Introduction:TheQCulture xvii- The efficient market story is at most four-fifths true and investors
can take advantage of the remaining one-fifth - Traditional tools of financial analysis remain an investor’s best
friends but that earnings management and accounting manipula-
tion can be her worst enemies - Intelligent investors pay special attention to who the managers are
and whether they are trustworthy
Minding these Ps and Qs does not require enormous amounts
of work, although it does require large doses of common sense as
inoculation against Q fever.
This antidote takes you through the golden gates of the safer and
more prosperous V culture world. The consummate teacher of V
culture, Ben Graham, was also a successful practitioner. Warren
Buffett, the consummate student and practitioner, is also a teacher.
All good students take the lessons of their teachers and expand upon
them in application. Buffett is no exception, nor are the many other
Graham disciples who take the core lessons and extend them in a
variety of successful ways.†
Yet the differences are subtle to say the least. Buffett keeps in-
violate Graham’s core ideas that call for a business analysis mind-
set, attention to the differences between price and value, and in-
sisting on a margin of safety when making any investment. Only
minor differences in application come up, including and pretty much
limited to the following: Buffett places somewhat more significance
on the role of managers in investing, is less beholden to bargain
purchases of the type Graham favored, is a bit less committed to
diversification of stoc kinvestment, and pays more attention to in-
tangible asset values than did Graham. But these differences are not
only overshadowed by what is common, they also reflect a broader
unifying principle: the importance of independent judgment in in-
vesting.
Other Graham disciples choose different ways of applying the
main ideas—some diversifying enormously, others concentrating
enormously, and some paying far more or less attention to the un-
derlying nature of businesses. With temerity and great humility, this
boo koffers an account of Graham’s ideas and Buffett’s extension
and application of them that reflect the example and tradition. It is
†Warren Buffett, The Superinvestors of Graham and Doddsville,Hermes(Colum-
bia Business School), Fall 1984.