The Evolution of Value Investing: Graham to Buffett to Munger
How value investing evolved across three generations — from Benjamin Graham's net-net strategy to Buffett's quality-focused approach and Munger's mental models framework.
Benjamin Graham: The Father of Value Investing
Benjamin Graham established value investing in the 1930s with Security Analysis and The Intelligent Investor. His approach was purely quantitative: buy stocks trading below their net current asset value (NCAV), providing a margin of safety against permanent capital loss.
Warren Buffett: From Cigar Butts to Wonderful Businesses
Buffett started as Graham's student, buying "cigar butt" stocks with one last puff left. But under Munger's influence, he shifted to buying wonderful businesses at fair prices. This evolution — from pure quantitative screens to qualitative business assessment — is the defining arc of Buffett's career.
Charlie Munger: The Mental Models Revolution
Munger introduced multidisciplinary thinking to investing. Rather than relying solely on financial statements, he advocates building a latticework of mental models from psychology, economics, biology, and physics. This approach helps investors understand competitive advantages that don't appear on balance sheets.
The Modern Synthesis
Today's value investors combine all three approaches: Graham's discipline around price, Buffett's focus on business quality and competitive moats, and Munger's insistence on understanding the wider world that shapes business outcomes.