Markets and Meditations

Day 119 of A Year of War and Peace

Value investing, the style of security analysis that made Warren Buffet a wealthy man, trades on the irrationality of others. Value investors understand that the market, driven by untamed animal spirits, often overvalues or undervalues asset prices. It is in the market’s mispricing of assets that value investors make their money. They pierce through the tangled yarn of faddish opinion and discover the intrinsic value of stock, investing only in undervalued companies with strong fundamentals. Benjamin Graham and David L. Dodd wrote the book on value investing. One of their earliest pieces of advice in that book, perhaps the cornerstone of the method itself, is for investors to “Guard against the overemphasis on the superficial and the temporary.”

It’s really too bad Graham and Dodd didn’t publish their book until more than one hundred years after the events of War and Peace. Andrei, Natasha, and Pierre could have benefited from that advice.

We’ll start with Prince Andrei. Sure, he’s happy. Ostensibly anyway. As we’ve argued previously, his happiness is unsustainable. It’s built upon the false foundations of that which is external to his own self. That’s a dangerous place to construct a house of happiness. It’s like building on someone else’s property. But he keeps at it anyway. He even thinks of marrying Natasha today. Can you believe that? He hasn’t even known her for more than twenty minutes. Slow it down, bro.

Natasha, for her part, is equally as reliant for her happiness on the superficial and the temporary as Andrei is. She’s absolutely enraptured by the ball and all the attention she’s receiving from the men there. She finds herself on the “height of bliss when one becomes completely kind and good, and does not believe in the possibility of evil, unhappiness, or sorrow.” How easy, however, it would be for her to fall from such a height. She had better be careful for, as the great farmer puts it, countless miseries roam among mankind and the earth is full of evils.

Finally, there’s Pierre. He keeps to himself at the ball, gloomy and unhappy. His problem is that he has become despondent — again — thinking about his wife. He’s humiliated by her position in society. You would think he would have already learned how to deal with her. It’s not like Helene’s behavior is novel anymore. Pierre knows what he’s into, her character is no great secret.

So we see that our characters invest heavily in the passing and the trivial. They do not guard against the superficial and the temporary. Each is reliant on that which they have no control over: the action of others. They ignore developing their own intrinsic value at their own peril.


Inquire of yourself as soon as you wake from sleep, whether it will make any difference to you if another does what is just and right. It will make no difference.
Marcus Aurelius, Meditations

This is the one hundred and nineteenth installment in a daily, yearlong, chapter-by-chapter reading devotional and meditation on Leo Tolstoy’s War and Peace. For more information on this project please read the introduction to the series here.

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