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Aswath Damodaran

lines on the record: 198
first: 2023-04-06
most recent: 2023-04-06
sittings or episodes: 1
sources: podcast

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“That behavioral and emotional factors play a much, much bigger role. Than economics and decision making on economic decisions, starting with where you buy a house, how much you pay for a house, where you go to college, what stocks you buy. And it's something that I've had to learn the hard way as I've watched markets adjust and go through booms and busts. I've learned that you need to be as much psychologists as economists to think about economic questions. And it's made me humbler because often when you have this rational view of the world and you have models, you start to believe that you drive the world and the decisions there, but you don't. You're an observer. And when behavior is different than what you predicted, rather than pick on the people who behave differently than you predicted and call them irrational.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“Could be a Vanguard group. It could be a plumber, plumbing business in Pittsburgh. If you're from that area, you're a Steelers fan. So I think that in a sense, if you are willing to kind of think out of the box, there are finance jobs all over. You can pick the part of the world you want to live in You can pick the type of business you want to work for and accept the fact that you might make 50% less than you might have had working for Morgan Stanley or Goldman Sach”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“And often you got to accept compromises. Life is about trade offs. And if you say, look, I want a balanced lifestyle, accept the fact that you might have to settle for a lower pay and live away from a big city because that's where your lifestyle might best be played out.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“Remember that finance has multiple careers. You don't have to end up at Goldman Sachs to be in finance. You could go work for a small privately owned business in Pennsylvania and be doing finance. Because finance basically, to me, it's a self-serving definition involves the use of any decision that has money involved in it as a financial decision. Defined that way, finance is all around you. You can work in a nonprofit and do finance. You can work for the government and do finance. You can work for a company. You can work for a bank. You can work for a consulting firm. And you ask me which one of those should I pick? Part of it is lifestyle choice, right? So don't go work for Goldman Sachs saying, look, I want a good balance of life and work. It's not going to be there, right?”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“In my book, somebody has to get killed and multiple people have to get killed for that book to be exciting. So I love books on serial killers from Hannibal Lecht, Silence of the Lambs. I mean, I read those books before they became movies. Michael Connolly, who writes books about Harry Bosch, who's a detective in LA. I love good writing. I love good writing to the extent that you read the book not so much because of what the story is, but because how the story is stored. I mean, I love John Krisham simply because he's a great writer. I love Stephen King because he's a great writer. I'm not a horror story fan, but I'll read a King book because it's extremely well written, keeps me engaged.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“The shop you go into every day, the guy behind the counter is always happy, even though he's got this job of handing out coffees three a second. How does he manage to stay happy? Maybe ask him, you know, what do you do that puts you in a good mood? And the things you learn from those people are essentially going to be a package that's going to be worth a lot more than picking a single person and a mentor and saying, I'm going to do everything that that person does.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“I wish people thought about that because I get asked to mentor people every week. I get students writing me. Can you be my mentor? And I said, maybe rather than mentoring, I can give you some guidance, but accept the fact that my guidance is not going to be perfect. Take the good stuff, reject the bad stuff, and do this with a bunch of people. You're probably better off than holding one person up as a mentor and say, I'm going to do what that person did. In my life's experience, I've learned things from Gene. I've learned things from Tom Copeland. I've learned things from Mike Babussen. I've learned things from my Uber drivers. So, I mean, you can get mentorship. Absolutely.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“Including the fact that he has a core philosophy that he goes back to no matter what happens. But there are things that he says and doesn't say. I don't agree with that. Doesn't mean that I'm rejecting the good stuff. It just means I'm taking it as a package”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“It hurts interesting because we know that investing all the time. The hard hand phenomenon. Right. It shows up in mutual funds where people put their money in a mutual fund management. He's got a hot hand. So there, what I've learned as human beings come as a package. There are good things and bad things. And I've learned not to put people on pedestals because then you're asking for disappointment. It's one of the pet peeves I have about people who put Warren Buffett on a pedestal. There are lots of things that Buffett does that I admire.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“So I remember that when I teach corporate finance that I can evoke interest in people that can lead them into lots of places and it's not what I'm saying, it's how much joy and enjoyment I feel, the passion I bring to a topic. One of the people that I've tracked in investing that I look up to is Mike Mobushen. Nobody had Michael Nuke. Oh, a couple times. Always delightful. Again, he's a person who is in multiple disciplines. Yeah, he's a polymath for sure. And I love talking to him because I always get good ideas about business and markets because of something he might say about basketball.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a fun person to talk to. You would think of him as a rigid efficient market person, but he actually very, very broad thoughts about markets, very pragmatic, very practical. And it told me that researchers didn't have to be this highbrow people who thought in abstract terms, who never talked in the language that normal people use. So I work with Jean Dick Roll, who was a professor at UCLA, was one of the people on my committee, but Tom Copeland was one of the people as well. And Tom was then a young professor at UCLA, went on to McKinsey, wrote a book on valuation, the McKinsey Valuation Book with Tim Kohler. So he actually was a great teacher. I took my first corporate finance class as an MBA from Tim Copeland. So when I think about why I went into teaching finance, it's because of the joy that he seemed to have in talking about finance. This guy's having so much fun talking about this topic. It must be worth exploring.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“Documentary was very I did my PhD at UCLA, and I remember it was my second year, the head of the department called me in and said, we have this visiting professor from the University of Chicago who comes here every summer because he likes to play tennis. And I said, who is it? And he says, this guy called Gene Farmer. And I was actually Jean's TA for those summers he used to come to UCLA. And we played more tennis. So he didn't use me as a research assistant as much as he used me as a tennis partner.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“We've been talking about on Apple TV, I've been watching Severance. Great show. On Apple TV, again, is following the HBO model. Exactly. That's why I love Ted Lasso. Who does? It's a fun movie. It's a movie that feels you leaves you feeling good after you watch.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“The series of mistakes that pile up, and as you watch it, you recognize how you make $8 billion trading mistakes, is you take a small mistake, you cover it up, you make a bigger mistake, and then a bigger mistake. So I have fairly diverse viewing across. I mean, I have six different streaming services.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“Know if you've pure entertainment value, it's like eating. You said jump, right? And I watched it simply because you watch it for just the craziness of what's going on. I also love Bosch on Amazon. My wife Bosch is a, it's a because I like Michael Conley. I like the books he writes. I like Bosch. I watch the Chernobyl documentary on H. Oh, really? It's an amazing documentary. It's not actually a mockumentary, which is they take the documentary and they've made it a movie really extraordinarily well done. And again, a very dark story because it's Chernobyl story. How can you make it a happy ending? But it actually takes you through.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“A little dark and a little dystopian, normally not my, but the fact that I watched all eight episodes tells me that they were able to keep me hooked on a show, even though I'm not a walking dead fan or a fan of the strange stuff that goes on in other universes. So I.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“The reason I'm not going to do that in Netflix is their business model is to throw 100 shows at the wall and hope three stick. HPO is at the other end of the extreme, whether you watch The Last of Us or you watch any of the shows, whether you like the show or not clearly thought went into the show. It's not something that mislead together. So HBO remains my streaming network of choices.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“Book listener. My favorite streaming service is HBO. And the reason is simple on Netflix, you have to start. More false starts on Netflix than any other service. Really, that's interesting. Because I start a show and 10 minutes in. I said, I don't want to watch this.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't even read quality. I read crime novels. I love serial killer books. Michael Connolly is what I'm reading right now.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“Silent for a while. I mean, doesn't mean the federal open market don't make this, make yourself the center of the investing universe. It's not healthy for anybody involved in the process.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“Whereas Tim. I'm hearing too much from Fed members telling me what they think about inflation. I think it would be good for the Fed to go”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, I remember an Alan Green span was the fed chair. Not only was he a person of few words, it was difficult to extract a sentence from him. And most people wouldn't even have been able to tell you who sat on the Federal Open Market Committee in the 90s. Because wasn't the center of the universe like it is today?”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“I'll tell you what my parents told me when I was a young child, which is children should be seen and not heard. And I would say the same thing about Fed chairman and people on the committee. I wish we saw less of them in mystery about them.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“Exactly. It's stability in inflation that really you're aspiring to do. And historically, high inflation has gone with more instability. So I think that the Fed has to not just have an inflation level in its target, has to think of ways in which how can we make that level more stable over time. A band which is tighter because I think it makes it easier than to make long-term investments and make judgments if you have a band that's tighter than if it's this wide band.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“Ways to go when Little more, and I remember in the 1980s, people are saying, let's target a 5% inflation or a 5% inflation. And they were okay with that. So there's nothing particularly magical about it. And in fact, if I step back, it's not high inflation per se that makes it difficult to run businesses. It's unstable inflation. In fact, I give people a choice between two economies. The first is 2% inflation, the second is 5% inflation. As the much economy would rather be in, as an investor as a business, they all pick the 2%. And they say, let me change the problem a little bit. Let's assume the country with 5% inflation. It's going to be 5% guaranteed everywhere forever. And the 2% inflation, you go from zero to four back to zero to four and say, which wouldn't you rather be? And the answer is I'd rather be in the 5% guarantee.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, and I think that that's part of the reason is that at some point the Fed has to decide whether two is where their end game is or whether they'd settle for it. There's nothing magical about two, right? Well, when you're at zero,”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“I think they want the break you need to get from six or five or wherever we are right now to 2% is a pretty significant break. Hey, listen, if we had a four.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“We're closer to the end of the. I think so. The cycle. I think so. And I think so the Fed is keeping its eyes on wage increases in different sectors. It's looking at pricing and subsets of services and it's looking for a break in that inflationary cycle.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“And it never really resonated with not collectively. If you have a subset of companies which are pricing power because it turns out that if you look at equities collectively, that pricing power is not complete. You're not able to pass inflation through completely. So I think equity, no financial asset can be a good investment if inflation is. Now collectively, you don't have enough pricing power to pass it through.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“That doesn't mean some companies are not price gouging, but in the aggregate, the story doesn't hold up. On the first issue of how does it affect valuation, I think that it boils down to pricing power. If you have pricing power, you can insulate yourself against inflation by passing it through. And there are some companies that clearly have pricing power that have done that, which is one reason equities have been remarkably resilient given what's happened to interest rates and costs of capital. 2022 was a record year in terms of how much cost of capital of companies went up in one year. The biggest single year increase I've seen in the 60 plus years that I've tracked the data for. So, I think that equities have been resilient precisely for that reason. They've been able to pass the earnings through.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“So, if you clean up for that and you look at 21 and 22 and say, did margins go up? Because that's the inflationary use. I mean, in some sectors, margins obviously continued to creep up parts of software, but overall margins for US companies have been pretty stagnant. So if there's been price gouging, it's not showing up as higher profits in the aggregate.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“And the margins have been rising now for a decade, partly because the subset of companies with the highest market caps are now technology. I mean, they're very efficient. And a software company could deliver 35% margins because of unity economics. The extra unit of software costs you nothing.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“The second, let me take the second question first. I've heard that story and it should show up as higher profit margins and higher returns that you're making.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“Of the Is landing on the people who can least afford it. That's exactly the reason you don't want to get let inflation get out of control because the people who pay the price to fight inflation. Are not the upper middle class and the wealthy. It's the people at the bottom. Because when you have a recession, guess who loses their jobs first? It's a day-to-day hourly worker who said, you know, you're going to work less hours. I'm going to pay you less. So I think you're absolutely right. The people that inflation punishes the most are not the wealthy people. They can find places to put their money and earn money to cover inflation. The people who can least afford. That's why inflation is a hidden tax. It's the worst possible tax. Because the people paying it are the people who can least afford to pay it”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“Because that's the only way you can break that cycle of higher prices. I think we're in that cycle, which is one reason inflation is so stubborn. It's not going away quickly. It's because it's not just about fixing the supply chains. It's now in people's psyches. People are asking for pay raises based upon, I mean, you look at the LA school district Strike and the pay raises teachers were asking for. It was like 7%, 8% a year, three years ago, they'd have asked for 3% a year.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“But then he raised prices. And then once he started on this core now, every month every month I go in, the price is up another 10 or 15 cents because he's being prudent. He's saying, look, I'm going to raise the prices because I need to pay my employees. They're going to ask me for higher wages. So once inflation gets embedded in people's psyche, it starts to affect how people ask for wage increases, how much you raise prices, which means often the only way you can break the back of inflation is to render people into hostages. You basically tell people, don't go ask for a pay raise, you might lose your job. Don't raise prices because people might not come in, which is an economic recession. It's a Volcker nightmare that played out where he said, look, I'm going to break the back of inflation. And he did, but it took a very severe recession.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“Probably should have because here's the problem, and I wrote a piece then saying, you know, even if inflation is purely supplied because initially their claim was this is transitory, it's going to be very short term. I said, even if that's true to the extent that there's a possibility that it's not transitory, you need to act now. And the reason I said that is inflation is as much a psychological phenomenon as an economic phenomenon. I'll give you an example. The restaurant that I live next to a Mexican restaurant, the price of a burrito had stayed the same for a decade.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“Inflation drives interest rates. In fact, I think one of the most unhealthy things we've done over the last decade is we've given the Fed powers, it never has. Feds don't set, the Fed doesn't set it. And once rates went up, you had banks like Silicon Valley Bank, which had bonds at low rates, which had to reprice the bonds. So inflation is at the core of almost everything we've seen in markets for the last year and three months. And it's always been the case. Once inflation enters, gets on stage, it's a hog. It's an attention hog. It sucks up everything. So, I think right now inflation is at the core of almost everything you do, whether you are a trader or an investor. You have to think about inflation because you have no choice.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it's a market driven by two macro forces. One is inflation, the other is what's going to happen to the economy. And at the start of this year, I said those are going to dominate the discussion. So now we've had this distraction in a sense for markets with the banking crisis. And it's in a sense a side game that's going on. But ultimately, what happens in the banking crisis, you could actually argue that it was inflation that created the banking crisis in the first place.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“And I think it's made me a lot more skeptical about scoring systems changing behavior. All they do is create gaming that companies use to make their scores higher without changing anything of consequence.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“They don't look at actions which actually change governance. And in fact, this extending this, any scoring system is going to create gaming, which is companies are going to figure out what drives the score and then they're going to gain the system to get a higher score. That's not because a bad company. It's because scoring systems create gaming. And I saw that play out with governance scores. We were told in 2001 and 2002 when S&P announced governance course this is going to change corporate governance because now we're going to score companies. Twenty years later I look back and say it changed nothing. We've had voting and non-voting shares. Governance has actually become more difficult now than 20 years ago.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“It's natural, it's psychologically, so that's why I think we lost track of this in corporate governance research. We thought the promise insiders. So if you look at the Sarbanox law, they fixed all the surface level problems, which is you can't have your cousin on the board, you can't have your brother on the board. Those are insiders. You need outsiders. And in a sense, and there's research that suggested that big boards are less effective than small boards. So they said, we're going to say have a small board composed of outside outsiders. And then we added, you know, it's diverse, more likely to get pushback. And we left it at that. But we did the easy stuff. And that's a problem with scores is they do the easy stuff. They do the checkbox. Right.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“And when you throw in an authority figure in there, which is the CEO and a lot of money who knows far more about the company than you do, then...”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“Because that really is a true measure of governance, and we don't have that now. And I think that might be a measure that could be useful for investors to get a sense of is this an effective board or an ineffective board. Because that, as you said, is a useful piece of information to investors.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“And he was what I call a corporate Caesar, a complete power. And he said there was not a single action taken by his board where the decision was not unanimous. And my reaction was, that's a rubber stamp board. If everything you come up unanimously gets voted on. So maybe we need less focus on how big is the board. In fact, many of the corporate governance scores are based on very surface level things. Are they insiders or outsiders? How big is the board? I'd like to get a sense of how effective is the board, how many no votes do you get, how much pushback do you get on CEOs?”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“It's got to be institutional. So I think that unfortunately this is not a process where you can expect shareholders to do their homework on who's standing for the board of directors, what's their background. Do they know the business? I mean, who has the time to do this? Especially, we tell investors to diversify. We also tell them, do your diligence. They have lives to live, families to feed. They don't have the time to do this, so I think it has to be institutional, and I think we need a corporate governance code that's not based on looks and check boxes. But based on actions. I want to get no votes at board meetings recorded and I'd like to know the percentage of the time directors vote no. I remember Harold Janine, who was CEO of ITT. This is no conglomerate in the 1970s. Said there was...”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“And I think that there is no evidence that I can see of that having diversity by itself makes boards more effective. No, I think that what you need is we need to change the process by which we pick the directors aboard because to the extent that you have nominating committees and CEOs of input in the process, the nature of the process, you're going to self-select. I don't care how diverse the board is, you're going to self select people who are less likely to ask you those tough governance questions.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“But that's an empirical question. Do we actually do it right? Are more diverse boards asking more questions? Because that's the way, I mean, ultimately, governance here means you have a board of directors that's active and aggressive about questions. I would love to see a board of directors stop a CEO. Doing an acquisition. That to me is governance at play, where the board says, you know what, this acquisition makes no sense. We're going to put brakes on this process for six months and look at the numbers. We're not going to let your banker come in and show us synergy numbers and push us through it. We're going to do our due diligence.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“And it's Orwellian. You pick it because you want people to look at the name and think you are free and democratic. ESG, that choice of G was deliberate. It was to make it look like they cared about corporate governance when in fact it's the exact opposite of everything I think of in governance because it makes managers accountable to no one.”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source
“there was nothing democratic about it or republic about it same reaction I have when people say people's republic of China right there you know it's not like people in Beijing said what do the people think”
2023-04-06 · Masters in Business · Aswath Damodaran on the Future of Business Education · IDENTIFIED FROM THE TRANSCRIPT · source