This week, we speak with Aswath Damodaran of NYU Stern, author of 11 books on investing, including the upcoming Narrative and Numbers: The Value of Stories in Business.
He describes the challenges confronting investors trying to objectively evaluate the valuation of companies, either public or private.
Damodaran states that Good Will is the most destructive accounting item ever created in history — its how the accountant admits they made a mistake in a purchase — its a plug variable that artificially is used to make up for bad purchase prices. He believes “Good Will” should be renamed “X” because its an unknown variable.
We discuss the valuations of Tesla and Amazon, as well as private firms like Uber and Theranos.
Damodaran notes that Tesla has a delusional CEO, whose business narrative seems to change constantly. The company has some powerful strengths at its core with huge relationships to customers, but little focus to help deal with its distractions like Solar City acquisition, etc.
Amazon’s Jeff Bezos is the opposite of Elon Musk — he laid out his vision in 1997, and has stayed true to that over the ensuing 20 years; Damodaran has called Amazon is a field of dreams company — if they build it, the customers come.
Please send your comments and suggestions to MIBPodcast at Bloomberg dot net.
Next week, we speak with Bill Miller, former CIO and Chairman at Legg Mason.