Barbarians at the Gate rarely mentions the role of spreadsheets, but I also had my interest sparked by Oliver Stone’s movie Wall Street (1987), which had a similar theme. It is a story about a fictional corporate raider called Gordon Gekko taking over a fictional company called Bluestar Airlines. Gekko mentors Bud Fox, a young financial analyst who is anxious to be successful. The movie draws on the gangster genre, with Stone replacing the iconic guns and cars of the traditional genre with spreadsheets and cellular telephones. I wrote about the movie in my 2010 post “Figuring Criminality in Oliver Stone’s Wall Street,” where I identified digital spreadsheets as one of the “weapons” used by financial raiders.

This post looks at the early use of digital spreadsheets and two aspects of modern capitalism that emerged during the 1980s with the personal computer and a significant spreadsheet that was dominant before Microsoft’s Excel. The LBO and the use of “junk bonds” emerged in conjunction with digital technology and new financial techniques that reshaped major corporations and the organization of modern finance.

This post looks at the early use of digital spreadsheets and two aspects of modern capitalism that emerged during the 1980s with the personal computer and a significant spreadsheet that was dominant before Microsoft’s Excel. The LBO and the use of “junk bonds” emerged in conjunction with digital technology and new financial techniques that reshaped major corporations and the organization of modern finance.

The concept of time is central to the“temporal finance” of spreadsheet capitalism. It empowers techniques like forecasting, modeling, risk analysis, and decision-making that depend on time-based variables, such as cash flows, interest rates, investment returns, or market trends. These techniques translate into debt instruments like bonds, mortgages, and loans that promise future repayment with interest, acknowledging the time value of money.

Temporal finance plays a critical role in the development of spreadsheet capitalism. In disciplines like corporate finance, portfolio management, and financial engineering, spreadsheets drew on established temporal practices and alphanumeric culture yet shaped a PC-enabled technical knowledge that transformed the global political economy and filtered out into general use.

I am using the term “spreadsheet capitalism” to refer to a type of rationality brought to the political economy due to the computer application’s confluence of capabilities exemplified by Lotus 1-2-3. The spreadsheet integrated previous political technologies such as the list and table combined with accelerated processing speeds, gridmatic visibility, and the interactivity and intimacy enabled by the microprocessing “chip” in the affordable PC.

Spreadsheets integrated temporal variables into financial decision-making and accelerated the influence of innovations in financial modeling, software, and decision support systems. Early spreadsheet software, like Lotus 1-2-3 and later Excel, allowed users to automate calculations across time periods using formulas, macros, and built-in functions. Financial analysts could efficiently calculate and project periodic growth rates, depreciation schedules, or portfolio returns without manually recalculating each period.

Lotus 1-2-3 effectively leveraged the PC’s keyboard and cathode-ray display to provide a clean, ASCII text-based interface that was easy for financial professionals to learn and use. While it was less feature-rich than later tools like Microsoft Excel, several functions and formulas on Lotus 1-2-23 were particularly valuable for LBO modeling. Not surprisingly, a key function was @SUM(), which added the values in a range of cells. For example, @SUM(D1..D7) would calculate totals from D1 through D7, such as revenue, costs, or aggregate cash flow over time. @ROUND() was often used to clean up financial outputs for reporting, ensuring Indo-Arabic written outputs are rounded to the nearest dollar, thousand, or million in its positional placement numbering scheme. More functions and formulas used by financial raiders and private equity will be discussed below.

Reaganomics and the Digital Spreadsheet

The larger context for the emergence of the spreadsheet economy was the “Reagan Revolution” and its emphasis on deregulation, dollar strength, tax incentives, and a pro-finance climate. These changes created fertile ground for the rapid growth of the spreadsheet economy. The Economic Recovery Tax Act of 1981 lowered capital gains taxes, making investments in LBOs more attractive to private equity firms and individual investors. Legislative changes in depreciation schedules also allowed firms to write off investments faster, improving cash flow and making acquisitions more financially feasible. Relaxed corporate tax laws allowed companies to deduct significant interest payments on debt, a cornerstone of LBO financing, and incentivized the heavy use of leverage in buyouts.

In this environment, temporal forecasting, modeling, and risk analysis during the 1980s and early 1990s enabled the complex calculations and scenarios that made corporate raiding and other types of mergers and acquisitions (M&A) possible. Users could automate calculations across future time periods using formulas, macros, and built-in functions. These were previously too cumbersome to perform manually but were made possible with formulas, macros, and built-in functions. These capabilities made spreadsheets instrumental in structuring and executing many major business deals and LBOs during the Reagan era.

Spreadsheets worked with several new technologies that emerged at the time to fundamentally transform corporate America and diffuse into many industries and social activities. This post will focus more on the basic capabilities of the PC that enabled the CP/M and MS-DOS spreadsheets. Other posts will track the developments in GUI environments that enabled Mac and Windows-based spreadsheets.

Standardization of IBM PCs and the IBM “Compatibles” for Lotus 1-2-3

While the Reagan Revolution of the 1980s created an economic and regulatory environment that made LBOs particularly attractive, the IBM PC and its compatibles became its initial workhorses. IBM had been the dominant mainframe computer producer but noticed it was “losing the hearts and minds” of computer users to the Apple II “microcomputer” and its games like Alien Rain, AppleWriter word processor, and especially the VisiCalc spreadsheet. In response to popular demand in the business world, IBM created its own microcomputer, based on a new Intel microprocessor.

IBM released the Personal Computer (PC) in 1981 to entice the business community back to “Big Blue,” as the New York-based computer company was sometimes called. After procuring an operating system (OS) from “Micro-Soft,” it went on sale in August 1981. Early PCs were powered by Intel’s 8088, a 16-bit microprocessing chip used for its central processing unit (CPU). Although limited by the era’s hardware, the 8088 allowed Lotus 1-2-3 to process larger datasets than previous-generation microprocessors, enabling businesses to manage more comprehensive financial information.

The combination of Lotus 1-2-3’s features and the 8088’s performance made the software versatile for various financial tasks, from simple bookkeeping to advanced financial modeling. The 8088, operating at 5-10 MHz, delivered significant computational power for its time, enabling fast data processing and calculations.

The speed of the 8088, representing a 50-times speed increase over the revolutionary Intel 4004 chip that inspired Bill Gates to leave Harvard and start “Micro-Soft.” Although primarily focused on developing software, they took advantage of an opportunity to buy and configure an operating system called MS-DOS for IBM. In a historic move, Gates would outmaneuver the computer giant, however, and offer MS-DOS to many new “IBM-compatible” microcomputers that were based on the reverse-engineering of the PC.

Working on many new PCs such as the Compaq and Dell, MS-DOS allowed Lotus 1-2-3 to dominate the market, despite Microsoft’s release of its Multiplan spreadsheet in 1982. Despite using the old-style command-line interface, the new spreadsheets could handle real-time financial updates, giving users the ability to recalculate entire spreadsheets almost instantly. With MS-DOS, Lotus 1-2-3 became the de facto spreadsheet tool for businesses.

The widespread use of the 8088 established the PC as a standard computing platform, encouraging software developers like Lotus to optimize their products for this architecture. The popularity of the 8088 and Lotus 1-2-3 fostered a growing arsenal of compatible software, add-in boards, and other hardware for storing data and printing charts, further amplifying its utility for financial purposes.

The 8088’s ability to handle multitasking allowed Lotus 1-2-3 to integrate spreadsheet, charting, and database functions. Financial professionals could perform calculations, visualize data, and manage records in one program without needing additional tools.

In early 1983, Lotus 1-2-3 was released after a long incubation period while being programmed in Assembly language for faster performance. Lotus could also run on “IBM-compatible” machines, such as the Compaq portable computer that came out a few months later. Lotus 1-2-3 became known for its ability to (1) visually calculate formulas, (2) function like a database, and (3) turn data into charts for visible representation of data. The spreadsheet’s features made the software versatile for various financial tasks, from simple bookkeeping to advanced financial modeling. Lotus 1-2-3 played a pivotal role in the emergence of spreadsheet capitalism during the 1980s, and its functions and logic informed the principles of modern LBO modeling.

Spreadsheets Empower Corporate Raiding

The consolidation of corporations in the 1960s and early 1970s, mainly through mergers, created the conditions that fueled the rise of corporate raiders in the 1980s. Expanding conglomerates often created inefficient bureaucracies with poor management by acquiring companies in unrelated industries. Slow decision-making, short-term planning, and internal competition for resources hid the value of their subsidiary companies. Leveraged buyouts, enabled by Lotus 1-2-3 and junk bonds, provided the financial firepower for corporate raiders to execute hostile takeovers and break up these companies for big profits.

Corporate raiders would model the complex financing of LBOs, where a company is acquired primarily with borrowed money. These raiders would input a target company’s financial data into a spreadsheet and assess the company’s value, analyze different scenarios, and identify areas where costs could be cut or assets sold off to increase profitability. They would adjust variables like interest rates, debt levels, and projected cash flows to determine the feasibility and profitability of the LBO. The spreadsheet results served as compelling presentations to banks and investors, showcasing the potential returns of the LBO and convincing them to provide the necessary funding. The 1980s saw a wave of high-profile takeovers, often leading to significant restructuring and changes in the corporate landscape.

LBOs in the 1980s included several prominent cases. Notable was the breakup of RJR Nabisco (1988) and the Beatrice Companies (1986) conducted by KKR, an upcoming investment firm founded in 1976 by Jerome Kohlberg Jr. and cousins Henry Kravis and George R. Roberts. They had all previously worked together at Bear Stearns. KKR became a leader in the LBO space and heavily relied on computer analysis and spreadsheets to structure its deals.

RJR-Nabisco

The RJR Nabisco buyout was one of the most famous and largest leveraged buyouts (LBOs) in history, and it perfectly illustrates how these deals worked, including the subsequent asset sales to repay debt. RJR Nabisco was a massive conglomerate, owning tobacco brands (Winston, Salem), and food brands (Nabisco, Oreo). KKR borrowed heavily (mainly through junk bonds) to finance the acquisition. These loans minimized the amount of their own capital needed. The final price was a staggering $25 billion, a record at the time. This massive figure was only possible due to the availability of the financial analysis tools such as the spreadsheet and high-yield, high-risk junk bonds that will be discussed in a future post.

KKR’s core strategy was similar to other LBOs. Take control of the company through the LBO paid for by large loans. Identify non-core assets and divisions that could be sold off and divest those assets to generate cash. They would then use the proceeds from asset sales to pay down the often massive debt incurred in the LBO. KKR and its investors would profit from any remaining value after debt repayment.

The sheer size of the RJR Nabisco deal meant KKR had to raise an enormous amount of debt. This borrowing was facilitated by investment bankers, and increasingly, the junk bond market. KKR proceeded to sell off various RJR Nabisco assets, including several food brands, and overseas operations were also divested. Anything that wasn’t considered core to the remaining business was on the table. The money from these sales went directly to paying down the principal and interest on the LBO debt. While the deal was controversial, KKR and its investors made a substantial profit. RJR Nabisco was significantly smaller and more focused after the asset sales.

The firm’s ability to efficiently model debt financing and equity returns gave it a competitive edge. The deal’s complexity required detailed modeling of debt structures, cash flow scenarios, and potential equity returns. These could be calculated and managed using Lotus 1-2-3, which enabled models of loan amortization schedules, showing how much of each payment goes toward the principal and interest. Key functions included PMT to calculate the fixed periodic loan payment. IPMT to calculate the interest portion of a payment. PPMT was also used to calculate the principal portion of a payment. These formulas could also model different types of debt, such as bullet repayments, fixed-rate loans, or variable-rate loans, and the analysis could include early repayments or refinancings in the schedule to determine total debt cost.

The RJR Nabisco LBO became a symbol of the excesses of the 1980s, highlighting the power (and risks) of leveraged buyouts and junk bonds. It also led to increased scrutiny of these types of deals, although they continued as spreadsheet capitalism spread.

Beatrice Foods

Beatrice Foods was a massive conglomerate with a diverse portfolio of food brands (Hunt’s Ketchup, Wesson Oil, etc.) and other businesses.
KKR borrowed heavily to finance the acquisition, allowing them to purchase a large company with relatively little of their own capital. The Beatrice acquisition was another of the largest LBOs at the time, valued at approximately $6.2 billion.

Using computer analysis and Lotus 1-2-3, they modeled Beatrice’s sprawling operations and assessed the feasibility of breaking the company into smaller, more manageable pieces. The deal’s complexity again required detailed modeling of debt structures, cash flow scenarios, and potential equity returns, which were conducted using the PC-enabled spreadsheet.

After extended deliberations, KKR purchased Beatrice Companies for $8.7 billion in April 1986 and proceeded to break it up. KKR sold off many of Beatrice’s non-core businesses, including those in areas like chemicals and construction. They focused on strengthening Beatrice’s core businesses, primarily in the food and beverage sector. This list included brands like Chef Boyardee, Samsonite, and Tropicana.

Promus

Another important deal was Promus Companies acquiring Harrah’s Entertainment in a 1989 LBO transaction that depended on detailed modeling of casino revenues and operational expenses. Again, this was made feasible by Lotus 1-2-3 because of its dominance at the time. LBOs require complex financial modeling to project cash flows and analyze the target company’s future earnings potential. It also needed to determine the optimal debt levels and repayment schedules as well as assess the impact of different assumptions, such as interest rates and revenue growth, on the deal’s profitability.

Raiding financiers and associated firms leveraged Lotus 1-2-3 to simulate financial outcomes and quickly adjust models as negotiations or deal terms changed. Estimating the company’s value under different scenarios and determining whether the target company could generate enough cash to service debt under different economic and operational conditions was crucial. This estimation required precise tracking of various tranches of debt, their repayment terms, and interest coverage.

The Blackstone Group

Blackstone also started with the help of spreadsheets like Lotus 1-2-3 for its early buyouts, including real estate and private equity deals. Lotus 1-2-3 provided the necessary tools for these complex financial analyses, which were used to organize data, build complex economic models, and perform calculations. Macros were available to automate repetitive tasks and improve efficiency in the modeling process. Blackstone also used Lotus to generate charts, graphs, and other visualizations to help analyze investment performance and make presentations in the boardroom.

LBO models can become complex, requiring intricate formulas and linkages between spreadsheet parts. The accuracy of the LBO model heavily relies on the accuracy of the underlying data inputs. Lotus 1-2-3 could perform sensitivity analyses by changing key assumptions (e.g., interest rates, revenue growth) to understand their impact on the model’s output.

Spreadsheet Formulas and the Temporal Imperative

Time is a crucial factor in capitalism and its financial investments, but it was only after the West’s social transformation of time and sacrifice that investment took its current priority. Religious discipline, which structured earthly time for heavenly reward, met with the Reformation in 16th-century Europe to produce a new calculative rationality – financial investment.[Pennings Dissertation] Also, by solidifying time in alphanumerical base-12 measures (60 minutes, 24-hour days, 360 days a year), a new correlation – investment over time gained prominence. Sacrificing spending in the present for payoffs in the future was the cultural precondition for spreadsheet capitalism.[4]

The analysis of the time value of money (TVM) was critical for LBOs, particularly for valuing a target company, determining debt service, and return on investment, as well as understanding and managing the risks associated with the LBO. TVM calculations were time-consuming and tedious, often requiring financial tables or manual calculations using formulas.

Digital spreadsheets significantly accelerated and improved the analysis of TVM by automating calculations, enabling “what-if” analysis, increasing accessibility, and enhancing visualization. Lotus 1-2-3 introduced built-in financial functions, such as PV (Present Value), FV (Future Value), PMT (Payment), RATE, and NPV (Net Present Value). These functions simplified TVM calculations that would otherwise require extensive manual work or financial calculators. Instead of manually solving the compound interest formula to find future value, users could simply input values (e.g., interest rate, periods, and payment) into the FV function. Spreadsheets allow users to quickly change input variables (interest rates, cash flows, and time periods) and instantly see the impact on the TVM calculations.

TVM is based on the notion that a dollar today is worth more than a dollar in the future due to its earning potential. This formula (FV = PV x (1 + i / f) ^ n x f ) has empowered individuals and businesses to make more informed financial decisions. Spreadsheets allow users to create charts and graphs to visualize TVM concepts, such as the impact of compounding interest over time or the relationship between present value and future value.

A vital formula that was converted to the Lotus spreadsheet was Present Value @PV(), a crucial tool for analyzing companies. It provided a foundation for evaluating the worth of future cash flows from raided companies or their parts in the present terms. Companies generate cash flows over time, and analyzing them with PV ensures that delayed returns are appropriately considered and valued. PV helps distinguish between high-growth opportunities that justify higher valuations and overvalued prospects with limited potential.

PV quantifies this by discounting future cash flows to reflect their value today. This equation is critical in decision-making, whether assessing investments, valuing a company, or comparing financial alternatives. Present Value determines the internal rate of return (IRR) or net present value (NPV), the difference between the present value of cash inflows and the present value of cash outflows over a period of time. NPV is used in capital budgeting and investment planning to analyze a project’s projected profitability.

A related temporal technique is Future Value @FV() that was developed to project future cash or investment values. It calculates what money is expected to be worth at a future date based on current growth trends. It is particularly useful for debt paydown schedules or residual equity valuation @IRR(), the Internal Rate of Return. These calculations were crucial for evaluating the return on investment for equity holders, a core metric in LBOs.

Net Present Value @NPV() helped assess the profitability of an investment by calculating the value of projected cash flows discounted at the required rate of return. @NPV was crucial as it allowed users to input a discount rate (representing the cost of capital) and a series of future cash flows, and the @NPV function would calculate the present value of those cash flows.

@IF() determined whether a debt covenant has been breached or whether excess cash should be used for debt repayment. Payment @PMT() was useful for calculating the periodic payment required for a loan, considering principal, interest, and term.

Conclusion

Lotus 1-2-3’s capabilities on IBM and “IBM-compatible” personal computers allowed private equity firms to confidently pursue larger and more complex deals by providing a reliable platform for financial forecasting and decision-making. The tool’s role in shaping LBO strategies contributed to the emergence of private equity as a dominant force in corporate finance. Many fundamental modeling practices in these landmark deals continue to underpin private equity and LBO analyses today, albeit with more advanced tools like Microsoft Excel.

By providing the computational power needed for sophisticated spreadsheet software, the Intel 8088 chip-enabled Lotus 1-2-3 to become a powerful tool for financial analysis, transforming how businesses managed and analyzed financial data in the 1980s. The 8088’s arithmetic capabilities enabled Lotus 1-2-3 to execute complex financial formulas and algorithms quickly, making it suitable for forecasting, budgeting, and economic modeling tasks.

Summary

This article explores the role of digital spreadsheets, particularly Lotus 1-2-3, in the rise of leveraged buyouts (LBOs) and “junk bonds” during the 1980s, a phenomenon termed “spreadsheet capitalism.” The author argues that spreadsheets, combined with the economic policies of the Reagan era, enabled the complex financial modeling and analysis necessary for these deals, transforming corporate finance and the broader political economy.

Spreadsheets like Lotus 1-2-3 allowed financiers to analyze target companies, model LBO financing, and present compelling cases to investors. This facilitated the wave of LBOs in the 1980s, exemplified by deals like RJR Nabisco and Beatrice Foods.

Spreadsheets enabled sophisticated financial modeling across time periods, incorporating factors like cash flows, interest rates, and investment returns. This “temporal finance” became crucial for LBOs and other financial instruments.

The IBM PC and its compatibles, powered by Intel’s 8088 microprocessor, provided the hardware platform for Lotus 1-2-3 to thrive. The spreadsheet’s features, combined with the 8088’s processing power, made it a versatile tool for financial professionals.

Reaganomics is a key point. It argues that the “Reagan Revolution,” with its emphasis on deregulation, tax cuts, and a pro-finance climate, created a favorable environment for LBOs and the use of spreadsheets in finance.

The article highlights specific Lotus 1-2-3 functions and formulas, such as @SUM, @ROUND, @PV, @FV, @NPV, and @IF, that were crucial for LBO modeling and financial analysis.

Spreadsheets automated complex calculations related to the time value of money, making it easier to evaluate investments and compare financial alternatives.

The author concludes that spreadsheets played a pivotal role in the rise of LBOs and the transformation of corporate finance in the 1980s. The ability to model complex financial scenarios and analyze the time value of money empowered financiers to pursue larger and more complex deals, contributing to the emergence of private equity as a major force in the economy.

Citation APA (7th Edition)

Pennings, A.J. (2025, Feb 3) Lotus 1-2-3, Temporal Finance, and the Rise of Spreadsheet Capitalism. apennings.com https://apennings.com/how-it-came-to-rule-the-world/digital-monetarism/lotus-1-2-3-temporal-finance-and-the-rise-of-spreadsheet-capitalism/

Notes

[1] Barbarians at the Gate was written by investigative journalists Bryan Burrough and John Helyar and based upon a series of articles written for The Wall Street Journal. The book was also made into made-for-TV movie in 1983 by HBO. The book centers on F. Ross Johnson, the CEO of RJR Nabisco, who planned to buy out the rest of the Nabisco shareholders.
[2] Lotus 1-2-3 v2.3 Functions and Macros Guide. Copyright:Attribution Non-Commercial (BY-NC)
[3] Differences between Microsoft Excel and Lotus 1-2-3.
[4] The concept of time is central to the creation of debt instruments like bonds, mortgages, and loans. These instruments promise future repayment with interest, acknowledging the time value of money. The Reformation, particularly in 16th-century Europe, profoundly transformed the concept of religious sacrifice, redirecting its focus from traditional spiritual practices such as indulgences and pilgrimages to a more personal, moral, and communal framework of financial responsibility and economic participation. Driven by figures like Martin Luther and John Calvin, the Reformation emphasized salvation through faith alone (sola fide), as opposed to salvation through works or financial contributions to the Church.
Sacrificial acts, such as indulgences (payments to reduce punishment for sins) or pilgramages, were denounced and replaced by personal piety and moral rectitude became the markers of faith.

The emergent Protestantism emphasized a form of asceticism that discouraged excessive spending on luxuries and instead encouraged investment in one’s household, community, and vocation as acts of divine service. Calvinist teachings in particular associated hard work, frugality, and the accumulation of wealth with signs of God’s favor, framing secular work and financial investment as forms of religious duty legitimizing economic activity and investment as expressions of faith. Financial stewardship—managing wealth responsibly for the benefit of family and society—was seen as a spiritual obligation, transforming economic practices into acts of religious significance. The reframing of religious sacrifice as financial responsibility and moral investment influenced economic development and the encouragement of disciplined financial behavior and reinvestment contributed to the rise of capitalist economies in Protestant regions. This transformation redefined the role of the individual in their faith community, linking personal piety with economic productivity and reshaping the societal understanding of sacrifice as a moral and practical investment in the future rather than a direct transaction with the divine.

Hypertext References (APA Style)

Burrough, B. and Helyar, J. (1990). Barbarians at the Gate: The Fall of RJR Nabisco. New York: Harper & Row.
Corporate Finance Institute. (n.d.). Reaganomics. Retrieved from https://billofrightsinstitute.org/essays/ronald-reagan-and-supply-side-economics
Investopedia. (n.d.). Net Present Value (NPV). Retrieved from https://www.investopedia.com/terms/n/npv.asp
Investopedia. (n.d.). Internal Rate of Return (IRR). Retrieved from https://www.investopedia.com/terms/i/irr.asp
Investopedia. (n.d.). Residual Equity Theory. Retrieved from https://www.investopedia.com/terms/r/residual-equity-theory.asp
Pennings, A. (2010). Figuring Criminality in Oliver Stone’s Wall Street. Retrieved from https://apennings.com/2010/05/01/
The Economist. (2024, October 15). Why Microsoft Excel Won’t Die. Retrieved from https://www.economist.com/business/2024/10/15/why-microsoft-excel-wont-die

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Anthony J. Pennings, PhD is a Professor at the Department of Technology and Society, State University of New York, Korea and a Research Professor for Stony Brook University. He teaches and ICT for sustainable development. From 2002-2012 he taught digital economics and information systems management at New York University. He also taught in the Digital Media MBA at St. Edwards University in Austin, Texas, where he lives when not in the Republic of Korea.

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Category: data analytics and meaning, digital monetarism, digital spreadsheets, electric money, enterprise systems, financial technology, geopolitical risk, journalism, technologies of meaning
Tags: IBM PC > Intel 8088 > LBOs > leveraged buyouts > Lotus 1-2-3 > Reagan Revolution > time value of money (TVM)

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