Aswath Damodaran - Making Sense of the Market - [Invest Like the Best, EP. 279] - Invest Like the Best with Patrick O'Shaughnessy

My guest today is Aswath Damodaran, a Professor of Finance at NYU’s Stern School of Business. Aswath is one of the clearest teachers of investing and finance in our industry and through his blog, books, and YouTube has open-sourced his wisdom for decades. This conversation is a masterclass of key investing concepts. We discuss inflation, narratives, disruption, the evolution of alpha and edge, and his thoughts on ESG. Please enjoy this great conversation with Aswath Damodaran.

For the full show notes, transcript, and links to mentioned content, check out the episode page here.

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Invest Like the Best is a property of Colossus, LLC. For more episodes of Invest Like the Best, visit joincolossus.com/episodes.

Past guests include Kevin Systrom, Mike Krieger, John Collison, Kat Cole, Marc Andreessen, Matthew Ball, Bill Gurley, Anu Hariharan, Ben Thompson, and many more.

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Show Notes

00:02:43 - [First question] - How he thinks about inflation as a now dominant force

00:04:33 - Why inflation is so important across the spectrum

00:09:02 - Big lessons from other periods of historically high inflation writ large

00:10:45 - Reasons why equities as an asset class struggle in high inflation environments

00:15:21 - The relationship betweens goods versus services in times of high inflation

00:16:59 - Broader economic implications especially for income inequality

00:19:03 - The Fed taking inflation seriously now when they didn’t and thoughts on the policy response to today’s situation

00:21:05 - How smart companies are defensively adjusting to inflation

00:27:46 - The importance of a capital allocation skill-set for executive team members

00:29:32 - Further historic lessons and how he’s being defensive against inflation

00:33:09 - Lessons learned about Amazon valuing them every year since their inception

00:42:25 - Whenever he sees Thanos in the Avengers he thinks of Amazon

00:44:51 - Thoughts on Facebook, Apple and Microsoft

00:48:26 - The evolution of edge and the search for alpha

00:54:37 - Whether or not there’s utility in studying other investors

00:57:16 - Skill versus luck and the most common valuation mistakes he’s made

00:59:09 - Assuming long-term growth rates and changing company life cycles

01:02:02 - Momentum and Value investing in today’s market

01:07:24 - Differences between interest rates and discount rates in regards to inflation

01:12:00 - How today’s market affects early stage equity investment

01:14:36 - The growing popularity of ESG and his seemingly contrarian view on it

01:24:03 - Nature of disruption as a force and companies that are protected from it

01:28:24 - Assigning a disruption risk premium when valuing companies

01:32:52 - What he makes of Elon Musk buying Twitter

01:34:24 - Other major topics he has a divergent view on

01:38:37 - Narrative And Numbers; The kindest thing anyone has ever done for him

01:38:55 - Teaching with a goal of changing mindsets