Value vs. Worth (Part 3)

Value vs. Worth Part 1, Part 2.

It feels like people have pulled a full negative 180 on WeWork recently, or “We Company.” They are going public and everyone is focused on how it should be valued - as a tech company or a real estate company, with the assumption that technology companies have higher multiples than real estate, which is funny… shouldn’t it just be valued as a company that is growing x% a year?

My friend Scott Norton, who founded a condiment company (and would appreciate me evoking the curiosity of which condiment company), sent me an amazing video about valuation after writing my previous two posts:

Aswath Damodaran: "Valuation: Four Lessons to Take Away" | Talks at Google

Aswath Damodaran: "Valuation: Four Lessons to Take Away" | Talks at Google

It’s a long talk, but the most important piece to pull away is that “Great companies” can lose money, and be valued accurately and well, and that there are two valuation methods: numbers and stories, and both of those valuation methods are based on societies perception of them at the current moment.

There was a scientist in the 1900s - Francis Galton - who believed that the “herd” mentality of people, although can be associated with extremely irrational behavior and panic hysteria, can also provide a lot of value, so he bought an Ox, and had a crowd of people guess its weight (for a prize). The average guess of the crowd ended up being within 1 pound of the real weight of the Ox.

I think valuations live somewhere between humanity’s irrational brain and the wisdom of the crowds.