MiB: Aswath Damodaran: Valuations, Narratives & Academia

This week, we speak with Aswath Damodaran, who holds the Kerschner Family Chair in Finance Education at New York University’s Stern School of Business. A nine-time “Professor of the Year” winner at NYU, Damodaran teaches classes in corporate finance and valuation to MBA students. He has also written several books on corporate finance and equity valuation and has published widely in journals. He received his MBA and Ph.D. from the University of California at Los Angeles. His next book, “The Corporate Lifecycle: Business, Investment, and Management Implications,” will be published in December.

He tells his classes “What makes for a good valuation is you’re either a disciplined storyteller or an imaginative number cruncher.” Damodaran wants the verbal half of the class to use the numbers intelligently, while the more mathematically inclined need to put those numbers into a narrative that is understandable.

Damdoran loves “untangling the puzzles of corporate finance and valuation.” He “always wonders about these accounting firms that reappraise price but not value; they reappraise price because they lack the tools to re-appraise value.” He points out that momentum is one of the strongest factors but is challenging to stay with.

He explains what makes Warren Buffett such a great investor: “Low-cost capital that doesn’t panic.” Buffett doesn’t have to worry about his clients asking tough questions because his clients are the actuarial tables. But if he can do it with insurance company capital, why can’t the other insurance companies do the same? The average portfolio manager is driven by emotion and mood and while they talk the value investing talk, in the end they are people who are still judged on a quarterly basis.

A list of his books is here; A transcript of our conversation is available here Tuesday.

You can stream and download our full conversation, including any podcast extras, on Apple, Stitcher, Spotify, Google and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.

Be sure to check out our Masters in Business next week with Joe Baratta, Global Head of Private Equity at PE giant Blackstone. In the 2000s, he helped establish the firm’s private equity business in Europe. He sits on Blacktone’s Board of Directors and its Management Committee and serves on many of the firm’s investment committees.