My Own Path: From the Bard to DSCRs

Since joining Pivotal180 in July, I have written a few blogs on paths—the path to becoming a financial modeler and the various paths to producing good and great financial models.

Are We There Yet? – The time it takes to be a financial modeler.

The time it takes to build a (good) financial model  

Are We There Yet? – The time it takes to build a (great) financial model

What is on the Path to Greatness best Practice Financial Modeling 

But as I am new to Pivotal180, I thought it would be useful to present my path to Project Finance, modeling, and to Pivotal180.

Many years ago, a lifetime some might say, I was a starving artist (metaphorically, as I have always been a rather stout gentleman). I was a stage actor. I started performing when I was 8 years old. Technically, I left the theater and its “starving” lifestyle in 2014 after nearly two decades of Shakespeare, Chekhov, modern works, and, of course, brand new, never before seen plays. And although I left the stage, you might argue that I am still performing as the role of “teacher” and “performer” aren’t terribly far apart.

But I want to go one step further. I argue that Project Finance and the Theater are not perfect strangers but relatives, cousins per se. So, in theory, I have merely been continuing my craft in a new and more niche role, but the skills remain the same.

How Shakespeare and a RE transaction are related:

Let’s set the stage.

What are the core components of theater production?

You have your actors, a host of supporting technicians, a performance location, design (costumes, props, lights, and sets) and a story to tell; a script with directions, instructions, and a conclusion. Besides these logistical pieces and participants, theater is a physical representation of a script told with nuance and dynamism following a narrative arc. Throughout that process, the actors have one key mission: to understand the objectives and intentions of those around them in order to support or impede progress towards the peak of the story.

So, you would cast a Romeo and a Juliet among others and decide to set the play in modern Paris or Seoul or perhaps somewhere more fanciful and fictional. Technical minds would then debate a myriad of initial inputs to determine if the producer or director’s ideas are even remotely feasible. You then begin rehearsals. Rehearsals are an interplay between directorial leadership, actors’ instincts, technical skepticism, and a bit of whimsy when things just “work out”. You may use the original script or modify it to better fit your ideal production.

Opening night arrives after lots of hard work. The work of many hopefully comes together on the night or else no one makes a penny or receives a single solitary clap of applause. After opening night, ideally the show becomes a well-oiled machine that delivers consistent and outstanding performances day in and day out for days, months, even years.

Hopefully at this point, you have picked up on my thinly veiled conceit.

What are the core components of a RE transaction?

To no surprise, you have your principal participants (equity, debt, EPC, and the like), your actors. You have selected a prime, sunny location with a receptive political structure. The engineers, advisors, CPAs, and lawyers begin their work of determining if this concept makes sense. The “actors” start to negotiate a script paying close attention to the incentives of their counterparts. The script is both written (legal documents) and set out in a financial model so the actors can see how the “story” might evolve as incentives shift complete with stage directions and notes on outcomes and goals.

No one makes a dollar if the show is never mounted. If the show does go on, then hopefully it runs well for years to come.

Solar panels—well, we can call those props in our little metaphor.

Et voilà! Theater and Project Finance are not-so-distant cousins.

Key Takeaways

All kidding aside, there are most certainly some skills from the theater that play an important role in Project Finance and in Modeling:

• Creativity – these transactions are large and complex. Often issues arise that require novelty and creativity to solve
• Listening – Many think that since theater is scripted, the actors are merely repeating their lines at the appropriate moment. But in truth, the best performers listen actively and pick up on subtext, inflection, and external context that adds depth to their own understanding and thus how they deliver the ensuing line. Listening is a critical part of negotiation.
• “Yes, and…” – In the improv community, there is a concept called, “Yes, and…” where you take exactly what is given to you on face value and try to build upon it rather than reject it. The idea behind this concept is built on creativity and listening with the added component of trust. I would argue that honest, “good faith” negotiations should be held in the same manner.
• Adaptability – In any Project Finance transaction, you may wear many hats: junior lawyer, modeler, novice engineer, financier, banker, and more. In many circumstances, you must step into the shoes of some other project participant and try to understand their motivation. Play the role that they are playing. It is incredibly useful to be adaptable and to settle into each of these disparate roles seamlessly.
• Daring – Live performances are an intense experience and require a decent amount of daring to execute well. Project Finance transactions are also similarly intense and impossible in a way. As we state in our introductory material, how do you convince someone to invest huge sums of money into a project that doesn’t exist, has no employees, no guarantees of ever operating or of ever generating revenue? Project Finance and modeling. Sounds like a daring venture to me.

From my time in the theater to now, I worked in a variety of finance roles that required the 5 skills above but added technical skills and transaction experience. My transition to teaching happened in graduate school when I became the teaching assistant for the Project Finance & Modeling course. I still hold that role 7 years later. I continued that role while working as a lender after receiving my graduate degree.

My transition to Pivotal180 this summer is a return to my theater roots. Trading the stage for the conference room while still aiming to deliver an excellent performance in every course. I don’t expect applause at the end (though always appreciated) but rather that those who take the course truly understand the theater of it all.

Training 

Want to learn to be a financial modeler and understand how to evaluate and optimize your projects, no matter which way the economic or legislative winds are blowing?

Enroll in a Pivotal180 course! We offer a range of training programs for modelers of different backgrounds and experience levels:

Renewable Energy Project Finance Modeling

Project Finance Modeling

Introduction to Project Finance Modeling

Financial Modeling Fundamentals 

Tax Equity & Hybrid Financial Modeling