There Is Nothing So Disastrous As a Rational Investment Policy In an Irrational World

John Maynard Keynes? Milton Friedman? A. Gary Shilling? Albert J. Hettinger, Jr.? Apocryphal?

Dear Quote Investigator: Forbes magazine has a fascinating searchable database called “Thoughts On The Business of Life” that contains “more than 10,000 quotes.” The following saying interests me, but the database doesn’t appear to include citations so I am not sure if it is accurate [MKFQ]:

There is nothing so disastrous as a rational investment policy in an irrational world.

— John Maynard Keynes

Can you find out when and where Keynes said this?

Quote Investigator: The earliest evidence QI has located for this saying is dated 1963. It appeared in the book “A Monetary History of the United States 1867-1960” by Milton Friedman and Anna Jacobson Schwartz, but the words were not written by Friedman or Schwartz. Near the end of the volume a commentary by Albert J. Hettinger, Jr. was appended and the following passage was included [AHMK]:

And Lord Keynes, here a “decision maker,” told the 1931 annual meeting of the investment trust of which he was chairman: “I have reluctantly reached the conclusion that nothing is more suicidal than a rational investment policy in an irrational world” (quoted from memory, without verification of exact phraseology).

So Hettinger in 1963 presented a quotation that he attributed to Keynes speaking in 1931. But Hettinger explicitly disclaimed knowledge of the precise wording used by Keynes. Later writers used a different phrasing that replaced “more suicidal than” with “so disastrous as” to yield the most common modern version of the saying.

Keynes died in 1946. Here are additional selected citations in chronological order.

In 1964 a column by the investment banker and financial writer Gerald Loeb in the Boston Globe reprinted the Keynes quote. The words appeared at the very end of the column, and the saying was streamlined by the omission of the initial phrase containing the word “reluctantly” [GLMK]:

John Maynard Keynes – “Nothing is more suicidal than a rational investment policy in an irrational world.”

In 1965 the book “The Great Contraction 1929-1933” by Milton Friedman and Anna Jacobson Schwartz was published. This work reprinted a section of the larger monetary history that was released in 1963. The commentary by Albert J. Hettinger, Jr. was included, and therefore the quotation attributed to Keynes was further disseminated via this shorter volume [GCMK].

In 1967 the book “Investment Analysis and Portfolio Management” featured a version of the maxim as an epigraph for a chapter. This citation was the first instance located by QI that used the sub-phrase “so disastrous as” instead of “more suicidal than” [IPMK]:

There is nothing so disastrous as a rational investment policy in an irrational world.

— John Maynard Keynes

In 1968 the popular business book “The Money Game” by the pseudonymous author Adam Smith was released. It contained a version of the saying ascribed to Keynes that was identical to that given in the 1967 cite listed above. George Goodman was the name of the man behind the moniker Adam Smith, and his book was a number one seller in 1968.  This widely distributed version of the remark now occurs more frequently than the 1963 version [ASMK]:

“There is nothing so disastrous,” said Lord Keynes, “as a rational investment policy in an irrational world.”

“The Money Game” was reviewed by multiple media organs, and sometimes the quote credited to Keynes was reprinted. For example, the review in Life magazine included this [LMMK]:

Smith sits in his absolutely tip-top club, sniffing brandy, smoking pre-Castro Havanas and plucking Keynes aphorisms out of the air (“There is nothing so disastrous as a rational investment policy in an irrational world”).

The role of Hettinger in transmitting the maxim of Keynes was not completely forgotten. In 1991 “The Great Myths of 1929 and the Lessons to Be Learned” was published and the author traced the saying to the same monetary history text that QI cited at the beginning of this post [HBMK]:

Albert J. Hettinger, Jr., a partner in Lazard Freres and Company, attributed to John M. Keynes the following wisdom: “I have reluctantly reached the conclusion that nothing is more suicidal than a rational investment policy in an irrational world.”

In 1993 A. Gary Shilling, a financial analyst and columnist, published an article in Forbes magazine that included a statement displaying concordance with the quotation under investigation [AGSF]:

Above all, in 1993 remember this: Markets can remain irrational a lot longer than you and I can remain solvent.

This congruity may have influenced its attribution because at some point in the 1990s the words were reassigned, and Keynes received credit for the expression. Here is a link to the QI blog post on this topic.

Also, during the 1990s another variant of the quotation emerged. Here is an example from the Philadelphia Inquirer in 1999 with the word “dangerous” instead of “disastrous” [PEMK]:

Citing John Maynard Keynes’ dictum that “there is nothing so dangerous as the pursuit of a rational investment policy in an irrational world,” Werner de Bondt of the University of Wisconsin unleashed an avalanche of international data suggesting that investors flock to pricey stocks that have done well in the past and ignore less fashionable securities.

In conclusion, the earliest cite known to QI for this apothegm is dated seventeen years after the death of Keynes, and the conveyor of the words admitted to uncertainty regarding the phrasing. Perhaps the minutes of the 1931 meeting mentioned by Hettinger are available somewhere? Without more evidence QI thinks this attribution is not very strong. But in QI’s opinion whoever crafted this maxim displayed great insight.

[MKFQ] Forbes magazine database “Thoughts On The Business of Life”, Quotation attributed to John Maynard Keynes. (Accessed thoughts.forbes.com on 2011 August 5) link

[AHMK] 1963, A Monetary History of the United States 1867-1960 by Milton Friedman and Anna Jacobson Schwartz, [Director’s Comment by Albert J. Hettinger, Jr., Partner, Lazard Frères and Company], Start Page 809, Quote Page 810, Princeton University Press, Princeton, New Jersey. (Verified on paper)

[GLMK] 1964 December 13, Boston Globe, “‘Contra-Plungers’: Can Investors Make Hay By Swimming Upstream?” by Gerald Loeb, Page A23, Boston, Massachusetts. (ProQuest)

[GCMK] 1965, The Great Contraction 1929-1933 by Milton Friedman and Anna Jacobson Schwartz, [Director’s Comment by Albert J. Hettinger, Jr., Partner, Lazard Frères and Company], Start Page 125, Quote Page 126, Princeton University Press, Princeton, New Jersey. (Verified on paper)

[IPMK] 1967, Investment Analysis and Portfolio Management by Jerome B. Cohen and Edward D. Zinbarg, [Chapter 14 epigraph quotation], Page 503, Richard D. Irwin Inc., Homewood, Illinois. (Verified on paper)

[ASMK] 1968, The Money Game by Adam Smith, Page 154, Random House, New York. (Verified on paper)

[LMMK] 1968 December 20, Life, Life Book Review: A Few Fine Fish That Almost Got Away by Melvin Maddocks, Page 6, Time Inc., New York. (Google Books full view)

[HBMK] 1991, The Great Myths of 1929 and the Lessons to Be Learned by Harold Bierman Jr., Page 188, Greenwood Press, New York. (Questia)

[AGSF] 1993 February 15, Forbes, Scoreboard by A. Gary Shilling, Page 236, Volume 151, Issue 4, Forbes Inc., New York. (ProQuest)

[PEMK] 1999 March 21, Philadelphia Inquirer, Seeking the Sense in the Behavior of the Investing Public: Whether a Stock Goes Up Or Down Has Less To Do With “Fundamentals” Than With Feelings, Studies Suggest by Joseph N. DiStefano, Section Business, Page C01, Philadelphia, Pennsylvania. (NewsBank)