JM Keynes

On Economics and Investing:

  • When the facts change, I change my mind. What do you do, sir?

  • It is better to be roughly right than precisely wrong

  • The market can stay irrational longer than you can stay solvent.

  • Successful investing is anticipating the anticipations of others.
  • It is ideas, not vested interests, which are dangerous for good or evil
  • The social object of skilled investment should be to defeat the dark forces of time and ignorance which envelope our future.
  • Americans are apt to be unduly interested in discovering what average opinion believes average opinion to be.
  • There is no harm in being sometimes wrong, especially if one is promptly found out. (From: The State of Long Term Expectation)

  • Words ought to be a little wild, for they are the assault of thoughts on the unthinking. (From: The State of Long Term Expectation)

  • The importance of money flows from it being a link between the present and the future.(From: The General Theory of Employment, Interest and Money)
  • The avoidance of taxes is the only intellectual pursuit that still carries any reward.(From: The General Theory of Employment, Interest and Money)
  • The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds (Preface)
  • Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits—a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities
  • It would be foolish, in forming our expectations, to attach great weight to matters which are very uncertain. It is reasonable, therefore, to be guided to a considerable degree by the facts about which we feel somewhat confident, even though they may be less decisively relevant to the issue than other facts about which our knowledge is vague and scanty
  • The state of long-term expectation, upon which our decisions are based, does not solely depend, therefore, on the most probable forecast we can make. It also depends on the confidence with which we make this forecast – on how highly we rate the likelihood of our best forecast turning out quote wrong
  • Business men play a mixed game of skill and chance, the average results of which to the players are not know by those who take a hand.  If human nature felt no temptation to take a chance, no satisfaction in constructing a factory, railway, a mine or a farm, there might no be much investment merely as a result of cold calculation
  • In absence of security markets, there is no object in frequently attempting to revalue an investment to which we are committed. But he stock exchange revalues many investments every day and the revaluations give a frequent opportunity to the individual to revise his commitments
  • In point of fact, all sorts of considerations enter into the market valuation which are in no way relevant ot the prospective yield
  • A conventional valuation which is established as the outcome of the mass psychology of a large number of ignorant individuals is liable to change violently as the result of a sudden fluctuation of opinion due to factors which do not really make much difference to the prospective yield; since there will be no strong roots of conviction to hold it steady.
  • For most persons are, in fact, largely concerned, not with making superior long-term forecasts of the probable yield of an investment over its whole life, but with forecasts of the probable yield of an nvestment over its whole life, but with foreseeing changes in the conventional basis of valuation a short time ahead of the general public. They are concerned, not with what an investment is really worth to a man who buys it “for keeps”, but with what the market will value it at, under the influence of mass psychology, three months or a year hence.
  • We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be.
  • There is no clear evidence from experience that the investment policy which is socially advantageous coincides with that which is most profitable. It needs more intelligence to defeat the forces of time and our ignorance of the future than to beat the gun.
  • Finally it is the long-term investor, he who most promotes the public interest, who will in practice come in for most criticism, wherever investment funds are managed by committees or boards or banks. For it is in the essence of his behaviour that he should be eccentric, unconventional and rash in the eyes of average opinion.
  • Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.
  • Even outside of finance, AMericans are apt to be unduly interested in discovering what average opinion believes average opinion to be; and this national weakness finds its nemesis in the stock market
  • The spectacle of modern investment markets has sometimes moved me towards the conclusion that to make the purchase of an investment permanent and indissoluble, like marriage, expect by reason of death or other grave cause, might be a useful remedy for our contemporary evils. For this would force the investor to direct his mind to the long-term prospects and to those only.
  • Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than on a mathematical expectation.
  • But individual initiative will only be adequate when reasonable calculation is supplemented and supported by animal spirits, so that the thought of ultimate loss which often overtakes pioneers, as experience undoubtedly tells us and them, is put aside as a healthy man puts aside the expectation of death
  • In estimating the prospects of investment, we must have regard, therefore, to the nerves and hysteria and even the digestions and reactions to the weather of those upon whose spontaneous activity i t largely depends.


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