The Intelligent Investor at 75
This anniversary edition of Benjamin Graham's classic text brings his timeless lessons to a new generation of readers
Sometimes I wonder if Benjamin Graham was a victim of his own success.
The widespread popularity of Security Analysis among value investors and students (wrongly) cemented the notion in many people’s minds that Grahamian investing is all about mathematical formulas and other quantitative concerns.
That true disciples of Graham need only plug some numbers into a calculator and wait for it to spit out the results.
But that completely ignores how much time he spent imploring investors to focus on their own psychological and emotional framework. This probably sounds vaguely heretical, but I think Graham has more to teach us from a qualitative standpoint than he does from a quantitative one.
The Intelligent Investor, originally published in 1949, reminds us of a simple truth: When the stock market gets topsy turvy — which it inevitably will — the only thing standing between crushing losses and life-changing gains is your own mindset.
It’s a shame that so many people mistakenly believe that Graham-style investing only means bottom-fishing for cigar butts and other dubious companies trading at impossibly low prices. When, in reality, it should mean that you are resolute in the face of market fluctuations, you understand that each share represents an ownership interest in an actual business, and you strive to make investments at the right price — thereby minimizing the chances of getting the dreaded “Game Over” screen.
In his introduction to The Intelligent Investor, Graham writes: “The investor’s chief problem — and even his own worst enemy — is likely to be himself. (‘The fault, dear investor, is not in our stars — and not in our stocks — but in ourselves…)”
The erudite Graham was paraphrasing Shakespeare’s Julius Caesar here, but in the spirit of updating his timeless message for a modern audience, perhaps we might liken his comment to the words of another bard: “It’s me, hi, I’m the problem, it’s me.”
(I didn’t expect to be quoting Taylor Swift when I started writing this review, but here we are.)
The Intelligent Investor is a challenging book. Not in the same way as the famously imposing Security Analysis, but in that it challenges each and every reader to get real with themselves. To honestly appraise whether they’re cut out for the money game, whether they can handle the wild swings of the market without panicking, and whether they really know themselves as well as they think they do.
Some Things Never Change
This new edition of The Intelligent Investor — timed to coincide with its 75th anniversary — will look familiar to those who read the previous edition from 2003. The format remains the same, with chapter-by-chapter commentaries from noted Wall Street Journal columnist Jason Zweig interspersed throughout the book.
Ben Graham’s text (written in 1971-72 and published in 1973 as the Fourth Revised Edition) has been left almost completely untouched.
“My goal is not to rewrite Benjamin Graham,” Zweig said on a recent episode of the Richer, Wiser, Happier podcast, “which would be kind of like rewriting Holy Scripture.”
“The principles all remain valid — and, in my opinion, may have become more valid over time.”
The book’s famous Chapters 8 and 20 — which Warren Buffett called “the bedrock of my investing activities” and credited with changing his life — are still here, along with all the rest. Readers will get the chance to meet Mr. Market, learn about the margin of safety, determine whether they’re a defensive or enterprising investor, and much more. Buffett isn’t exaggerating. This is life-changing stuff.
Speaking of the Oracle, his preface is exactly the same as in the 2003 edition — so don’t expect any new material from him here. (Though that’s not entirely true, as Zweig quotes from a personal correspondence with Buffett in an early footnote about Graham’s investment performance and GEICO.)
But Some Things Do (Change)
Since many of us have already read (and re-read) older editions of The Intelligent Investor, the biggest question is: What’s new in this 75th anniversary edition?
✨ The total package clocks in at nearly 600 pages (not counting the index) with all-new commentaries from Jason Zweig accompanying each of Graham’s chapters. And, since Graham did not submit any new material via seance or otherwise, the Zweig commentaries are effectively the difference between this and previous editions.
And, believe me, Zweig cut no corners. He started entirely from scratch, not even going back to re-read his older commentaries, and completely rewrote all of them from the ground up. Even the introductory “A Note About Benjamin Graham” is completely different with new biographical information and a changed focus.
In 2003, Zweig’s commentaries were understandably informed by the wreckage of the dot-com bubble still fresh in everyone’s minds. This time, though, he tackles our brave new world of meme stocks, cryptocurrency, and the gamification of investing. It’s all here — Robinhood, speculating on SPACs and NFTs, short squeezes led by Reddit forums, ESG investing (or, as he calls it, “extremely sanctimonious gimmicks”), etc.
By my count, there are over 200 pages of new commentaries by Zweig — making this new edition an appealing two-for-one proposition. Graham’s untouched classic and nearly a full book’s worth of writing by Zweig. It creates an interesting juxtaposition between new and old, giving readers a whole new perspective on Graham’s message.
✨ The only notable cuts — and they might be notable only to me — are three of Graham’s appendixes which discuss “long-ago companies and obsolete tax rules”.
Important Rules Concerning Taxability of Investment Income and Security Transactions
A Case History: Aetna Maintenance Co.
Tax Accounting for NVF’s Acquisition of Sharon Steel Shares
I can’t really blame the editors for these omissions as they are likely of interest only to history buffs and the hardest of the hardcore Graham devotees. For the completionists among us, these three appendixes can still be found in the 2003 edition.
To paraphrase a point made by Morgan Housel last year, it’s incredible to me how Benjamin Graham writing this book in New York changed the life of a young investor in Omaha, who up until that point had dabbled in the dark arts of technical analysis and charting in order to predict future movements in the stock market.
Graham’s words reached out from the pages of The Intelligent Investor, shook the teenage Buffett by the shoulders, and showed him that there was a better way.
And Buffett has, in turn, done the same for so many all over the world.
Every year, when tens of thousands of shareholders and fans make the pilgrimage to Omaha to hear Buffett speak, let’s remember that that phenomenon was only made possible because Graham sat down, wrote out his principles, and put them into print for the wider world to study.
That’s a snowball that no one could see coming.
And it makes me wonder what further ripples might come from this updated edition of The Intelligent Investor being released to a new generation of learners.
This is a very nice piece. Thanks. Warm wishes, William Green
Kevin, thanks for your commentary. It prompts a couple of stories. It the early days of the personal computer and the ability of spreadsheets to calculate to 3, or more, decimal places, I was invited to give a talk. It had two titles: Why is my computer not registered as an investment advisor? And: Warren, why are you so smart? The answer to the second question was simple: Warren understands significance. Was it Keynes who said that he would rather be roughly right than precisely wrong? Three times I heard someone ask Warren at an annual meeting how he values a company. Each time he explained patiently that the value of a company is the present value of future cash flows/earnings. I vaguely recall that he threw in ‘estimated into infinity’. Each time he asked Charlie for a comment. The first: I’ve no comment; the second, no comment. The third time, he piped up: “In all of the years I’ve known Warren I’ve never seen him calculate a present value.” To this Warren shot back: ya, if I had to, it wouldn’t be worth it. That was a very wise exchange: you have to understand the source of value, which, incidentally, future earnings is not a vintage Graham/value source, but it ought to be obvious to you. I suspect AI might fool many into thinking they have false precision.