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Excel bug/feature: recursive VLOOKUP for hierarchy calculations

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There's lots of Q&A websites out there talking about Excel bugs that are actually formula errors, and others that talk about recursive VLOOKUPs when they really mean iterative. To be clear on what we are talking about:
Excel (2007, 2010, 2011)  has an undocumented feature where you can use circular reference in the third argument of VLOOKUP without iterative calculation. Why should I care?  Here's one type of problem you can solve with this "feature". Suppose we have an organizational chart and want to find how many levels deep each person is. Similar to this problem posted on MrExcel.


IDBOSSNAME1John Smith21Susan Jones32Alice Johnson42Tim Moore51Rachel Parker61Tom Allen75Michael Gross85Kim Dole96Kathy Roberts106Betsy Foster1110Mini Foster
You can do it with this in cell D2: