Episode Details

The sugar daddy (or molasses mommy) effect becomes a factor when you have a bountiful benefactor who covers all your funding needs, and it is at play at CVCs, SWFs and in green investing, with parent companies, governments and impact investors playing the sugar daddy role. I look at the missions and magnitude of each of these investing groups, and argue that, at least in the aggregate, they punch well below their weight. While the very best in each of these groups matches up to the best in the peer groups (VCs for CVCS, actively managed funds for SWFs and energy funds for green investing), the under performance in the aggregate can be traced to the unwillingness to shut down the worst performers. Independent, transparency, clearer mission statements with guardrails on side missions, and a willingness to euthanize under-perfomers provide the pathway to success.
Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/SugarDaddy.pdf
Blog post: https://aswathdamodaran.blogspot.com/2024/10/the-sugar-daddy-effect-corporate.html

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