What is a Fermi problem and how is it useful to investment analysts?*

  • Author:
    Geoff Robinson
  • Level:
    Intermediate to Advanced
  • Study time:
    Always adding content
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Course overview
A Fermi problem, named after physicist Enrico Fermi, involves making good approximations with limited information. It is characterized by breaking down complex issues into simpler, solvable elements, enabling a rough quantitative estimate even when precise data are not readily available.

For investment analysts, adopting a Fermi mindset can be particularly beneficial, as it trains them to dissect multifaceted financial questions into more manageable components, estimate the significance of each, and synthesize these into an informed approximation of a company's potential value or the impact of market events.

This approach not only sharpens analytical thinking but also aids in navigating the uncertainties inherent in financial markets, fostering a deeper understanding of risk, reward, and the interplay of various market factors. Hence, leveraging Fermi estimation techniques equips investment professionals with a robust toolkit for making better-informed decisions when faced with the inherent ambiguities of economic and financial analysis.

What's included?

  • Fundamental research written by Geoff Robinson
  • Analyst-curated insights
  • Embedded podcasts
  • Embedded videos
  • Downloadable models, where applicable

Who should read this?

This note is essential reading for investment analysts, financial professionals, and business decision-makers who face the challenge of making informed decisions with incomplete data. It's also beneficial for finance and economics students seeking practical analytical skills. The insights provided on the Fermi approach will equip readers with a valuable framework for tackling uncertainty and improving estimation judgments in the dynamic world of finance.

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Geoff Robinson FCA FMVA MFM

Thought leader, instructor, writer, financial influencer, Former UBS Managing Director and 8x #1 ranked analysts EMEA Institutional Investor Survey
Geoff has had a varied career. He was a Managing Director within UBS Equity Research, leading their Global Fundamental Analytics franchise. During this time, he was #1, ranked 8x in the EMEA Institutional Investor Survey. Before UBS, he was a material equity investor and LBO co-investor in two market exited training consultancies. Geoff has a passion for learning and is well-known for his ability to break down complex subject matter and distil it to an audience in a digestible and engaging manner. He brings this passion to TheInvestmentAnalyst.com.