Valuation in Four Lessons | Aswath Damodaran | Talks at Google

The tools and practice of valuation is intimidating to most laymen, who assume that they do not have the skills and the capability to value companies. In this talk, I propose to lay out four simple propositions about valuation. The first is that valuation is not an extension of accounting, insofar as it is not about recording the past but forecasting the future. The second is that valuation is not just modeling, where people put numbers into Excel spreadsheets and pump out values. A good valuation requires a narrative that binds the numbers together. The third is that valuing an asset or business is very different from pricing that asset or business, a difference that is often blurred in practice. The fourth is that luck plays a disproportionate role in whether you make money off your valuations. Put differently, you can do everything right and still walk away with nothing or worse at the end.
About the Author
I view myself, first and foremost, as a teacher. I do teach valuation and corporate finance not only to MBAs at Stern but to anyone who will listen (on iTunes U, online and on KZbin). I love to write books, teaching material and blog posts. After 30 years of teaching finance, I still find it fascinating as an interplay of economics, psychology and number crunching.

[@demainmarie4898]

Successful people don't become that way overnight. What most people see at a glance-wealth, a great career, purpose is the result of hard work and hustle over time. I pray that anyone who reads this will be successful in life..

[@alfonsoramirez268]

You are right ma

[@alfonsoramirez268]

Most people don't invest due to ignorance.

[@lucasdesmedt4804]

@Martin Mayer Who's your expert

[@sebastianaguiarbrunemeier9192]

This guy is a badass. He makes a typically boring topic fascinating.

[@felixthefoxMEXICO]

Boring what? This is the shit

[@gwho]

curious, intelligent, and articulate. Those are the key traits that makes able to do it.

[@justinching9317]

he came in to speak during one of my training sessions for my first job... i fell asleep in the front row

[@karlmdelacruz]

Apparently his students are still sleeping till this day. Doesn't sound fascinating.

[@TheYuwern]

@@gwho u

[@sergioviana84]

"What sets price? Supply and demand, mood and momentum. What sets value? Cash flows, growth and risk" Geniously simple explanations

[@aloevera7422]

Future cashflows per thiel

[@sergioviana84]

@@aloevera7422 hello friend! What is a per thiel mesure?

[@japanman6]

@@sergioviana84 I think he meant Peter Theil, as in a quote by Peter Theil -- great investor to look up if you haven't already

[@carlrodalegrado4104]

@@japanman6 yeah he is the co-founder of Paypal and Merged with Elon Musk's X.com. He even Invested in the early days of Facebook. He has a book called "Zero to One" all about start-ups.

[@mohanvalrani]

Interesting, At the age of 78, I am learning, thank you

[@JASHVEER22]

Learning is a life long process. Everyday I learn ☺️☺️

[@justhuman1225]

Wowwww...sir u inspired and encouraged me learn proudly. Actually we learn everyday until the grave.

[@CarolinaGomez-hl8tv]

P

[@NishGurjara]

At age of 79 (1 year since your comment) you still open to learning... is Commendable trait 👍

[@mohanvalrani]

I celebrated my 80th birthday on the 30th of September and still learning ✌️

[@beejagpalo2146]

What? How on earth i'm being recommended this by Google after 5 years! I should have watched this 5 years ago. OMG, he is so genius.

[@MURBZrecords]

The world needs more people like Aswath, break free from bureaucratic jargon and see things from a clearer and simpler perspective. Hands down, one of the best lectures I've watched in my life!

[@user-zm6su1hq8t]

Could not agree more... watching it for pure entartinment purposes.

[@0530628416]

جج

[@nagen78]

agreed

[@lucv5573]

Amen

[@RebelosTheseefoodchef]

Ok lol l

[@ashishvaishnav4254]

After an MBA in Finance, and 13 yrs in the Industry - Best Learning Experience. Thank you for putting it up on the web...

[@shahree100]

Teringventje introductionary?? Where did YOU work?

[@akashbavishi6615]

Does indian venture capital firm follow this concept properly while doing valuation,what do u think?

[@arjunratnadev]

you cannot imagine the feeling I have for google ai for suggesting this to me in MARCH OF 2023!!! 🤦‍♂

[@nosferatu15]

Sir what do you think ? Can a marketing guy be good at valuation, securities analysis or put it simply can he be good at picking businesses based on marketing skills

[@gaulindidier5995]

When Warren passes away, at least we got Aswath.

[@wanderingdoc5075]

What's his investing track record? CAGR?

[@levishhunted7593]

We have todd combs too

[@DanT-iu6oc]

This is what a god-tier teacher looks and sounds like. absolutely phenomenal. A true treasure of a human being

[@marklouis3038]

Im not from the states but honestly there would not a single individual who could hold a candle next to this man..his ideas are complex,he is able to connect with everyone on a level which is so phenomenal ..people in Finance i envy lol esp those folk at NYU Stern ...Sir Damodran please teach us more.

[@mohammadsaeed3494]

That's why the value of good teachers will always be relevant even in this age of AI -ChatGPT etc. I am from Mechanical engineering background but found this whole session so engaging, interesting & informative.

[@christopherarmstrong2710]

15:00 Numbers people vs. Story people 15:40 *The end game is to have numbers people with imagination, and story people with discipline. That's the way to think about valuation.* Stories are actually much more effective at selling businesses than numbers are, and it's been true for as long as human beings have been on the earth. So if you tell a story, bring in enough numbers to discipline yourself, because if you don't have the numbers it's very easy to veer away into fantasy land. *A good valuation should tell a story - behind the numbers, what is the story you're telling about a company?* 29:30 So much of what you pay for in a valuation business is a banker feeding numbers into a [program or software] and then spending 25 days making it look like he did a lot of other stuff, and then charging you millions of dollars - something he has no business charging you for. To valuate businesses like 3M, you don't need an appraiser, you don't need a banker. Anybody should be able to valuate those companies. 33:30 *Investing is a game of odds* 35:05 Young startups are difficult to valuate, but still you should make your best estimate instead of giving up (like most founders do). 42:50 "I've never felt the urge to explain what some other person pays [for a public company]. Much of what you see passing for valuation out there is really *pricing."* 44:20 Most realtors simply price based on the relative prices of other properties or units on the marketplace. (pricing vs. sophisticated valuation) 50:30 *Markets are fickle. Today they like users, tomorrow they might not.*They used to like website visitors for a long time, but you can't pay dividends with that. At some point they are going to ask for substance. 51:30 *Investing, VC is a game where luck is a dominant paradigm. If you're lucky you can do horribly sloppy things and be incredibly rich. If you're lucky all else can be forgiven.* There's no such thing as smart money - there's stupid money and less stupid money, but there is no smart money (i.e. hedge funds, perform less than S&P 500 index fund). 54:20 *You learn valuation by doing.* If you really want to learn valuation, here's what you do - value a company. The first time you do it, it will be like pulling teeth. Then value a second company, as different from the first as you can. 54:50 *When we get big differences in value, it's not because the numbers are different, it's because we have different narratives. The right question you've got to ask is, "What is the right narrative for my company?" This is about telling a story, and delivering the kind of decisions that back up that story.* 59:40 If you've got an acquisition proposition, it's going to work only if you're willing to walk away from the table; even if its the best target that you've ever found, but the price is too high. *If you're not willing to walk away from the table, you're going to overpay again and again.* 1:00:40 Investing [properly] takes time. If you don't have time for that work it's better to invest in an index fund or some other spread; it's best to spread your bets. 1:01:00 *Don't overreach. You don't get rich by investing, you get rich by doing what you're doing, and investing is about preserving what you made elsewhere and growing it.* It's when you get greedy about trying to make that killing off of your investment that you tend to overreach.

[@MeiMei-dl4fp]

Thank you for writing this out.

[@christopherarmstrong2710]

@@MeiMei-dl4fp Sure, these notes are for myself, BTW - but happy to hear others are getting use out of them :)

[@isaiahmaragalla]

the most sane talk ever heard about valuation, and it was gold all throughout.

[@deodatlawson8877]

This guy literally summed up my entire degree in 1 hour what a great teacher🙏🏼🙏🏼🙏🏼

[@xdude57]

Yep! Hope you didn’t take a loan to get the degree 😂

[@tellurium96]

What degree is that?

[@nosferatu15]

MBA = Maa behen ak

[@michaelgnaedinger4637]

One of the best hours I have ever spent sitting on a train! Excellent teacher, entertaining and engaging, keep up the great work Aswath!

[@shantanuselokar6357]

This guy has a really badass classy Bond villain vibe. He doesn't want to take over the world, he just wants to valuate it correctly

[@osraneslipy]

This is one of the best finance-related videos I have ever seen

[@oshiawase]

This is incredible....the quality of learning on KZbin is amazing.

[@saptarshi9433]

Whoa !! i didn't blink my eye during this 1-hour video. Such a magnificent speaker. that's how the best of the best look. And about the substance of his talk, the way he said it, you would end up believing him.

[@StockNinja]

This was one of the best lectures i've ever heard related to stocks, everyone who invests should give them a listen. Thanks Google!

[@sahajkhunteta1705]

Simple yet beautiful and super useful talk on valuation! It is mind numbing how he breaks myths with simple logic and basis proven business rules. Cash flow, margin and logical estimations around growth and risk - my takeaway!

[@RookieN08]

His valuation on Twitter was spot on. The stock price peaked at $69 a month after its IPO and never reached that price ever again. It fell to $14 in 2016 and now it's been hovering around $28.

[@sherryflavour3791]

It was $77 a year ago.

[@YouMustBeMadReplyingToMe]

@@sherryflavour3791 Aaaaand its back down

[@cittoo]

Now it's delisted and named as X

[@winnerofAI34]

We need more people like him in this world.

[@juanochoa3972]

he is by far one of the best teachers I have ever seen. One of my dreams would be to have the chance, money and time to do one of his course in presence at NY. Unfortunately I don't, however he is so generous by sharing so much information of superb quality and detailed. from spain, thank you so much!

[@Chris-tw2rr]

Amazing. I have been in the tech industry and have seen it all. His explanations gave me goosebumps. Spot on. Aswath is now on my wall of heroes.

[@ashishsawhney6196]

First 3 minutes, and I already like him. I think he should talk about how he taught valuation under the head of security analysis for 22 years and no one figured it. That’s clever.

[@WamuyuGatheru]

Wow. Lucky people who have been taught by this interesting and knowledgable man!

[@TARUNPANWAREngineer]

Amazing Sir. Have never posted comments or any videos up over here in KZbin but today i have to...i just wish professors mentors like you stayed in INDIA and enlighten us soo that we can also think differently towards things..

[@rickjames21]

I absolutely love this gentleman. I have been in private equity for over 15 years and this is exactly what I tell interns.

[@dericflairmultiverse4952]

Aswath Damodaran is the David GOLDfield of the University of KZbin!!! Thank you for sharing your profound knowledge and explaining it with succinct and eye-opening simplicity and wisdom

[@brteja0110]

With zero knowledge of business and finance, you got me interested in the topic. Thank you, I certainly learned from the talk.

[@vivekrajup9701]

Awesome lecture from a guru in valuation, simple to understand and in plain terms. No jargon and confusion to make something look more complex than what it actually is. Thanks

[@Aman13579]

This is guy genuinely passionate even after ~38 yrs and that too while addressing such a small audience size. And he is entertaining bcoz he uaes logic & passion judiciously. Definitely a great teacher.

[@hsetiono]

How To Value A Company: 1. What's the cash flow from existing assets? 2. What's the value that you'll be creating in future growth? 3. How risky are these cash flows? 4. When will your business mature?

[@pisanghangus2]

he is a great teacher

[@TTTT-rw7xt]

This video is AMAZING. Learning so much from GoogleTalks. Thank You.

[@Brianlovesrice]

MBA student here, I learned a crap-ton more about the meaning behind accounting terms by this video than I did in my undergrad and masters. "Stockholder's Equity is everything from the first IPO" is not something a typical Accountant would tell you.

[@Kobe29261]

His is also a Master-Class in what makes an extraordinary teacher - a true passion, almost fiendish for knowing the truth about some one obscure thing! He could teach anything - the fire's in the belly! Loved every bit of it though finance bores me to death!

[@77magicbus]

I love reading your articles and listening to your KZbin videos, and podcasts. Thanks for giving so much wisdom and understanding .

[@DanielKuriaWanjira]

Very nice talk; I want to go to NYU Stern mostly to attend your class.

[@sachinrv1]

This man knows all too well how to keep his audience interested. Excellent lecture Sir !

[@cadddie_ai]

rare to see such transparency from intellectuals, really enjoyed the talk.

[@prezsenna3785]

Prof. Damodaran provided a very clear and fundamental explanation of how Financial Statements and Valuation of a company are integrated. Never seen this clarity brought forth before with simple looking logical diagrams which are so difficult to bring it on paper. Thank you Google for Uploading this special lecture and BIG thank you to Prof. Damodaran.

[@richardbravo7448]

It< makes sense, BTC and crypto is off helping to regulate, rather than pretend it won't ever happen. The big institutions getting in is the catalyst that will launch us into the stratosphere. Most people don't like change but after the change is made they grow used to it and it becomes a non issue usually because their fears never materialize. The projects that initiated the process of regulation have not been ruined, they got involved in setting guidelines and helping the regulators understand the crypto space. I’d get involved more knowing that I have made over 12 btc from day-trade with Axel William Crypto in few weeks.

[@bryandouglas4589]

Pls, how do i get him?

[@richardbravo7448]

yes that's his handle up there, you all can earn from him👆

[@mrclever408]

No one, NO ONE, can argue Axel William at least currently, the best out there, even when Bitcoin is looking bearish with the market sentiment swinging low. But they kept us grounded with their real analysis, just the facts in the charts.

[@nicoricardo6136]

A lot has changed and that's on everything but the truth is that i don't even care much about bullish or bearish market because Axel William got me covered, I am comfortably earning monthly

[@ianmorris9627]

Axel William really helped me understand bear markets much better... Great content, and loved it.

[@brettrhodes2047]

There are lots of books on investing strategy but a prescriptive methodology to valuation unique. This is excellent. Thank you!

[@shankerpai5052]

ASWATH DAMODARAN ..." rather be transparently wrong ..than be opaquely right "

[@martel003]

Wow! What an awesome professor. Valuation vs pricing... Awesomeness in action....

[@gpgis]

I could listen to him all day..

[@rudhisundar]

I needed this talk. Thank you, sir!!

[@dilendraratnayake8689]

Knowledge of years delivered in 60 minutes. A great video.

[@martarivas6760]

I really liked this! I will check out the tools on your site. I need to do an excel driven project but I just did not get it. With this I can see why and your insight has been super awesome. Thanks

[@MukeshSharma-vm7jb]

Inspite of Knowing Finance and done DCF's there was so much to learn. Great Lecture Sir. Thanks Google for sharing.

[@TheUrbanFight]

60 minutes, well spent! :)

[@dada01ish]

💯

[@carrascorfvconstruccionesc3149]

@Gabriel Caruso i

[@arjunratnadev]

best 60 min investment!

[@pratikjain6597]

Ha ha true

[@tariitonyo3360]

Love this!!!!! Picked up my notebook after 5 mins. So many gems.

[@tathagatpriyadarshan]

Really enjoyed this valuation class. Feel like its worth the time spent on watching it. Please keep up the good work.

[@alliseeisW]

I love the clear explanations and putting the concepts into simple context with examples provided. Thanks for sharing your knowledge!

[@hydraman007]

For a moment, I thought he was going to lecture on how hard it was to integrate into a school environment where not many people looked like him, but then I realized this video is from a time when these talks focused on things with substance.

[@qeromanzofinanziario9143]

Aswath is both a great professor and a fine human being.

[@pathsymartin3786]

I dont know how I found this but I am sooooooooo glad I did!!! Thank you!

[@sathsah1593]

jeesus all that experience and still looking soo young. How lucky I am to find your lecture today

[@dineshkulkarni7069]

Excellent !! Damodaran is one of the best authorities on valuation topic👌👍

[@uitrev]

This guys was so humble during the talk. Loved it!

[@dogbackyards]

Goodness Aswath is so insightful!! ABSOLUTELY LOVE LEARNING FROM HERE on here! Thank you Talks at Google!!

[@VijayARajendran]

The single greatest lecture on finance on the internet.

[@inzin0606]

Great lecture, was looking for valuation excel tutorial but happened to click on this video, not exactly what I was looking for but somehow helpful

[@okeekpagha2126]

Did you eventually find a tutorial that helped?

[@aconsideredmoment]

I appreciate the clear and direct language. "And let's be completely clear about this. Goodwill is the most useless asset known to man. And here's why..." Unequivocating. Unambiguous. Willing to break with Warren Buffet's Coca-Cola brand example which is decreasingly valuable. Thank you.

[@jkj1459]

MOST USELESS OR USEFUL ? I AM CONFUSED .

[@Ramkishor-bu5tx]

He is a great teacher...really awesome listening to him !!

[@willinoysitorus1509]

You are a God of finance, when you can talk about boring theories of accounting/banking/finance in a cool and very simple way.

[@MegaNeutronX]

As a medic from a non-finance background that’s venturing into entrepreneurship, this feels like I’ve been bathed for an hour in financial wisdom.

[@sportsmusiclover]

I love DCF. It gives me Rate of Return based on an assumed percentage. Take the diff with the investment and I test various scenarios. It’s a great tool for valuation.

[@yeah112358]

Brilliant point on valuation vs pricing. Great talk!!

[@RahulSharma-oq2gk]

Such a fantastic overview of valuation in just an hour. Thank you..

[@masifrao]

i loved it, aswath truely made it insanely simple

[@oah8465]

This talk is simply amazing. Tons of info to grasp in one video.

[@manassemassuama9472]

This is a fantastic class! Exactly what I needed for my application next week.

[@arulprakash6872]

"The balance sheet has this very unpleasant requirement, it has to balance." I have been watching Mr. Damodaran's videos for the past year, and this is definitely my favorite one!

[@jkj1459]

YES TO BALANCE SHEET JUST TO MAKE IT BALANCE .. NO ACCOUNTABILITY OF MONEY THAT IS SIPHONED OR MISUSED .

[@rexmagnusify]

Excellent talk, thanks!

[@ChrisWilliams-sc2kh]

Thoroughly enjoyed! Without a doubt he'd be my favourite professor at college

[@pyrascheme]

By 21 minutes I was already being mindblown.

[@Mufti199]

This man is an amazing teacher!!

[@saraspano]

Such a well-spent hour. Thank you, Google, for making this accessible to everyone.

[@jeffmack4561]

This is one of the best videos I’ve seen on finance.

[@pattersonthomas9927]

Great video and some nice tips! This is a scary time for new investors but the best thing you can do is not to make decisions based on emotions. This could actually be a good time to buy more of your high conviction stocks or crypto on a discount. Wealth is created during bear markets, not bull markets. If your portfolio is really effecting your mental health then delete the app and go for a walk. Let the market do its thing and have a long time horizon. I buy and just trade long term more than ever, I have made over 16` btc from day trading with Stacy Huth in few weeks this is one of the best medium to backup your assets incase it goes bearish.

[@pattersonthomas9927]

Her Te-le-gr am ( @coin_signal10 )

[@stevepedersenhoike4399]

Thanks for enlightening everyone with your own experience , I have learnt not to panic in what ever way crypto goes up or down

[@DavidLee-ms7dh]

I can’t describe how much your help meant to me. I’ll forever cherish your great acts. thank you so much Stacy Huth .

[@donaldmarshall584]

My growing love for crypto caused me to explore until I came across Mrs. Stacy (although I'm trying to avoid sensationalism) hse is by far the best. No hype for hype's sake, but a great inspiration to trade Crypto.

[@kelvinedwin1288]

I invested with Stacy Huth too, she understands every beginner's intention and fixes you to a trading plan that matches your capacity.

[@Shawk95]

Very impressive. I learned a lot. Thanks Mr. Damodaran.

[@kairos106]

What a legend!

[@dfmoscon]

I wish i could have had a teacher like him at the time i was in university.

[@compoundinvesting8719]

I Wish the same..Many of his talks are on youtube though..

[@phoenixrising164]

That’s a overflow of wisdom . Thanks Ashwath .

[@TrailBlazer5280]

Love this guy, finally someone speaking the truth; Goodwill is bullshit!

[@alliesteamc3546]

Excellent, entertaining substantive and creative presentation! Many thanks! 🙏😃

[@stevenoliver9728]

He's a gifted teacher.

[@mikhaillindan9091]

This guy is AMAZING.AMAZING.AMAZING

[@r6limoi970]

I think i am a bit over my head from trying to pass my first year of university in economics and finance. Still very interesting will take down notes for later in life hopefully! Thank you.

[@clintonrezeki4243]

Thank you for teaching us!

[@anirbanleo1]

Sir..one day i will attend your class definitely

[@ayushnaik1008]

Hey did you attended any so far?

[@TheFernando9999]

by far the best professor in Finance.

[@ryanthornburg1242]

Twitter has moved between $15 - $18 for the past 18 months. Impressive

[@thanduxolonelisiwe3265]

Valuation seems to be such a time-consuming and complex exercise that is part science and mostly subjective estimation that by the time you're done valuing multiple companies in a market (sector/industry), it'll be too late to invest because too much time would have passed while you were busy making these valuation and the facts would've changed all over again. My fav keynotes: >You can't pay intetest on debt with ideas. >A strategic deal is a really stupid deal. >China is a meaningless buzzword... 😂😂😂 >Anything that doesn't affect cashflows doesn't affect the value. >There is no smart money in hedge funds. >traders can't tolerate the EMH.

[@Andy-no9zl]

Wow. This was a great presentation. Keep me interested for the full hour

[@mrh4742]

This was amazing, professor! A huge fan.

[@tocaciulevente992]

One of the best videos on youtube!!! thank you sir!