Having charted my grandfather’s course to Wall Street, I’m driven to find out how Benjamin Graham developed value investing. What experiences sparked the creation of his famed investment strategy? Surely Ben Graham, a prolific man of letters, must have revealed something on that subject. Eagerly, I bury my nose in his books. I find nothing, a void that impels this granddaughter to turn sleuth. I resolve to look more closely—to scour his life for clues that might solve the mystery of how Benjamin Graham became “the father of value investing.”

 

 

Once again, I open his iconic work, the 75^th anniversary edition of The Intelligent Investor with its promising subtitle: “The Definitive Book on Value Investing.” Ever since Warren Buffett called it “the best book on investing ever written,” The Intelligent Investor has been a massive multi-edition bestseller. I peruse the table of contents and the index. “Value investing” does not appear. That strikes me as odd. I email Jason Zweig, the eminent financial columnist for The Wall Street Journal who wrote the commentary for the 2024 edition, to ask him if the term appears in the book.

 

Ben Graham Never Used the Phrase

Mr. Zweig kindly gives me more than I asked for. He replies: “You ask a complicated question. To the best of my knowledge, Ben Graham never used the phrase ‘value investing’ either in his books or any of his speeches.”

This revelation surprises me. Still, Mr. Zweig sends me a link to Benjamin Graham’s 1974 speech, where Ben refers to his investment style as the “value approach.” And in The Intelligent Investor, Ben Graham does teach his readers about value investing by discussing its key elements—investment versus speculation, security analysis, per share earnings, emotional discipline, value, and margin of safety. But, dear reader, he does not tell us where those ideas came from.

 

What is Value Investing?

Value investing is a methodology for finding and buying stocks and bonds that are priced well below their worth. As Adam Hayes sums up in Investopedia: “The underlying logic of value investing is to purchase assets for less than they are currently worth, hold them for the long-term, and profit when they return to the intrinsic value or above.” Simply put, value investing entails shopping for high-quality Wall Street bargains.

 

How Ben Remembers His Mother

Shopping for bargains? In that case, Ben’s early life could have played a formative role. I page through his autobiography, Benjamin Graham: The Memoirs of the Dean of Wall Street. Ben was the youngest of three sons. His father died when he was eight, and his mother became his most powerful influence. Ben’s recollection of her, looking back sixty years, stops me in my tracks:

“Mother was…averse to work or concentrated effort, unless absolutely necessary… She developed quite an art of transferring household chores to her sons. We got our own breakfast while Mother slept late… We boys didn’t cook dinner but we dried the dishes, made the beds, pushed the carpet sweeper. I ran most of the errands—which meant that I did most of the shopping.”

 

That’s unusual, for three kids to make their own breakfast and get themselves off to school while their mother sleeps—until 10 a.m., he later specifies. Ben “ran most of the errands and did most of the shopping.” The family was practically penniless. Ben’s father Isaac, their breadwinner, was dead. They lived off handouts from Ben’s Uncle Maurice, his mother’s brother, and the paltry earnings of Ben and his brothers, gleaned from their after-school jobs. They couldn’t afford to do much shopping—except for food.

 

Ben Graham Did the Grocery Shopping

Grocery shopping primarily fell to women and girls in the early 1900s, and often still does. Suddenly I recall that Ben’s mother, Dorothy, had yearned for a daughter—so much so that she felt the urge to throw newborn Ben out the window because he was a boy. Dorothy hung multiple variants of the same professional portrait in their home, circa 1896, which depicted Ben as a toddler wearing what appears to be girlish attire.

 

 

Ben strove not only to be the perfect son but also to be—in this one respect—the daughter his mother had always wanted. Her helpful child who did the shopping. I find confirmation in Ben’s unpublished memoir, when he reveals that in his forties, he still brought his mother a bag of groceries each time he visited her. She was not employed and had time on her hands; he was still the helpful child, supporting her, working hard as a fund manager.

In Ben’s youth, Dorothy’s food budget was awfully tight. Ben had already tried his hand at shopping for bargains for himself, such as high-quality baseballs for ten cents and secondhand tennis balls priced at three for twenty-five cents. Could there be a connection between my grandfather’s boyhood chore and his iconic development of value investing?

 

Young Ben Goes to the Butcher Shop

Ben gives us scant information about his shopping trips, so I conjure a fictional dramatization based on the hints he left. My young grandfather sets out after school to buy the food his mother requested—say, liver and onions—for her to cook that night. I picture this adorable, curly-headed, small-of-stature boy, striding purposefully down the sidewalk. When he sees friends playing stoopball, street hockey, or “cat,” he waves and marches on, determined to accomplish his task.

He veers around a boy purchasing freshly roasted peanuts from a street vendor, a boy like the one atop this post. Salivating at the rich, nutty aroma, Ben rushes past, too short of time and money to buy himself a snack. Smart as a whip, Ben shoulders the burden of knowing that he must stretch the quarters in his pocket to feed a family of four. He must pay the lowest possible price for the highest quality food he can find. He dodges a trio of those “older, bigger” boys who were his youthful nemeses—boys who derided him with antisemitic taunts, tripped him, spat at him, or sometimes worse. (He remembers in the Memoirs that his mother took no notice of his bruises and resented it when his trousers required her to mend them.)

 

Ben ducks into a butcher shop like the one pictured above. He stands in a line of women, awaiting his turn to get the attention of a white-coated butcher, who by this late hour likely sports bloodstains on his smock. Quickly, Ben assesses the liver on display and points to a piece of day-old liver that hasn’t yet developed the slime or gray color that signifies spoilage. He asks the cost and nods his approval when the man behind the counter offers a fair price, lower than the posted price for “fresh.”

Later, sitting at the table with his brothers and mother, he cuts a chunk of meat, chews, and smiles into his plate. He did it! He purchased good liver at a bargain price. He glances at his mother, knowing he can only hope for an absence of disapproval. He has become inured to her ways—of keeping her distance, of not expressing affection or appreciation. A second bite melts on his tongue. His reward is a tasty meal.

 

How Benjamin Graham Discovered the Kernel of Value Investing in a Chore

Now it hits me. Benjamin Graham, the boy, bought bargain food with value. Benjamin Graham, the man, bought bargain stocks with value.

I’m ready to bet that this unique experience for a boy—shopping for groceries on a meager budget—shaped Benjamin Graham’s future development of value investing. But he never tells us that. I can’t know for sure.

 

Proof!

 

 

One day, in search of early references to value investing, I take out my old copy of The Intelligent Investor—the book my grandfather inscribed for me in 1973. Eyeing the cover, I notice that the subtitle has changed. The new 2024 edition is subtitled “The Definitive Book on Value Investing.” The old 1973 edition sports a lengthy subtitle that includes “the indispensable guide to sound investing.” I turn over the book and scan the back cover.

 

 

Benjamin Graham’s Secret Skill

That’s where I find this amazing quote:

“In an article in a women’s magazine many years ago we advised the readers to buy their stocks as they bought their groceries, not as they bought their perfume.”

 

Wow. Ben Graham knew how women bought groceries. Here at last is evidence of Benjamin Graham’s secret skill, possessed by none of his fellow professionals employed at brokerage firms. I’d venture a guess that Ben’s fellow professionals didn’t deign to write investment articles for women’s magazines, either. Imagine my wonderment to find Ben essentially giving this advice—to men and women—on his book jacket: “Buy stocks the way you buy groceries.”

Benjamin Graham could have chosen any lines from the book to grace his back cover. He could have chosen the paragraph from Chapter 8, which Zweig calls “the single most important paragraph about investing ever written,” about resisting the urge to be “stampeded” into selling one’s shares in a declining market. He could have chosen a photo of himself and praise for the book. Instead, Ben Graham chose the passage about groceries.

 

Ben Graham Always Asked “How Much?”

Ben has more to say on the book’s back cover, which I later determine consists of an excerpt from the introduction.

 

“The really dreadful losses of the past few years (and on many similar occasions before) were realized in those common-stock issues where the buyer forgot to ask ‘How much?’”

 

Ben, the small boy with scant cash in his pocket, never bought anything—neither liver nor onions, apples nor oranges, used tennis balls nor baseballs—without first calling out in his bright, clear voice: “How much?” His sharp mind quickly analyzed: Is this item priced low enough to be worth buying?

 

The Sole Wall Streeter

Benjamin Graham was likely the sole Wall Streeter with a wealth of experience buying groceries. His colleagues had never gone to the greengrocer, the butcher, or the baker, never pointed and said, “How much?” Ben Graham had asked that question hundreds of times.

 

Perfume is Always Priced High

Many men do buy perfume, usually as a gift for a woman. The buyer chooses a particular scent by name, such as Chanel N°5 or Guerlain Shalimar. Today, if they want Shalimar, they pay the $390 price. In Ben’s day, stocks like General Electric and U.S. Steel were the perfumes of the stock market. If investors wanted shares in those big-name companies, they paid the price.

Ben needed to pay the lowest price for the best quality food he could find. Innumerable women and girls who lived on the edge of poverty, as he and his family did, accomplished this same task. Why didn’t some savvy woman shopper invent value investing?

 

Women Were Not Welcome

In the 1910s and ’20s, when Ben launched his career, no woman held an investing job on Wall Street. No woman had the opportunity to become a statistician like Ben did. A statistician was the precursor of the profession we now call “financial analyst.” No woman had the chance to analyze stocks and bonds or to determine which ones were selling at prices significantly below their value.

The financial district was hostile territory for women. A few women found employment as typists, but not in finance, banking, trading, or on the floor of the New York Stock Exchange. That august institution did not admit its first female member until 1967, when Muriel Siebert paid nearly half a million dollars to buy a seat. Despite this, she still had to use a male proxy in order to avoid setting foot on the floor, where she was unwelcome.

 

 

Half a century prior, when a bomb exploded on September 16, 1920 during the financial district’s lunch rush, news photographers captured a sea of male fedoras. No women are visible among the onlookers.

 

Ben Knew and Respected the First Women Security Analysts

Ben Graham’s decision to write an (unspecified) article for a women’s magazine, perhaps in the ’60s, when finance was not a popular ladies’ topic, may have arisen from his esteem for the first two women analysts he had known. In his Memoirs, he writes that in the late ’30s, he attended the monthly gatherings of security analysts at the home of Helen Slade:

“There were a dozen prominent figures who found her indispensable, some speaking to her daily over the phone. For years—until her final illness—she was the moving spirit behind The Financial Analyst’s Journal… She was a great and intensely loyal friend of mine. ”

  

 

In his unpublished memoir, he also writes about former “musical-comedy star” Edna Wallace Hopper, who lost and made fortunes prior to mastering “the art and semi-science of ‘speculative investment’” and attending the security analysis soirees hosted by Helen Slade. Ben saw no reason why women couldn’t be shrewd investors like Hopper and Slade.

 

The Benefits of a Matriarchal Family

Benjamin Graham gained a crucial advantage from growing up in a matriarchal family, where his mother reigned supreme and assigned household chores without regard to traditional male and female roles. He brought his experience of grocery shopping on a shoestring budget to the ultra-masculine culture of Wall Street. He also brought his stellar all-boys education at the New York public schools and Columbia, his keen mathematical mind, and his gift for original thinking. How remarkable that he developed value investing by merging his knowledge of shopping for undervalued liver, onions, and potatoes with his drive to make big money on the stock market.

 

Dwelling in the Space Between the Patriarchal and Matriarchal Worlds

Benjamin Graham stood with one foot planted in the patriarchal world of Wall Street and one foot planted in the matriarchal world of his wife and his mother. Some of my greatest heroes—from Florence Nightingale to Gandhi, Thurgood Marshall to Malala Yousafzai—meld traditional feminine qualities, such as compassion for those who suffer, with the traditional masculine quality of courage to stand up to power. I’m not elevating my grandfather into this stratosphere. I’m only observing that by wielding the feminine and masculine aspects of his life experience, he gained a unique perspective that sparked his enduring contribution to investment thinking.

 

Embracing the Masculine and Feminine in Ourselves

Ben’s journey exemplifies how all of us can reap rewards from embodying traditionally masculine traits, such as toughness and resoluteness, as well as traditionally feminine traits, such as empathy and generosity. My grandfather manifested qualities that were lacking in his early life—caring and compassion for others. (I see his emotionally unavailable mother as having been short on these capacities.) I’m deeply grateful that Ben evinced kindness and friendliness and bore a magnanimous wish to help others avoid financial ruin. By teaching Security Analysis at Columbia Business School starting in 1928 and publishing his investment strategies in The Intelligent Investor in 1949, he generously gave, to everyone seeking to learn, the sound principles he developed to help investors find financial security. In Forbes Greatest Investment Stories, contributing editor Richard Phalon offers this apt quote from Warren Buffett, Ben Graham’s most prominent protégé: “I benefited enormously from the intellectual generosity of Ben Graham, the greatest teacher in the history of finance.”

 

From Stone-Broke Son to “Father of Value Investing”

Benjamin Graham also shows us that our youthful difficulties—in his case, living on the edge of poverty and complying with his mother’s demands that he do typically female chores—can incite creativity. His boyhood burden taught Ben a skill that became the crux of his acclaimed achievement. The son who shopped for bargains metamorphosed into the father of value investing.