The episode about how a rogue trader cost JPMorgan Chase $6.2B due to an Excel error struck a chord with folks. This episode explores three horror stories (and a recent one related to COVID) where people made simple spreadsheet errors and cost their companies and organizations millions of dollars. I don't get too in-depth with the actual spreadsheet error in each story like I did with the JPMorgan Chase story, but do provide a quick analysis and lessons to be learned from each story. At the end of the day, these stories are not about the deficiencies of Excel itself, but rather human error and oversight.

EuSpRIG for the win

All the stories below come from the EuSpRIG's website where some of the stories go back to the mid-90s. I came across the European Spreadsheet Risks Interest Group (EuSpRIG for short) watching a webinar about auditing Excel workbooks by Paula Guilfoyle. During the webinar, she mentioned these Excel "horror stories" on the EuSpRIG website, and low and behold there's a rich archive of all these horror stories which the team has consistently been updating for what looks like to be over 20 years. You know the group and the content must be legit since the website still looks like a site from the late 90s:

EuSpRIG website

In all seriousness, Patrick O'Beirne (chair of EuSpRIG) has created an amazing community and resource all spreadsheet users should peruse to learn from past spreadsheet mistakes. Nicole Kobie at Wired recently wrote a great story about these "Excel warriors," and I think this quote from the story highlights the main issues all you analysts out there should heed:

Part of the challenge of this work is that spreadsheet defenders must not only be Excel experts but know the industry that they’re working in.-Nicole Cobie, Wired

From what I can tell, all the horror stories on the EuSpRIG website (and really any time you see a story in the media about a spreadsheet error) highlight something negative that happened to the company. These type of stories are the only ones that reporters pick up and lead to clicks, ad dollars, and that whole thing. Rarely do you see a story of masterfully crafting a spreadsheet formula that leads to a positive result for the company.

Story #1: $2.6B erased from Fidelity's Magellan fund

This story originated from a thread in an e-mail listserv from 1995 called The Risks Digest. Stepping back for a bit, it's amazing that these spreadsheet mishaps were "documented" this far back on Microsoft Excel '95 (I learned Excel on version 2003 which seems lightyears ahead of 1995):

Excel 95, Source: Version Museum

Story goes like this: In November 1994, Fidelity was planning on making a distribution from their fund in the amount of $4.32/share. Fidelity cancelled the distribution because a tax accountant forgot to put a minus sign in front of a $1.3B net capital loss, which resulted in a positive dividend estimate that was off by $2.6B.

Analysis & lessons learned

Can you imagine being the tax accountant having to tell your boss that you forgot to put a minus sign in a cell?