Valuation, Prioritisation and Crypto
Three stories that stood out for me recently:
I am late to the party. I have finally started listening to Aswath Damodaran’s commentary on finance, especially valuation. This short essay that he wrote in the FT made for a good reading where he describes the fundamentals of how valuing start-ups and young growth companies requires a different approach and mindset than valuing established majors. Young growth companies claim huge potential markets and are (quite often) money losers in the beginning. This is, given that they are reinvesting most of their earnings back to fuelling that growth. In addition, while many of these companies operate in different industries, they claim to have technology-first models. That’s why the old model of valuation based on comparables breaks down. Damodaran instead suggests that one way to address this gap is to craft narratives for young growth companies ‘that reflect their competitive advantages and convert these into forecast revenues, profit margins and reinvestment needs to estimate value’. Doing so helps project the potential of these companies better than simply looking into the numbers. That way, the value investors have a better chance of understanding and evaluating such opportunities.
I believe most of us struggle with prioritisation. We all want to do so much, reach so many goals that either we drop off in exhaustion at the end of the day chasing them, or simply give up. James Clear wrote this brief story about Buffett’s prioritisation technique, which I found useful. So much so that I created my own list of 25 goals and then shortlisted the top five. The key, however, was what Buffett recommends one should do with the remaining 20 items left in the list. Doing this exercise absolutely led to some realignment at my end.
Ukraine wants to be the crypto capital of the world, so claims this story in NYTimes. How so? To start, the government is taking steps to support uptake of cryptocurrency. For instance, recently, the Ukrainian government passed a law legalising and regulating Bitcoin to make it mainstream. Goes a step towards rebranding the country as well, which aims to become ‘the most convenient country in the world, for people and business’. Quite an ambition, I thought when I read this story. The idea behind supporting crypto comes from a realisation that start-ups aiming to work within the crypto would find Ukraine as an ideal location to set up their business. Funding of all blockchain-related tech has reached seven billion USD already. It’s not only about attracting new investment but also changing the narrative of the country, dogged by years of chaos and mismanagement.
A quote that I came across:
Intensity is overrated. Consistency is underrated.
