Mr. Market: Paying Attention to the Right Things

By Jeff Copper, MBA, PCC, PCAC, CPCC, ACG – April 29, 2024

As an ADHD and attention coach, I frequently have individuals come to me for coaching because they are not getting the outcome they want. The majority of the time they are “stuck” because they are paying attention to how they believe something works (or how they believe it is supposed to work).

Take for example the stock market. Some individuals value a stock based on its current trading price while others value a stock based on its long-term inherent (or real/genuine) value. But are they paying attention to the right things and how they actually work?

The trick to coaching is to help the individuals attain clarity on how something actually works. If coaching is successful, they will move past how they believe it works and pay attention to a new belief of how it actually works. This clarity almost always points to other solutions that will work.

To illustrate the effect of what is paid attention to, I’d like to share with you something Warren Buffett, whom I consider to be the most successful investor of all time, wrote more than 20 years ago that I find helps to open our minds on a variety of topics from the economy, to investing, to human behavior:

Ben Graham, my friend and teacher, long ago described the mental attitude toward market fluctuations that I believe to be the most conducive to investment success. He said that you should imagine market quotations as coming from a remarkably accommodating fellow named Mr. Market, who is your partner in a private business. Without fail, Mr. Market appears daily and names a price at which he will either buy your interest or sell his.

Even though the business that the two of you own may have economic characteristics that are stable, Mr. Market’s quotation will be anything but. For, sad to say, the poor fellow has incorrigible emotional problems. At times, he feels euphoric and can see only the favorable factors affecting the business. In that mood, he names a very high buy/sell price, because he fears that you will snap up his interest and rob him of imminent gains. At other times, he is depressed and can see nothing but trouble ahead for both the business and the world. On these occasions, he will name a very low price, since he is terrified that you will unload your interest on him.

Mr. Market has another endearing characteristic: He doesn’t mind being ignored. If his quotation is uninteresting to you today, he will be back with a new one tomorrow. Transactions are strictly at your option. Under these conditions, the more manic-depressive his behavior, the better for you.

But, like Cinderella at the ball, you must heed one warning or everything will turn into pumpkins and mice: Mr. Market is there to serve you, not to guide you. It is his pocketbook, not his wisdom, that you will find useful. If he shows up someday in a particularly foolish mood, you are free to ignore him or take advantage of him, but it will be disastrous if you fall under the influence. Indeed, if you aren’t certain that you understand that you can value your business far better than Mr. Market, then you don’t belong in the game. As they say in poker, “If you have been in the game 30 minutes and you don’t know who the patsy is, you’re the patsy.”

Ben’s Mr. Market allegory may seem out of date in today’s investment world, in which most professionals and academians talk of efficient market, dynamic hedging and betas. Their interest in such matters is understandable, since techniques shrouded in mystery clearly have value to the purveyor of the investment advice. After all, what witch doctor has ever achieved fame and fortune by simply advising, “Take two aspirins”?

The value of the market esoterica to the consumer of investment advice is a different story. In my opinion, investment success will not be produced by arcane formulas, computer programs or “signals”/”buy” behavior of stocks in markets. Rather, an investor will succeed by coupling good business judgment with the ability to insulate his thoughts and behaviors from the superior contagious emotions that swirl about the marketplace. In my own efforts to stay insulated, I have found it highly useful to keep Ben’s Mr. Market concept firmly in mind.

Ben Graham’s Mr. Market metaphor illuminates contracting ways of paying attention to financial markets and how they work. Warren Buffett, whom reported to be the wealthiest man on earth as of March 5, 2008, is proof that outcomes are a function of paying attention to the right things and understanding how something actually works.

The parable said it best: “If you aren’t certain that you understand you can value your business far better than Mr. Market, then you don’t belong in the game.” So, if you have ADHD, are not paying attention to the right things, and don’t understand how it works, then, like they say in poker, “You’re the patsy.”

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