Aswath Damodaran holds the Kerschner Family Chair in Finance Education and is Professor of Finance at New York University Stern School of Business. He has published prodigiously, authoring several prominent textbooks on valuation, finance and investing, and he has frequently been named “Professor of the Year” by graduates of NYU’s M.B.A. class.
Those feats do not fully capture his impact, though. Outside academia, he is known as Wall Street’s “Dean of Valuation,” as his opinions about companies have a way of influencing the way the world sees them. Additionally, his insistence that videos of his teaching remain freely available allows him to serve students all over the world, at a scale rarely conceived or accomplished by most classroom teachers.
We reached out to him to learn about how he deploys his considerable talents. What we found was someone who does many things by doing one thing very well. His output, whether in the classroom or on his blog, begins with pure passion for teaching and ripples outward from there.
For Professor Damodaran, teaching is both a passion and a platform, a way of shaping others and sharing what he himself is learning, thinking, and solving.
Aswath Damodaran: I think each of us is put on the earth to do something that we can do well. For me, it was teaching. I discovered very early on, my very first session, that this is what I wanted to do with the rest of my life.
Teaching is not really a profession; it’s a passion. You can’t walk away from it. I belong to a family of teachers; my wife’s a second-grade teacher, my daughter is a special ed teacher, and my daughter-in-law is a high school science teacher.
As we talk with each other, I realize that we might teach very different things—my wife teaches seven-year-olds how to write and add and multiply and divide, and I might teach an undergrad or a 60-year-old CEO. But it’s amazing how much there is in common in teaching. We get a chance to change the way people think, and that’s something that most people don’t get a chance to do.
Everything I do is an extension of teaching, whether I write on my blog or do a YouTube video. I don’t do traditional consulting, but I do informal consulting where people call me and say, "What should I do?" Then, I teach. Basically, everything I do is a platform of my teaching.
Thinking of teaching as a platform allows Professor Damodaran to reach students well beyond the ones enrolled in his classes; also, in a more fundamental way, it heightens the importance of his planning.
Damodaran: Teaching is 95 percent preparation, 5 percent inspiration. For a class to go well, you better prepare for that class. Preparation has to become part of teaching. You can’t view it as the dirty work you do so that you can have fun in the classroom. To me, it’s all part of the same process.
If you’re going to be a good teacher, you’ve got to work at it. And it’s incremental. What you see in my classes today are recipes from the very first class that I taught in 1984. Teaching is built up over time, because teaching is constantly a process of re-examining what you do, taking out things that don’t work, adding in things that do.
That’s why it never gets boring; I can teach the same subject for 50 years (or in my case, 36 years so far). But it’s never the same subject, because the subject matter keeps changing, the classes keep changing, the participants are different. Each time I teach it, it’s going to be a different experience.
Beyond his subject matter, and like the very best teachers, Professor Damodaran seeks to instill in his students some basic principles about how a thoughtful and rational person might approach the world and think through problems.
Damodaran: I think we live in a world where looking up things has become too easy. I call this the “Google Search Curse,” which is when you want to know the answer to something, and rather than thinking through to the answer, you go into Google search, type in your question, and there are a thousand people who have delivered answers.
I find this to be a very, very destructive phenomenon because it means people don’t think for themselves. They don’t think things through. The way you learn how to solve a problem is by thinking through the problem and solving it for yourself. If you let somebody else give you the solution, it might be the right solution, but you have not figured out how to solve the problem.
If you look at an answer, it comes from a process. And to the extent that that process is set by somebody else, it’s not your answer, it’s their answer. So in problem solving, not only do you need to think about the question you need to ask, you also need to ask “what is the process by which I would try to answer the question?”
That takes work, it takes energy, it takes effort. The way we become intellectually nimble is by learning to think through answers to questions. Thirty years ago, you might have had no choice but to do it. But because we can look up the answers now, we’re losing that agility to look at a problem and solve it.
If Einstein had had Google search, would he have come up with the theory of relativity? I’ve seen very bright people kind of fall into the trap of thinking: “If it’s already been answered, why should I bother?” I tell them, “Look, you need to bother because the answer might not be the right answer.”
If it’s a fact-based question, it’s different. Then you can say, “Hey, go look up on Google search what the tallest mountain in the world is.” Reasoning your way into a factual answer is not going to give you a better answer. But if your question is more analytical, I think there is an advantage to taking a 30-minute break before you open up Google search and look for an answer.
Doing the hard work of thinking through problems—even at the risk of being wrong—is an instructive process in itself.
Damodaran: I tell people in my class, I’d rather be transparently wrong than opaquely right. Part of the process of my teaching is to let students see my thought process when somebody asks me a question, rather than giving them the answer. Often, I lead them through my thought process of how I get an answer so that they can see that this isn’t something that comes instantaneously to anybody. I might be an expert on company valuations, but I still have to think through the questions and go through a process, and I want them to see the process.
Also, when I come up with the wrong answer, I want them to see what part of the process that I used that did not work. Students realize then that everybody’s fallible, that nothing comes easily to anybody.
They also realize that no matter who it is on the other side of the table, if they come up with an answer, it’s your job to still ask, “Is that the right answer?” and not take it as a given, simply because the person on the other side might be three levels more senior or somebody with a lot more pedigree. I think that’s part of what we’re risking losing because of the ease with which we can look up answers to questions.
Professor Damodaran also pushes back against prevailing ideas about specialization.
Damodaran: The push towards specialization happens earlier and earlier in life now because we’re in a competitive world. You’re told, “Look, if you’re good with numbers, you better work on your number skills and get a good numbers degree and get a numbers job.”
It’s a society-wide problem. We’re creating a world of specialists, each of whom is told very early in life that you’ve got to choose. Are you going to go down the storytelling path and take literature and history, or are you going to go down the number path? Then on top of that, you’re going to get all kinds of pressures and people picking a path because they need to survive. They need to pay off that college loan.
I think we’re doing a disservice to both the children and to society by forcing them to do that because we’re creating one-dimensional people. That’s not good. It reminds me of David Epstein’s book about hedgehogs and foxes. If you get a chance, read it. Hedgehogs are specialists. They know everything about a topic, and foxes are scattered. They are a little bit of this, a little bit of that. He compares them in terms of forecasting accuracy and discovers that experts are terrible at forecasting their specialties.
Now, people who are generalists are much better at forecasting because they have skills in multiple disciplines. If you’ve ever been in Florence and you’ve seen Burleski’s Dome, it’s amazing. It was built by a guy who didn’t know any architecture, science, or construction. He taught himself just enough of everything to build the greatest freestanding dome in history. It wasn’t just him. Leonardo Da Vinci was a scientist, an artist and an engineer. There’s a reason renaissance men have the reputation they do. They dabbled in multiple things.
Even 40 years ago when I walked into an investment bank and I talked to an investment banker, there were more people who were well-versed in theater, in literature, in finance. They were very bright people, but they were also people who were very wide in their interests.
Today, you walk into a consulting firm, an investment bank, a technology firm. You’ve got an expert who knows everything there is to know about a particular topic and very little outside of that topic because the topic has become so deep, they can’t afford to be generalists anymore.
Specialization can sometimes lead to tribalization—doing society a disservice.
Damodaran: The point of my book “Numbers and Narrative” is that we’ve created two tribes that can’t talk to each other. I spend time in Silicon Valley, talking with founders and venture capitalists, who are mostly storytellers. I spend time talking to bankers and investors, most of whom are just number crunchers. You put the two in the same room, and they’re talking different languages. They don’t even understand what the other side is saying.
As a consequence, what we do is we go back to what we’re comfortable with: hanging out with people who think just like us, who are trained just like us, and speak the same language we do. In a way, we’re setting ourselves up for the big mistakes we make.
We’re all so used to what we tell each other that nobody has any sense to step back and say, “that doesn’t make sense,” whether it’s mortgage-backed securities in the 2008 housing crisis, or whether it’s a venture capitalist paying based on the number of users. People have lost perspective because they talk to people who think just like they do.
What I was trying to convey in that book was that we need to take back both halves of our brain. We can’t be just left-brained or right-brained. But, the entire system works against that.
Increasingly, we’re putting our kids in positions where they have to make a choice of what they want to be. It’s happening when they’re 15, 16. Then we wonder why 15 to 20 years later, people collectively are making big mistakes. It’s because they’re hanging out with people that think just like them.
