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QuestionerIn light of recent stock market volatility, could you give us your definition of stock market risk?
WarrenWe don't think in terms of, well, we think first in terms of business risk. The key to Graham's approach to investing is not thinking of stocks as stocks are part of a stock market. Stocks are part of a business. People in this room own a piece of a business. If the business does well, they're going to do all right, as long as they don't pay way too much to join into that business. The stock market is there to serve you and not to instruct you. And that's a key to owning a good business and getting rid of the risk that would otherwise exist in the market. You mentioned volatility. It doesn't make any difference to us whether the volatility of the stock market is average as a half a percent a day or a quarter percent of a day or five percent a day. In fact, we'd make a lot more money if volatility was higher because it could create. more mistakes in the market. So volatility is a huge plus to the real investor. Ben Graham used the example of Mr. Market, which is the, and we've used it. I've copied it in the report. I copy it from all the good writers. And Ben said, you know, just imagine that when you buy a stock that you, in effect, you've bought into a business where you have this obliging partner who comes around every day and offers you a price at which you'll either buy or sell. And the price is identical. And no one ever gets that in a private business where daily you get a buy, sell, off, or buy a party. But in the stock market, you get it. That's a huge advantage. And it's a bigger advantage if this partner of yours is a heavy drinking manic depressive. I mean, the crazier he is, the more money you're going to make. So as an investor, you love volatility, not if you're on margin. But if you're an investor, you aren't on margin. And if you're an investor, you love the idea of wild swings because it means more things you're going to get mispriced.