There’s a Crucial Difference Between Doing An Analysis And Being An Analyst
Excel has bred millions of analysts. After a few false starts it often becomes the generator of all that is TRUTH. Once you become comfortable with your skill level, confidence rises in the various bottom lines created by the equal number of spreadsheets you’ve created. The lifeless, static nature of the spreadsheet is at some point morphed into future projections by the investor. Assumptions are made. Premises are accepted without challenge. Then it happens.The investor reaches the point at which they’re ready to ‘set the bar’ for whatever it is they’re doing. On BiggerPockets it’d mostly be real estate or notes secured by same. Before long there are several of these bars. These bars are set with assumed premises, many unchallenged/untested. Assumptions that are hopes more than defendable data. But it can be even worse.The assumptions can be unspoken — between the lines, if you will. These are often unintentional in nature, but can be devastating just the same. The longer period of time a spreadsheet covers, the more likely it is the damage will be substantial. False premises and erroneous assumptions are bad enough in and of themselves. When combined into a lethal cocktail, the hangover can last for years, or worse, cause hard earned investment capital to disappear.Even solid, reliable data can backfire during careful analysis.Though I learned the lessons of analysis years ago (and too many the hard way), a few conversations this week have served to underline the wisdom imparted by those lessons. One of those conversations was had online, in the comments after a post I recently wrote here. It had to do with the velocity of paying off loans, and the method used to make early debt retirement a reality. I’d promoted the payoff of one loan at a time, while the writer wondered why it mattered. If the loans were eliminated one at at time or slowly, together, the time it took was identical. In other words, concentrating on one of say, two properties, then the second, didn’t speed anything up whatsoever, all things being equal.