The Theory of Investment Value (Part 1)

A New Book that is Old: The Theory of Investment Value, Written by John Burr Williams

Today I received a book, that I ordered a few days ago, delivered to my front door by the postman. The book was John Burr Williams’ The Theory of Investment Value from 1938.

I have just read a few pages today, but already noted a few interesting things. In the beginning of the book Williams writes about price and value, and also about speculation and investment. Two familiar topics that Benjamin Graham also discussed, for example in his book The Intelligent Investor.


Below are two quotations, the first one about real worth and market price and the second about the definition of an investor. Boldings are my own.

“Separate and distinct things not to be confused, as every thoughtful investor knows, are real worth and market price. […] Our problem, therefore is twofold: to explain the price as it is, and to show what price would be right.”

“As will be shown later, the longer a buyer holds a stock or bond, the more important are the dividends or coupons while he owns it and the less important is the price when he sells it. In the extreme case where the security is held by the same family for generations, a practice by no means uncommon, the selling price in the end is a minor matter. For this reason, we shall define an investor as a buyer interested in dividends, or coupons and principal, and a speculator as a buyer interested in the resale price. Thus the usual buyer is a hybrid, being partly investor and partly speculator. Clearly the pure investor must hold his security for long periods, while the pure speculator must sell promptly, if each is to get what he seeks.”