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There is no day that I wake up and say, 'I wish I didn't have to teach today': Aswath Damodaran

One of the greatest professors in the world of finance and investing on why he chose to be a teacher and not an investment banker, and what he has learnt from market cycles over the past four decades

Neha Bothra
Published: Sep 13, 2023 12:32:02 PM IST
Updated: Sep 13, 2023 01:17:59 PM IST

There is no day that I wake up and say, 'I wish I didn't have to teach today': Aswath Damodaran Aswath Damodaran, professor of finance, NYU Stern School of Business Image: Alexander Tamargo/Getty Images for Vox Media

In a teaching career spanning around four decades, Aswath Damodaran, professor of finance, NYU Stern School of Business, has received numerous awards and accolades. Notably, year after year, he has been voted ‘Professor of the Year’ by the graduating class of MBA students. Damodaran teaches corporate finance and valuation, and his MBA batch comprises 350 students. His classes are so popular that they are held in the amphitheatre. His joy for teaching explains why students ambush him at every opportunity after class—at the gym, at the cafeteria—to get his insights on all things topical in the world of finance and investing.

“I'm not a professor, I'm not a researcher, I'm a teacher first and foremost,” the widely respected valuation guru says in an interview on Forbes India Pathbreakers. In a free-wheeling conversation, he talks about the craft of valuation, disruptive trends, and his learnings over the 40 years of market ups and downs. This is the first of a multi-part series. Edited excerpts:

Teaching vs investment banking: ‘I have a passion that happens to be my job’

The big decisions in your life are often made by accident. It was actually the very last quarter of my MBA programme. I think I had a job lined up at an investment bank and, as you said, it would have been on the ground floor of what was then going to be a huge growth business. I needed money because I was running out of cash. So, I agreed to be a teaching assistant in an accounting class. I don't even like accounting. I walked into that first session and 15 minutes in, I knew that this was what I wanted to do with the rest of my life.

I tell people, look, there are moments in your life where you get, I'm not even sure how to describe them, but messages from God, saying, this is what you were meant to do. I'm not saying I'm a vessel for religious messages, but I knew then that this was what I wanted to do with the rest of my life. So, after that session was done, I walked up to the finance department—as I looked across all the different classes I'd taken, finance seemed to be the most interesting, the most fun—and said, I'd like to do a PhD, because that was the entry to being a teacher in finance. I'm not a professor, I'm not a researcher, I'm a teacher first and foremost, and that was my entry point to teaching.

I think even if you take a first-level economics class, you're told the objective in your life is to maximise utility. It's not to maximise wealth. It's not to maximise income. It's to maximise the happiness you feel over the course of your life. I have a job I love. I don't even describe it as a job. I have a passion that happens to be my job. There is no day that I wake up and say, I wish I didn't have to teach today. When you have something that truly brings together your passion and your livelihood, why would you ever want to go explore something else?

I have everything I need, and could I get more? Yes. What am I going to use it for? So, from that perspective, I've never been tempted to be anything other than what I am as a teacher. I've never consulted a day in my life. I don't do expert witness work. I don't serve on boards of directors. I essentially don't do any of those things because I don't see the need to. I'm lucky enough that I don't have to do those things. I'm not looking down on the people who do it, but for me, teaching is front and centre, what I do.

Connecting with students: ‘I hope I make people curious’

When I set out in a class, I don't set out to, kind of, instil what I know in other people, because that's going to pass. I want people to get a window into how I think through problems. Because, remember the old saying that you want to teach people how to fish rather than give them fish? The objective in teaching is to give people a sense of how you think. So, if I have changed the way people think, that, to me, is the biggest contribution I can make as a teacher. I hope I make people curious because I think human beings instinctively want to learn. I truly believe that. Hopefully they rediscover that in my class and they can go out and find their own curiosities and come up with their own solutions.

I think the most exciting part, especially in the classes I teach, is I have 50,000 live case studies out there. Every publicly traded company is a case study; a case study because you can value the company and there's a market price today. So, it's fascinating for me to value a company in real time and see how it plays out. It does mean that in hindsight you could be wrong. I mean, I valued Nvidia a few weeks ago, I came up with $410/share and today it’s trading at $500. I'm getting emails from people saying what did he get wrong? I am not upset or worried by that because I think the exciting part of doing this is having it happen in real time and see how the market evolves over time. So, I think this adds to the excitement. I'd rather look at things happening rather than things that happened 10, 20, 30 years ago. And luckily, I teach in a discipline where I'm able to do that in real time.

Also read: 'Lead with your heart as well as your head': Bill George

 

Key lessons: ‘Markets are bigger than any of us’

The lesson I've learned is, my motivations have to be internal, they can't be external. As long as I look outwards to experts, to specialists for what I should be doing, I'm going to be pulled back and forth. I need to internalise what I know. I tell people, and this is going to be very strange advice, we read too much now, we think too little. I think we need to start to go back and think about questions and answers and try to reason our way through. And if it's the one lesson I can take away from this is as long as I'm comfortable with my own decisions, it doesn't matter to me what other people think about my decisions. It's not their problem. It's mine.

The markets are bigger than any of us. We've got to recognise that the market is essentially a consensus of millions and millions of investors coming together. It's an amazing instrument for delivering that consensus message. And I think if nothing else, I tell people, look, I can disagree with markets, I can think they're wrong, but I should always respect markets, and I always do. So, when you're too quick to jump to the conclusion, the market has gone crazy, the market is wrong, I think you're missing a chance to step back and say, what is the market seeing that I'm not seeing?
 
Watch the full conversation on September 20 on Forbes India Pathbreakers for invaluable insights from the Dean of Valuation

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