TIP725: First Principles of Valuation w/ Tim Koller

On today’s episode, Clay is joined by Tim Koller to discuss all things valuation. Tim is the lead author of Valuation: Measuring and Managing the Value of Companies which is the #1 best-selling guide to business valuation. This book—now in its eighth edition—has sold more than one million copies, and is used as a textbook at top business schools such as Wharton School, University of Chicago, MIT, INSEAD, Tuck School of Business, and Northwestern University. As a Partner at McKinsey & Company, Tim combines broad cross-sector experience with decades of service to clients in value creation, corporate strategy, capital-markets issues, and M&A transactions. IN THIS EPISODE YOU’LL LEARN: 00:00 - Intro 01:45 - How companies create shareholder value. 05:13 - The common misconceptions related to creating shareholder value. 13:54 - How managers should think about return on invested capital. 28:08 - Why it’s so common for managers to not take a long-term approach. 33:16 - How return on invested capital impacts a company’s valuation. 46:30 - How Tim thinks about the vast differences in returns we’ve seen in the US relative to Europe. And so much more! Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences. BOOKS AND RESOURCES Join Clay and a select group of passionate value investors for a retreat in Big Sky, Montana. Learn more ⁠⁠⁠⁠⁠⁠here⁠⁠⁠⁠⁠⁠. Join the exclusive ⁠⁠⁠⁠⁠⁠TIP Mastermind Community⁠⁠⁠⁠⁠⁠ to engage in meaningful stock investing discussions with Stig, Clay, Kyle, and the other community members. Tim’s book: Valuation. McKinsey’s website. McKinsey’s insights: McKinsey on Finance. Related Episode: TIP577: Valuation Masterclass w/ Aswath Damodaran. Follow Tim on LinkedIn. Follow Clay on LinkedIn & X. Check out all the books mentioned and discussed in our podcast episodes ⁠⁠⁠⁠⁠⁠here⁠⁠⁠⁠⁠⁠. Enjoy ad-free episodes when you subscribe to our ⁠⁠⁠⁠⁠⁠Premium Feed⁠⁠⁠⁠⁠⁠. NEW TO THE SHOW? Get smarter about valuing businesses in just a few minutes each week through our newsletter, ⁠⁠⁠⁠⁠⁠The Intrinsic Value Newsletter⁠⁠⁠⁠⁠⁠. Check out our ⁠⁠⁠⁠⁠⁠We Study Billionaires Starter Packs⁠⁠⁠⁠⁠⁠. Follow our official social media accounts: ⁠⁠⁠⁠⁠⁠X (Twitter)⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠LinkedIn⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠Instagram⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠Facebook⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠TikTok⁠⁠⁠⁠⁠⁠. Browse through all our episodes (complete with transcripts) ⁠⁠⁠⁠⁠⁠here⁠⁠⁠⁠⁠⁠. Try our tool for picking stock winners and managing our portfolios: ⁠⁠⁠⁠⁠⁠TIP Finance Tool⁠⁠⁠⁠⁠⁠. Enjoy exclusive perks from our ⁠⁠⁠⁠⁠⁠favorite Apps and Services⁠⁠⁠⁠⁠⁠. Learn how to better start, manage, and grow your business with the ⁠⁠⁠⁠⁠⁠best business podcasts⁠⁠⁠⁠⁠⁠. SPONSORS Support our free podcast by supporting our ⁠⁠⁠⁠⁠⁠⁠sponsors⁠⁠⁠⁠⁠⁠⁠: HardBlock Human Rights Foundation Plus500 Shopify Netsuite Vanta HELP US OUT! Help us reach new listeners by leaving us a ⁠⁠⁠⁠⁠⁠rating and review⁠⁠⁠⁠⁠⁠ on ⁠⁠⁠⁠⁠⁠Spotify⁠⁠⁠⁠⁠⁠! It takes less than 30 seconds, and really helps our show grow, which allows us to bring on even better guests for you all! Thank you – we really appreciate it! Support our show by becoming a premium member! https://premium.theinvestorspodcast.com/ Support our show by becoming a premium member! ⁠⁠⁠⁠https://theinvestorspodcastnetwork.supportingcast.fm⁠ Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm