We're searching for those extra factors that will help us plug the best numbers we can into our valuation formulae. We've found that ‘absolute constants' don't exist, so let's continue looking for ‘relative constants' as part of our search for an investing edge.

Ironically, the closest thing I've found to a constant in financial markets is also the one that causes the most volatility and inconsistency — human behaviour. It doesn't matter which decade or century you look at; the fact is that market participants react in a similar fashion given similar circumstances. I came to this conclusion years ago after an interminable amount of time spent reading books on economic and financial history.

It seems I'm not the only person to have come to this conclusion. The following is from the introduction of the 1954 edition of The Intelligent Investor, where Graham describes the ‘rules' he'd been exposed to during his then 40-year Wall Street career: ‘The rules that have failed relate mainly to types of securities; the ones that survive apply mainly to human nature and human conduct.'142

Let's consider how human nature and human conduct have been shaped.


The first time I went to New York was with my family. We visited the American Museum of Natural History. Fascinating. It has an exhibit called the Heilbrunn Cosmic Pathway, a 360-foot walkway spiralling downwards through a display that maps out 13 billion years of cosmic ...

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