32 ATaleofTwoMarkets
a business has experienced as grounds for gauging its future business
performance. The earnings and cash flows are what give a business
value and what are of interest; market prices do not, and β is
therefore of no interest to a business analyst.
As the vogue of mathematical investing approaches raged in the
late 1960s, Ben Graham declared that treating volatility in price
changes as the meaning of ris kis “more harmful than useful for
sound investment decisions because it places too much emphasis on
market fluctuations.”^19 EMT sought to neutralize that objection by
saying that market fluctuations were simply rational price changes
reflecting information changes. Just so. Yet some things are not that
simple. Charlie Munger is fond of quoting Einstein on this point:
Everything should be made as simple as possible, but no more so.^20
Graham continues to be right.