5 Excel Bloopers with Huge Concequences

Adit Ruparel Sep 01, 2014

We all know how useful Excel can be for day to day tasks, however the popular Microsoft program has been implicated in the financial crisis, Europe’s growth problems, the U.S.’s weak economic recovery, and pretty much everything else.

Apparently some really smart people have trouble mastering Microsoft Office. Here are some notable Excel victims:

 

We should have seen the financial crisis coming. Back in 2003, the giant mortgage guarantor made an error in an Excel spreadsheet when transitioning to a new accounting regulation. The result: an error that made Fannie look $1.3 billion more profitable than it actually was. The company was forced to later restate its results.

Carmen Reinhart and Kenneth Rogoff used debt levels of dozens of countries going back to the 1800s in their 2010 paper to show that when a country’s debt hits 90% of its GDP, economic growth slows dramatically. In contrary, according to a paper written by three economists at The University of Massachusetts, a coding error in the Harvard professor’s spreadsheet completely excluded the first five countries in their dataset. The error caused the professors to conclude that on average, countries in the 90% + category tended to see their economies shrink -0.1% a year. In fact, the economies grew 2.2%.

In 2011, a miscalculation in Utah’s office of education underestimated the number of students who would enrol in the state’s public schools and led to a $25 million budget shortfall. The state’s superintendent eventually attributed the error to a “faulty reference in a spreadsheet,” and two of the state’s top finance officials were forced to resign.

In the wake of the $6.2 billion JPMorgan Chase trading loss, countless employees have been fired or even brought in front of governing bodies. However, who or what was really to blame? According to an internal report on the trading loss released in February, the Microsoft Excel model that was supposed to monitor and limit the amount of risk the bank’s London traders were taking was “operated through a series of Excel spreadsheets, which had to be completed manually, by a process of copying and pasting data from one spreadsheet to another.” One key measure was added when it should have been averaged. The result: Risk officers at JPMorgan believed their trade was half as risky as they actually were. By those numbers, CEO Jamie Dimon can pass $3.1 billion off on Excel. The rest is still on him.

When Barclays sent over its offer to buy up Lehman Brothers in the immediate wake of the firm’s September 2008 collapse, it did so with an Excel spreadsheet. The makers of the spreadsheet, which detailed Lehman’s assets and what Barclays was willing to buy, hid, rather than deleted, nearly 200 cells. But when a junior law associate at Cleary Gottlieb Steen & Hamilton converted the Excel file to a PDF and e-mailed it over to the bankruptcy court, the hidden parts of the spreadsheet reappeared. The result: Along with the parts of Lehman Barclays wanted, the British bank was also forced to swallow losses on an additional 179 toxic deals it never intended to buy.

Improving your Excel skills could prevent any number of costly mistake (hopefully none on the scale you've read above!)

About Adit Ruparel
As a fresh faced 19 year old Adit was one of Filtered's first interns way back in 2010. After completing his degree in Mechanical Engineering, Adit joined full time in the Commercial team. Adit now uses his degree to over analyse everything, much to Adams annoyance. Outside of work, Adit tries to emulate Robbie Fowler on the football pitch and even more so in the property market.
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