Narrative and Numbers: The Value of Stories in Business (Aswath Damodaran, 2017)

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  • Corporate lifecycle: start-up > young growth > high growth > mature growth > mature stable > decline
  • Storytelling: exposition > complication > climax > reversal > denouement
  • Founder stories: Horatio Alger (rag-to-rich), charimas, connections, celebrity, experience
  • Type of business: large superior brand (bully), cheaper products (underdog), unmet need (eureka), more desirable and better suited (better mousetrap), change how business run (disruptor), reduce cost (low-cost player), noble clause (missionary)
  • Precision: small grouping vs. accuracy: near target
  • Growth vs. risk vs. reinvestment: is risk reflecting where you are growing, are you reinvesting enough, is your risk consistent with your reinvestment strategy
  • Expected value of business = value as going concern (intrinsic or DCF value) x probability of going concern + value as failed concern (liquidation value) x probability of failure
  • Total market x market share = revenues (sales) - operating expenses = operating income - taxes = after-tax operating income - reinvestment = after-tax cash flow
  • Inexorable growth - unstoppable growth


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