Adam Smith Money Game

October 11, 2016
George Goodman, Who

Getty Images George J.W. Goodman

Warren Buffett considers Jerry Goodman the second-best writer ever to explain how the investment business works, after the brilliant Fred Schwed, whose Where Are the Customers’ Yachts? (originally published in 1940) remains the finest – and funniest – book on Wall Street ever written.

“Schwed was the best ever, ” Buffett told me in a telephone interview this past week. “But Jerry, especially in ‘The Money Game, ’ was incredibly insightful, and he knew how to make the prose sing as well.

“He knew how to put his finger on things that nobody had identified before. Jerry stuck to the facts, but he made them a helluva lot more interesting. He was a great writer.”

In The Money Game, the best-selling book he published in 1968, Goodman exposed the frenzied trading, epidemic rumor-mongering and bizarrely neurotic behavior that drove many professional money managers throughout what came to be called the “go-go” years of the bull market of the late 1960s.

With a panache no financial writer ever since could hope to match, he cited the mumbo-jumbo of Freudian psychologists, quoted philosophers and poets in untransliterated ancient Greek, and ridiculed Wall Street analysts trying to make sense of momentum stocks with mock names like Murgatroyd Bonbon and Digital Datawhack.

How good a writer was Jerry Goodman? You be the judge:

A stock is, for all practical purposes, a piece of paper that sits in a bank vault. Most likely you will never see it. It may or may not have an Intrinsic Value; what it is worth on any given day depends on the confluence of buyers and sellers that day. The most important thing to realize is simplistic: The stock doesn’t know you own it. All those marvelous things, or those terrible things, that you feel about a stock, or a list of stocks, or an amount of money represented by a list of stocks, all of these things are unreciprocated by the stock or the group of stocks. You can be in love if you want to, but that piece of paper doesn’t love you, and unreciprocated love can turn into masochism, narcissism, or, even worse, market losses and unreciprocated hate.

- The Money Game (1968 edition, p. 81)

If you are not automatically applying a mechanical formula, then you are operating in this area of intuition, and if you are going to operate with intuition – or judgment – then it follows that the first thing you have to know is yourself. You are — face it — a bunch of emotions, prejudices, and twitches, and this is all very well as long as you know it…. A series of market decisions does add up, believe it or not, to a kind of personality portrait. It is, in one small way, a method of finding out who you are, but it can be very expensive. That is one of the cryptograms which are my own, and this is the first Irregular Rule: If you don’t know who you are, this is an expensive place to find out.

- The Money Game (1968 edition, p. 26)

[paraphrasing a money manager who referred to the typical individual investor as “John Jerk”:]

In more polite circles, John Jerk and his brother are called “the little fellows” or “the odd-lotters” or “the small investors.” I wish I knew Mr. Jerk and his brother. They live in some place called the Hinterlands, and everything they do is wrong. They buy when the smart people sell, they sell when the smart people buy, and they panic at exactly the wrong time. There are services that make a very good living out of charting the activity of Mr. J. and his poor brother. If I knew them I would give them room and board and consult them…. I would push the pheasant and champagne through the little hatch of his cell and ask Mr. J. what he was going to do that morning, and if he said, “buy, ” I would know to sell, and so on.

- “The Day They Red-Dogged Motorola, ” The New York World Journal Tribune, Oct. 30, 1966

[writing about the enduring investment principles of Benjamin Graham, the great investment manager who wrote Security Analysis and The Intelligent Investor, and who once signed a letter to Goodman “Benj. Graham”]

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