Benjamin Graham
Benjamin Graham (1894–1976) is considered the father of value investing. His books Security Analysis and The Intelligent Investor laid the foundation for modern investment analysis.
The Margin of Safety
Graham's most enduring contribution is the concept of Margin of Safety. His insight: since the future is uncertain, an investor should only buy when the price is significantly below estimated intrinsic value. The gap between price and value is your buffer against error.
This idea influenced generations of investors, most notably Warren Buffett, who studied under Graham at Columbia Business School.
Connections
Graham's thinking connects to several mental models:
- Probabilistic Thinking — Graham insisted on analyzing investments statistically rather than relying on stories or predictions
- Inversion — rather than asking "will this stock go up?", Graham asked "what could go wrong, and am I protected if it does?"
- Map is Not the Territory — Graham warned against confusing financial statements (the map) with the actual business (the territory)