether it's Excel, whether it's Google sheets, whether it's, you know, some other application, you look at planning tools, pretty much everything uses the spreadsheet for you to input the data. Some form of a spreadsheet type, a two-dimensional kind of that you enter your information in. It's super easy to do.

Guest: Rob Langrick

Yeah, no, exactly right. It's got a certain elegance to it, an intuitiveness that people like, that I think it would be hard to displace because you have to displace it with something and the question is what, I'm not sure what that would be.

Yeah, you asked the question are the financial models the number one tool? The reason I said probably was I've seen lots of people make lots of big decisions, especially when I was in strategy consulting at Bain, and I would say that the model's often the most important thing when you're doing like a private equity deal, for instance, I've definitely seen that, but I think it's just one branch of logic, right? It's kind of applied common sense in a way. And so I've seen other things be really powerful motivators for people to take action in the corporate world. So risk and fear is one of those, for instance, or ideas like, why don't you kill three birds with one stone, often very compelling for corporations to take action when you do two or three things with one kind of chess move, or now or never, use it or lose it. Very powerful motivation to action that doesn't have to be in the model form.

So I think modeling is just another branch of logic and reason and rush and rationality and so, in that sense, there are other things that do compel people to action. If you had to say one thing, sure, modeling.

Host: Paul Barnhurst

Yeah, no, that makes sense. And I like how you put that, right? You're using logic to make decisions. One of the most common logical things you build is a financial model. I can see why the "probably", and that makes sense, what you said there. So I get that one.

So, you know, we're coming up on the end of our time here. I've really enjoyed the interview. We have just two questions left for you.

So the first one is, what piece of advice would you have for a college student today who wants to get into the field of finance, whether that be corporate finance or investment banking, but just, you can give different advice for each of them if you want, or you can just give it to general finance. I'll let you take that where you want.

Guest: Rob Langrick

Yeah, I would say just trying to draw lessons from my life. I'd say make investments when you can most afford to make them, and what that really boils down to is starting as early as you can with your kind of career thinking essentially. So think about the, I wasn't even making a speculative bet. When I suddenly got obsessed with Bloomberg in London as a junior analyst, I wasn't intending to go and get to meet Mike Bloomberg and so on, even though I did, you know, that wasn't my intention. I was just really interested in it and kind of nerded out with it, I'd say.

And so making lots of little speculative bets is quite wise. You never know what's going to happen. You can only make sense of your life looking backwards, not looking forwards. And so, I'd say you know, these new sort of little courses as well, I think we talked about FMI earlier, these are little speculative bets, and you never know whether that could blossom into a mighty oak tree later in your career, right?

So, taking lots of little speculative bets when you can afford the time, that's before life gets in the way, and you know, later in life when you do leave university. So yeah, that'll be my number one piece of advice. Take learning opportunities as they come. You don't know how they're gonna be useful later on.

Host: Paul Barnhurst

I think that's great advice, and you're so right, you never know when you take those learning opportunities, you invest in yourself, you take those speculative bets and you never know where they're going to lead.

Like, like you mentioned, you had no idea that one day you'd be working for Bloomberg. I agree with you, that's a really good one, I like that one.

So last question, if our audience wants to learn more about you or get in touch with you, what would be the best way for them to do that?

Guest: Rob Langrick

Yeah, LinkedIn. I've connected with lots of folks on LinkedIn, lots of CFA charter holders, people in the modeling community. I'm very responsive to "in message" on LinkedIn and also, you can watch my posts as well, so LinkedIn.

Host: Paul Barnhurst

Sounds good, and we'll definitely put that in the show notes so people can find you. Again, thank you for being on the show today, Rob, really enjoyed chatting with you and, I look forward to sharing this with the audience.

Guest: Rob Langrick

Really enjoyed it, Paul. Thanks very much!

 

Financial Modeler's Corner was brought to you by Financial Modeling Institute. Visit FMI at www.fminstitute.com/podcast and use code PODCAST to save 15% when you enroll in one of their accreditations today.

Paul Barnhurst
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