Third Quarter 2024 Review — ft. Aswath Damodaran

Scott and Ed open the show by discussing Governor Newsom’s proposal to increase tax incentives for movie production in California, Boeing’s stock sale, Robinhood’s new election contracts, and the volatility in Trump Media’s stock. Then Aswath Damodaran returns to the show to map out the road ahead for some of the “fallen angels,” including Nike, Starbucks, Estée Lauder, Boeing and Intel. He discusses his philosophy on succession planning, shares his thoughts on Tesla’s most recent earnings, and breaks down how he’s thinking about the upcoming election as an investor. Check out Prof G Markets in Spanish and Portuguese on Youtube. Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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• 0:30Speaker 01

  Energía baja, falta de concentración, nebla mental? You might be dehydrated. Gatorade Zero Powders han sido diseñados científicamente para ayudarte a mejorar el balance de hidratación en el cuerpo. Hechos con la mezcla número uno de electrolitos, sin colores ni sabores artificiales. Shop now online or at retailers nationwide. Gatorade hydrates better than water. Is it in you? Signos de dehidratación leve y moderada. Consulta a tu médico si los síntomas persisten.

• 1:00Speaker 02

  This episode is brought to you by Michelob Ultra. Good times mean competitions between you and your friends, like seeing who can throw some pigskin the farthest or rush the field the fastest. Winner gets an ultra because it's not just a superior light beer. It's also giving fans superior access to their favorite sporting events. Superior is worth playing for. Visit michelobultra.com/superioraccess to enter. Enjoy responsibly. Copyright 2026 Anheuser Busch InBev Michelob Ultra Beer, St. Louis, Missouri.

• 1:29Scott Galloway?

  Today's number, $1.8 billion. That's the estimated total amount of American adults spent on their Halloween costumes this year. True story, Ed, I went to a Halloween party dressed as a chicken and I met a girl dressed as an egg and we answered the age old question, the chicken.

• 1:46Scott Galloway?

  Ed, you'll get it in about a minute.

• 1:59Scott Galloway?

  You look confused.

• 2:00Ed Elson?

  I'm confused, but I'm seeing, I'm seeing laughter over here, so I assume it's good.

• 2:06Scott Galloway?

  Which comes first, the chicken or the egg? Ed, Jesus, do I really have to?

• 2:10Ed Elson?

  Oh, God, it's.

• 2:12Scott Galloway?

  All right.

• 2:13Ed Elson?

  You gotta really spell it out for me. I'm slower than I appear.

• 2:16Scott Galloway?

  Ed, what is a good word?

• 2:18Ed Elson?

  I'm doing very well, Scott. Another day in New York. It's been lovely weather. My sister visited this weekend.

• 2:23Scott Galloway?

  That's nice.

• 2:24Ed Elson?

  Very nice. Hung out with her. Life is very good.

• 2:27Scott Galloway?

  Did I know you had a sister? I think I did.

• 2:29Ed Elson?

  I think you did know that.

• 2:30Scott Galloway?

  Does she have kids? I don't care. I'm just asking. But I don't care. Does she have kids?

• 2:35Ed Elson?

  She does not have kids.

• 2:36Scott Galloway?

  Really?

• 2:37Ed Elson?

  Any other questions?

• 2:38Scott Galloway?

  I think you'd be a nice uncle. How old is your sister?

• 2:40Ed Elson?

  She's 28.

• 2:42Scott Galloway?

  That's nice. And where does she live?

• 2:43Ed Elson?

  She's at business school in Virginia. She's at UVA.

• 2:47Scott Galloway?

  She's at Darden?

• 2:48Ed Elson?

  That's right.

• 2:48Scott Galloway?

  That's an amazing school. And it's the second most beautiful campus in the nation. I would say Duke or UCLA are tied for number one, but, or Pepperdine, but I'm not sure that really counts. But I'm gonna hear it from my Pepperdine friends. Anyways, but I have this, I'm glad I was asking about you and we could manage to bring this back to me. I had this image of where I would retire and teach. And I was so stressed out about not making enough money in New York. And I thought, that's it. I'm gonna leave. And I'm just gonna go to a college town and teach brand and write books and have a nice life, making a reasonable amount of money. I'm off this hamster wheel. And Darden was one of the places I was considering. Charlotte, have you been to Charlottesville? Have you visited her?

• 3:32Ed Elson?

  I have indeed. It is, it's incredible. Beautiful campus.

• 3:34Scott Galloway?

  Wonderful. Wonderful. Great school too, hard workers.

• 3:37Ed Elson?

  Princeton campus is nicer.

• 3:38Scott Galloway?

  Really?

• 3:39Ed Elson?

  But it does not have a good grad program.

• 3:41Scott Galloway?

  Yeah. There's something about, there's something about Princeton that just bothers me. I don't know if it's you or just the reputation they have. I don't know what it is. Anyways, enough of that. Get to the headlines, Ed.

• 4:00Ed Elson?

  California Governor Gavin Newsom wants to more than double the state's tax incentives for movie production to $750 million per year. If approved, the increased incentives would take effect in the summer of 2025. Boeing raised $21 billion by selling common stock and convertible shares. The airplane manufacturer was looking to boost liquidity and prevent its credit rating from being downgraded to junk. Robinhood has launched betting contracts for the presidential election. Users will now be able to trade a Trump or Harris contract as long as they are a US citizen. The stock rose 3% on that news. And finally, shares of Donald Trump's media company rose 21% on Monday alone as prediction markets favored him to win the presidential election.

• 4:45Ed Elson?

  Trading was then halted for volatility multiple times on Tuesday, with nearly 16 million shares exchanged in the first 10 minutes of a highly volatile session. Scott, your thoughts, starting with Gavin Newsom's decision to double tax incentives for Hollywood?

• 5:02Scott Galloway?

  Given the reality of the situation, that everyone from Canada to Ireland to Albuquerque to Atlanta to Vancouver are offering big incentives for film production, this was a good move, and it was a needed move, and it was overdue. And the analysis of this shows that for every dollar in tax credits that California gives to the motion picture industry or the TV industry, they get a dollar oh eight back in tax revenues. So it's net neutral. It's not, it's not a net positive. You do actually, at some day, have to charge corporations for doing business, and you do need tax revenue from them. And when it's, we couldn't have sectors that are just net neutral in taxes. Otherwise, we couldn't fund the Navy or the parks. But this is a really good idea, given the situation,

• 5:47Scott Galloway?

  given that LA has really struggled with production the last couple of years. By some estimates, it's down 30 or 40%. In addition to it being net neutral in terms of tax revenue, every dollar of incremental tax credits results in $8 of incremental wages and $24 in incremental economic activity. So it really is stimulus that works. Also, I just think the identity of LA and California is so caught up in this industry, and they don't even need to exceed the tax credits of other municipalities. They just need to match them because the talent pool around Hollywood is so deep. And that is, if you're a senior that wants to go pursue, you're the star of your drama club and you want to go pursue your dreams in Hollywood.

• 6:31Scott Galloway?

  If you know how to make sets, if you're good with CGI.

• 6:36Scott Galloway?

  That talent, their first instinct is to get on a plane and come to LA. So LA just has, I would argue, the greatest concentration of TV and theatrical talent ever assembled. So to not take advantage of that and also create sort of the zeitgeist and economic growth in LA, which has struggled in this industry the last couple of years, would be not leaning into your strengths as, you know, as a metro. So I'm a big fan of this. I think it was a really good idea. What are your thoughts?

• 7:05Ed Elson?

  Well, that was extremely compelling because I looked at this and I just hated it. This, to me, was sort of all of the worst criticisms of the Democratic Party come true. I mean, just the idea of California using a government-funded program to subsidize the production of Hollywood movies. To me, that sentence could be basically like a billboard for the Republican Party on just how woke and dumb the Democratic Party has become. But the case you just made is actually quite compelling. The only pushback I would give is that, you know, they're subsidizing an industry which, to your point, is important and systemic to the culture, but it is a dying industry.

• 7:48Ed Elson?

  And I just wonder if it makes sense from a public sector strategic perspective to be trying to subsidize an industry that ultimately, over the long term, probably is on its last legs.

• 8:00Scott Galloway?

  I think the word dying is a little bit overdone because if you look at content spending across, across film and TV, it's actually up 2% this year. What's happened is it's been globalized. The auto industry, auto sales didn't go down in the 80s. They just went down amongst American cars because they were making a shitty product and people started buying Japanese cars. And Netflix is actually globalizing itself and sending content offshore. And what we're talking about here is, you know, it's real money. It's going, I think, from 350 million to 750. That's not big in an economy that's the fifth biggest economy in the world. And to your point, I hate this race to the bottom that our tax subsidies and the result

• 8:42Scott Galloway?

  is corporations are paying less as a percentage of GDP in their taxes since 1938. It's the lowest level since 1938. But at the same time, a lot of very Republican states, the only way they get Toyota to go to wherever it was, Alabama, or wherever they are in the South, is with subsidies. And these governments have to do the math and go, are the subsidies worth it in terms of economic growth?

• 9:05Ed Elson?

  You've convinced me. I had a sort of red pilled reactionary take to the headline, but you've convinced me this actually makes sense. We should talk about Boeing and this $21 billion share sale. We talk a lot about how you never want to be a forced seller in any transaction, in any negotiation. This is essentially a forced sale. They're not doing this for any long-term strategic reason. They're doing it for one reason and one reason alone, and that is if they don't, the ratings agencies like Moody's and S&P Global, et cetera, those ratings agencies will downgrade their credit rating from triple B minus to double B, which is the highest rung in junk status. So Boeing really doesn't want to be a junk bond. It's

• 9:48Ed Elson?

  very bad for their reputation. More importantly, it means they're going to have to pay significantly more in interest payments. So this is a no-go. So what are they doing? They are selling shares to basically alleviate that $60 billion pile of debt on their balance sheet and to make the ratings agencies happier. So from a shareholder perspective, I look at this and this is just a nightmare. They're not selling shares because they want to. They're selling shares because they have to. What is your view?

• 10:16Scott Galloway?

  The reality is, this is a company that's not doing well and it's financially strained for a number of reasons. Most recently, the strike. So they're not producing planes. They had enough debt where essentially the market was starting to get jittery and was saying, given the decline in your business and your debt load, your debt is about to become more expensive. So in order to give the debt holders some certainty, such that the interest rate didn't go up, they decided that the cheapest source of liquidity was to issue more stock and maintain, you know, keep their bonds out of junk rating. So this was just a straight financial reason. There's no, there's no getting around it. They wouldn't have to do this if their business was booming. But they decided it was worth to take for shareholders to take the dilution to shore

• 10:58Scott Galloway?

  up their liquidity such that their debtors didn't start massively increasing interest rate, which would again strain their cash flows. So they had to make a bad choice between bad choices, and this was probably the least bad. And shares actually went up because the market said, okay, this company needed liquidity. It got the secondary or the preferred or the share sale done. And now they have a much stronger cash position on their balance sheet to endure whatever bullshit happens, or if the union rejects the next offer. And their debt, their debt remains out of junk territory. So this was the best of a series of bad decisions is the way I would think about it.

• 11:39Ed Elson?

  Yeah, absolutely. But certainly some blame on management's part for even being in that situation in the first place. The last thing you want is to be given a series of bad choices and have to choose the least bad one. Your reactions to Robinhood getting into the betting markets. We've talked about Calci and Polymarket and Predictit, all of these events contract markets that allow you to bet on various things, but most recently they allow you to bet on the presidential election. Now Robinhood's getting involved. What's your view on this?

• 12:11Scott Galloway?

  Like, Robinhood is not where you go to invest. It's not where you go to learn. It's where you go to gamble. And that's fine. You're allowed to. There's FanDuel. There's DraftKings. They're a gambling site, and there's no reason they shouldn't be in this. I think this is sort of a non-story. I think the two founders are mendacious fucks, but I don't see any reason why they shouldn't be in it. I mean, it's like a tobacco company says, I know, let's make our logo even fucking cuter so more 18-year-olds will want to smoke. What do you think?

• 12:37Ed Elson?

  I think of it as a little less mendacious, I think, than than you describe it. Having said that, I've just interviewed the CEO of Calci, who sort of brought me around on that side.

• 12:48Scott Galloway?

  Brought you around to that he's a mendacious person?

• 12:51Ed Elson?

  No, to to believing that actually it's not so bad. And so you can check out that interview when it comes out in a few, in a few days.

• 12:59Scott Galloway?

  It makes sense to take grandma's money she gave you for junior college and bet on whether you think Trump or Harris is going to win. That that can't end badly. That's just a really good idea. Really good idea.

• 13:10Ed Elson?

  Well, let me just throw out one, one little interesting new piece of data.

• 13:14Scott Galloway?

  Okay.

• 13:15Ed Elson?

  I mentioned earlier that I, people say, you know, the betting, the betting markets are more accurate. They're sort of more truthful because people have money on the line. They're better than polling. And you might remember my thesis was actually the likelihood, given the fact that 60% of gamblers and 60% of stock market participants are men. The likelihood is that most of the people betting on this election and betting on these platforms are likely men, which likely skews it towards Trump. So, Kalshi actually released their demographic data. How many of the, what percentage of the platform do you think are men?

• 13:51Scott Galloway?

  I would think that it's 80 to 90, but you're going to tell me it's lower than that.

• 13:54Ed Elson?

  No, no, no, it's, it's 90%.

• 13:56Scott Galloway?

  90?

• 13:57Ed Elson?

  90% of the users on the platform are men. So, you think about how seriously people have taken these betting markets and, you know, Trump's up 60%. The one thing you do have to remember is that nine out of 10 people betting on that outcome are indeed men.

• 14:15Scott Galloway?

  Well, the Kalshi data, if you type in Kalshi presidential election, it has Trump at 62% and her at 38.

• 14:21Ed Elson?

  That's right.

• 14:21Scott Galloway?

  I don't know how that works though. Does that mean if you bet a buck, you get a buck 50 back? I don't know how that works. I don't know how you actually bet on these things.

• 14:29Ed Elson?

  Well, tune into First Time Founders on Sunday to find out. Our final headline, Donald Trump media rose 21% on Monday. Your thoughts?

• 14:37Scott Galloway?

  This thing is hilarious. It's now worth more than Twitter. You want to talk about Vegas? I mean, if you look at the options market, if you wanted to buy a call way out of the money at like 65 that expires this Friday, so only what, three days left from here? And let's pick, let's pick a call at say, I don't know, let's say way out of the money, like it's 65 bucks, you have to pay, get this, three bucks. So, I mean, this thing is just so volatile. The options market is telling you that this thing is going to go to, you know, either 70 or 30. And what it would be really interesting is if on Wednesday morning, I wake up in London.

• 15:20Scott Galloway?

  And I put on the new radicals, you get what you give, and I start dancing around, which will have meant that Harris, it looks like Harris has won. That's going to be really interesting to see what happens. Well, either way, it's going to be really interesting to see what happens to this stock. But you could see this stock, assuming it holds where it is at 54 bucks. If she wins on Wednesday, that, I can't imagine that thing's not in single digits within 48 hours. I mean, I just saw an article today saying, if he doesn't win, he may, if not go to jail, come very close to going to jail. This is a company losing hundreds of millions of dollars on two or three million in revenue. What is the home or the outcome for this company if he's not president?

• 16:05Scott Galloway?

  It's worth zero.

• 16:07Ed Elson?

  I don't even understand what the home or the outcome for the company is if he does win.

• 16:11Scott Galloway?

  Well, the assumption is that I think that he's a kleptocrat and that he will figure out a way to mandate government contracts or funnel revenue to this company, the same way he funneled revenue to his hotels. The next seven days, eight days, this is going to be the most, you're going to see trading halted here over and over. You're going to see this thing just go absolutely insane. And there's going to be a lot of money made and lost in the options on this thing. But it's this kind of, I'm kind of ready for this company to go away. This feels to me like the Playboy brand. I would really like, I would really like to have a dual execution of both of these brands and say, okay, it's time to just stop talking about these companies. They're not real companies.

• 16:51Ed Elson?

  We'll be right back after the break for our conversation with Professor Aswath Damodaran. If you're enjoying the show so far, be sure to give Prof G Markets a follow wherever you get your podcasts.

• 17:02Speaker 00

  When you need to build up your team to handle the growing chaos at work, use Indeed sponsored jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsored job credit at indeed.com/podcast. That's indeed.com/podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs.

• 17:40Speaker 01

  Energía baja, falta de concentración, nebla mental. You might be dehydrated. Gatorade Zero Powders han sido diseñados científicamente para ayudarte a mejorar el balance de hidratación en el cuerpo. Hechos con la mezcla número uno de electrolitos, sin colores ni sabores artificiales. Shop now online or at retailers nationwide. Gatorade hydrates better than water. Is it in you? Signos de dehidratación leve y moderada. Consulta a tu médico si los síntomas persisten.

• 18:09Speaker 05

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• 18:40Ed Elson?

  Welcome back. Here's our conversation with Professor Aswath Damodaran, the Kerschner Family Chair in Finance Education and Professor of Finance at NYU Stern School of Business. Professor Damodaran, thank you very much for joining us once again on Prof G Markets.

• 18:53Aswath Damodaran?

  Thank you for having me.

• 18:56Ed Elson?

  So last time we talked, when we had you on for our quarterly review, we were discussing some of these fallen heroes in the market. So companies like Nike and Starbucks and Intel, these once iconic companies that have been struggling recently. And I'd like to just get your updated view on some of these companies as there have been some very interesting new developments. And we'll start with Nike, who recently hired this new CEO, Elliot Hill. He's been a longtime employee of the firm. Give us your headline thoughts on Nike at the moment, their struggles and the challenges ahead for Mr. Hill.

• 19:32Aswath Damodaran?

  I mean, part of the problem Nike faces is, I mean, they've had a long run as an apparel slash shoe company with a brand name. Brand names in this business tend to fade quickly. I mean, you look at great brand names, they're here today, gone tomorrow. Nike's had a long run. In fact, I read, I read the book Shoe Dog as a pre, I wrote a piece on Nike and I read the book Shoe Dog to kind of prepare myself. Because it kind of talks about the process by which Nike got to where it got and the accidental choices it made, including it's the swoosh and just do it, how they were chosen without a great deal of thought. I mean, I think they paid thirty five dollars to design the swoosh, you know. So it's an amazing set of coincidences that have built one of the

• 20:17Aswath Damodaran?

  great brand names in the world. But it's a brand name that's been built around people, right? That that choice of signing Michael Jordan in nineteen eighty four, when he was not a superstar yet, but riding that wave of NBA Michael Jordan fandom to success, that is always a tricky, tricky place to be because you've got to find new celebrities and celebrities are human beings. So you live and die with those human foibles that come with the sign. So I think that, you know, when Nike hit seventy two, which was the, I think, pretty close to its low, I said, look, you know, the market's building in the expectation that Nike's best days are done, that that growth is not coming back, that margins are going to continue to slide. And I agree with part of that

• 21:01Aswath Damodaran?

  statement. I don't think you're going to see double digit growth from Nike for the next decade, but it still has the most recognizable brand name in this business. It still has, you know, great margins, even on its worst days. It's a very good company, but it's not going to be a great growth company anymore.

• 21:19Ed Elson?

  I just want to put forward a thesis that we've talked about on this podcast. We hear a lot about this term, brand as moat in business, this idea that if you have a strong brand, that's one of the best protections against competition. But, you know, I look at all of these iconic brands, especially Nike, that have, you know, fallen out of favor. And I'm starting to believe that maybe that phrase is outdated because what it looks like is happening is these companies are becoming too reliant on their brand. They're sort of resting on their laurels and they're convincing themselves that the brand is the moat. And then as a result, maybe they get lazy and the brand sort of depletes in value. So I'd love to get your reaction to that thesis, especially in relation

• 22:01Ed Elson?

  to Nike, that perhaps brand as moat in twenty twenty four. Is maybe less true than it used to be.

• 22:08Aswath Damodaran?

  You know, brand names, you know, even though their long term competitive advantages need nurturing, need need take being taken care of. I mean, remember Quaker Oats? And how quickly that brand name, one of the most recognized names in grocery stores kind of faded away because they didn't take care of the brand name. The other reason, though, is nothing to do with laziness and not taking care of it. Your brand name is recognized by a segment of the population. If your market is aging, your brand name by its very nature is going to become less valuable over time. Kraft Heinz. I mean, it's not that they were lazy, it's that people don't particularly care for Kraft cheese and there's fifty seven taps of ketchup.

• 22:50Aswath Damodaran?

  If they're twenty five or thirty years old, you've lost a large segment of the population because your brand has aged. So sometimes it's neglecting your brand name, sometimes it's your brand name aging. And as it ages, your market gets smaller. And sometimes it's that the world has moved on, that what used to be a valuable brand name no longer works. I mean, I'd take the automobile business. If you think about the great brand names of the twentieth century, none of them has been successful in the electric car business, none of them. So maybe what made you successful in a business can become actually a problem as the business itself changes. So lots of different reasons brand names fade, but if you look at brand name as a standalone competitive advantage,

• 23:33Aswath Damodaran?

  it remains one of the strongest and longest lasting competitive advantages a company can have.

• 23:39Ed Elson?

  It sounds like perhaps one of the things you think Elliot Hill should be going after is young people. Would you say that would be sort of the number one on the agenda for this new plan forward for Nike?

• 23:49Aswath Damodaran?

  While taking care of the one thing you cannot do is go after a new market and forget about the existing market. Remember the Gap in the nineteen nineties decided to go young and ignore the fact that their core market was, you know, thirty five to forty year olds who walked in requiring a khaki and just another colored shirt. So they went they went young and in the process they forgot to take care of the core market. So while he's going after the young market, he's got to make sure he's not going overboard. It's one thing for an on, you know, young company going after niche market to go after the young. It's another thing for Nike, the largest company in this space, to go after the young market without in some way risking their core market.

• 24:35Scott Galloway?

  So Aswath, always good to see you. When I got out of business school, we love this topic of fallen angels. The best job you could get in 1992 in the Bay Area was to go to work for Intel. And it's 2021 was worth three times more than Nvidia. Now Nvidia is worth 33 times what Intel is. Jensen Huang, the CEO of Nvidia is worth more than Intel. That, to me, I wonder if it's been oversold, because I do think there are some moats there around IP, manufacturing facilities. And then the other one where I would also say is a great American icon that has fallen really far is Boeing. And I wonder if that's been oversold, given that it's a duopoly. Thoughts on Intel and Boeing?

• 25:15Aswath Damodaran?

  Let me start with Intel. I mean, I think, again, Intel was one of the companies I did write about a few weeks ago. I think the problem for Intel is they were at the top for so long that their story is we're the biggest, we're the best. And when that slipped, they wanted to go back to the top. I mean, if you think about what they've done over the last 10 years, it's not that they haven't tried to do the things that would make them successful. I think they've tried too hard. Tried too hard in what sense? They tried to out TSMC, TSMC with the Intel Foundry, huge investments in manufacturing chips, saying, we too can be like TSMC. They've invested, I think, after Nvidia, perhaps even more than Nvidia, they've thrown in billions of dollars into developing the next

• 26:00Aswath Damodaran?

  AI chip, because they're convinced that they can out Nvidia, Nvidia. And I think in the process, they've overreached. I call it me too-ism on steroids, because that's basically what Intel has done for the last five years, is me too, I can do that. And I can do it five times more expensively than you can. Now, I remember going into Intel six or seven years ago, I went to their offices and I was talking to their, you know, they asked me to come in and speak to their, as a general audience. And what I noticed about Intel as a company was the absence of energy. You don't get that sense of excitement and energy, and it wasn't there anymore. And it's tough to be in the business that Intel is in without that driving the choices. I do think, though, that it's been oversold. I think, especially

• 26:44Aswath Damodaran?

  when it dropped below $20 per share, you are effectively assuming that Intel would shrink over time and its margins would go away. Intel has a couple of advantages still that can work in its favor. One is the Inflation Reduction Act, as you know, put as a priority, chips made in the US. TSMC has built a factory in the US, but Intel is supremely well positioned to take advantage of the subsidies that come out of that. So if Intel can find its feet on the foundry business, there's a way back. And I think that as long as they don't try too hard and accept the fact that they will not dominate AI, that that battle's lost. Nvidia will, but they have a niche portion of the AI business

• 27:29Aswath Damodaran?

  they can go after. I think there's a pathway back to middle age. Not great growth, but middle age for Intel. And at less than $20 per share, I thought it was, it was a pretty good bargain as an investment. I own Intel now, so I've got to be quite, quite, quite open about that. I did it after I wrote the piece and I looked at, you know, what would happen if they became a 3% growth company and the margins slipped by 3 or 4% and they were $28 per share with those assumptions built in. I can live with those assumptions. I think the odds are, in fact, in your favor in Intel. Boeing, though, is an entirely different story. I mean, I've never seen a company blow up its reputation as thoroughly and as completely as Boeing has done

• 28:14Aswath Damodaran?

  over the last 20 years. I mean, it's one of the great engineering companies in the world. I mean, a company that was, you know, people went to because it had superb, superb engineering and technology knowledge, trusted in many dimensions. The only reason Boeing is afloat is because it's in a duopoly. I mean, that's, that's a reality is this company has so thoroughly trashed its credibility in markets that in any other market, we'd be talking about rap, you know, winding up the story and selling the assets to others. I do think they're, they're thinking about selling their space division now, and that's the first phase in a company saying, we're in trouble.

• 28:57Aswath Damodaran?

  We're going to sell off our crown jewels because we have to survive. They're in complete survival mode, and I don't know an easy pathway back to credibility because once people get the perception that you cannot be trusted, that your products are not safe, which for an aircraft manufacturer. Is diabolically dangerous. It's very difficult to find a pathway back. So Boeing, I would not buy at any price simply because I, you know, I think there are too many things that can go wrong here that can cause the company, if not to go bankrupt, at least to be taken into receivership by somebody that might maintain the assets and run it. But, you know, the company is in serious, serious trouble.

• 29:40Scott Galloway?

  So two other fallen angels that have been kind of the leaders in their category, held up as icons of management. First, Estee Lauder, which made some of the best acquisitions in the aughts with Mac, consistent earnings growth, great performer, really strong in China. And then Disney, which was always seen as this, talk about moats between the intellectual property, the parks, diversified business, kind of owned family and imagination, just these incredible brand associations. Estee Lauder is off 38% year to date. It's been cut in half over the last five years. Disney is up 6% year to date, but is off 27% in the last five years. And I think it's trading kind of where it was about 10 years ago.

• 30:25Scott Galloway?

  Estee Lauder and Disney.

• 30:27Aswath Damodaran?

  I'll take the Disney part first because I think Disney is, if you were writing a case study about how not to transition top management, Disney would be the case study. I think, you know, because let's face it, 2012 is when Bob Iger went to the board and said, you know, I'm ready to leave. I mean, I actually wrote a very complimentary piece about him then saying, this is the way top CEOs should behave is they've made themselves dispensable. And he said, and I blame the board of directors at Disney, which I think has to rank up there among the 10 worst boards of directors in terms of corporate governance. You know, they convinced Bob Iger that the company could not make it without him.

• 31:10Aswath Damodaran?

  I mean, in my classroom, I use the example of Julius Caesar, you know, and the Shakespearean version where he says, you know, where they tried to crown him king. He says, no, no, I'm not the king. And the second time they try, the third time around, he says, okay, I'm the king. And in a sense, Iger initially resisted. They were so persistent that finally he said, you're right. This company cannot make it without me. When he came back in two thousand and fifteen, though, he set in motion an entire set of events and Disney's still trying to live down. That second layer of management that was waiting to move up said, we're not waiting around. If you think about Tom's, basically go down and look at the people who are supposed to step in. They all left and moved on, which left Disney with an empty cupboard in terms of top management skills.

• 31:56Aswath Damodaran?

  So of course, Bob Iger became indispensable because there was nobody else left. And I was surprised when he left in two thousand and twenty, to be quite honest, because there was really nobody ready to step in. But I think Disney is facing a problem that's out of their control as well. The entertainment business is broken. I mean, I haven't talked to a single person in entertainment who feels secure about what the future will deliver. We know who broke it. Netflix dead with the streaming model. But even Netflix hasn't benefited from breaking the business. And that's why, you know, one of the things I often say is disruption is easy, but making money of disruption is really difficult. At this point, the one thing we know is nobody in the entertainment business is healthy.

• 32:40Aswath Damodaran?

  Healthy in the sense of you can look at the company and say, this company has a business model that's going to deliver sustained profits for the long term. Netflix can't do it. Disney cannot do it. Warner cannot do it. Paramount definitely cannot do it. But there's consolidation coming in this business. You're going to see the business consolidate. Estelle Order, I have less strong feelings about. It's a business that I'm not that comfortable, you know. I don't quite understand the movements, the fads, the fashions that drive that business. I mean, I think there too, there might be a governance issue that we've got to deal with sooner rather than later. If you know, if change is needed, is it likely to come with the people running the business? I'm not sure it is.

• 33:23Aswath Damodaran?

  And I think almost both these companies, I think, reflect the fact that the underlying businesses they were in for a long time were predictable businesses that they learned how to operate in. Those businesses have changed. These companies are struggling with an entirely new business that they're in and how to make their way to success on both.

• 33:44Ed Elson?

  Just a sort of general question about succession planning while we're on the subject, Aswath. Philosophy on hiring insiders versus outsiders. So Estee Lauder, they have just said they are going to hire or they're going to promote an internal executive to CEO. We saw the same thing at Nike. Starbucks brought in the Chipotle guy. Disney is sort of balancing that question. What's your view on internal versus external hires?

• 34:11Aswath Damodaran?

  I think the question is, why are you in trouble? If you're in trouble because of mechanics, logistics, something that's inside the business, then I think it makes sense to go inside the business. You want to bring somebody who understands. If your trouble is with storyline, you've lost your narrative as a company. You have to go outside. You have to bring in fresh thinking into the business. I mean, I'll, you know, my views on Starbucks are it's, the Starbucks story is broken. It's broken because the original Starbucks story was to bring the European coffee shop experience to the US, a country which never had that experience. And it succeeded beyond its wildest imagination.

• 34:53Aswath Damodaran?

  Coffee shops where people came and hung out three, four, five hours a day, they brought the laptops. That was the Starbucks story. And I hate to bring COVID into it because we blame COVID for everything. But COVID in a sense set the framework for the Starbucks story breaking. Why? Because it created the online ordering system. And today, when I walk into a Starbucks, I notice 25 people standing around picking up their online orders and three people forlornly sitting in the coffee shop, drinking their coffee. The coffee shop experience is broken and it's also created logistical challenges. Because at eight 30 in the morning, whether you live in LA or New York or any big city,

• 35:35Aswath Damodaran?

  you walk into a Starbucks, there are like a hundred online orders that come in at the same time and the barista just can't handle them. You don't have the old mechanism of the line slowing you down. It's created both a story and a logistical problem. The Chipotle guy. Might be able to solve the logistical problem, but I don't know whether he has the capacity to solve the story problem and that's going to be the test.

• 36:00Ed Elson?

  I went into a Starbucks the other day and I tried to order a coffee and they said, oh, you can only order on your phone. Sorry. Just turned away and went back into the kitchen. It's unbelievable.

• 36:09Aswath Damodaran?

  And maybe there's a different storyline. Maybe we need to shut down all these expensive leaseholds of big stores and just have kiosks. Maybe that's a better, that's a different, I'm not saying it's, it is what they will do.

• 36:22Ed Elson?

  More of an Uber Eats story.

• 36:23Aswath Damodaran?

  Exactly, right. In a sense, that's what it's become. And for better or worse, that's the reality that a new CEO of Starbucks will have to face.

• 36:32Ed Elson?

  Absolutely. I was gonna shift us over to tech. We've got some big tech earnings rolling out over the next few days. Is there anything you're paying particular attention to in these earnings reports?

• 36:43Aswath Damodaran?

  I'm looking for patents. If you see all of them underperformed, then that, there's a signal here that you're. My guess is you're going to see what you've seen all year, which is, you know, you take the mag seven, four will beat their earnings, three will fall. It's almost like if you have all seven in your portfolio like I do, disappointment on one are offset by gains on the other. One of these days, that's going to end. They're all going to go down at the same time, but that's going to happen because a market correction occurs, which is large, not what you're seeing. So I expect the usual pattern. I do think that expectations have been lowered for some of the tech companies, in particular, you know, for, for, for Met and Alphabet.

• 37:25Aswath Damodaran?

  The expectations are low, are set lower than they used to be. I think it's going to be easier for them to meet those expectations. Nvidia's last earnings report was a crapshoot. I mean, their expectations are set so high that even though they beat their estimate by 5%, the stock, of course, took a beating. It'll be interesting to see if people have adjusted expectations to reflect the new reality or not, because that's, that's, you're seeing the expectations game. And that's, I'm watching the expectations game a lot more than the actual game.

• 37:56Ed Elson?

  Right. It seems like a lot of these earnings, I mean, we'll see Microsoft, Alphabet, Amazon, Meta. A lot of the story there is, interestingly, actually about Nvidia because their capex is basically Nvidia's top line.

• 38:10Aswath Damodaran?

  That's a spending for those companies with revenues. And at the same time, the server businesses for all these companies are going gangbusters. Because the same AI zeal that's causing them to spend the money on these AI chips is also causing demand for cloud. So you look at Microsoft today, and I was looking at it last week. It gets about half its revenues from the cloud business. It's more cloud business than software company now. I never thought I would see that day 10 years ago. But it's astounding how big it is and how incredibly profitable that business is. In fact, if you're an antitrust person, you should probably go after the cloud business in terms of dominance.

• 38:51Aswath Damodaran?

  Not the businesses you're going after, smartphones, advertising, because that's really where I think you see the dominance play out.

• 39:00Ed Elson?

  Stay with us.

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• 40:46Scott Galloway?

  We're back with Prof G Markets. So let's talk about Tesla. The most recent earnings call, you saw a substantial pop in the stock price. I think it was up 21% growth, up 6%. But the revenue mix was an improvement. Some of their higher margin categories grew faster than the core business. But it still seems to be, I call it kind of a hybrid stock. It's a company with real cash flows, but it also feels like it has some memeish qualities to it. Your thoughts on the most recent Tesla earnings?

• 41:18Aswath Damodaran?

  As a Tesla owner, I like the earnings because the stock, I do think the jump I saw in the price.

• 41:23Scott Galloway?

  A Tesla vehicle owner or a Tesla stock?

• 41:26Aswath Damodaran?

  Stock owner, right?

• 41:27Scott Galloway?

  Okay.

• 41:27Aswath Damodaran?

  I own a Honda Civic, a 2010 Honda Civic that basically nobody would steal. So, but as a Tesla stockholder, it was good news for me, but I did think it was out of proportion to the good news in the report. It's almost was a relief rally because we've had so many bad surprises with Tesla earnings reports that people have decided relief saying, thank you for not seeing the margins drop even more and reporting more bad news because that's what people were. So it's almost like the consensus numbers have become a side story now. The market seems to have its own set of expectations for companies that if they don't meet or do meet, reflect in the price.

• 42:09Aswath Damodaran?

  Now, I do think that this automated driving thing is still very much in the mix. And I'm not sure that it's a distraction or an addendum to the story, to be quite honest. I think that, you know, that that took a lot of the publicity around, you know, around what happened around the only last earnings report. But I do think that the relief was, hey, you know, at least they're going back to the products and services that deliver the highest margins. That's good news. They're not throwing a ton of money after these businesses they're chasing. But I think this is going to be one good earnings report, followed by a second earnings report where you get surprised again.

• 42:52Aswath Damodaran?

  I mean, with Tesla, you never can rest easy on what you're sitting on. So I'm going to go earnings report to earnings report. Right now I'm feeling okay. But who knows what the next earnings report will deliver and what new businesses they will claim to be in before the next earnings report.

• 43:07Ed Elson?

  The We Robot event, by most consensus, it was kind of a disaster. You know, it was sort of all all talk, no action is what I would say. But the thing that really stuck out to me was the fact that the AI humanoid robots, which are supposed to be the future, it's what's fueling this huge valuation of the company. They were being controlled by people. They were being voiced by people. They were basically being puppeted by people.

• 43:38Ed Elson?

  I'd love to get your view on that. And how bad is that? Are we bordering on fraud here?

• 43:44Aswath Damodaran?

  I'm not going to go that far, but I think we're overpromising.

• 43:46Ed Elson?

  Okay.

• 43:47Aswath Damodaran?

  In general, with AI products and services, I think there's a lot of overpromising going along of these great new devices, which will not need any, as you pointed out, many of these AI products and services require almost as many human beings behind them as they claim to replace. And that's really going to be the test is whether, I mean, somebody described AI, the difference between AI and machine learning is a difference between stochastic and deterministic. Now, machine learning is basically deterministic. It's rule driven and principle driven. What makes AI different and perhaps better than machine learning is it's stochastic. It adjusts in the moment based on the data it has and gives you.

• 44:29Aswath Damodaran?

  But we don't know how well it does that. I mean, that's, I think, still an unknown. The AI advocates claim it'll get it'll get better, that AI beings are going to be sentient in some sense and behave more like human beings. But I don't think we've seen any evidence of that happening yet. Maybe it will, maybe it will not, but I think that you're right. What you saw in the robot, in the, in the robot dynamics was you're saying this isn't that impressive, this isn't going to change the world, but it's still early. So I'm going to be, I'm leaving the door open, but I think a lot, I mean, it's not, and it's not just Tesla, across the board.

• 45:10Aswath Damodaran?

  I think the product and service part of AI, I'm hearing a lot of promises, but I'm not seeing much in terms of delivery.

• 45:18Scott Galloway?

  What are your thoughts on Uber and potentially their vertical expansion into travel, but with a potential acquisition of Expedia?

• 45:24Aswath Damodaran?

  To me, big acquisitions are the death knell for great companies. I mean, I, I know, I, I just don't like them. I don't like them because you pay a premium on the market price and you got to deliver on those, on that market price. So from a strategic standpoint, from a marketing standpoint, you might say this is great news, but I'm, you know, the price they'll have to pay to get it, I don't think it's worth it. I mean, that, and that's my bias playing out. I do not like acquiring large public companies as part of my growth plan because historically, it's almost never delivered enough returns to justify it. I'll make a prediction, if they do go for the Expedia acquisition, their stock price will drop and will drop pretty substantially in the announcement of the acquisition.

• 46:07Aswath Damodaran?

  Cause I think markets share that same skepticism about growth through big acquisitions. I'd much rather Uber focus on smaller acquisitions, perhaps of private businesses that add to their platform, add to their technology and get them there. I, I'm not sure buying Expedia is the way to get there.

• 46:24Ed Elson?

  Just want to go back to Google, one of the big tech companies. There's been talk from the FTC about breaking up Google. The courts have, of course, declared the monopoly and we're entering into the remedy phase. You believe a breakup is not the right remedy. Why are you against a breakup of Google and what kinds of remedies do you think would be more appropriate in your view?

• 46:46Aswath Damodaran?

  Let's talk about the companies that have been broken up successfully and why it worked. Standard Oil, easy to break up because it was geographic, you know, basically you broke it up into 36 different companies geographically.

• 46:59Aswath Damodaran?

  AT&T, they gained regional belts and long distance. Microsoft in 2000, close to a breakup, they never pulled it off. But they said Office on one side, Windows and browsers on the other. I'm not sure where the breakup lines would be in Alphabet. You know, because Alphabet's business is not a platform, it's online advertising. It has multiple platforms and being in the ecosystem increases their advertising revenues. I think when I look at Alphabet, the two businesses that could potentially be broken up are YouTube subscriptions. Because YouTube, you could argue, the subscription model doesn't have to be. And the cloud business. YouTube subscriptions, would they survive as a standalone business?

• 47:44Aswath Damodaran?

  I'm not sure they could because I think it's still very heavily subsidized by the advertising business in terms of how much it costs them to maintain the platform. And the cloud business, even if you're able to separate it out, what advantage or benefit do you get as the Justice Department? It doesn't take away the dominance, the core business. I mean, the Department of Justice is worried, is worried because Google controls so much of online advertising that so much flows through that search box. It's really very difficult to figure out a way to break that because that's, it's the natural economics of business. I don't like it, but the consolidation that you see in online advertising

• 48:24Aswath Damodaran?

  is reflective of the networking benefits that you can't make go away through, you know, Justice Department actions. So I don't think it's going to be effective. It's not that I like Alphabet as a company or I like their management. It's just that I don't think it'll deliver what the Department of Justice wants to deliver, which is less dominance from the search box. I think that's still going to remain.

• 48:49Scott Galloway?

  Couple of years ago, Aswath, you essentially said Meta distinctive the, how badly it had been beaten up because of this hallucination around headsets, the massive investment they made there. You said, look, this is just a cash volcano that's been oversold.

• 49:05Scott Galloway?

  When you look at a lot, some of these fallen angels and these icons that are trading at near 10-year lows, is there any sector or specific companies that stand out to you as being dramatically oversold?

• 49:15Aswath Damodaran?

  If I look across sectors, I think, you know, I would be looking at entertainment, maybe apparel, because there's a shakeup happening. And perhaps in the shakeup, there are companies that are, you know, falling off the cliff, which don't deserve to, because it's being shaken up. So, you know, right now, nothing catches my eye as being incredibly cheap in terms of, you know, cash flow. But I think that, you know, as I said, buying these, selectively buying these companies which have dropped 40 or 50% might actually be a pathway. In fact, the last four companies I bought have all been middle-aged or declining companies where the market price has dropped much more than I think it should.

• 49:58Aswath Damodaran?

  So, no, that's where I would look if I were an investor, is look at, look at companies that are down, companies which had glorious past. Don't just jump into them and ask yourself, is there a pathway back for these companies? And I think there is for Intel and Starbucks if they can find that pathway.

• 50:17Ed Elson?

  At the beginning of the year, I asked you, Professor Damodaran, what you were most focused on in the public markets as an investor in 2024, and your answer was the election. We are now days away. The markets appear to be pricing in a Trump win. I'd love to know what is just generally on your mind right now, particularly as an investor, as we approach November 5th.

• 50:41Aswath Damodaran?

  You know what? Sometimes the data comes in, you have to reassess your thinking. The more I look at what markets are doing, the more I'm getting the impression the markets don't believe that either presidential candidate is serious about what they're saying on their plans. Because if they were, you'd see much bigger contortions in the market. You might get a collective market expectation that Trump will win. But if you look at the sectors that would be hurt by, let's say, a tariff of 200%, you're not seeing that. Similarly, you can look at the companies that would benefit from Harris win, and you're not seeing those companies go up.

• 51:24Aswath Damodaran?

  So it's almost like the market saying, these people are not serious about the economic plans. There's a lot of posturing going on. With the posturing, you might as well just go back and make a collective judgment on who's going to win. And right now, tax rates are going to go down under Trump. We'll push up the pricing a little bit more. But I think it's, you know, we'll see in hindsight whether that's true and whether this is a dangerous thing to do. But that's my impression of what markets have done this year. It's been, they've been remarkably sanguine as, as both sides have put out their economic plans about how those economic plans will play out in revenues, earnings, cash flows and market prices.

• 52:02Ed Elson?

  Are you thinking about the election in terms of your own investing strategy? Do you have any politically based theses that you're investing towards? Are you trying to kind of compartmentalize what's happening in politics?

• 52:14Aswath Damodaran?

  I try to avoid politically based investing because I'm a terrible political prognosticator. So I've, I've, I've learned to avoid doing things where I'm, I don't have any competitive advantage. So I, and that's, and it's one reason why I've never, I, I under invest in Chinese companies because I've talked about how China is part of every Chinese company's story. I don't like mixing my politics with my investing and I prefer to keep it that way. So for better or worse, I've stayed away from making any bets.

• 52:50Ed Elson?

  Professor Damodaran is the Kersha family chair in finance, education and professor of finance at NYU Stern School of Business, where he teaches corporate finance and valuation. As always, fascinating and a pleasure. Thank you so much for joining us.

• 53:03Aswath Damodaran?

  Thank you, Ed.

• 53:03Ed Elson?

  Thanks, Al.

• 53:04Aswath Damodaran?

  Thank you, Scott.

• 53:14Ed Elson?

  Algebra of Wealth. Scott, Professor Demeterin said he does not like to mix his politics with his investing. We're a few days away from the election. It feels harder than ever to keep those two things separate. What would your advice be to listeners who are probably anxious about this election and what it could mean for their money?

• 53:35Scott Galloway?

  So my advice would be to do what Professor Demeterin says, not what Prof G did. And that is, what is likely to happen regardless of who wins is that we're going to have more intransigence. And some people see that as a good thing, some people see it as a bad thing. And that is, any big sweeping changes likely aren't going to happen. And so the notion that you should try and figure out, A, we don't know who's going to win, and then try and game like which companies will do well or poorly based on their victory is just not a good idea. And I have personal experience here. In 2016, when Trump won, I had some experience with Trump-affiliated companies. And I thought, these people are fucking village idiots. They were some of the worst business people I had ever encountered in business.

• 54:20Scott Galloway?

  And I thought, okay, this guy's now running the country. That is really bad news. And I, I think a week after the election, I sold most, if not all, of my stocks. I was convinced the market was going to crash. The market ripped that year because of tax cuts and other things. And the fact that I took a tax hit on the sales and then had to buy back in, one of the dumbest investment decisions I've made. And it's a lesson, and that is, your emotions are your enemy. I can't stand the catastrophizing on both sides. Hardcore supporters on both sides have each decided that if the other candidate wins, it's the end of America. That lacks historical context, and it doesn't appreciate or recognize how enduring the

• 55:05Scott Galloway?

  American experiment is. And also, I think that's true of the markets. I would not try to game the market here. I would not try to make any sort of predictions about what impact it's going to have on your stocks or on your investments. So the bottom line is, stay the course and also recognize, for your own mental health, whatever happens here, America will endure.

• 55:27Ed Elson?

  This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss, Mia Silverio is our research lead, Jessica Lang is our research associate, Drew Burrows is our technical director, and Catherine Dillon is our executive producer. Thank you for listening to Prof you Markets from the Vox Media Podcast Network. If you liked what you heard, give us a follow and join us for a fresh take on markets on Monday.