WEBVTT NOTE Ludwig von Mises, Meet Benjamin Graham: Value Investing from an Austrian Point of View 1 00:00:00.000 --> 00:00:15.000 Thank you Mark for the introduction. Thanks very much indeed for the Mises Institute for inviting me to give a talk and particularly to Pat Barnett who assisted with the presentation or the infrastructure if you like of getting the organization of my presentation going. 2 00:00:15.000 --> 00:00:28.000 And thank you particularly for you for attending the conference and listening to my talk. As Mark said, Chris Leithner is my name. I run a couple of businesses in a suburb of Brisbane in Australia. 3 00:00:28.000 --> 00:00:58.000 Australia. My job is basically or one of my jobs is to take shareholder's funds which appear if you like as a current asset on a balance sheet to take cash and to invest it to convert it into a non-current asset. My job basically is to allocate capital. Wearing another hat, my job is to take investment institutions funds and to do much the same sorts of things to invest it sensibly. I raise that because my job and my presentation before you today is to talk from a much 4 00:00:58.000 --> 00:01:06.000 and a much more applied point of view about the linkage between one style of investing and the Austrian School. 5 00:01:06.000 --> 00:01:13.000 I've chosen the title Ludwig von Mises meets Ben Graham, Value Investing from an Austrian point of view 6 00:01:13.000 --> 00:01:23.000 because it struck me for several years, a lot of years I dare say, that when I talk to Austrian School people about investing topics 7 00:01:23.000 --> 00:01:29.760 there's not too much about which we disagree when Austrians conversely talk 8 00:01:29.760 --> 00:01:33.560 to a particular style of value investors about that there seems to be a fair bit 9 00:01:33.560 --> 00:01:38.520 of commonality and I'd go as far to say that and I'm perhaps stretching it but 10 00:01:38.520 --> 00:01:42.760 we'll see how far I can stretch it that value investors and Austrian school 11 00:01:42.760 --> 00:01:47.640 economists may well have more in common than value investors have with their 12 00:01:47.640 --> 00:01:52.320 mainstream and Austrian school people have with the economics mainstream now 13 00:01:52.320 --> 00:01:56.840 Now, my purpose today is not to explain that, but perhaps to describe it to show some of 14 00:01:56.840 --> 00:02:00.800 the ways in which there are a fair few commonalities. 15 00:02:00.800 --> 00:02:06.240 I've chosen the title almost as if two gentlemen meet at a relatively formal function, two 16 00:02:06.240 --> 00:02:10.600 people who might think, gee, these two gentlemen have a fair bit in common, it would be useful 17 00:02:10.600 --> 00:02:15.480 to introduce them such that they themselves can perhaps can explore their commonalities 18 00:02:15.480 --> 00:02:22.200 to perhaps from first principles to explain why those commonalities might exist. 19 00:02:22.200 --> 00:02:26.200 Just a wee disclaimer, my apologies for that. My purpose today is not, N.O.T. is not to 20 00:02:26.200 --> 00:02:32.560 sell you any securities, not to provide legal, accounting, financial advice. I've presented 21 00:02:32.560 --> 00:02:37.480 or I've prepared a written paper available either from the website towards the bottom 22 00:02:37.480 --> 00:02:44.040 or thanks to Pat Binett by way of the Mises Institute. In the time allotted to me, I haven't 23 00:02:44.040 --> 00:02:48.240 the time to discuss it in any great detail. Perhaps what I'll give to you is a hitchhiker's 24 00:02:48.240 --> 00:02:54.240 guide following the points which I've just now raised. Let me talk to you 25 00:02:54.240 --> 00:02:59.200 briefly as an audience by and large of Austrian School economists or people 26 00:02:59.200 --> 00:03:02.440 interested in the Austrian School and not so much as value 27 00:03:02.440 --> 00:03:07.200 investors, a couple of points about value investing. Let me talk very briefly about 28 00:03:07.200 --> 00:03:13.320 Ben Graham, both an investor and an adjunct academic at the Columbia B 29 00:03:13.320 --> 00:03:20.120 School from roughly the mid-1920s to roughly the late 1940s. 30 00:03:20.120 --> 00:03:25.640 Graham was born in London at a relatively early age, moved to New York City, was something 31 00:03:25.640 --> 00:03:30.440 of a prodigy as a student, graduated from Columbia, was offered three academic posts 32 00:03:30.440 --> 00:03:36.120 at Columbia, one in mathematics, two in classics, which was a lifetime passion and interest 33 00:03:36.120 --> 00:03:40.620 of his and I confess on the spot off the top of my head the third one might have been English 34 00:03:40.620 --> 00:04:01.620 but don't quote me upon that, but a man with a very eclectic, a very wide-ranging set of views throughout his life and indeed, as you read in his autobiography, investing per se was by no means the most important thing in his life, if anything, the study of classics was a greater passion for him than was the allocation of capital. 35 00:04:01.620 --> 00:04:05.780 to give a very brief overview summary what on earth is this thing value 36 00:04:05.780 --> 00:04:09.740 investing at least as he described it up one or two other points the Great 37 00:04:09.740 --> 00:04:14.460 Depression was very hard on Graham just as it was on many other people he 38 00:04:14.460 --> 00:04:18.940 founded an investing investment company in the mid 1920s which did 39 00:04:18.940 --> 00:04:23.140 extraordinarily well during the boom of the 1920s like many other investing 40 00:04:23.140 --> 00:04:28.680 companies did extremely badly in the early 1930s and that prompted him to go 41 00:04:28.680 --> 00:04:34.680 and we'll go back to first principles to explain to themself what went wrong 42 00:04:34.680 --> 00:04:39.680 and equally importantly to present some principles to go forward. 43 00:04:39.680 --> 00:04:44.680 That book, Security Analysis, is often described as a foundation stone for investing. 44 00:04:44.680 --> 00:04:49.680 It's often described that way but I dare say relatively few people these days will read it from cover to cover. 45 00:04:49.680 --> 00:04:55.680 To my knowledge, which admittedly is limited knowledge, certainly in Australia it will never appear on a B-school curriculum 46 00:04:55.680 --> 00:05:07.680 and adventure guests in this country as well. It may well be mentioned on occasion but certainly not utilized that extensively even though there have been multiple editions and the book is still in print. 47 00:05:07.680 --> 00:05:21.680 Graham retired in around about the mid-1950s among his students and colleagues at Graham Newman Corp, his investment company, was Warren Buffett who obviously went on to much greater and much more prominent things. 48 00:05:21.680 --> 00:05:30.680 Graham, if anything, issued publicity. Mr. Buffett, it seems to me, doesn't necessarily attract it, but the publicity comes his way, nonetheless. 49 00:05:30.680 --> 00:05:38.680 Right, now having said that in terms of background, according to Graham, investment is most successful when it's most business-like. 50 00:05:38.680 --> 00:05:48.680 An investment operation is one that, upon thorough analysis, promises safety of principle and a satisfactory return, operations not meeting these requirements are speculative. 51 00:05:48.680 --> 00:05:54.280 Grahamites, first and foremost, are analysts, as I'll say a fair bit more, are analysts of businesses. 52 00:05:54.280 --> 00:05:59.680 What they are not are people who stare at a screen and notice a blip of a price which goes up or down 53 00:05:59.680 --> 00:06:03.680 from one hour to the next one day to the next week or month. 54 00:06:03.680 --> 00:06:08.180 Their interest is very much in the business that they're looking at. 55 00:06:08.180 --> 00:06:13.680 Businesses have securities obviously, but their interest is in the tangible business which underlies security. 56 00:06:13.680 --> 00:06:31.680 Their objective, their passion is to analyze that business, to ascertain the value of that business, to compare value to price, hence the label value investing, when their assessment of value is greater than price to buy, if their assessment of value doesn't meet those criteria to step aside. 57 00:06:31.680 --> 00:06:37.680 You can see a commonality though. I put a quote from Human Action from von Mises. 58 00:06:37.680 --> 00:06:44.680 Stock exchange transactions produce neither profits nor losses, but are the consummation of profits and losses arising in commerce and manufacturing. 59 00:06:44.680 --> 00:06:49.680 I take that quote to be, look at the underlying economic, tangible economic activity. 60 00:06:49.680 --> 00:06:56.680 The market exists in order to make transactions, but the financial market per se, the blips on the screen, are not the be all and end all. 61 00:06:56.680 --> 00:07:02.520 and all, in actual fact, it's businesses producing ultimately goods and services for consumers, 62 00:07:02.520 --> 00:07:05.640 that is the be all and end all of investing. 63 00:07:05.640 --> 00:07:09.720 The final point then, on a day-to-day basis, the operations of a business are much more 64 00:07:09.720 --> 00:07:12.960 stable than any assessment of its value. 65 00:07:12.960 --> 00:07:16.640 Assessments of value will change virtually instantaneously, but it seems to be certainly 66 00:07:16.640 --> 00:07:21.520 in with respect to relatively well-established businesses, they're much more stable. 67 00:07:21.520 --> 00:07:31.520 and that's an insight it seems to me that Graham was properly able to take advantage of during his career, certainly Mr. Buffett's done so since then. 68 00:07:33.520 --> 00:07:36.520 Just another couple of points in terms of overview. 69 00:07:36.520 --> 00:07:41.520 Focusing on that distinction between price and value, it's certainly not a mainstream sort of a notion, 70 00:07:41.520 --> 00:07:47.520 repeating a point I made at the outset to talk to Austrian School economists about the distinction between price and value, 71 00:07:47.520 --> 00:07:54.320 to say that price is what's paid, value is what's received, that elicits little if any descent, no arguments there. 72 00:07:54.320 --> 00:08:02.820 Second point, Graeme observed that over time, price and value tend to gravitate towards one another, sometimes it can take a fair while to do so. 73 00:08:02.820 --> 00:08:11.020 At any given point, they may well diverge, sometimes by quite a wide margin, and indeed from one minute to the next, they may well diverge. 74 00:08:11.020 --> 00:08:18.560 They'll eventually converge, but they won't instantaneously do so, they won't necessarily do so from one moment to the next. 75 00:08:18.560 --> 00:08:25.960 Graham also lamented that most people rarely recognize, very few willfully, and a few, sorry, more than a few will willfully ignore, 76 00:08:25.960 --> 00:08:28.400 that fundamental distinction between price and value. 77 00:08:28.400 --> 00:08:34.420 That's certainly not a mainstream notion, price and value are synonyms, according to the mainstream, 78 00:08:34.420 --> 00:08:38.860 in terms of the catechisms taught in business school, and people will scratch their heads, 79 00:08:38.860 --> 00:08:40.500 where mainstream people will scratch their heads 80 00:08:40.500 --> 00:08:42.140 if you put these points to them. 81 00:08:43.020 --> 00:08:45.820 Final point on that slide, value investors, 82 00:08:45.820 --> 00:08:48.220 investors seeking value, which may well, 83 00:08:48.220 --> 00:08:50.620 and often does, differ from price, 84 00:08:50.620 --> 00:08:52.820 will reject the mainstream view that these two things, 85 00:08:52.820 --> 00:08:56.820 price and values, necessarily coincide at all times. 86 00:08:59.420 --> 00:09:01.120 There's a fair bit of commonality, it seems to me, 87 00:09:01.120 --> 00:09:03.220 between Graham and I selected Mises 88 00:09:03.220 --> 00:09:06.740 as a relatively accessible source on investing risk, 89 00:09:06.740 --> 00:09:08.900 on what investing risk is. 90 00:09:08.900 --> 00:09:13.140 For mainstream or for MBAs taught in these schools, 91 00:09:13.140 --> 00:09:15.860 the risk of an investment is the price volatility 92 00:09:15.860 --> 00:09:17.260 or the risk of a listed investment, 93 00:09:17.260 --> 00:09:21.380 which is the overwhelming concentration, is volatility. 94 00:09:21.380 --> 00:09:24.260 The more volatile it's been in, say, the recent past, 95 00:09:24.260 --> 00:09:26.020 what's that, a week, a month, a year, 96 00:09:26.020 --> 00:09:28.540 the more volatile it is, the riskier it is. 97 00:09:28.540 --> 00:09:30.620 For Graham, that's patently absurd. 98 00:09:30.620 --> 00:09:34.180 Risk resides in a tangible business, 99 00:09:34.180 --> 00:09:47.180 the degree of success in the past currently under plausible assumptions how successful it's likely to be going forward largely on the basis of accounting criteria, return on capital, etc, etc, etc. 100 00:09:47.180 --> 00:09:58.180 But the price or the volatility from one moment to the next is of virtually no interest to Graemeites with the one exception if it enables them to buy a quality asset at a decent price. 101 00:09:58.180 --> 00:10:13.180 A couple of other points on that and I'll just read from Mises and it struck me because it's something that Graham could easily have written. I dare say he wished that he had written. 102 00:10:13.180 --> 00:10:20.180 According to Mises, I'll quote, a popular fallacy considers entrepreneurial profit a reward for risk taking. 103 00:10:20.180 --> 00:10:30.180 It looks upon the entrepreneur as a gambler who invests in a lottery after having weighed the favorable chance of winning a prize against the unfavorable chance of losing his stake. 104 00:10:30.180 --> 00:10:36.180 This operation manifests itself most clearly in the description of stock exchange transactions as a sort of gambling, 105 00:10:36.180 --> 00:10:48.180 which is very similar to what, if you like, a typical newspaper account will be if prices are rising today, falling today, back garden conversation in terms of my investments are doing well, they're not doing so well and so on. 106 00:10:48.180 --> 00:11:18.180 Mises continues quote every word in this description is false the owner of capital does not choose between more risky less risky and safe investments he's forced by the very operation of the market economy to invest his funds in such a way as to supply the most urgent needs of the consumers to the best possible extent the success or failure of the investment in stocks bonds etc etc depends ultimately upon the same factors that determine success or failure 107 00:11:18.180 --> 00:11:19.300 of the Capital Invested. 108 00:11:19.300 --> 00:11:21.300 And as I say, that's something that Graham could use. 109 00:11:21.300 --> 00:11:23.100 The thought is a very Grahamite thought. 110 00:11:23.100 --> 00:11:26.780 I dare say he wished he'd expressed it that eloquently. 111 00:11:26.780 --> 00:11:29.300 Risk then has to do with tangible businesses, 112 00:11:29.300 --> 00:11:30.140 their operations. 113 00:11:30.140 --> 00:11:32.700 It has to do not with squiggles on a line 114 00:11:32.700 --> 00:11:34.200 from one moment to the next. 115 00:11:36.780 --> 00:11:39.140 I haven't the time to go through the paper point by point, 116 00:11:39.140 --> 00:11:40.260 which is just as well, 117 00:11:40.260 --> 00:11:42.820 and I certainly shan't read from it or quote from it, 118 00:11:42.820 --> 00:11:44.460 but there are eight points of commonality 119 00:11:44.460 --> 00:11:46.060 I put up in my paper. 120 00:11:46.060 --> 00:11:47.740 I've mentioned two of them thus far. 121 00:11:47.740 --> 00:11:51.580 a distinction between price and value, conception of risk. 122 00:11:51.580 --> 00:11:54.740 A third point of commonality I put within parentheses 123 00:11:54.740 --> 00:11:57.680 that Graemites are methodological individualists. 124 00:11:57.680 --> 00:11:59.660 I dare say I stretch the point slightly. 125 00:11:59.660 --> 00:12:01.500 The individualists in this sense 126 00:12:01.500 --> 00:12:04.380 that their relentless focus, the concentration, 127 00:12:04.380 --> 00:12:06.980 their passion is in the individual business 128 00:12:06.980 --> 00:12:09.180 which is being analyzed, 129 00:12:09.180 --> 00:12:11.820 individual business which has individual securities. 130 00:12:11.820 --> 00:12:13.580 Their interest is not in the market 131 00:12:13.580 --> 00:12:16.060 or not in a market average, a market aggregate, 132 00:12:16.060 --> 00:12:21.300 be it the Standard and Poor's 500, the All-Ordinary's Index, any of many other indices. 133 00:12:21.300 --> 00:12:26.340 They're not looking at that aggregate level rather at the more within quotations individual business level. 134 00:12:26.340 --> 00:12:32.180 So if you like a business analyst is a reasonable handle for them. 135 00:12:32.180 --> 00:12:37.220 A fourth point of commonality is a skepticism about mathematical modeling. 136 00:12:37.220 --> 00:12:43.740 For Graham in his experience, the more fancy the mathematics, the more arcane the assumptions, 137 00:12:43.740 --> 00:12:51.180 The more likely the person doing the assuming, the more likely the person utilizing the mathematics was speculating rather than investing. 138 00:12:51.180 --> 00:13:00.300 He was very cautious about anything beyond ordinary arithmetic in terms of the sorts of things one would need to analyze a balance sheet, a profit and loss statement, and so on. 139 00:13:00.300 --> 00:13:08.980 It's stretching slightly, but not very much, dare I say it, to say that little more than primary school mathematics is required to be a grey mite investor, which is just as well. 140 00:13:08.980 --> 00:13:19.980 Certainly the arcane stuff with which MBAs would be exposed is not just alien to a gray mite but they'd be not just very skeptical about it but I dare say they'd run as fast as a feet can carry them from it. 141 00:13:19.980 --> 00:13:34.980 A fifth point, the future is largely but not radically uncertain. A gray mite would say look, they would be comfortable with the notion there exists laws of economics, there exists historical data and on the basis of those sorts of things, 142 00:13:34.980 --> 00:13:44.980 One, they're prepared to look very cautiously into the future, that's not to say that they're making forecasts that the price of a stock will be X in six months' time. 143 00:13:44.980 --> 00:13:52.980 They're saying, look, based upon the laws of economics, their analysis of a business, that a reasonable price is likely to be no more than such and such. 144 00:13:52.980 --> 00:13:59.980 And if you buy today on the basis of their experience going back now, the better part of three-quarters of a century, one is likely to do reasonably well. 145 00:13:59.980 --> 00:14:02.980 But that's not the same thing, if you like, as a point forecast. 146 00:14:02.980 --> 00:14:09.980 are much more comfortable saying, look, given this information, we're rather unlikely to end up disastrously wrong. 147 00:14:09.980 --> 00:14:15.980 Sixth point is that value investors are Austrian entrepreneurs in a specific way. 148 00:14:15.980 --> 00:14:19.980 In the way that, for example, Israel Kirzner described entrepreneurs. 149 00:14:19.980 --> 00:14:26.980 Not so much, not at all in the way that, for example, Joseph Schumpeter might have described entrepreneurs. 150 00:14:26.980 --> 00:14:31.980 I'm grateful for Robert Blumen for distinguishing the two more clearly than I would have. 151 00:14:31.980 --> 00:14:37.980 Value investors seek to discover things which other people have, for whatever reason, overlooked. 152 00:14:37.980 --> 00:14:43.980 They're not the sort of people who, in a sense, are creating utterly and completely new things, 153 00:14:43.980 --> 00:14:48.980 engaging in the process of creative destruction, going where no person has gone before. 154 00:14:48.980 --> 00:14:54.980 So they're entrepreneurs in that Kirznerian sense as opposed to a Schumpeterian sense. 155 00:14:54.980 --> 00:15:00.980 I'll skip in terms of time available, but I've drawn another distinction in terms of the views about capital goods. 156 00:15:00.980 --> 00:15:30.980 goods. I have given an example, Austrians don't use the phrase time preference, to my knowledge it's a the phrase itself isn't used by them. The underlying logic though is something they use virtually on a daily basis. They constantly talk in terms of payback periods. Making an investment today, how long is it likely for the fruits I expect to be generated? They seek the smallest possible payback period, the longer it is, the greater risk becomes in terms of unanticipated things which might occur between now and then. 157 00:15:30.980 --> 00:15:47.980 So I'm stretching it a bit, I don't think dramatically so, to say that look, there's not a complete commonality, but a sufficient commonality to be intriguing in terms of the views of time preference and concepts that stem from it, namely interest and an investor's rate of return. 158 00:15:50.980 --> 00:15:57.980 Let me say a few points in terms of, a few points more I should say, a bit of detail, in terms of the distinction between price and value. 159 00:15:57.980 --> 00:16:16.980 The price to a gramite is set at the margin, the price is a ratio at which the most eager person, say the most eager buyer and the most eager seller voluntarily exchange some specified goods, service, commodity, stock or bond. 160 00:16:16.980 --> 00:16:22.980 A buyer is most eager in the sense that he or she is willing to exchange it for the greatest amount of some other commodity, say money. 161 00:16:22.980 --> 00:16:28.480 A seller's most eager in the sense that he's prepared to accept less money for it than any other seller. 162 00:16:28.480 --> 00:16:32.480 You might shrug your shoulders and say, well that's elementary, and indeed I agree that it is. 163 00:16:32.480 --> 00:16:35.980 Those comments are not from an Austrian School economist, they are from John Burr Williams, 164 00:16:35.980 --> 00:16:40.480 his book, The Theory of Investment Value, published in 1938. 165 00:16:40.480 --> 00:16:44.980 The margin, says John Burr Williams, who is a colleague who's pushing it, 166 00:16:44.980 --> 00:16:51.980 acquaintance of Graham, in William's words, the margin will fall between owners and non-owners, 167 00:16:51.980 --> 00:16:58.980 The ins and the outs, the eyes and the nays, and this margin, opinion, mere opinion, will determine actual price. 168 00:16:58.980 --> 00:17:05.980 An opinion is not the same thing as a fact, and Graham Mites, I dare say, are very familiar with the notion that some actors will be better informed than others. 169 00:17:05.980 --> 00:17:12.980 The mainstream notion that all buyers and sellers, all market participants have the same information, they would reject. 170 00:17:12.980 --> 00:17:17.980 The notion that all buyers and sellers would react in the same way to that information, they'd reject. 171 00:17:17.980 --> 00:17:23.460 And with it, comes a rejection of quite a lot of contemporary finance. 172 00:17:23.460 --> 00:17:29.140 So in that point, again, an initial point of elaboration. 173 00:17:29.140 --> 00:17:33.500 To say, for example, that SecurityX is selling at such and such a price on this particular 174 00:17:33.500 --> 00:17:38.940 Friday in February at this moment, basically has to do with the opinions expressed by, 175 00:17:38.940 --> 00:17:41.500 ultimately, two different people. 176 00:17:41.500 --> 00:17:44.580 Whether they're well informed, whether there's other information that can be brought to bear, 177 00:17:44.580 --> 00:17:49.300 That's a different issue entirely. 178 00:17:49.300 --> 00:17:51.380 Prices are neither omniscient nor prescient. 179 00:17:51.380 --> 00:17:58.060 Briefly, let me summarize that point, not from Graham, but from Jim Grant, who quotes 180 00:17:58.060 --> 00:18:02.340 from Graham occasionally. 181 00:18:02.340 --> 00:18:06.620 Grant says this, I quote, to suppose that the value of a common stock is determined 182 00:18:06.620 --> 00:18:12.800 purely by a corporation's earnings, discounted by the relevant interest rate and adjusted 183 00:18:12.800 --> 00:18:23.800 for the Marginal Tax Rate is to forget that people have burned witches, gone to war on a whim, risen to the defense of Joseph Stalin and believed Orson Welles when he told them over the radio that the Martians had landed. 184 00:18:23.800 --> 00:18:35.800 Actors and markets are not necessarily well-informed actors. To say that the price of something sells for X today is not necessarily an accurate reflection of underlying value. 185 00:18:35.800 --> 00:18:40.800 As a rule, disbelieve the media, another implication stemming from the point. 186 00:18:40.800 --> 00:18:45.800 A lot of silly things, and it's no news to you, appear on the news from day to day. 187 00:18:45.800 --> 00:18:51.800 The fact that if a market index falls on a given day, quite often journalists will talk about a sell-off, 188 00:18:51.800 --> 00:18:55.800 which is silly because for every security that's sold, there has to be a corresponding buyer. 189 00:18:55.800 --> 00:19:01.800 For every person selling, there has to be a buyer. Why not call it a buy-off? 190 00:19:01.800 --> 00:19:12.800 It's then simply silly to talk about a rush to get out of the market, a rush to get into the market. Why? Because the queue is going in either direction, the one balances the other, ignoring IPOs and the like on a given day. 191 00:19:12.800 --> 00:19:21.800 The number of securities at the end of the day is identical to that at the beginning of the day. It's simply silly to talk about a rush in one direction or the other. 192 00:19:21.800 --> 00:19:37.800 Let me skip to my conclusion then, running short on time. From an applied point of view, from the point of view of someone who runs an investment company and who interacts with investing institutions, the relevance of Austrian economics. 193 00:19:37.800 --> 00:19:49.800 Point one, it helps to inoculate against absurdity. And I've put in a quote there, the next time somebody tells you with a straight face that all investors have the same information, expectations, time horizon, 194 00:19:49.800 --> 00:20:00.800 That markets are very liquid, making transaction costs so small that they can be ignored, and that value and price are synonyms, the next time they tell you that, it seems to me the sane response is simply to laugh. 195 00:20:00.800 --> 00:20:11.800 Austrian economics, if you like, and I can stretch the analogy, are prophylactic against a lot of silly things that one hears and reads on a daily basis. 196 00:20:11.800 --> 00:20:16.800 Second point, helps to avoid over-optimism and unwarranted pessimism. 197 00:20:16.800 --> 00:20:20.800 and pessimism. Jim Grant has a really good quote at the beginning. I put it in the paper. 198 00:20:20.800 --> 00:20:24.800 He equates Austrian economics, if you like, to the ability to 199 00:20:24.800 --> 00:20:28.800 avoid getting up in the middle of the light and stumbling over the lampshades or the lampstand and so on. 200 00:20:28.800 --> 00:20:32.800 The future is always unlit, but it helps to have a theoretical 201 00:20:32.800 --> 00:20:36.800 edifice that enables you sometimes to avoid the more severe 202 00:20:36.800 --> 00:20:40.800 injuries of stumbling over lamps and lampshades and furniture in the middle of the night. 203 00:20:40.800 --> 00:20:44.800 I think that really encapsulates the point far better than I 204 00:20:44.800 --> 00:20:59.800 The final point, and I'll stop with perhaps a minute or so left, is that for businessmen and investors, or business people and investors, Graham said the two are in effect identical, that to be a good investor you have to be a good business person and vice versa. 205 00:20:59.800 --> 00:21:12.800 Austrian School economics, it's neither necessary nor sufficient, that's to say to be a good Austrian School economist, that has no necessary implications for your style of investing, to be a Grahamite investor doesn't necessarily predispose you towards the Austrian School. 206 00:21:12.800 --> 00:21:15.840 in School. The point of my paper though is to show that seems to me there's a 207 00:21:15.840 --> 00:21:20.840 fair bit of overlap and intriguingly big overlap such that these things are 208 00:21:20.840 --> 00:21:24.280 neither necessary sufficient but goodness me by my experience and it 209 00:21:24.280 --> 00:21:29.320 certainly helps. So I'll stop there and thank you very much for your attention.