In Defense of the Difficult Person

In Defense of the Difficult Person

Learning how to say no is an essential part of becoming a better investor, lender, or financial modeler. The challenge is knowing when an analysis will genuinely improve a decision and when it will merely consume time, create false precision, or confirm what you already know.

No. Just putting it on the page gives me unspeakable joy. “No” can be an adjective; it often serves as an adverb; in other cases, it cries loudly and proudly as an interjection; and do not sleep on “no” as a noun. No is dynamic. It sings with dulcet, mellifluous tones. So much can and is said with so little.

And yet, “no” is not easy. No to another slice of cake? Would that I were so strong. No to that not-so-clever idea that your boss keeps proffering as if it were the greatest revelation since Hamilton’s and Perelman’s work on proving the Poincaré conjecture? Bonne chance!

To be clear, I am not openly advocating for wanton insubordination; rather, a capable professional must develop the intuition – as informed by rigorous analysis that translates to quality experience and judgment over time – necessary to know when no is the answer.

Speaking from experience, too often I have known that a specific analysis might be an exercise in futility, and yet I lacked the courage to push back effectively. Many years ago, during the early days of the COVID-19 lockdown, when the financing of new-build power plants came to a complete halt, my then employer decided to use the comparative downtime as an opportunity to do a deep-dive on new international markets for the sale and financing of combined-cycle natural gas power plants.

I was, at the time, focused on the so-called “EMEA” (Europe, Middle East, and Africa) regions, and accordingly tasked with preparing a systematic ten-page investment memo for 15 countries. One such investment memo was to be on the lovely island nation of the Seychelles.

I knew very little about the Seychelles. An East African Island nation near Madagascar and a former territory under the iniquitous thumb of both the British and French imperial apparatus, the Seychelles is better known for its beaches and its wonderful people, than it is known for its industry or energy demand.

So, as one did before the current AI era, I conducted a Google search and went straight to the country’s Wikipedia page: approximately 100,000 residents; about 50 MW of electric load; 115 islands across the archipelago; USD 1.87 B of GDP in 2019; and no domestic source of natural gas. I stopped there and audibly laughed out loud (though for the avoidance of any doubt, not at or about the great and beautiful nation of the Seychelles!).

The notion that the Seychelles would have any use for a multi-billion-dollar natural-gas-fired power plant and the associated gas supply infrastructure – equal to or greater than the size of its annual GDP no less – was ridiculous.

I strolled confidently into the weekly team meeting (or rather I dialed into the video conference two minutes early) thinking that I would simply articulate several of the above points in order to get out of the aforementioned exercise in futility. When it came my turn to speak, I began my well-prepared monologue on all of the above, only to find myself cut off midsentence by the imperious managing director presiding over the meeting and exercise. As associates often do when one’s job is potentially at stake, I reluctantly gave the equivalent of a “roger that” and stopped short of making the very rock-solid case for why this was a giant waste of everyone’s time.

As such, I spent the next week preparing a ten-page memo on the Seychelles. The memo effectively stated that, for all intents and purposes, the Seychelles are a very poor candidate for a new-build combined-cycle natural gas power plant. Later that month, as we went through the agenda at the outset of the meeting, the head of our group immediately dismissed the necessity of covering the Seychelles. She quipped, “whose hare-brained idea was it to put together an investment memo on selling natural gas turbines to the Seychelles?” I smirked, vindicated that I lived to see this specific instance of imperial heavy-handedness humbled by common sense.

Whilst the above case might seem like a particularly elaborate, self-indulgent, and obvious example, I share it as a relatable anecdote of the kind of work investors and lenders can often find themselves doing to no end.

Many of you can, no doubt, relate to the feeling of reluctantly agreeing to review a pitch deck for a deal because you did not want to say no to a friend or professional acquaintance. Never mind the fact that the proposed investment is completely outside of one’s strike zone in terms of cheque size, industry sector, investment security type, or perhaps all of the above all at the same time! Or perhaps a manager has asked you to convert a quarterly construction draw schedule into a monthly schedule (during an initial screening phase, no less) to produce a marginally more precise equity IRR, that is unlikely to drive outcomes but takes a day to model.

So how does one then effectively say no, you might ask? For that, I will start by sharing another anecdote about the most effective CIO with whom I have ever had the pleasure of working. This CIO, who led not only investment strategy but also execution for one of the nation’s largest Green Banks, approached every introductory conversation with a counterpart with what can only be described as radical candour.

On one particular due diligence call with a prospective client, five minutes into a conversation in which the other side’s CEO and CFO were clearly hoping to dazzle and blind us with figurative and literal science, the CIO firmly but politely interrupted and asked two essential questions: (i) did they have a counterpart willing to underwrite an equity cheque for 30% of the project’s estimated construction costs; and (ii) could they support a 9.5% interest rate on the specific deal. The other side, which was likely used to having at least thirty minutes to regale prospective lenders was taken aback with the candour. They flailed around for a few minutes, attempting to redirect the conversation to completely unrelated stock talking points with the conviction of a United States Senator proudly boasting of empty accomplishments and spinning fabricated yarns on the campaign trail. The CIO gently but decisively noted that these were essential prerequisites to any term sheet discussions. The door was left open to revisiting the topic if circumstances changed, but the call came to a swift end thereafter.

Whilst not everyone can pull that off, and no doubt this particular CIO’s approach may have rubbed some folks the wrong way, there is real virtue in our line of work in getting to a quick “no” when it is merited.

Too often, we are taught that as good negotiators, it is essential not to reveal too much about our investment thesis or expectations, and to keep options alive as long as possible and at all costs; however, both the withholding of information and the pursuit of endless optionality come at their own costs.

The lesson is not that investors and financial modelers should become reflexive naysayers. Nay, it is better that we learn to distinguish between that which reduces uncertainty, and that which merely produces more detail. A good “no” is rarely an assertion of preference; it is a judgment about materiality, decision-usefulness, and the opportunity cost of scarce time. A practical, non-exhaustive rubric might include:

• Start with a back-of-the-envelope calculation. Before building the model, estimate the outer bound of the possible impact. If the answer cannot plausibly change the decision, the analysis may not be worth doing. A simplified model, or a sensitivity analysis that can quantify the materiality of a driver of value can be powerful tools to that end.
• Ask what decision the work will inform. “What would we do differently if the answer were X rather than Y?” is often the most useful question in finance. If nobody can answer it, that is itself an important and useful observation.
• Test materiality before precision. Distinguish between an analysis that could move valuation, sizing, risk allocation, or investment approval and one that will merely add another decimal place.
• Make the opportunity cost visible. A request is easier to challenge when framed not as “I do not want to do this,”  out of perceived petulance, but as “this will take a day and displace these two higher-priority analyses.”
• Build organizational support for principled pushback. Teams should agree in advance on screening criteria, materiality thresholds, and minimum investment requirements so that “no” rests on shared standards rather than individual temperament.
• Where necessary, comply, but flag the concern. Sometimes the right answer is: “I will do it, but I do not expect it to affect the recommendation.” Afterward, revisit whether the result justified the effort. Repeating that cycle builds trust in your judgment, and permits you to push back with greater confidence on a go-forward basis.
• Leave the door open where circumstances may change. “No, because the project currently lacks committed equity” is more useful than “No, never.” A well-framed rejection identifies the conditions under which the answer could become yes.

The objective, then, is not to do less work for its own sake. It is to devote rigorous work to questions whose answers matter. In investing, lending, and financial modeling, the scarce resource is not Excel capacity, but rather, it is attention. Learning to protect said attention, politely, analytically, and with conviction, is one of the most valuable forms of judgment for any professional.

Here at Pivotal180, we accordingly focus not only on teaching the tools of financial analysis and transaction structuring, but also on developing the judgment to know when, how, and why to use said tools. Said another way, modelling is not simply about producing an answer; it is about improving outcomes, whether on individual transactions, across investment processes, or in the everyday allocation of time, attention, and judgment. That broader perspective is central to how we approach our courses and trainings.

Plato is purported to have said, “one of the penalties for refusing to participate in politics is that one ends up governed by inferiors.” So, too, can it be said that one of the penalties for refusing to say “no” is that one may end up governed by inferior priorities masquerading as superiors.