“There are two requirements for success in Wall Street," said Graham. "One, you have to think correctly; and, secondly, you have to think independently.”
"The erudite Graham then referenced English economist Walter Bagehot — who believed that whenever people have excess money, speculation is sure to follow. The presence — and prevalence — of money does not soothe the ego, but instead seems to spur it on to seek higher returns and riskier ventures. And once people are speculating on a wide scale, financial panic cannot be far behind."
The House Money Effect is a core part of human nature. One way to avoid it is to believe that you are a steward for someone else's capital, e.g. retirement savings, and that person will be very upset at capital losses. Thus, the capital you manage is not yours to speculate with but to carefully grow over time, with a close eye towards downside risks.
One can readily see why Warren Buffett has always loved him! Thank you for these pearls of wisdom.
Ben Graham definitely had a way with words. I think that gets lost sometimes when people focus solely on the "Security Analysis" portion of his work.
Thanks for sharing!
"The erudite Graham then referenced English economist Walter Bagehot — who believed that whenever people have excess money, speculation is sure to follow. The presence — and prevalence — of money does not soothe the ego, but instead seems to spur it on to seek higher returns and riskier ventures. And once people are speculating on a wide scale, financial panic cannot be far behind."
The House Money Effect is a core part of human nature. One way to avoid it is to believe that you are a steward for someone else's capital, e.g. retirement savings, and that person will be very upset at capital losses. Thus, the capital you manage is not yours to speculate with but to carefully grow over time, with a close eye towards downside risks.
Well said!
Excellent post!
Thanks!