The idea of a higher standard for professionals is not new. So, let’s go back in history to learn from the wisdom of our predecessors. We will start in 1759 with Adam Smith, then on to 1949 and Benjamin Graham, and finally, if you will, to the investment philosophy that I have developed during my own 65-year career.
Ultimately, the future of today’s beleaguered financial system will depend on the actions of enlightened, intelligent investment professionals who consider the interests of their clients and our society their highest priority. Prudence will again emerge as the central investment strategy, an idea that Adam Smith clearly and persuasively endorsed in his Theory of Moral Sentiments way back in 1759:
“The care of . . . the fortune . . . is considered as the proper business of that virtue which is commonly called Prudence. . . . Security, therefore, is the first and the principal object. . . . [Prudence] is rather cautious than enterprising, and more anxious to preserve the advantages which we already possess, than forward to prompt us to the acquisition of still greater advantages. . . .”
The Prudent Man
“The prudent man always studies seriously and earnestly to understand whatever he professes to understand, and not merely to persuade other people that he understands it; and though his talents may not always be very brilliant, they are always perfectly genuine. He neither endeavors to impose upon you by the cunning devices of an artful impostor, nor by the arrogant airs of an assuming pedant, nor by the confident assertions of a superficial and imprudent pretender. He is not ostentatious even of the abilities which he really possesses. His conversation is simple and modest, and he is averse to all the quackish arts by which other people so frequently thrust themselves into public notice and reputation. For reputation in his profession, he is naturally disposed to rely a good deal upon the solidity of his knowledge and abilities. . . .
“In the steadiness of his industry and frugality, in his steadily sacrificing the ease and enjoyment of the present moment for the probable expectation of the still greater ease and enjoyment of a more distant but more lasting period of time, the prudent man is always both supported and rewarded by the entire approbation of the impartial spectator . . . the man within the breast, the great judge and arbiter of our conduct. . . .”