by Wayne A. Thorp
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"Microsoft's New Math"
Here is a little math quiz for you: What do you get when you multiply 850 by 77.1? You would be correct if you answered 65,535. However, if you were using Microsoft Office Excel 2007 prior to the middle of October, you would have gotten an answer of 100,000. This is not some new Microsoft Math. Instead, its the nightmare of every software usera bug.
In September, reports starting appearing on Web sites that Excel 2007 was generating, on occasion, improper calculations. Eventually, Microsoft confirmed these suspicions on an Excel support newsgroup. Interestingly, the error was confined to just 12 of the 9.214*10^18nine quintilliondifferent numbers Excel is able to store, all of which involved numbers near 65,535 and 65,356. Furthermore, it was only Excel 2007, not any prior versions of Excel, affected by this bug.
Microsoft Excel is by far the most popular spreadsheet program on the market today and is in its 10th version for Windows. Given this, it would be safe to assume that Microsoft would have nailed town multiplication functions by now. In its own defense, however, Microsoft was quick to point out that the errors were not due to wrong calculationsthe culprits were errors in the code involving the display of these 12 numbers.
Unfortunately, this is probably no consolation to someone who possibly made a business or financial decision based on data Excel 2007 improperly displayed. However, by the middle of October, Microsoft had released a patch to correct the problem.
This situation highlights the potential risks of relying on the results of software or Web sites to make financial decisions. If a mature program such as Microsoft Excel can have this problem, seemingly any program could fall victim to these types of bugs.
Dont take this to mean I advocate turning off your PCs and picking up a pencil and an HP-12c calculator. I firmly believe that there are many quality software applications and Web sites available to individual investors that are able to help you make money through investing or, equally important, avoid losing money.
However, when using any software or Web site for investment analysis, you shouldnt place blind trust in the results. Many programs and Web sites rely on a database, especially those for stock or mutual fund screening, as well as technical analysis and charting. Some databases are comprised of data entered manually. Others are a compilation of data from various third-party providers such as exchanges. Given the sheer volume of data in any comprehensive database, it is virtually impossible for database providers to Q&A all the data to test its integrity, especially when errors are randomnot impacting all companies in the same way. There is no such thing as a 100%-clean database. As a result, it is a good idea to verify the integrity of the data before acting upon it.
One benefit of using computerized tools for investment analysis and research is the time-saving element. It may be well worth spending a little of that time verifying the data on which you are relying. You dont need to recreate the wheel, but a little bit of paranoia now and then may be a good thing, especially before committing real money to an investment.