LongOnly

*Walter Bloomberg Verified account @DeItaone · Mar 23

*TRUMP: TOLD DEPARTMENT OF WAR TO POSTPONE STRIKES

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Boring_Business Verified account @BoringBiz_ · Jan 28

My hot take is that financial modeling will never be fully automated by AI

The best analysts already know that all models are wrong. At best, good models are just directionally correct.

Despite this, the reason good analysts still build models from scratch is because it fundamentally teaches you what drives the business you are looking at

To build a good financial model, you have to understand:

> what is unit economics of the business?
> what is price and volume mix?
> what decisions will the management make to grow top line?
> what segments are growing or declining, and why?
> how will margins trend and why?
> what type of working capital does the business need?
> what capital expenditures will be needed in the future?
> how will the growth be funded?

And much more.

As you go and build your model, you have to think through each of these aspects of the business is great detail.

Not just the historical data, but rather how each one trends over the next 3-5 years in the future

This is ultimately what gives you a fundamental understanding of the business that you cannot learn by simply reading a 10K or an equity research report

In fact, equity research analysts already publish their own models that you can steal if you have access to them

Most hedge funds do have access, and yet, hedge fund analysts still build their own models internally from scratch

Similarly, if you outsource building your model to an AI, you will still be severely limited in your conceptual depth of knowledge on the company

Sure, you might use AI to tweak models here and there, or make tedious edits to an excel file

But my hunch is that the best analysts will continue to build financial models till the end of time

That will never truly go away

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