By Warren Buffett (via Benjamin Graham)
In the short run, the market is a voting machine but in the long run, it is a weighing machine.
— Warren Buffett (via Benjamin Graham)
This popular formulation comes from Warren Buffett, refining ideas from his mentor Benjamin Graham.
In Security Analysis (1934), Graham and Dodd wrote: “The market is not a weighing machine… Rather should we say that the market is a voting machine, whereon countless individuals register choices which are the product partly of reason and partly of emotion.”
Graham originally said the market is not a weighing machine. It was Buffett who added the insight that in the long run, it eventually becomes one.
Jeff Bezos in 2000, after Amazon’s share price had fallen over 80%:
Clearly there was a lot of voting going on in the boom year of ‘99—and much less weighing. We’re a company that wants to be weighed, and over time, we will be—over the long term, all companies are. In the meantime, we have our heads down working to build a heavier and heavier company.
The killer line: “We’re a company that wants to be weighed.”