Are You Addicted to the Money Game?
Financial journalist Adam Smith interviewed wealthy investors about their motivation for playing the stock market. Their responses will surprise you.
“Ninety percent of investors don’t really care whether they make money or not.”
This bold statement is what financial writer Adam Smith (the pseudonym of George Goodman, best known for his Emmy Award-winning PBS program Adam Smith’s Money World) hypothesized in his 1968 bestseller The Money Game, hailed by The New York Times Book Review as “the best book there is about the stock market.”
To illustrate his point, Smith’s psychiatrist pal Harold allowed him to interview seven of his wealthy patients about their true motivations for investing in the stock market. In the excerpt below, three of these stories from Smith’s interviews reveal how emotions often play a vital role in investment decisions.
“I don’t really know anything about stocks,” said the bright-eyed pretty thing across the table. “But I love the market. All the men I know love to talk about the market, and if a girl can listen to them about the market, it makes them feel good.”
“So you talk to the men you go out with about the market,” I said. (I picked up this technique from Harold. You never really have to say anything, you just agree gently with what was just said and maybe form a question a tiny step forward from that.) “That’s where you find out what to buy.”
“Sometimes,” said the bright-eyed thing across the table. “I came out about even in those. Some of them went up and some of them went down. Right now I only have one stock, and I thought of that one all by myself.”
“You thought of that one all by yourself.” (You begin to see the technique. It helps if you have a pipe and go mmmm as well.) “And what is the stock you had yourself?”
“Comsat,” said the bright-eyed thing. “What do you think of Comsat?”
“What do you think of Comsat?” I said, with the proper turn-back technique.
“I just love it,” said this pretty girl. “I got it, well, right when it started, practically the first day. And it’s grown and grown. I just love it.”
I wanted to know what was so lovable about Comsat.
“It’s satellites, you know,” said the girl, stirring her Tab. “And rockets, and the future. I got it when it was twenty-two and now it’s seventy, and it was all my idea, by myself. Every time they fire off one of those satellites, I think, that’s mine, that’s my baby!”
“Do you know anything about the prospects for Comsat? What kind of money it’s making, or could make?”
“No. I don’t care. I don’t understand that anyway. I just love Comsat, and I’ll never sell it. I don’t care if it goes down.”
“You don’t care if it goes down?”
“No, I wouldn’t care. I won’t ever sell it. Some day it would come back up. It’s too well behaved to stay down; whenever it goes down it comes back up, anyway.”
“The men you go out with—what do they think of your Comsat?”
“Oh, they all have other stocks, but you know, Comsat is really something you can’t disapprove of.”
“A noble institution.”
“Yes, and it was all my idea.”
About a month after this lunch—which I had mentioned to him—I got a call from Harold.
“I thought you might like to see her again,” Harold said. “She just had another one.”
So the bright-eyed girl and I met again at the coffee shop.
“McDonnell Douglas,” she said. “What do you know about McDonnell Douglas?”
“What do you know about McDonnell Douglas?” I said.
“I think it’s very exciting. They’re in missiles and jets and things like that.”
“What happened to Comsat?”
“Nothing happened to Comsat. I still love Comsat. I always will. But you know, you don’t want to have just one, all alone.”
IBM AS RELIGION: DON’T TOUCH, DON’T TOUCH
Here are some short notes from a broker who happens to be on Harold’s circuit, all sworn and attested to be true.
Once upon a time there was a very astute gentleman we will call Mr. Smith. Mr. Smith was so astute that many, many years ago he invested in a company called International Tabulator, which was a predecessor of IBM. Mr. Smith had great faith in the company, which in due course became IBM, waxed fat, and prospered. Mr. Smith and Mrs. Smith had issue, and the children grew up to be nice children. Mr. Smith said to them, “Our family owns IBM, which is the greatest growth company in the world. I invested twenty thousand dollars in IBM and that twenty thousand has made me a millionaire. If something happens to me, whatever you do, don’t sell the IBM.” Mr. Smith himself never sold a share of IBM. Its dividends were meager, naturally, and so Mr. Smith had to work hard at his own business to provide for his growing family. But he did create a marvelous estate. Eventually he became a grandfather, and he made gifts of the stock dividends of IBM to his grandchildren. And at family Thanksgivings, he counseled: “If anything happens to me, whatever you do, don’t sell IBM.”
Mr. Smith died; the IBM was divided among his children. The estate sold only enough IBM to pay the estate taxes. Otherwise the children—now grown, with children of their own—followed their father’s dictum, and never sold a share of IBM. The IBM grew again, made up for what had been amputated to pay estate taxes, and each of the children grew as rich as Mr. Smith had been because the IBM kept growing and growing. They had to work quite hard at their own businesses, because their families were growing and their only money was in IBM. Only one of them even borrowed on his IBM, to get the down payment for a heavily mortgaged house. And the faithful children were rewarded by seeing IBM multiply and grow. Mr. Smith’s original $20,000 has become millions and millions.
The Smiths are now in their third generation of IBM ownership, and this generation is telling the next, “Whatever you do, don’t sell IBM.” And when someone dies, only enough IBM is sold to pay the estate taxes.
In short, for three generations the Smiths have worked as hard as their friends who had no money at all, and they have lived just as if they had no money at all, even though the various branches of the Smith family all put together are very wealthy indeed. And the IBM is there, nursed and watered and fed, the Genii of the House, growing away in the early hours of the morning when everyone is asleep. IBM has been so good to them that even after divisions among children and rounds of estate taxes they are all millionaires or nearly so.
Presumably the Smiths will go on, working hard, paying off their mortgages, and watching their IBM grow with joy, always blossom, never fruit. It is a parable of pure capitalism, never jam today and a case of jam tomorrow; but as any of the Smiths will tell you, anyone who has ever sold IBM has regretted it.
THE BROKER AS WITCH-DOCTOR
“You get into some strange situations,” said Harold’s friend the broker. “The customers who don’t get involved themselves and don’t understand anything about the market think you can actually make them money by some sort of mystical power if you really want to.
“I met a girl at a party, and when I told her what I did for a living she got quite interested. I met her for a drink the next day.
“‘I want you to make me fifty dollars,’ she said. ‘In the market. Just pick something that’s going to go up fifty dollars.’
“I said I thought we could do better than that, that the commissions would probably take away that first fifty dollars.
“‘You don’t understand,’ she said. ‘I love my husband, that’s why I’m meeting you here. I want to get him a jacket for his birthday, but I don’t have any money and I can’t ask him for money to buy him a present for himself. So could you make me fifty dollars?’
“I said again we’d have to try for a little better than that—and that I had no objections to trying—but she was adamant.
“‘I only want fifty dollars,’ she said, ‘and I don’t want any more than fifty dollars.’
“I suppose I should have just taken her phone number and then sent her fifty dollars later, saying I had made it in the market, but when I wanted to do better than the fifty dollars she finished her drink, said good-bye, and left.
“Then I have a client who is a surgeon. He’s been in some good long-term stocks and he’s done quite well. One day he came in and said he wanted me to take part of the account and trade it, every day. I wanted to know why.
“‘I ride home on the train at night,’ he said, ‘and everybody else turns to the stock page to see what happened that day. I don’t have anything to watch in the market.’
“So I opened another account for him and he watched it every night and it did well, so he had happy watching. They were pretty wild, swinging stocks, though, and that made him a bit nervous. He used to call me in the mornings.
“‘My God, I have to go in and operate in about ten minutes and all I can think about is California Computer,’ he said. ‘It went down yesterday. Will it go up today?’
“So I calmed him down and he went in and operated on a patient. The trading account did well and he said he wanted to send me a present. I told him I didn’t want a present, the commissions were quite enough. He said he wanted to send me a present anyway, and he did. It came in a little box, and it was a gland, a gland he’d cut out of some guy that he thought was the best job he’d done, and he wasn’t kidding, either. You know anybody wants a prostate gland in a little box?”