Is Benjamin Graham still relevant in 2015? Or is he not? Maybe just to some extent, or is Benjamin Graham more relevant now than he has ever been before?
Maybe these are just another redundant questions, or could they be the most important ones to ask yourself. Asking questions often means trying to find new answers, new answers regarding circumstances not considered earlier, or as a way of questioning your own beliefs and the way you look at things around you.
Why am I asking this question to myself—Is Benjamin Graham still relevant in 2015? Does it really matter? Maybe not everyone. But to all of us trying to improve our value investing skills by following the investment concepts laid out by Benjamin Graham, the question is of utmost relevance I believe. Why? Because if they are not relevant today in 2015, we have to go looking for other sources of knowledges to serve as our main guide out in the investing sphere.
Albert Einstein said:
The important thing is not to stop questioning. Curiosity has its own reason for existing.
John Maynard Keynes said:
When my information changes, I alter my conclusions. What do you do, sir?
Keynes also said:
The difficulty lies not so much in developing new ideas as in escaping from old ones.
From the above quotes, we should keep in mind the importance of “not to stop questioning” from Einstein, and also that we always have to be prepared to “alter [our] conclusions” when “[our] information changes” from Keynes. But, this may be easier said than done, as implied by the last Keynes quote, that the greatest danger when it comes to new ideas, even if our new ideas are hard to come by, might be escaping from the old ones. Why is that?
In his speech—The Psychology of Human Misjudgment—at Harvard Bussiness School in June 1995 Charlie Munger was, among other kinds of biases, talking about the bias from commitment and consistency tendency as (emphasis added) “…a superpower in error-causing psychological tendency: bias from consistency and commitment tendency, including the tendency to avoid or promptly resolve cognitive dissonance. Includes the self-confirmation tendency of all conclusions, particularly expressed conclusions, and with a special persistence for conclusions that are hard-won.”
Charlie also said that (emphasis added) “The human mind is a lot like the human egg, in that the human egg has a shut-off device. One sperm gets in, and it shuts down so that the next one can’t get in. The human mind has a big tendency of the same sort … According to Max Plank, the really innovative and important new physics was never really accepted by the old guard. Instead, a new guard came along that was less brain-blocked by its previous conclusions. And if Max Plank’s crowd had this consistency and commitment tendency that kept their old conclusions intact despite disconfirming evidence, you can imagine what the crowd that you and I are a part of behaves like … What people are shouting out they are pounding in.”
The most important thing (as Howard Marks would have said) is to:
- Never stop asking questions.
- Be aware of the consistency and commitment bias and how it affects us.
- Be willing to change your mind when the facts change. The “truths” of yesterday may, or will certainly, not be the “truths” of today or the future.
So, is Benjamin Graham relevant? I do think so. Of course not everything he said or put down on paper or in his books is relevant, but the main ideas still seem to serve the ones willing to listen rather good.
For the article that sparkled my mind about the topic of this post, see Net Net Hunter’s article Is Benjamin Graham Still Relevant in 2015?
To read about some of the concepts of Benjamin Graham, see here:
Another great read is What Has Worked in Investing from Tweedy, Browne Company LLC.
Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company or individual mentioned in this article. I have no positions in any stocks mentioned.