Valuation Guru Damodaran: SpaceX Valuation is Like Using Kindergarten Report Cards to Predict College Performance
New York University professor Aswath Damodaran stated in a recent interview that accurately valuing SpaceX is extremely difficult, likening it to using a child's kindergarten report card to infer their college performance.
He pointed out that a company's value equals the present value of future cash flows, but assumptions in speculative fields have almost no certainty; any input error leads to "garbage in, garbage out." He advised investors to recognize whether they are better at handling numbers or telling stories, with the number-oriented leaning towards traditional finance and the story-oriented leaning towards venture capital and entrepreneurship, while reminding them that assumptions are often wrong and should not be stubbornly held.
His statement reinforces that high-uncertainty tech valuations require a balance of narrative and numbers, with funding favoring analytical frameworks that can handle both narrative and models simultaneously, while extreme valuation methods driven purely by numbers or stories face pressure.
Source: Public Information
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Aswath Damodaran has long been hailed as the "valuation guru," known for his transparent DCF model and narrative dissection of emerging companies. He has previously conducted independent valuations of companies like Tesla and Uber, emphasizing the balance between story and numbers.
His analytical approach focuses on the quality of inputs rather than the formula itself: for companies like SpaceX, which have scarce historical data and highly speculative future scenarios, he points out that financial statements only reflect the past and cannot capture expansion options. His motivation is to remind investors to distinguish between "current numbers" and "potential stories" to avoid systemic biases caused by a single dimension.
Similar cases can be seen in the long-standing divergence between number-oriented and narrative-oriented perspectives in the valuation controversies of early Amazon and Tesla, as well as the current high capital expenditure and long-term monetization uncertainties faced by AI and aerospace companies. The industry is at a stage where story-driven premiums and fundamental validations coexist.
Essentially, this represents a shift in pricing power: valuations are moving from being dominated by historical financial data to being weighted by probabilities of future scenarios. The mechanism is that the cash flow paths of speculative businesses heavily depend on assumptions, allowing analysts who excel at constructing credible stories and quantifying their probabilities to gain greater pricing authority.
ABAB News · Law of Cognition
- Kindergarten report cards cannot predict college performance.
- If the assumptions are wrong, even the best formulas yield garbage.
- Both number-oriented and story-oriented perspectives need each other.