ChannelPulse
Mental arithmetic and market sizing
Paper LBOs, trading loops and modelling tests all reward the same skill — getting a defensible number without a calculator. This measures the error in the rule of 72, builds the MOIC-to-IRR table worth memorising, then sizes a market as a chain of multiplications and shows the uncomfortable arithmetic of compounding errors: three plausible 2x mistakes put you an order of magnitude out.
What you'll be able to do
- Use the rule of 72 and know the range where it is accurate
- Convert MOIC to IRR in your head for the hold periods that come up
- Size a market as an explicit chain of multiplications, and defend each link
- Explain why every input in a multiplicative model has the same elasticity, and what that implies for where to spend your uncertainty
Before this: lbo-mechanics
The rest of this lesson is in the app
Paper LBOs, trading loops and modelling tests all reward the same skill — getting a defensible number without a calculator. This measures the error in the rule of 72, builds the MOIC-to-IRR table worth memorising, then sizes a market as a chain of multiplications and shows the uncomfortable arithmetic of compounding errors: three plausible 2x mistakes put you an order of magnitude out. This walkthrough runs about 22 minutes, with runnable code you can edit and re-run as you read.
Continue in ChannelPulseThe first module of every track is free to read on the web — see what's open in Finance.