Country Risk, Tech Valuations, & How the Markets Lost their Predictive Power — ft. Aswath Damodaran

27:26As the valuation expert, I would just love to get your views on Google and how Google is trading right now. I'm going to take you back about a decade when Google renamed itself Alphabet. When it did so, it said because it didn't want to be just a search engine. It put all these other businesses. If you remember, the six other businesses, the bets. And the problem is for much of the decade, the bets were just cash drains and nothing came back in the form of revenues and earnings. In my experience, there's never been a company that gets as many headlines for its top products, right? Whether it's Waymo or whether it's any of its other products or Ness.

28:07But there's so little to show for it in the bottom line. The question that investors keep asking is, if all of this is working, how come you're so dependent on the ad business for so much of your value? And I think Google has, you know, because of that decade of not delivering on all of its other bets, markets are skeptical. They say, okay, that sounds great, but show me the money. Yes. And I think that, you know, if I were an investor and I've never held any of the MAG7 stocks and I want to enter, Alphabet would be my choice to enter this group, you know, because I think it's a company that if it does deliver on its other products will be able to beat expectations on earnings and revenues.

28:53But a decade of not delivering has brought those expectations down and people are pricing in based on those lower expectations. To follow up from the story you described of Google, and this is a very interesting connection that I've just made. You describe 10 years ago, however long it was, when Google changes its name to Alphabet and they say, we're not just a search box. We're doing all of this incredible stuff. We're doing Nest and we're doing the Google Glass. And we have all of these ideas and we've got this incredible research lab working on these very fancy ideas. And I would assume that maybe at the time the markets were very excited about it.

29:33And then you fast forward to 2025 and the markets, I presume, I mean, I'm young, so I don't really know what happened. But I presume the markets go, we've seen this story before and we're not as interested in it as we were in 2012. And so we're going to slap on a multiple that is actually lower than the average of the S &P. I wonder if that, it sounds very similar to the story of Tesla. It sounds like Tesla is doing a similar thing. We're not just a car company. We are an AI company and a robotics company and a robotaxi company. We're all of these things. And I wonder if, you know, 10 years from now, it's a similar story to Google where the markets go, So we don't believe you anymore.

30:21And even if you do prove your business, we're not as interested. It'll happen. Every company reaches a stage in the life cycle where the story is not going to be enough. With Tesla, they've been able to put off this bar mitzvah moment. I've used that word before of, hey, when will we see the numbers? But it'll happen. It'll happen. And I think, but I do think, you know, that when you talk about Google, my question is, who's Google's narrative setup? Who's Google's storyteller? Sundar Pichai is not the storyteller for Google. He's basically, you know, he's a good CEO. I mean, the other company I think of that drove on narrative for decades was Amazon.

31:05And you've got to give Jeff Bezos credit. He's a guy. He set the narrative and he sold the market on the narrative. That's a CEO's real job. It's not to fix supply chains. It's to be the storyteller for the company. So I think both Tesla and Google illustrate the criticality of having somebody at the talk who frames the narrative for the company. In which case, maybe$30 billion is the right number to get Elon Musk to stick around. To be full-time and actually be CEO again, right? I mean, because he's been CEO in Absentia. And I think that there is a value to having a storyteller with a group of people who believe in a storytelling.

31:50And I think, you know, when you have that, you've got a narrative setter at the top. I'd love to get your thoughts on NVIDIA right now. A company recently hit$4 trillion in market cap. It's now worth$4.4 trillion. It is more valuable than the entire UK stock market. Any thoughts on NVIDIA's valuation right now and what we've seen with this massive runner? NVIDIA is an AI architecture company. And if I frame out how much the architecture has to cost for NVIDIA to be worth$4.4 trillion, I don't see economics. I mean, if the architecture costs$2 trillion or$3 trillion, it can justify NVIDIA's valuation.

32:33But if you spend$3 trillion on AI architecture, AI products and services have to be$12 trillion,$15 trillion in value to make your money back. I think AI is great, but I don't see the market as that big. That said, I understand why NVIDIA is doing what it's doing. AI is the buzzword at the moment. And if you're an investor and you want to invest in AI, guess what the one tangible place you're going to go where companies actually make money? It's NVIDIA. But there are, I mean, AI is a big buzzword, but there are relatively few companies that actually make money on AI. NVIDIA does. Maybe Palantir does on its commercial software.

33:16But then it's mostly architecture companies. Constellation Energy, data center companies. It's almost entirely in the architecture space. So if you're a portfolio manager and your client says, have you invested in AI? Guess what the easy answer is? Yeah, we own NVIDIA. It's become the lazy investor's answer to, how much money do you have in AI? Well, I have NVIDIA stock. And I say it's a lazy investor because I do think that ultimately the AI business is also going to shake out and the architecture companies are going to go into the background and the product and service companies are going to go into the foreground.

33:54I'll take you back to the dot-com era. When all was said and done, Cisco was not the biggest winner from the dot-com era. It was Amazon.com. I'm waiting to see who the Amazon.com of the AI boom will be, but I don't think it's going to be NVIDIA. That's why the big win from AI investing will be to find that company that you think will emerge in the product and service business. And that's a much, much tougher call to make. And that's why portfolio managers are not even trying. I would propose one to you right now, which is OpenAI. just raised at$300 billion. And my response to that would be, perhaps they're lazy, but the only Amazon.com in the AI world, which in my view is OpenAI, you can't invest in because it's private.

34:45And this has been a theme that we've discussed on this podcast, which I'd love to get your reactions to, which is all of the good companies, in AI at least, OpenAI, Anthropic, even beyond AI. You look at SpaceX, you look at Stripe, you look at Databricks, all of the really great companies that might become the next Amazon.com, they're all staying private, which means that if you're a retail investor, it's very hard to invest in those companies. I'm wondering if you have those same concerns. Which is the reason NVIDIA takes off, right? Because if that is the only tangible company in your portfolio manager, mutual fund manager who has to buy just public companies, you're stuck with.

35:27You're right. Many of them are staying private. They have no trouble raising capital as private companies. Many of them are corporate governance nightmares, which might be one reason they're staying private, right? It allows them to do things that would never pass muster in a public company. So I think that my worry is not that they stay private, but that the corporate governance nightmares that are embedded in these private companies will come back to bite them as companies. It's not good for them in the long term. I mean, I think that, you know, OpenAI would be a much better company. If Sam Altman were open to people who disagree with them, which is what markets do, which is what having a board of directors with different points of view, it makes the company better.

36:14So people often think of, you know, strong corporate governance as putting a check on founders. I don't think of it as that right. I think it brings founders to reality when they get distracted, when they start doing things. It doesn't always work. But my worry of them staying private companies is they might not grow in healthy ways as private companies because there's so little accountability, even to their investors. You think big VC investors will demand accountability? I don't think they do. VC investors, especially these big companies, are passive investors. They take their money, they put it in, and they hope to make their money from exits two years, five years down the road.

36:57And they're not asking the questions that need to be asked to make these companies truly great companies. When I think about it from the investor perspective, I think back to what you said about how big is the TAM on AI really? Is it$12 trillion? I mean, what is the number? And show me your model and show me how the business is going to get to that number. And I could imagine that with a frontier technology like AI, part of the investment thesis is, look, don't worry about the TAM. If this is what people think it might be, you just got to get in. You just got to get on the train. You got to get in NVIDIA or you got to get in OpenAI.

37:42And, you know, be my guest, do the math, but your loss, because none of us really know what the TAM is. None of us know what this is going to become. You have to just sign up if you want a piece of this. You cut to the heart of what separates investing from trading. And I'm not passing any value judgment. Investing is about assessing terms and estimating revenues and cash flows, even in the face of uncertainty and trying to ask, is this a reasonable price to pay for this company, given the business it's entering? Pricing is about demand and supply, mode and momentum. AI is it. You want to be in there.

38:23You've got to pay what it's like wanting to buy a house in an expensive neighborhood, right? You don't do an intrinsic value of the house. You've decided to be in that neighborhood. Guess what? You've got to pay what other people are paying. That's your entry point. And I think that 95%, maybe 99 % of the money in AI now is just pricing and trading. They want to be in the game. They have no idea what the TAM is. They couldn't care less because they think it's like a very expensive game of pass the cushion, which is, hey, even if you're wrong, if you can flip it to somebody else while the game is getting bigger, you're going to make money.

38:59What difference does it make that eventually somebody is going to be left holding that cushion? So I think that that's driving a lot of money into the AI space. I am an investor. I'm not comfortable doing that. But I completely understand that if you're a portfolio manager, you often have no choice because your clients will push you towards trading AI because they want AI in their portfolios. Well, it seems almost irresponsible to not have some level of AI allocation. Especially being judged on a year-to-year basis, right? I mean, it is irresponsible if you're going to be judged on an endowment fund or a pension fund on the returns you make each year.

39:41Not having NVIDIA will put you at a disadvantage. But if you're an investor, your only responsibility is to yourself in the long term. It's a very different game. And I understand, therefore, why portfolio managers might disagree with me on this because they have a different mission, a different job to do. I'm not going to point fingers at them saying you shouldn't be doing it. What they're doing makes complete sense given their mission. But what I'm doing makes complete sense given my mission, which is I am investing to preserve and grow my wealth for the long term. And that effectively might mean staying out of spaces where I think I'm paying too much for the cash flows and earnings I'm going to get on it.

40:23It's a different mindset. It's not better. It's not worse. It's just different. You sound somewhat bearish on AI. And correct me if I'm wrong, but it sounds like your view is that there is just a lot of hype. People just want to get in the door. And because of the amount of demand to get in the door, it's the popular club. Everyone wants to, they will pay anything. And as a result, you know, eventually the hype dies and prices go down. It sounds like that is your view on AI in general. It sounds like that's your view on NVIDIA, perhaps some of the other chip stocks, OpenAI. Is that your view? It's part of what I call the big market delusion.

41:07I've written about it. In fact, I have a paper and it's a chapter in one of my books. It's because I've seen this movie before. I saw it with online advertising 10 years ago with dot-com in the 1990s, the PC business in the 1980s. The big market delusion happens anytime there's this buzzword big market. PCs early in the 80s, the internet early in the 90s, online advertising, social media early in the last decade. When you have a big market, what it does, it attracts entrepreneurs who tend to be overconfident, with capital coming from venture capitalists who are also overconfident. It's a feature of the game.

41:46Each thing, they can conquer the big market. So each, in a sense, overestimates their chance of success, overestimates their value. But if you add up all of the pods of these overconfident groups, collectively, that value is going to be much greater than the value that can be delivered by the market. I think of it as healthy because this is the way change comes about. Eventually, there's a correction. We ring our fingers and say never again. But guess what? We come back to play the game again. To me, I don't see why AI is going to be the exception to what's happened historically. People overreach.

42:24They're correct. They say, I will never do it again. But the world changes as a consequence, right? The dot-com boom busts. But guess what? It changed the way we live. And I think the AI boom will have a correction, but AI will change the way we work and live. And I think that's how human beings advance. They're overreached. They're overconfident. They try for things that are beyond their reach, and eventually they adjust and they feel some pain. But the question I asked my class whenever I bring this big market delusion up and people said, this is terrible. I said, would you want to live in a world run by actuaries?

43:02I'm okay with bubbles. I'm okay with overreaching. Because ultimately, that's how change happens. So I'm an optimist on bubbles. This is the way the world works. You overreach, you correct, you clean up, and then you move on in another bubble form. So the next big thing. And AI is, I think, a big thing. It is going to create change. It is going to have a correction. but it is going to change the way we live and work. To run with the dot-com analogy, to your point, a lot of people lost a lot of money when the bubble burst. And a lot of people got burned. The people who got too excited and just bought into the hype.

43:39But we saw Amazon. We saw Netflix. We saw the rise of Apple with the iPhone, which tapped into the internet. We saw immense value creation. and just to sort of steel man the AI hype men today, I think a lot of people are thinking, well, our job is to find the next Amazon. It's to find the next Netflix. That's certainly what I'm thinking about. I'm looking around. I'm like, which one is it going to be? I'm wondering if you're thinking the same thing. Do you believe that we'll see another Amazon in the world of AI? Are you looking for another Amazon? And if so, do you have your eye on anything? I'll be quite honest.

44:23I think the search for multi-baggers, which is the stock which will go up tenfold, is one of the most dangerous things in investing, right? Because we all want it. I mean, let's face it. We all would love to have bought Amazon in 1997 or Microsoft in 1986. The big winner from the PC business was not one of the PC companies with Microsoft. And that's fine, right? I mean, look back, I wish I'd done that. But if you say, look, that's what I'm going to make my investing is about, is finding the next Microsoft circa 1986, the next Amazon circle. It skews the way we invest because we go for the big hit and everything we do is about the big hit.

45:06You know what? If a big hit happens, I want it to happen almost accidentally in my portfolio. I would love to get a big hit. NVIDIA was an amazing hit. Apple in 1999 for me was an amazing hit, but I didn't expect it to be. I didn't go for it because I thought it was a fairly undervalued company. I was going to make 5 % more than the market. It turned out in hindsight. So I think sometimes letting the multi-baggers happen rather than going out and making your entire investing venture, searching for them is a much healthier way of investing than saying, I'm going to make my entire focus looking for that next big winner.

45:44So sometimes we try too hard in investing. And when we try too hard, most of the time it comes back to hardest. Stay with us.

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47:31From Pushkin Industries, I'm Jonathan Goldstein, and Heavyweight is back. The new season is bigger than ever. Bigger hopes. I keep waiting for this moment when he says, Mom, I get it. I'm sorry. Bigger dreams. Tom Hanks wants to meet with you. This is a real chance. And bigger heartbreaks. I thought it would be my movie moment. And maybe he would even whisper in my ear, I've always been in love with you. Check out new episodes of Heavyweight on Apple Podcasts.

48:14We're back with Prof. G Markets. You recently wrote another article, which was titled, To Bitcoin or Not to Bitcoin? And you discussed this new trend that's becoming very popular in the markets right now, where these companies are transitioning into Bitcoin treasury companies. And this is what MicroStrategy did. Our listeners will remember we had Michael Saylor on the podcast. He took us through what the plan is with MicroStrategy. He and I got into a little bit of a tiff. But you wrote about this. I would love to hear your views on Bitcoin treasury companies. What are your thoughts? What were your conclusions writing that article?

49:00The question I was trying to address was the push you were seeing, not just in the Bitcoin treasury companies, but in the rest of the market to get companies to move cash out of where it's traditionally been short term liquid investments, treasuries, commercial paper into Bitcoin. Microsoft had some shareholder proposed that they voted it out. Thank God for that. So my question is, for a typical company, does it make sense to take cash, which is held in liquid, relatively riskless investments, earning a low rate of return, and put it into Bitcoin? With the benefit of hindsight, people say, of course.

49:36Because think of how much more money you'd have made if that$100 billion that Apple had 10 years ago being put into Bitcoin instead of left in cash. That's asking the wrong question. Because cash was never supposed to have that purpose of delivering high returns. It's provide safety. It's a shock absorber. So I was started by listing out all the reasons companies hold cash. And none of them is to earn 30 % returns. You hold cash to stabilize the company, to get you to the bad tax. And I said, Bitcoin doesn't meet any of those requirements, even if you took its great history. because it's too volatile, it swings around too much.

50:15And then I calmed out an exception for some companies where you allow people to get away with holding Bitcoin. And I said, I would not be one of the investors, but if you're one of those investors, I understand what you do. The first was for companies where you felt the company was run by what I call a Bitcoin savant. I don't even know whether that's politically or, you know, right word to use, but a Bitcoin savant is somebody who senses is the right time to buy Bitcoin. And therefore, they trade Bitcoin for you, but at much better prices than you can. So think of it almost like, you know, how SPACs became popular five years ago.

50:54So this is basically a company that you create as a SPAC. And all it does is trade Bitcoin for you. But you're willing to do it because the person doing it is much better than you are. That's, I think, the story you can tell for investors in micro strategy. The second is companies where Bitcoin is part of their business model. PayPal, Coinbase, where some of their transactions happen in Bitcoin, you need Bitcoin as part of your treasury to deal with those transactions. The third, and this is, I think, the most dangerous group of companies, is companies whose business model is broken. There's no narrative you can tell for recovery.

51:30AMC, GameStop, right? where you're not going to go back to malls and people coming into your mall stores. The companies have become meme stocks. Why? Because, you know, if you're 25 or 30, you have some nostalgia for that GameStop you stopped at, and you feel you're saving the company from the bad guys. The bad guy, of course, or the hedge fund. So these companies have become meme stocks, which is just a fancy way of saying they've broken away from the gravitational pull of value. Usually we have price and value. value operates as some kind of force pushing price back. With meme stock, that link is broken.

52:06You're just unmoored. It's demand and supply, mood and momentum. And once you've gone there, who cares what your business is anymore? So what do you do? You decide that you become even more of a meme stock by taking your money out of mall stores and buying Bitcoin. If you're GameStop, you might as well do this. At this point, nobody's betting on mall stores coming back. So I might as well just buy into the fact that I'm just a mean stock. People trade me, so I'll give them something to trade. For most of the rest of the market, though, I think it's a terrible idea to let CFOs take cash out of T-bills and buy Bitcoin.

52:45Now, I tell people, look, what if I replace the word Bitcoin with Beanie Babies or Picassos? Would you be okay with your CFOs taking cash that belongs to the company and betting on the direction of, you know, fine art and where it's going to go? And the answer is, of course not. So why would you be okay with them doing it on Bitcoin? CFOs are terrible traders. They don't have a sense of what the bottom is, what the top is. They often trade at the wrong times. I don't want the CFO of a company I invest in putting my money in Bitcoin, even if I'm a Bitcoin believer. I'd much rather they give me the cash and I'll go buy my own Bitcoin.

53:27I don't want my CFO doing it for me. I share those same concerns. And I almost feel like you're doing these money managers, these Bitcoin managers, these Bitcoin treasury companies, you're almost doing them too much of a service to justify what they're doing. But I appreciate you doing it anyway. And just to your point about the whole idea of crypto, the whole idea of Bitcoin, it's about independence, right? It's about not being dependent on someone else managing your money. Own your keys, own your coins. You don't want to depend on all these other people. And then suddenly we have this new strategy, which is you don't need to own the Bitcoin.

54:10I'll do it for you. Because why? I'm a Bitcoin savant. I know what the right price is. I mean, whatever the The justification is none of it makes sense. So I'm glad we agree on the Bitcoin treasury companies. I'd like to get your views on Bitcoin itself, because I don't think we've asked you about Bitcoin. What are your views on Bitcoin? What do you think of the price? It's now comfortably more than$100 ,000 per Bitcoin. What are your thoughts? The question I often ask for Bitcoin advocates is, is it a currency or is it a collective? You have two choices here. Initially, their point was it's a currency.

54:51Well, if it's a currency, it's not a very good one. It's very inefficiently designed. And if it takes a thousand Ukrainian miners guessing a nine-digit number for me to buy my Starbucks cappuccino, it doesn't work for me. And it's not worked. In spite of all of the press that Bitcoin has got over the last 15 years, if you look at the actual transactions where Bitcoin is used, it can buy and sell things. It's minuscule. It's never taken off because it's an inefficient currency. Over the last few years, there's been a shift among Bitcoin advocates saying it's not a currency, it's the new collectible.

55:30It does have one thing going for it. Collectibles need to be scarce. And Bitcoin comes with this imposed scarcity of 21 million if you think of Bitcoin as its own investment. There are two other things you need for a collectible. One is the demand has to endure. Gold is a great collectible because people have been okay with it being a collectible now for thousands of years. And the second is good collectibles operate as hedges against financial assets. Put differently, when stocks and bonds go into collapse, a good collectible holds its value. That's why people hold gold, because often It holds its value during crises when fiat currency.

56:12Bitcoin for its existence, and let's face it, it's been around only for 16, 17 years, has not behaved like a good collector. I mean, COVID, the first quarter of 2020, markets were down, S &P was down 33%. Gold held its value. You know what Bitcoin did? It was down 56%. Over the following six months, stocks come back 50%. You know what Bitcoin did? It doubled. Bitcoin to its history has behaved like very risky stock, which is not a characteristic of a good collectible. The reason I can understand traders, and you can't invest in Bitcoin, you can only trade Bitcoin because it can only be price. I can see why people trade Bitcoin is you're trying to get ahead of the demand supply gap.

56:56There's an insidious effect of getting companies to invest in Bitcoin, right? Or mutual funds and endowment funds. If they invest in Bitcoin, what do you do? Increase the demand side for Bitcoin. and since the supply is fixed, the price goes up. So it's almost like you're gauging what would like, well, how many people can I get to buy Bitcoin? And if I can get more people to buy Bitcoin, it'll push up the price. So I'll get ahead of that price range. There's a reason I think Bitcoin has done so well since the election last year, which is there is this feeling that more people are now going to be allowed to enter the Bitcoin buy side of the market.

57:34And that's going to increase demand. that increased demand will push up the price. So this is a trading argument for Bitcoin that I understand. But trading arguments can fall apart very quickly because all you need for that to change is a 30 % drop in the Bitcoin price, because all of a sudden, all that demand will start to dissipate. So trading, it's a pure trading instrument. And as long as you accept it as such, and you realize that if you're good at detecting mood and momentum, you'll be okay, then I'm okay with you betting on Bitcoin. But don't ask me whether Bitcoin is undervalued overvalued because it cannot be valued.

58:07I'd like to just double click on gold because, you know, I agree that first the argument was, no, it's a currency. We're going to use it to pay for stuff. And now it's, no, it's collectible. Now it is really, it's gold. And I think that that is actually accurate. And I accept that analogy. It's digital gold. Now, the trouble that I run into is gold itself I don't fully understand. Because gold seems to have, its value seems to be determined by the same circular reasoning that determines Bitcoin's value. And you almost just said it just there. You said, why does gold work? Well, because it's worked for thousands of years.

58:55People have decided that it works. You know, you can't really use it for much. I mean, there are some use cases. I mean, we could talk about its use cases in terms of jewelry, some metallurgical properties. But overall, I mean, this is a huge asset. This is trillions of dollars. It's actually been one of the best performing asset classes of the last several years. And I couldn't really tell you why. I mean, yeah, it's a hedge against inflation. It's a hedge against doomsday. But whenever I try to project this out, like what happens when the world collapses and asset prices go to zero? Oh, great.

59:38I have my gold now. I'm going to be fine. And my question is always, well, why don't you get your bullets and your water and your food? I mean, gold itself, I don't fully understand. But I can see a world in which the same, well, everyone likes gold argument works for Bitcoin. Everyone likes Bitcoin. Everyone just accepts it. Could you see that happening? I think that's where the enduring demand comes about. There's a reason people pick gold. It was compact enough that you could transport it. It was very difficult to destroy. You could make it into different things. So whatever the reason, gold has endured.

1:00:15So that's why I'm not willing to say Bitcoin is going to go away because the demand will go away. How do I know? Maybe Bitcoin can pull off being digital gold. And that's why when somebody says, should I buy Bitcoin? I don't give them the advice of you shouldn't buy. Tell them this is a traded instrument. It's based on not just what you think the demand will be for the next year, but what the demand will be really long term. Because nobody's ever seen a Bitcoin. People have seen gold. I mean, I grew up in India. You know, gold used to be the way in which inheritances were passed down to daughters.

1:00:56The sons could not inherit property. There's something about gold that I can't explain that has this connect to people that cuts across cultures and cuts across time. Does Bitcoin have it? It might have it for the moment. But I'm not sure it will, right? You can't see it. You can't hold on to it. Its demand seems to come almost entirely from the fact that it's done well for the last decade. If I take that away, will people still hold Bitcoin? I'm not sure. But I have a feeling people will hold gold even if it's down 50 % because they like the feel of gold. For some people, at least, there's something about gold that gives them comfort.

1:01:38And, you know, pricing is based on emotional things. And that is an emotional need that it fills. You know, for thousands of years, what the dream has been with gold, right? Alchemy. Yes. If alchemy, this is the irony of alchemy. If alchemy actually worked. It's over. The price of gold would collapse towards zero. So very active being successful. So my question with Bitcoin is, what is the version of alchemy that people are trying on Bitcoin? Because I have a feeling you're going to see something that looks like Bitcoin meets the same paranoid requirements that Bitcoin has. People are trying alchemy every day to come up with something like it.

1:02:23And that's my concern if I'm a Bitcoin trader, that that alchemy is going to work. And you're going to get some other crypto coin you're holding on to 15 years from now. In which case, it's value as a collector that starts to dissipate very quickly. Well, I'm going to start to wrap us up here. And thank you so much for your time. This has been tremendous. this. As we finish, we hope to see you in three months. We try to get you on once a quarter. What are you most focused on right now? What are you thinking about in investing, perhaps in life? What's on your mind as we head into the end of summer?

1:03:03I'm just finishing up a piece that I'm going to post today on AI scans. There's a scan going around me an Instagram scam that uses my likeness, my video. And in the scam, I'm talking about Palantir and NVIDIA. And it's inviting people to join an investment club that I'm supposedly part of that I will tell them how to make 60 to 80 percent returns. And it's a scam that's collecting people's money. And I, you know, my initial reaction was anger and outrage and frustration. But then my teacher in me kicked in and I said, I'm going to grade the scam. So I took the scam and I graded it on look and language, A -.

1:03:45I graded on content, C-, and graded on message consistency and F. But I also talked about the template we have to start to use to think about, because there are more of them coming at us. Because AI is changing the scam game. It's upping the ante. So that's going to be my next immediate topic. But I'm a dabbler. I mean, I couldn't tell you what I'm going to think about next week, but I'll next week deliver that interesting question. What was your final grade on the scam? My final grade for them is anybody who knew me, who read what I wrote, knew it was a scam. The problem is that's not the target audience here.

1:04:25The target audience are people who don't do their homework, don't read what people are doing, but want to invest in somebody's name. Yes. So I'm not sure I'm reaching that target audience. And I'm not sure that target audience can ever be protected. But I have a feeling that there's this entire space that's going to get scammed going forward. Now, the scam is like a tango. You need both sides for it to work. You need a scammer and you need the scammed. And I think we're too easy to put one in the victim's side and the villain's side. But I think until the scam recognizes how much they're part of the scam, scams are not going to go away.

1:05:04Absolutely. I will note we've seen a lot of these AI scams for our podcast or for Scott, Scott Galloway. Tons of AI scams out there of Scott. But to your point, everyone knows. They send us the link. They say, hey, this is an obvious scam. You should go check it out. And then we just go report it and it goes away. So as of now, I think I would give somewhere between a D and an F to most of these AI scams. But of course, the question is if they're going to get better, and I'm sure they will. They will get better. Yeah. Exactly. Asmath Damodaran is the Kirshner Family Chair in Finance Education and Professor of Finance at NYU Stern School of Business, where he teaches corporate finance and valuation.

1:05:47You can read his research on his blog, Musings on the Markets. Professor de Moderen this was wonderful thank you so much for joining us thank you for having me this episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer Miel Silverio is our research lead our research associates are Isabella Kinsel and Dan Chalon Drew Burrows is our technical director and Catherine Dillon is our executive producer thank you for listening to Prof G Markets from the Vox Media Podcast Network if you liked what you heard give us a follow and we will be back with a fresh take on the markets after our summer vacation with Josh Brown on August 25th.

1:06:28See you then.

1:06:54And the dark flies in love

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