Updated: Oct 20
In his short story “Funes the Memorious,” Jorge Luis Borges proposes what would happen to a man who could remember everything (if you get a chance, please read the story and all short stories by Borges). The tail ends logically, but contrary to our intuitions, badly for his hero. As Funes grows older, he is forced to remember every little detail about every little thing every second. To escape his reality, the only real one, this icon must retire to a dark room to have some peace of mind. The rest can continue with our regular times, even in these abnormal times, because our brains simplify reality. The universe happens at a scale that is impossible for us to process unless we forget parts of reality and turn it into a model within our minds.
Engineering, finance, sciences, and math are birthed from this simplification need. This idea is sturdy and has many avenues to explore, and we will try to apply a part of it to finance here.
Lesson 1 - “Don’t put everything into your financial models.”
First and foremost, remember that reality won’t fit in your model. You’re trying to distill the relevant aspects of your business into numbers that help your audience understand them. With our predetermined column names, Finply creates a framework that guides you to the relevant aspects and filters out distracting noise.
Lesson 2 - “The model won’t predict your exact future.”
One of our last blog posts dealt with this issue, but let us rehash it quickly. You’re creating a map for your future, one that will change in significant ways, because no matter how hard we all try, we can’t precisely predict what will happen. We can, however, create multiple scenarios that help us see where the dangers and opportunities lie. With our revenue app, you can create scenarios instantly and seamlessly, just by moving a couple of sliders.
Lesson 3 - “Make sure the tree doesn’t distract you from the forest.”
As we stated above, Funes had to live in a dark room because all his memories would distract him from the present. Focus on where you’re going and make a plan that allows you to get there. Too many models are five years projections that tend to be overly optimistic and draw focus away from what’s critical. The fifth-year won’t matter if you don’t have enough revenue in your first twelve months. Finply helps you focus on your sales for the first year because those are the ones you can impact today.
Finance is a hard science, and we hope these posts help everyone realize that concepts and focus matter as much as the numbers we present. I sincerely hope to have expanded your interest in Borges, and hopefully, you’ll give him and Finply a try.