Why your scenarios matter more than your base plan
Most founders build one financial model. They spend weeks getting the numbers right, defend it to their board, and treat it as a plan to execute. This is exactly backwards. A financial model isn’t a prediction. It’s a tool for thinking through possibilities. And the most useful part of it isn’t the base case you built first. It’s the scenarios you run after. The anchoring problem Daniel Kahneman’s research on cognitive bias identified something called anchoring: once you see a number, it distorts your judgment about what the right number should be. The first estimate you encounter becomes a reference point that’s hard to escape, even when you know it’s arbitrary. ...