What Does the Spoon in the Matrix Movie Have To Do With Value Investing?
Part II - The missing subtitle
We know that our last post took a novel stance when we stated that much of the real confusion began with none other than the Oracle of Omaha himself, Warren Buffett. We argued that value investing does not exist and started walking you through how that illusion started. Arguably, it was Benjamin Graham whose words, inadvertently, might have led to a few early cracks. Those cracks would later become a fault line, and the real confusion would start.
If your first reaction is, “Come on now,” that’s understandable. You know we have great respect for Warren Buffett, have applauded him (and Charlie Munger) many times for being a staunch defender of true investing, and still appreciate their principled stance on crypto.
Having said that, we also promised you that we would call it exactly the way we see it. How is it possible that the investor extraordinaire who arguably understood Graham and his insights more than anybody else could have contributed to such confusion about “investing”? As implausible as that sounds, we believe that a trip down the historical corridors of finance does support our assertion. Let’s continue our detective work with finance history and see whether or not you agree with our thesis.
The Evolution of A Subtitle
“The Definitive Book on Value Investing” wasn’t the original subtitle of The Intelligent Investor. When the book was first released in 1949, the subtitle read: A guide for the general reader to wise investment practice under today's financial conditions.
Six years later, in 1954, the book was revised with a new cover:
The revised subtitle on the new edition read:
New Revised Edition of the book that has become for thousands the
indispensable guide for sound investing
Still rather dull, don’t you think? It’s quite long and not exactly catchy. Perhaps, at the time, the marketing departments at publishing houses were less worried about short and sexy catchphrases and were fully content with descriptive subtitles.
Five years later in 1959, a second revised edition was released:
As you can see, the second revised edition in 1959 had the same subtitle as the 1954 edition. Are you noticing a pattern here?
After another six years (1965), yet another version, the third revised edition was released:
Still the same subtitle. Still, the phrase “value investing” is nowhere to be found. Let’s keep going, shall we?
Ben Graham updated the book one more time during 1971-1972. In fact, he collaborated with Warren Buffett, the only person he felt comfortable with in that role. As described by author Janet Lowe in Benjamin Graham on Value Investing:
On Ben’s way home from France, he met Adam Smith at the Plaza Hotel in New York for breakfast, where Ben broached the idea of Smith collaborating on the new edition of The Intelligent Investor. According to Smith, Ben said that the only other person he would consider as a coauthor would be Warren Buffett.
Graham and Buffett connected and began to collaborate, but according to Lowe, they “bumped heads.” Turns out, two opinionated investors holding the same pen wasn’t exactly an easy exercise:
Buffett now was devoting more thought to the new edition, but “as soon as I started doing it, I wasn’t doing it his way. You could see one author against another. So that spurred him into doing it himself.”
It ended up not being a co-authorship.
In 1971, Ben wrote to Buffett again. The revisions were complete. “I gather that you modestly disdain coauthorship. However, I should be happy to follow the lead of Security Analysis [with respect to Charley Tatham] and add to the title page: ‘with the collaboration of Warren Buffett,’ some distinguished remarks about you. How about that?”
In the book’s note of acknowledgment, Ben thanked Buffett for his help but also thanked Irving Kahn’s sons Alan and Thomas and a deceased friend and former student, Conrad Taff. The Kahns reviewed and made current the charts and statistics in the book.
Buffett would end up contributing to the book more later, but that wouldn’t happen until after Graham’s death:
Buffett did not write the introduction to the original fourth edition, though, in an edition printed after Ben’s death, he contributed a preface.
The fourth revised edition came out in 1973, the last version that Ben Graham touched before his death in 1976:
(A Warren Buffet signed version can be found here.)
Again, the subtitle text remained unchanged: “Fourth Revised Edition of the book that has become for thousands the indispensable guide to sound investing.”
So, here is the historical recap:
1949 - First Edition - subtitle: A guide for the general reader to wise investment practice under today’s financial conditions.
1954 - Revised Edition - subtitle: The book that has become for thousands the indispensable guide to sound investing.
1959 - Second Revised Edition - subtitle: same as 1954
1965: Third Revised Edition - subtitle: same as 1954
1973: Fourth Revised Edition - subtitle: same as 1954
1976: Graham dies.
The “Father of Value Investing” first published his masterpiece in 1949, and revised it four times before he died in 1976. Yet, the subtitle “The Definitive Book on Value Investing,” is nowhere to be found. If you look at your current version, it will be there but it is missing in all previous editions that Graham had written before he passed away.
The phrase “Value Investing” found its way into the subtitle posthumously, but how and why? We have some theories…
