Ben Waber reviewed Little Book of Valuation by Aswath Damodaran
A Great Introduction to a Shockingly Flawed Methodology
5 stars
Damodaran delivers a rigorous but accessible introduction to standard approaches to corporate valuation and pricing, importantly highlighting some of the limitations of the standard methodology. And that methodology is highly flawed - while the models presented here are mathematically understandable and reasonable first assumptions, they are hilariously poor at doing what they're supposed to do. From this perspective, the book doesn't do a great job reflecting on this failure, but I would encourage people to read this book less as a reflection of how to value companies effectively and instead to understand how it's done today. This is analogous to a book detailing a geocentric model of the universe - not the most unreasonable approach, accurate over short time frames, and still a very poor representation about what actually happens in the universe. Still, understanding the state of the field is critical to making improvements. Highly recommend
Damodaran delivers a rigorous but accessible introduction to standard approaches to corporate valuation and pricing, importantly highlighting some of the limitations of the standard methodology. And that methodology is highly flawed - while the models presented here are mathematically understandable and reasonable first assumptions, they are hilariously poor at doing what they're supposed to do. From this perspective, the book doesn't do a great job reflecting on this failure, but I would encourage people to read this book less as a reflection of how to value companies effectively and instead to understand how it's done today. This is analogous to a book detailing a geocentric model of the universe - not the most unreasonable approach, accurate over short time frames, and still a very poor representation about what actually happens in the universe. Still, understanding the state of the field is critical to making improvements. Highly recommend