Why the Crowd Is Usually Wrong | Benjamin Graham's Greatest Investing Lesson

[gentle music] Imagine asking a thousand people what two plus two equals.

Suppose every single one of them confidently replied, "Five." Would that somehow alter mathematics? Of course not.

Reality is wonderfully indifferent to opinion.

It doesn't matter how many people believe something.

Truth is not decided by majority vote.

Yet somehow when money becomes involved, we forget this remarkably quickly.

If a million investors decide a company is worth one hundred billion dollars, it somehow feels more believable than if only one investor thinks so.

But intrinsic value doesn't emerge from consensus.

It emerges from facts.

A business earns what it earns.

It owns what it owns.

Its debts remain exactly the same, regardless of how many enthusiastic commentators appear on the television.

Markets can influence price, but they cannot alter value.

Graham understood this perhaps better than anyone.

His famous character, Mr.

Market, is often remembered because he offers irrational prices.

But perhaps the more important lesson is this: Mr.

Market is usually accompanied by millions of other people who happily agree with him.

When markets become euphoric, almost everybody becomes optimistic.

When markets panic, almost everybody becomes pessimistic.

The herd moves together.

It always has.

It always will.

Because there is tremendous comfort in agreement.

If everybody loses money together, somehow it feels less painful.