In Conversation w/ Dan Gross Part 2
In Part II of our conversation with Dan Gross, Fiona and Dan continue discussing Dan’s career advice for those working in renewable energy or energy finance. In particular, they discuss how to improve your understanding of financial models and why this skillset is so useful to renewable energy professionals across all disciplines.
Let us know in the comments your perspective on the value of financial modeling in your career!
If you missed Part I of this conversation, tune in here: In Conversation with Dan Gross, Part I
If you’d like to learn financial modeling and check out the courses Dan mentioned, you can learn more in Pivotal180’s courses:
- Renewable Energy Project Finance Modeling
- Tax Equity Modeling
- Introduction to Battery Storage and Financial Modeling
Fiona: You know, I’m interested as someone who’s, you know, senior in this field but also who founded Pivotal180, which is the company that’s really focused on financial modeling, whether that’s teaching people how to build a financial model or, you know, doing advisory services where modeling is, again, a key part of the work, for me, it was very clear to me early on in my career just how important a financial model was and how that really drove so many deal decisions and negotiations. And it just encapsulated so much in one file about a project. And I admit, the company that I was working for at the time, which was a really small environmental finance firm, they didn’t have a in-house, you know, training program for financial modeling. So I got a lot of experience, but it was more ad hoc and I was always looking for like a place to solidify those skills or do formal training. That’s something I sought out and, you know, eventually took one of Pivotal180’s courses, totally aside from the University of Cape Town courses, which are, I would say, include modeling, but that’s not the focus. And so because of this personal background, I’ve always thought a lot about, you know, a lotta people build financial modeling skills very early in their career in a few years, you know, as an analyst, maybe they’re working in investment banking. And then, I don’t think this was entirely true, but some people feel like, if they missed that part of the track, it’s too late for them to go back and learn financial modeling. And because I know I’ve found my own ways of beefing up the modeling skills and understanding project finance and other ways of financing renewables projects. But what do you think is the best way to learn financial modeling? Do you think that, you know, getting in those two years, you know, maybe right out of a university or right out of a degree where you’re living and breathing models, is that really the best way? Or do you think that, you know, later on, more mid-career, people can go back and do a financial modeling course and, you know, get a lot out of it, even if they aren’t gonna be the person who’s building models day in and day out?
Dan: So first, let me sort of couch this statement by describing myself, which is like I am a guy who midlife regretted I had never taken a computer science coding class in college. And so just decided like for fun in the evenings, I’d take an online course coding in C and like taught it to myself and did the problem sets. And so I enjoyed that learning despite the fact that I had sort of missed out early, and I felt like it was never too late. And so you know, that’s me. That is not everyone. But that is me. You sort of have to be open to it and still believe that you can learn, but we never lose the capacity to learn. So look, there is, I don’t want to say that there’s no substitute for those two years early on in being an analyst or an associate when you’re relatively new out of school. It’s a great way to learn the skillset. It’s a great way to be surrounded by people who understand how deals are put together, who can mentor you, who can invite you to join and observe and learn. because most of the way that deals are structured and negotiated and executed isn’t taught in a textbook. Like you learn by doing. and the modeling is a critical piece that feeds into it. And the modeler is oftentimes like the focal point who’s pulling in data and information from everyone and sending back analysis to decision-makers. And so what a privileged place to be early on in your career. And I think that it can be really helpful.
Fiona: Okay, welcome back. We had a quick disruption from our virtual studios. But we’ll launch right back into it. Thanks, Dan.
Dan: Hey, sorry about that. I may be losing my train of thought, but just, this is the perils from working at home. So I think where I was going is, for someone who is more senior within their career, like it’s absolutely a skill that you can learn. While someone may be privileged and advantaged to have spent those two years modeling early on, it doesn’t mean that like you can never understand what needs to go into a model. I have a good friend, like former colleague from industry, who was a managing director in investment banking, like started as an analyst, did his financial modeling, had his career built up, hadn’t used modeling in a very long time, spoke to modelers, and then said, like, “I’m really trying to understand renewable energy taxes. What should I do?” And I said, like, “Take a Pivotal180 class.” And although he was now an MD at an investment bank, I said, like, “Don’t do all of it. Maybe go to the final model and see how it works, and you know, to the extent you have questions, just look at things that supplement, things that you don’t know.” And so he started with that approach, and then he said, “You know what? I went back to the beginning and I did the whole thing.” And although he’s never going to build a tax equity model, he understands how it works and he’s able to manage people who do it in a way that he couldn’t had he not invested the 20 hours that it took to do that. Like it’s not such a heavy lift, I think. And what I’d say is, for people who are in a management role, who aren’t going to be coding line by line, still making the investment to know what the people who are coding line by line need to do, it doesn’t take two years. You know, it can be done in a couple of days. And again, if you’ve done modeling, if you’ve seen it before, and if you don’t need to do the coding, I’m very proud of Pivotal180. Like I’m not here to sell it, but I do believe that it’s the best product that’s out there. And like I’m saying this as a guy who’s taught financial modeling and mentored and managed a lot of people who do it. I think being able to use it as mid-career person, use the tools of Pivotal180 in order to familiarize yourself, in order to manage other people, in order to know what they’re doing, even if you can’t do what they do, is a really good use of the tool. And it’s kind of never too late to do that. Like and, again, I think it’s fun to pick up a new skill. So like if you learn a trick or two that you never saw before, great. It keeps you young.
Fiona: Totally. I totally agree, totally agree. Dan, I have a very high-stakes question for you now.
Dan: Ooh, sure, okay, I’m nervous.
Fiona: See if you can handle it. Tell us: What is your favorite Excel function?
Dan: Oh, this is such a controversial answer, because Haydn and I have a debate about this one. So I shouldn’t really acknowledge it, but my favorite Excel function is OFFSET. And but look it up. And even when you look it up, you’ll be like, “Why would that be his favorite function?” It’s just wildly flexible. It does amazing things and it’s not calculation-based. It’s like geography-based. It’s when you want to pull a number from somewhere else, how far up do I go? How far to the right or left do I go? Do I want it to be a single cell or do I want to be pulling it from the sum or the IRR of different things of variable width? It’s just incredibly flexible. However, it is a function that you should never use in a best practice model, because it’s virtually impossible to audit. And when you add lines or add columns, it like almost always gets messed up. So not a good function to use, but I really love it. I groove on it and I think everyone should at least see what it does, OFFSET.
Fiona: Well, you’ve given me two ideas for future episodes. One, we’re going to have to have you back on to teach people exactly how to use OFFSET.
Dan: Oh totally, yeah.
Fiona: Even though they should never use it. And then we’re probably gonna have to have another follow-up episode where we give Hayden the opportunity to explain why he hates the function
Dan: Yeah, why you should never use it.
Fiona: So much, yeah.
Dan: There’s always a workaround to use something other than OFFSET, yeah, that sounds good.
Fiona: I’ll just be the neutral interviewer for all of this. But great, thank you for sharing that.
Dan: But definitely, you don’t want us in the same physical space ’cause like-
Fiona: Right, totally.
Dan: It might come to a fist fight.
Fiona: Definitely not, yeah. Great, okay, there’s a lot to digest here. I’m sure a lot of our viewers are gonna wanna be rewinding and reviewing parts of this conversation. But I got a lot out of it personally, Dan. Thank you for coming on the show. It’s great to see you again. And yeah, thanks for all you’ve contributed through Pivotal180. We will host this on our website, on YouTube, and LinkedIn. And so looking forward to the comments from our audience. I’m sure a lot of really good questions are gonna be generated as well.
Dan: Awesome, thank you so much for having me, Fiona. And it’s so nice to see you again.
Dan: Sorry it’s not in the same place. I think last time it was dinner-
Fiona: Next time in Cape Town.
Dan: In Cape Town, right? Yeah, awesome. Take care, be well. And thank you, everyone, for tuning in.
Fiona: Take care.