During this interview with The Investor’s Podcast, Aswath Damodaran discusses overcoming investment blind spots by valuing companies you don’t understand. He says, Warren Buffett has been open about the fact that he didn’t invest in technology stocks enough. Here’s an excerpt from the interview:
Damodaran: That’s why I said don’t say never on any company, no matter how you feel in your gut about that company. I think we all have our blind spots in investing.
And I have mine. Warren Buffett has his. And Warren Buffett has been open about the fact that he didn’t invest in technology stocks enough.
In fact, he didn’t invest in them at all until you get to the last decade. And I think the point he made is, ‘I didn’t invest in them because I didn’t understand them.’
Let’s face it, as we get older, there’s less and less of the world we understand. The fact that I don’t understand the fascination with TikTok doesn’t mean that I shouldn’t be trying to value TikTok as a company if it goes public.
So I think we’ve got to get past this discomfort of saying, ‘I don’t know how that works.’
And still be willing to try to value companies in the midst of that uncertainty, because if you don’t do that, more and more of the world is going to become out of your universe.
You can’t invest in those companies because you don’t understand them.
You can watch the entire discussion here:
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