Finding Value in Numbers

Most finance books recycle the same material. Finding Value in Numbers doesn’t. Mark Gandy sits down with author Ehsan Ehsani to unpack a book he calls his new favorite finance read with math—and he’s read nearly all of them. From ROIC adjustments to marginal investing frameworks, Ehsan brings fresh thinking to fundamental investing in a way that’s both intellectually rigorous and genuinely approachable.

Key Takeaways

1. Every great investor needs a framework — but it has to be yours. Ehsan argues that successful investors have two things: the right mindset (your philosophy, psychology, and behavioral awareness) and a repeatable process (how you source, evaluate, and decide on investments). But critically, if the framework isn’t yours, you won’t stick to it when markets get ambiguous and tough. The goal of the book isn’t to hand you a framework. It’s to help you build one.

2. ROIC is king — but most people are calculating it wrong. Return on invested capital is the most complete single measure of business health, but Ehsan dedicates nearly 70 pages to it for good reason. Most financial platforms calculate it using a simplified “financial view” that’s easy to mess up — particularly when people forget to account for excess cash or ignore preferred shares. Ehsan introduces the “operational view” and walks readers through adjustments for special scenarios, including new-economy businesses, companies in transition, and asset-light models.

3. A simple rule of thumb for cost of capital: just use 10%. When Mark presses him on what percentage to use for cost of capital, Ehsan’s answer is refreshingly practical—10%. Run different scenarios, and you’ll find the variance in outcomes isn’t significant enough to warrant the complexity. Put your energy on the levers that actually move the needle.

4. ROIC breaks down for asset-light and SaaS businesses — here’s the fix. When invested capital is minimal, ROIC can shoot into the hundreds of percent, which is mathematically true but analytically useless. Ehsan’s solution: use EVA divided by sales as a modified economic operating profit margin. It sidesteps the inflated-denominator problem and allows you to compare companies across completely different industries—SaaS vs. utilities, for example—in a more apples-to-apples way.

5. Marginal ROIC: the forward-looking signal most investors miss. Standard ROIC is backward-looking. Marginal ROIC shows how a business is evolving over time — giving investors at least a partial read on what’s ahead. Ehsan traces the idea back to Peter Drucker’s Managing for Results, making the point that many of today’s most valuable concepts aren’t new—they’re old wisdom we’ve forgotten in the noise of AI and information overload.

6. Short-termism is baked into how we measure companies. If boards set simple ROIC as a KPI, they’re inadvertently pushing executive teams to avoid long-term capability building — like brand investment — because it hurts short-term numbers. Smart executives won’t be penalized willingly. The fix is incorporating intangibles into how leadership measures and talks about value.

7. DCF is a useful tool, but it shouldn’t be your main valuation method. Borrowing from Columbia’s Bruce Greenwald, Ehsan argues that DCF is dangerously speculative—often 70–80% of the output is driven by terminal value assumptions that are essentially fiction. His alternative: start from the balance sheet, which gives you tangible, accurate numbers, and layer in assumptions only where necessary. The result is a tighter error range.

8. Unit economics: the data companies should be reporting but aren’t. Mark uses Radio Shack as a cautionary tale—the demise was telegraphed in store-level unit economics years before it showed up in the financials. Ehsan agrees and cites small-cap investors like Amy Zhang Alger as examples of analysts who use unit economics to assess whether a small company can become a truly exceptional large company. It’s a frustrating area: companies across sectors define and report these metrics inconsistently, making benchmarking difficult.

9. Portfolio size is a function of your research capacity. Ehsan’s portfolio chapter includes a sobering stat: 24 hours per stock per quarter is the bare minimum for professional money managers to maintain an informed view. Add more positions, and you’re stretching the quality of your analysis thin. Mark’s honest reaction: “I think I have too many stocks.”

⚡ Lightning Round Highlights

• Hawking Index — a fun measure of whether people actually finish books
• First vs. Second Level Thinking — what separates the crowd from the edge
• Reflexivity — Soros’s theory explaining irrational price behavior, including parabolic run-ups and crashes
• “Diversification is protection against ‘ignorance’—Buffett’s reminder, which Ehsan says he uses to check himself before adding positions.”
• Rule of 72 – Eshsan learns how Mark first heard of this rule from his late mother-in-law, Carolyn Dietiker
• Terminal values? Ehsan’s diplomatic verdict: “If I want to be very cruel, I would say they’re generally garbage.”

Who Should Read Finding Value in Numbers

• Value investors and fundamental analysts looking for genuinely fresh frameworks
• CEOs and executives—Mark specifically recommends the first nine chapters (through owner earnings) as accessible and valuable even without a finance background
• Young MBAs and finance professionals — ideal for a book club, chapter by chapter
• Anyone who has read the usual finance canon and feels like they keep hitting recycled material

📚 Books Mentioned by Ehsan

• The Power Broker by Robert Caro—his best read of last year; he calls it a masterpiece born of “selfless exceptionalism.”
• The Universal Tone by Carlos Santana—inspiring and very different from his usual reads
• Elon Musk by Walter Isaacson — both host and guest came away with more appreciation than expected

Episode Pairings