By Jason Zweig
3:10 pm ET Feb. 17, 2014
George J.W. Goodman, known as Adam Smith to his readers and Jerry to his friends, died last month, age 83. But his work will outlive him for years, and quite likely decades, to come.
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”]
You can see why Benj. Graham never sold like Anyone Can Make a Million or How I Made $2 Million and so on. Telling a game player that he might make some money in two years is like betting him on how tall the corn will grow and then letting him sit on a camp chair in the corn field watching it. And in the long run, Keynes said, we are all dead.
— Supermoney (1972 edition, p. 190)
[profiling the flamboyant mutual-fund promoter Bernard Cornfeld at Cornfeld’s castle in the French Alps]
Bernie’s Great Danes were romping in the fields, the chickadees from his own aviary were drying their nails around the pool and twittering in several languages, his grapes were growing on their vines, and Bernie had this stack of articles…. the stories weren’t financial stories, except that there was a Lot of Money Around in them; instead, they had a breathless, Jackie-and-Ari quality: Bernie and his Rolls, Bernie and his girls. Eventually they would have Bernie and his model agency, Bernie and Pierre Cardin and Guy LaRoche, Bernie and his jet, the one that was going to make Hugh Hefner’s Flying Hutch look like a tired Sopwith Camel.
— “Bernie: The Hundred Days at Elba,” New York magazine, Aug. 24, 1970.
Personally, my favorite piece by Jerry Goodman is Chapter 5 of Supermoney, titled “Somebody Must Have Done Something Right: The Lessons of the Master,” in which Goodman recounts meeting Benjamin Graham – and how that led Goodman to meet a then-obscure money manager named Warren Buffett. It was the first major profile of Buffett ever published and, in my opinion, is still one of the best.
Goodman met Buffett after Graham invited the writer to to help him revise The Intelligent Investor for its 1972 reprinting:
“There are really only two people I would want to work on this,” Graham said. “You’re one, and the other is Warren Buffett.”
“Who’s Warren Buffett?” I asked.
That led to several meetings between Goodman and Buffett, with Goodman capturing Buffett in his earnest analytical prime. Visiting Buffett in 1971, Goodman wrote:
We are driving down a street in Omaha; and we pass a large furniture store. I have to use letters in the story because I can’t remember the numbers. “See that store?” Warren says. “That’s a really good business. It has a square feet of floor space, does an annual volume of b, has an inventory of only c, and turns over its capital at d.”
“Why don’t you buy it?” I said.
“It’s privately held,” Warren said.
“Oh,” I said.
“I might buy it anyway,” Warren said. “Someday.”
And, sure enough, Buffett did buy Nebraska Furniture Mart – 12 years later.
In 2003, long after Graham’s death, I’d had the honor of editing the latest edition of Graham’s The Intelligent Investor. I met Jerry Goodman only once, probably two or three years after that. I immediately recognized him from his television show, “‘Adam Smith’s Money World.” I went up to him and said, “Are you ‘Adam Smith’?” “No,” he answered puckishly as he shook my hand, “I’m Jerry Goodman.”
“I’m Jason Zweig,” I said, “and I —” He then said two of the kindest words anyone has ever said to me: “I know.”
I asked him the one question I most wanted to hear him answer: “Why didn’t you say yes when Ben Graham asked you to work on revising The Intelligent Investor with him?”
“I was just too busy then,” Jerry said. “I didn’t want to do it at all if I couldn’t do it right, and I knew I wouldn’t have the time for that.”
Buffett told me that Graham was so particular about his own writing that a working partnership with another writer probably wouldn’t have worked out in any event.
A last tip from Buffett: He recommends a 1963 movie called “The Wheeler Dealers,” starring James Garner and Lee Remick. The plot features a Texas oil man who comes to New York and falls in love with a female stock analyst on Wall Street. The screenplay was written by Jerry Goodman with “all that effervescence of his,” says Buffett. “It’s a fun movie.”
I’d never heard of the movie before.
I don’t know about you, but I’m watching it this weekend.
Source: WSJ.com, Total Return blog