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Prof G Markets

Markets are Ignoring Catastrophic Risks — ft. Aswath Damodaran

20 Feb 2026

Transcription

Chapter 1: What is the main topic discussed in this episode?

2.056 - 15.479 Ed Elson

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16.019 - 32.637 Ed Elson

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35.958 - 45.933 Aswath Damodaran

Today's number, $792,000. That's how much Singapore is paying its athletes who win gold at this year's Olympics. Ed, why does Africa never win at the Olympics?

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46.234 - 46.474 Unknown

Why?

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46.694 - 49.519 Aswath Damodaran

Because it's a continent, dumbass. So racist.

49.799 - 55.708 Unknown

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 punchline.

55.768 - 63.079 Aswath Damodaran

So insensitive. You and your millennial white privilege. What, did you go to Princeton? Ugh.

65.945 - 75.516 Scott Galloway

Listen to me. Markets are bigger than us. What you have here is a structural change in the world distribution. Cash is trash. Stocks look pretty attractive. Something's going to break. Forget about it.

75.536 - 79.52 Unknown

How about that Singapore number? $792K. It's pretty good.

Chapter 2: What catastrophic risks are currently being ignored by markets?

1479.133 - 1487.869 Unknown

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1490.262 - 1508.435 Aswath Damodaran

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1508.955 - 1526.715 Aswath Damodaran

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1527.134 - 1547.259 Aswath Damodaran

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1547.8 - 1556.23 Aswath Damodaran

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1564.799 - 1566.743 Unknown

We're back with Profiteer Markets.

1566.764 - 1587.193 Aswath Damodaran

I want to focus in on two companies, the two biggest LLMs, Anthropic and OpenAI, which I would argue are technically public companies. You can buy shares in the secondary market. I believe Anthropic's raising at $350. OpenAI, I believe, is trying to close around at $850. Yeah, I'm curious what you think of those respective valuations on the companies.

1587.413 - 1608.314 Aswath Damodaran

And our thesis has been that Anthropic is actually, I don't wanna call it underpriced, but we think that there's gonna be a flip in valuation, that Anthropic has more momentum, more enterprise, and that OpenAI is a bit more consumer, more vulnerable, and quite frankly, it's just endured a lot of negative PR, which feels like negative momentum.

1608.334 - 1611.397 Aswath Damodaran

Have you looked at either or both of these companies in the respective valuations?

Chapter 3: How has the global economic order changed since World War II?

2088.61 - 2114.37 Scott Galloway

I think that those are things that people do all the time. But I do agree with you. that it's during uncertainty that the payoff to being systematic, to trying to do your homework is greatest, because that's when market mistakes explode. So whether it's software in this first round or something else in the second round, I would look at the sector

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2114.35 - 2137.398 Scott Galloway

and then start to go through the sector and start to separate the adaptable from the non-adaptable. Because there will be companies that get through this and come out, not just intact, but perhaps as winners, because you'll have fewer players left in the game. They'll have less competition after this thing plays out. So I agree with you on that, but it's not for the faint of heart.

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2137.518 - 2157.672 Scott Galloway

It is going to come with a lot of ups and downs, more downs initially than ups. I describe investing as an act of faith. Faith that you're right about your assessment of value and faith that the markets will adjust your value. Faith because if you ask me to prove that a particular software company's cheap, I can't do it.

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2157.652 - 2178.175 Scott Galloway

And if you ask me to prove that even if it's cheap, that the price will adjust to that value that you got, I can't prove that either. Investing is all about faith and your faith will be tested. Might as well be open and honest about the fact. Anybody who claims that they have absolute certainty that software is undervalued, they're jumping in. I have zero interest in following.

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2178.155 - 2195.016 Scott Galloway

This is not a space where you can be absolutely sure about anything. You're going to be wrong and you have to be willing to admit when you're wrong. And that's the other thing I'd build into investment philosophy. What are the things you're going to track to see if your investment bet is playing off? So maybe layoffs.

2195.249 - 2214.152 Scott Galloway

other thing you want to track, and the company that you're doing acts like nothing's happening. It's in denial. Maybe no matter how good it looked to you at the initial round, you might say, that's not the company I wanted. So being willing to say I was wrong and go back and revisit the company you picked might be an integral part of the strategy working for you in the long term.

2214.453 - 2235.769 Unknown

On the catastrophic risk that you feel that it is underpriced right now, that is not being, the investors are not paying enough attention to, what are some data points or signals or events that have led you to believe in this notion that there are greater risks than we really understand?

2236.238 - 2248.493 Scott Galloway

I'm going to give you a strange answer. I've never been one to track the price of gold and silver. And last year was a phenomenally good year for gold and silver. Gold was up almost 70%, silver was up 150%.

2250.095 - 2275.707 Scott Galloway

But what made it so unusual was gold and silver usually go up either during periods of hyperinflation, not just high inflation, but hyperinflation, 1970s, or during severe market crises where markets are down 30%, 40%. Neither was... true in 2025. So you're saying, why did they go up? There's a segment of the market that has always been into the gold and silver.

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