The Intangible Economy with Kai Wu

Rob Arnott, founder of Research Affiliates and a pioneer of alternative indexing, explores the hidden costs of passive investing and the market’s AI frenzy. He discusses index inclusion effects, why AI adopters may benefit more than infrastructure builders, GPU obsolescence, capital-intensive Big Tech, and the value of accounting for intangible assets. He also shares thoughts on leadership, quantitative research, and avoiding overfit backtests.

Alex Edmans joins Kai Wu to explore behavioral finance, market inefficiencies, and why investors overlook intangible assets such as employee satisfaction, innovation, and brand strength. Drawing on his book The Madness of Markets, the London Business School finance professor explains why markets overreact to headlines, underreact to long-term value, and leave opportunities for patient, independent investors.The Madness of Marketshttps://amzn.to/3T9rdotAlex Edmans on Twitterhttps://twitter.com/aedmansTopics covered:How soccer defeats reveal the influence of investor emotions on stock pricesWhy short-term momentum and long-term reversals can coexistCostco, employee satisfaction, and the intangible value markets struggle to priceWhy publicly available research does not automatically eliminate investment opportunitiesMeasuring innovation through R&D productivity, patent citations, and patent noveltyWhat brand strength, customer reviews, and employee talent flows reveal about businessesHow AI can improve intangible investing while behavioral biases persistUpdating value investing to include human capital, brands, innovation, and network effectsSeparating financially relevant ESG factors from labels, and inclusion from demographic diversityFinding an investing edge through knowledge, endurance, and independenceTimestamps:00:00 How investor emotions move stock prices05:27 Why markets overreact and underreact11:52 Why employee satisfaction alpha persisted after publication17:46 R&D, patents, and the value of innovation21:52 Brand strength and Amazon reviews as investment signals26:13 Will AI eliminate the edge in intangible investing?30:25 Tracking talent flows and the long payoff from intangibles35:36 Finding mispriced intangibles where others cannot or will not look40:05 Why value investing needs more than accounting adjustments46:17 The End of ESG and what actually drives shareholder value52:40 Inclusion, psychological safety, and the limits of simple metrics58:41 Knowing your edge: knowledge, endurance, and independence1:04:36 Why Edmans disagrees with efficient market theoryLearn more about the Excess Returns podcast network:https://excessreturns.coNo information discussed in this podcast should be construed as investment advice. Securities discussed may be held by the hosts and guests, their firms or their clients.

Dan Rasmussen, founder and managing partner of Verdad Advisers and author of The Humble Investor, joins Kai Wu to examine the unraveling of private equity, the rise of private credit, and how AI is reshaping software, labor, and the economics of technology investing. They also explore the massive AI CapEx boom, why value investing has struggled in the intangible-heavy U.S. market, the unusual opportunity in Japanese small caps, and how investors can quantify intangible value in biotech.Topics covered:Why private equity became a consensus trade and why exits are now cloggedHow leverage and high debt costs threaten private equity returnsWhat publicly traded private equity funds reveal about true volatility and NAV discountsHow private equity shifted from old-economy buyouts into software and healthcare technologyWhy AI may have erased code as a software moat while strengthening other intangible advantagesHow ARR lending helped private credit finance software buyouts and created an obsolescence mismatchWhat AI is doing to hiring, junior roles, productivity and the composition of workWhy the AI CapEx boom may be a crowded, path-dependent overinvestment cycleWhy traditional value metrics work better in Japan than in the intangible-heavy U.S.How Tokyo Stock Exchange reforms, buybacks and dividends can unlock value in Japanese small capsHow R&D spend, specialist ownership and short interest can help quantify biotech valueTimestamps:00:00 Intro04:03 Why private equity's debt burden changes the equity math09:24 How private equity became a software momentum trade13:29 Why code may no longer be a durable software moat17:48 How private credit enabled software buyouts through ARR lending23:56 AI productivity, jobs and why displacement is slower than expected30:23 Why the AI CapEx boom may be the market's most crowded risk34:29 Rational overinvestment, leverage and the timing risk in AI38:46 Why consumers may capture more of AI's value than investors44:07 Japan's below-book-value reform and the return of old-school value51:03 Quantifying biotech value with R&D, specialist ownership and short interest55:08 Dan's non-consensus views on private markets and JapanLearn more about the Excess Returns podcast network:https://excessreturns.coNo information discussed in this podcast should be construed as investment advice. Securities discussed may be held by the hosts and guests, their firms or their clients.

Azeem Azhar, technologist, investor, and author of The Exponential Age, explains the real economics behind the AI boom. He maps the four-layer AI stack and where value might accrue. He discusses hosting and memory bottlenecks, open-source versus proprietary models, vertical integration into applications, and which intangible moats survive as intelligence becomes abundant.

Professor Aswath Damodaran joins The Intangible Economy to break down how to value SpaceX, AI companies, intangible assets, and the future of value investing.We discuss why big markets do not automatically create big value, how AI CapEx is changing the character of major technology companies, and why the best investment stories still have to connect to the numbers.Aswath Damodaran on Xhttps://x.com/AswathDamodaranMusings on Marketshttps://aswathdamodaran.blogspot.com/Revisiting the SpaceX Valuation: A Post-Prospectus Updatehttps://aswathdamodaran.blogspot.com/2026/06/a-weeks-ago-i-assessed-value-of-spacex.htmlThe Big Market Delusion: Valuation and Investment Implicationshttps://papers.ssrn.com/sol3/papers.cfm?abstract_id=3501688Valuing Cyclical and Commodity Companieshttps://people.stern.nyu.edu/adamodar/pdfiles/papers/commodity.pdfValue Investing: Requiem, Rebirth or Reincarnation?https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3779481Topics covered:Valuing SpaceX after its IPO and why price matters even for great companiesHow Starlink, space launch, and xAI fit into SpaceX’s valuation storyWhy total addressable market can mislead investors in AI and other disruptive industriesThe problem with AI unit economics, data centers, power, water, and reinvestment needsWhy growth can destroy value when margins and returns on capital are weakHow intangible assets, R&D, future growth, and narratives should show up in valuationThe Big Market Delusion and how overconfidence drives boom and bust cyclesWhy AI CapEx is different from the dot-com boom and could create broader risksHow AI is changing the character of the Magnificent Seven and semiconductor companiesWhy value investing became rigid, ritualistic, and righteous, and how it can evolveTimestamps:00:00 Why great companies can still be bad investments01:03 Introducing Aswath Damodaran and The Intangible Economy01:49 SpaceX IPO, Starlink, xAI, and the challenge of valuing uncertainty05:31 Why Starlink became the core of SpaceX’s current revenue10:31 How Damodaran valued SpaceX across launch, connectivity, and AI14:07 Why AI’s huge market may still have difficult unit economics17:10 The tension between SpaceX competing in AI and renting data centers to competitors20:00 Why valuation should use distributions instead of false precision22:39 How stories and numbers work together in valuation26:45 Why investors confuse promises, potential, and businesses30:49 The Big Market Delusion and overconfidence in AI investing33:02 Why the AI CapEx boom is different from the dot-com bubble35:17 How AI infrastructure is changing the Magnificent Seven38:36 Nvidia, Micron, semiconductors, and the risk of peak cycle earnings41:00 Why the biggest AI market stories could be scary for society43:37 AI disruption, labor markets, and the speed of technological change46:30 Measuring which jobs and companies are most exposed to AI automation49:00 Why AI cost structure may look more like Spotify than software51:13 The unresolved business model questions for LLMs and AI agents52:29 Why traditional value investing lost its edge56:03 Passive investing, book value, and the blame game in value investing58:13 Why rigid value investing is vulnerable to AI disruption01:00:58 How value investing can adapt to intangible assets and uncertainty01:02:21 Why any company can be a good investment at the right price01:04:57 Why investing mistakes and track records are harder to judge than they look

Edward Chancellor, financial historian and author who studies capital cycles and bubbles. He explores how past manias like railways and dot-coms mirror today’s AI investment rush. Short, punchy takes cover why markets fund tech shifts but miss winners, the prisoner’s-dilemma of hyperscaler spending, GPU depreciation impacts, limits of large language models, and where anti-bubbles may hide value.

Michael Mauboussin, seasoned investor and author on decision-making and valuation, joins to weigh AI’s bold growth claims against historical base rates. He discusses diffusion models, megaproject lessons, why intangibles create fatter tails, who likely captures AI value across the stack, and the risks of massive preemptive capital spending. Short, sharp takes on forecasting, competitive dynamics, and intangible-driven market shifts.