Aswath Damodaran: What’s Your Moat Against the Bots in Investing?

During his recent interview with Excess Returns, Aswath Damodaran explores the impact of AI and automation, particularly in the context of mechanical, rule-driven tasks like factor investing.

He emphasizes the need for individuals to differentiate themselves from machines by focusing on tasks that AI cannot easily replicate. Damodaran suggests that jobs reliant on rigid processes can be easily handled by bots, which follow rules more precisely than humans.

He poses the question, “What is your moat against a bot?” and encourages people to reflect on their unique skills or abilities that make them indispensable in an increasingly automated world.

Here’s an excerpt from the interview:

Damodaran: Everything I’ve done in my life is about teaching how to be, but that’s not working because this bot has read everything I’ve done and it’s confused about value companies.

Clearly I’m not doing my job, but you know the piece I’m writing is act as if there’s a bot with your name looking over your shoulder, watching what you’re doing.

Remember, you don’t have to be even in the public domain like I am. It’s watching what you’re doing, and ask yourself: what can I do that a bot can’t do better?

That, I think, is going to be the challenge for those who think AI is going to change the way we work and live. If your job is mechanical—that’s why factor investing is completely mechanical—if what you do is mechanical, rule-driven, a bot can do it much better than you can. Because machines are better at mechanical stuff than you and I are. They follow the rules, and have absolute fidelity to those rules.

So, whatever you do, take a look at what you do and ask yourself: what can I do that a bot can’t? We talk about moats in investing, and my question is, what’s your moat against your bot? What is it that you do that you don’t think a bot can do?

This is something that’s occupied my mind for the last few months. In my piece, I suggest a few things we can do, and I think that’s something each of us has to think about—what can I do to keep my bot underperforming what I can do?

You can watch the entire discussion here: