The Money Game
by Adam Smith
Apr 2002
Equal parts humor and wisdom
Much to my surprise, I find myself in agreement with a prize winning economist. (Paul Samuelson has dubbed The Money Game a "modern classic," and it is).
A brief but insanely great read, Adam Smith made me laugh out loud at least half a dozen times with his dry sarcasm and sardonic wit. If Reminiscences of a Stock Operator is an all-time ultimate classic for traders, then The Money Game is one of the all-time ultimate classics for investors.
Written almost a decade before I was born, the book is just as relevant today as it was in the latter half of the sixties. The high flyers Smith writes about are so similar to those of the 1990's bubble, it is literally as if nothing but the symbols have changed (and perhaps the clothing styles). Sixties screamers like Brunswick and Solectron were bid up to hundreds of times earnings, then flamed out and fell through the floor with spectacular declines of 90% or more… just like the JNPR's and CMGI's and JDSU's of our more ‘enlightened' age. The Great Winfield, master tape reader of his day, is the perfect 1960's equivalent to the dotcom daytrader banging bids on Island or Selectnet. The technical analysts of the sixties, with their punch cards and their vacuum tube computers, are in perfect harmony with the high powered number crunchers and stochastics trackers of today.
And when Smith discusses the complete and utter wackiness of corporate accounting methods, complete with a hundred and one ways to massage earnings statements six ways to Sunday while technically remaining within the law, you would swear he is foreshadowing the fall of Enron. And of course there is good old John Jerk, proud representative of the uninformed public… buying high, selling low, and generally getting taken behind the woodshed, just as he still is today.
The old hands are always saying that the game is the same. (Jesse Livermore said it 80 years ago… no doubt some ancient mariner passed such words on to him.) Young gunslingers and wet behind the ears traders nod and smile, because they know the old timers are wise—yet the youngsters are still naïve enough to harbor doubts in the back of their minds as to whether it is true. Is the game really and truly always the same? Couldn't it be different this time? Couldn't it?
The Money Game goes a long way in putting the question to rest. There is no way a book written in 1966 could sound perfectly suited to 2001, no way that bowling stocks and fiber-optic packet-switching stocks could give near identical performances under mania circumstances, unless the game is indefinitely, immutably the same.
And why shouldn't it be? We can put a man on the moon, but we certainly aren't any more humble or mature than we were yesterday. Our collective knowledge may increase, but greed and fear do as brisk a business as ever.
Bravo Adam Smith (or should I say George Goodman). I don't know if you are even still alive to read this praise, but your book is as fresh today as it was the day you wrote it.
