aswath damodaran: Learning from Experience: Aswath Damodaran on Hubris, mistakes, and the art of letting go for successful investing

In a candid reflection on his decades-long career, Aswath Damodaran, the renowned valuation expert, in his interview with ETNow, shared his wisdom on the evolving nature of markets and the personal growth that comes with it.

If the Aswath Damodaran of 2024 could offer advice to his younger self from the 1980s, it would be simple: don’t take yourself too seriously.

This advice may seem straightforward, but it holds profound meaning for investors who often find themselves entangled in the pursuit of perfection.

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Damodaran emphasizes that markets and businesses are unpredictable, and no amount of data or sophisticated models can grant complete control over outcomes.

He cautions against hubris—the belief that one can outsmart the market by relying solely on tools, data, and expertise. “The biggest enemy in investing is hubris,” he warns, noting that even after decades of experience, mistakes are inevitable, and that is perfectly okay.Reflecting on his journey, Damodaran explained how early in his career, he would beat himself up over errors, assuming that being wrong meant something had gone wrong in his process.Now, he acknowledges that even when you do everything right, external events—unforeseen and uncontrollable—can drastically change the outcome. He offers the example of valuing a hotel in late 2019.

Despite performing the valuation perfectly, the unexpected arrival of the COVID-19 pandemic made the valuation almost obsolete six months later. “You can’t blame yourself for not predicting the unpredictable,” he says.

This evolution in thinking led Damodaran to what he calls the “karmic point in valuation”—the realization that once all the data has been collected, and every possible analysis has been conducted, the outcome is no longer in one’s control.

For investors, understanding when to let go and accept this reality is not just crucial but can also bring a sense of peace and perspective.

Drawing inspiration from Indian philosophy, Damodaran highlights the importance of recognizing that some things are out of our hands. He believes this approach can lead to healthier, more balanced investing practices.

Accepting uncertainty, making peace with mistakes, and letting go when necessary are invaluable lessons for anyone navigating the unpredictable world of investing.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)