I’m not sure in what context you’re reading this, but if it’s outside of your work hours and you’re trying to disconnect, I apologize in advance. No one likes to have the devil spoken of in their presence, but I have one question: Have you ever considered how crucial Excel is to your job? Think about it. During an eight-hour workday, how many hours do you spend staring into an endless expanse of cells, columns, and formulas? How much does your company and your salary depend on well-maintained Excel spreadsheets?
What’s more, imagine what would happen if, for some reason, Microsoft CEO Satya Nadella decided to completely remove Excel from the market starting tomorrow. You would likely be in disbelief, and rightfully so. However, one thing is clear: A significant amount of money is at stake, all tied to Excel spreadsheets. When something goes wrong in Excel, the consequences can be severe.
Perhaps we rely on Excel more than we should.
Life before Excel. Excel has been around for about 40 years. It’s hard to believe, isn’t it? Before it became the essential tool in business that it is today, several other spreadsheet programs existed. You might recall tools like VisiCalc (created for the Apple II in the late 1970s), Lotus 1-2-3 (which succeeded VisiCalc and became standard on IBM computers), and Multiplan, Microsoft’s first spreadsheet editor that laid the groundwork for Excel.
Lotus 1-2-3 was the dominant program of its time, while Multiplan struggled to keep up with it on MS-DOS. However, the rise of Windows and its user-friendly graphical interface changed the state of things. Combined with Excel’s design, which was built to function in a graphic environment from the start, Lotus 1-2-3 gradually fell out of favor. Excel emerged as the leading spreadsheet software. The first version was released for Mac in 1985 and later for Windows 1.0 in 1987.
Excel quickly became Microsoft’s flagship product. In 1993, Word and PowerPoint were sold alongside Excel as part of what we now know as Microsoft Office. Excel’s significance was so great that Microsoft had to update the interfaces of Word and PowerPoint to align with those of its premier software.
Lotus 1-2-3 on MS-DOS. How fun! | Image: Odacir Blanco, public domain
Excel takes over. Excel’s success began right from the start, just like Windows. This was an ideal situation for Microsoft. Windows provided a graphical environment, its market share continued to grow, and Excel was perfectly suited for that environment. Moreover, it was the only spreadsheet option available for Windows at the time. Meanwhile, IBM’s Lotus Development remained focused on OS/2 and took too long to adapt to the changing landscape. Eventually, in July 2011, IBM donated the source code to the Apache Foundation for its OpenOffice project.
The triumph of spreadsheets. Spreadsheets offer a significant advantage: When understood and used correctly, they can replace almost any program. Why would you need separate software for accounting, inventory control, and other tasks when you can accomplish everything with an Excel sheet, some formulas, and macros? At its launch, Excel was user-friendly, more intuitive than its competitors, and allowed users to store, analyze, represent, and access information quickly.
Spreadsheets were like a beacon of light in the overwhelming sea of data that humanity generates–not over days, but in hours and even minutes. However, as with everything in life, there are downsides.
The problem of Excel abuse. Excel is a versatile tool, but it may not be the best fit for every task. We all know someone who loves Excel spreadsheets, but this dependency can lead to serious issues. Specialized software exists for specific tasks precisely because they focus on particular functions. For instance, while you could track your work hours in Excel, it would be wiser to use dedicated software that won’t jeopardize an entire year’s worth of data due to an accidental deletion.
Plenty of cautionary tales. While it may be exaggerated to say that the world economy relies on a single Excel spreadsheet with manually entered data, there’ve been instances where spreadsheet errors have resulted in millions of dollars in losses. One of the most well-known examples is the case of JPMorgan Chase, often referred to as the “London Whale.”
Image: Xataka
In 2012, JPMorgan Chase was developing a Value at Risk model supported by an Excel spreadsheet. The data for this model had to be entered manually and copied and pasted from other spreadsheets. The employee responsible for this task, who lacked training in model development, made a critical error. He copied and pasted the sum of two figures instead of their average. This led JPMorgan Chase to make riskier investments than it should have, resulting in a loss of $6 billion.
A second case in point. In 2010, Carmen Reinhart and Kenneth Rogoff from Harvard University published an economics paper titled Growth in a Time of Debt. The study claimed that countries with deficits exceeding 90% of their GDP experienced slower growth compared to other nations. This argument was used to justify the austerity policies implemented after the 2008 financial crisis. However, a graduate student named Thomas Herndon discovered a significant error in their research when he attempted to replicate their results.
Upon reviewing the study, Herndon found that the authors had excluded several countries (specifically Australia, Austria, Belgium, Canada, and Denmark) from their calculations. Additionally, they had used a simple average instead of weighting the data based on the size of the economies. The data presented was incorrect, yet it was the foundation for the harsh austerity measures imposed on European countries such as Spain, Portugal, and Greece. While the thesis had some merit, the policies adopted could’ve been more lenient.
Image: Mikhail Nilov/Pexels
These are just two well-documented cases, but they’re not the only examples. The European Spreadsheet Risk Interest Group aims to “provide a forum where research into business and audit risks from the use of spreadsheets and ways in which those risks can be avoided and countered, could be collated and presented in a form suitable for auditors and business managers.”
The dependence on Excel. The issue isn’t with Excel itself but rather the misuse or abuse of the tool. Excel is designed to store, analyze, and visualize data, not to function as a second brain for making critical decisions. The reasoning is straightforward: 94% of Excel spreadsheets have errors.
When data entered manually is linked to other data and integrated into a formula, it leads to a result, can trigger a macro, and ultimately forms the basis for decision-making. However, when the data entered is erroneous, the outcome can be disastrous. The larger the spreadsheet, the higher the risk of errors and the more challenging it becomes to identify the source of those errors. The weakest link is often the same as in cybersecurity: the human factor.
Is there a solution? Yes, a change in processes. While Excel is effective for organizing and storing data, it may be more beneficial to transfer that data to a dedicated processing tool, especially if it’s intended for decision-making. This kind of tool should feature standardized formats and facilitate real-time collaboration and updates. However, transforming established processes (especially ones that have been in place for many years) can be quite challenging for a company.
Another option is to implement an Excel spreadsheet review process, where files are periodically audited for errors. This would create a form of quality control for Excel sheets.
Image | Mika Baumeister
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