Episode summary
Aswath Damodaran: “World Order is Coming Apart” | Prof G Markets
Prof G Markets
· · 1 hr 7 min · Hosts: Scott Galloway, Ed Elson · Guests: Aswath Damodaran
Summary
Aswath Damodaran argues that stocks are no longer just pricing in ordinary valuation risk; they are underpricing a larger geopolitical break. In his view, the post-World War II economic order centered on the U.S. and the dollar is coming apart, and markets are assuming the transition to a new order will be smoother than it really will be. He thinks that makes the entire equity market vulnerable, even if the S&P 500 can still be rationalized on conventional metrics.
He is more constructive on beaten-down software than on the market as a whole. Damodaran says the sector’s margins are likely to compress as AI eats into fat cost structures, but he believes the strongest firms can survive by adapting quickly, especially those willing to replace their own legacy products with AI rather than protect them. He favors selective bets on adaptable companies over a broad basket of software names.
On private AI leaders, he says he would rather own Anthropic than OpenAI if forced to choose, mostly because he trusts Anthropic’s management temperament more. He also sees prediction markets, the dollar, gold and silver, and rising political fractures as useful signals that investors are increasingly recognizing real catastrophic risk. His bigger message is that uncertainty should push investors toward discipline, not paralysis: build hedges, watch behavior, and be willing to admit when a thesis is wrong.
Key takeaways
- Damodaran thinks the market is underpricing catastrophic risk tied to a breaking global order, not just overvalued stocks.
- He believes software margins, not revenues, are the first place AI disruption will hit.
- He prefers adaptable software companies that cut costs fast rather than a broad software basket.
- If forced to choose between the two private LLM leaders, Damodaran would pick Anthropic over OpenAI.
- He sees rising gold and silver, higher political fractures, and wider use of prediction markets as signals that investors are pricing in more risk.
- On the dollar, he says there is no obvious replacement, but its status is wobblier because of inflation, Fed independence, and geopolitical change.
Notable quotes
“the potential for catastrophic changes is much greater now than perhaps at any time in the last 70 years”
“the old system is coming apart. There's nothing to replace it. That's where the catastrophic risk component comes in”
“I think collectively, yes. And I think that that almost always happens when you have worries about a catastrophe”
How the episode opens
Today's number, $792,000. That's how much Singapore is paying its athletes who win gold at this year's Olympics. That Why does Africa never win at the Olympics? — Why? — Because it's a continent, dumbass. So racist. — I was going to say that, but I didn't want to ruin your joke. I couldn't tell if that could actually be the punch line.
So insensitive. You and your you and your millennial white privilege. What did you go to? Princeton. Uh,
How about that Singapore number? 792K. It's pretty good.
I think they're getting the better end of the bargain because if someone from Singapore wins the Olympics, did you know Singapore has n mandatory national service similar to Israel and Singapore is the most religiously diverse nation in the world and they very definitely decided that we are going to be so prone to ethnic violence with all this religious heterogeneity that we need to get people more focused on the flag. And so they decided to do national service. I think it's a great move.
You also go to jail if you leave gum on the ground. Um, but is that not true?
That's actually not true. It's an offense. But I I will tell you this though. I was in Singapore about a month ago and you have never seen a guy my age go through his luggage more carefully to make sure that that joint from two years ago wasn't floating around in a pocket somewhere.
Has that ever happened to you? You accidentally had some detritis. — Detritis? Yeah, some some leftover uh paraphernalia — Detritus. I thought that was some sort of gum disease. I think I saw my periodonist for that. Um no, I usually I'm I have a very healthy fear of prison and I don't travel with edibles or um I do travel with prostitutes.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- global order
- catastrophic risks
- software selloff
- ai valuations
- private markets vs public markets
Companies and tickers mentioned
- Anthropic
- OpenAI
Watch the episode
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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