The application of base rates is all over the map. Some things it's relatively straightforward to do. Other situations are unusual, and the distributions look realy kind of funky. But i would just say, broadly speaking, it's a vastly under utilized framework versus a misused framework. And so what you can then say is, i'm on look at a company, and i'm to say, the market thinks it's going to grow x %. I men to say, i mon to look at the base rates of companies of this size or in this industry,. What the distribution of growth rates has been.
Michael Mauboussin is an adjunct professor of finance at the Columbia Business School and the Head of Consilient Research at Counterpoint Global, Morgan Stanley Investment Management. Bill Mann interviewed Mauboussin in front of a live audience about a range of investing topics, including:
- The approach of "expectations investing" and how to apply it
- Why a company's base case for growth is so important
- Peloton’s faulty growth predictions
- Businesses with real option value
Companies mentioned: SBUX, PTON, AMZN, GOOG, GOOGL, WMT, TGT
Host: Bill Mann
Guest: Michael Mauboussin
Producer: Ricky Mulvey
Engineers: Tim Sparks
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