The Money Game

Putting your money in the stock market: is it a gamble, or is it an investment? Is the stock market influenced by the crowd mentality? Charts and graphs, computers, and market analysts—do they really make a difference? Systems—are there any that really work? Who really makes the big money? What is money, anyway? Do you really want to be rich? These are the many questions addressed in this pithy, witty, wise, and funny book on the stock market, written by one who’s been through the Wall Street wringer and kept his sanity to tell us about it. Written under the alias of Adam Smith, his real name is George J.W. Goodman, who is Harvard and Oxford educated. Published in 1967, not much has changed since then; the same rules still apply. The Wall Street Journal recently included “The Money Game” among the 15 best books on Wall Street investing that have stood the test of time. Caution: if you’re looking for some insight into making money on the Street, “The Money Game” is probably not for you.One of the main points of the book, which the author returns to again and again, is that the stock market is a game. Those who make lots money see it as such, where the real object is not to make money but to play the game. They are the precious few investors who see money not as an end but as a means of keeping score. Smith cites cases where investors who made a killing on the Street retired early only to become bored with their yachts and their Ferraris and their endless afternoons on the golf course. They missed the action. What did they do? Return to Wall Street to take up the game once again. Can smart investing be taught? No. It’s a kind of locked-in concentration, an intuition, a feel for what’s going on. Either you have it or you don’t. Even the best investors start out by making mistakes, and learning from them. Says one very successful investor: “When I look back, my life seems to be an endless chain of mistakes.” The market is ruled by greed and fear, and possesses a herd mentality. After all, what’s more galling than to see someone making money when you’re not. What do they know you don’t? Probably not much, says the author, and very likely will lose the money they made. He cautions never to follow the crowd. The crowd is “excessively emotional, impulsive, inconsistent, irresolute and extreme in action, incapable of any but the simpler and imperfect form of reasoning, like an unruly child.” If you must invest, do your homework. There is no substitute for information. The market is not a roulette wheel. Good research and good ideas are the one absolute necessity in the marketplace. And know yourself. Be able to step away and observe your actions with disinterest. The Street is an expensive place to learn who your are.And what of money with all its allure? Money is “condensed wealth; condensed wealth is condensed guilt. But guilt is essentially unclean.” People who became rich often try to ease their guilt by making large donations to charities. The apparent accumulation of wealth “is really impoverishment of human nature,” says Smith. At the end of the book, the author questions whether or not the money game is really worth the effort, whether making money on the street is all that’s cracked up to be. The author quotes famed economist John Maynard Keynes that the day will come when avarice and usury are no longer our gods, when mere wealth will no longer be of social import, morals will change, and “we shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some the of the most distasteful of human qualities into the position of the highest values. . . .” When that day will come Keynes doesn't say. “The Money Game” is a sort of old-fashioned morality tale, about the pitfalls and evils of making money, where all but a few accumulate anything like real wealth. And of what purpose for those who do? To be merely rich? Is that what life is about it? What about the enjoyment of art, a good book, a walk in the park, being with family, serenity itself? As I said above, if you’re looking for an angle to making money, this book is not for you. But if you’re looking for a good yarn, a bit of wisdom, and humor, you’ll enjoy this book very much. Quoting the Wall Street Journal article: “Reading this mockery can help sharpen your own skepticism toward the next new investment idea—which almost certainly will turn out to be neither great nor new.” Final note: The book is divided into five sections: (I) You: Identity, Anxiety, Money; (II) Systems; (III) They: The Pros; (IV) Visions of the Apocalypse; and (V) Visions of the Millennium.

Every generation, a writer and their books pop up that show the back end of Wall Street and its ilk running back to Bagehot’s “Lombard Street”. There was then Livermore’s Reminiscences of a Stock Operator, and Schwed’s “Where Are the Customers' Yachts?” The generation before me had Michael Lewis and his “Liar’s Poker.” You may say that he is contemporary, since he is still writing, but that book made his name, and he hasn’t worked on the street since. He’s more of an outsider now – in fact, “Liar’s Poker” just got a rerelease for its 25th anniversary. Our generation lacks our defining book. The writers who might have written those books are still grappling with the legacy of the 2008 financial crisis.But I digress. Then if Lewis was for our fathers, the Adam Smith was for our grandfathers. It is an interesting read in the more things change, the more they stay the same sort of way. Some of the references are dated, but others are remarkably contemporary. One example is traders talking about the income potential of shale gas out west to produce once technology comes on line. There is a joke that they have always been waiting for technology to extract the oil, at least since the thirties. You know what the new technology was that was so promising 50 years ago? Drillers were going to plant small nuclear devices down wells to make them produce. It makes the current fracking debate seem quaint – oh, what’s a little flammable hydrocarbon in your water matter? It could have been much worse. That’s just a tiny part of the book. There’s also some good advice built in. For example, I flagged “If you know the stock doesn’t know you own it, then your ahead of the game” (72), which is evergreen advice against getting stuck in the sunk cost fallacy. There’s also worries that computers will take over and the value of the dollar will go down – which also seems familiar. Overall, this book is well worth a read for someone who is interested in the history of the market or even someone looking for advice in today’s market.