Aswath Damodaran - Numbers and Narratives

The world of investing/finance is divided into two camps. In one, you have the number crunchers, who believe that the only things that matter are the numbers and that imagination/creativity are dangerous distractions. In the other, you have the story tellers, who build on the stories they tell about companies and how these stories will bring untold wealth. Each side believes it has a monopoly on the truth and looks with contempt at the other. In my view, both sides are right and both sides are wrong. Stories matter, but only if they are connected with numbers, and numbers are empty, unless they are connected with narratives. In this session, I look at the process by which you build narratives, check them against reality and convert them into valuations. I use Uber and Ferrari to illustrate the process.

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