Mr. Market

Mr. Market is Benjamin Graham's allegory: a manic-depressive partner who shows up every day and offers to buy your share of the business or sell you his at a price. Some days he's euphoric and bids high; other days he's despondent and offers to sell cheap. Your job is not to let his mood dictate your behaviour. You can say no. You can take his offer when the price is silly in your favour and ignore him when it isn't. The market is a quoting mechanism, not a weighing machine — it tells you what others will pay, not what something is worth.

Graham introduced the idea in The Intelligent Investor (1949). The point is psychological and practical. Prices move for reasons that have nothing to do with the underlying business: fear, greed, momentum, flows, macro noise. If you treat the market as a source of truth about value, you will overpay when others are euphoric and sell when they are panicked. If you treat the market as a sometimes-useful, often-mad counterparty, you can use it — buy when Mr. Market is depressed and selling low, sell or stand aside when he's manic and bidding high. The edge is in knowing the difference between price and value, and in having the temperament to act only when the spread is in your favour.

The model extends beyond stocks. Any setting where you transact with a market — hiring (the job market), M&A (the market for companies), real estate, talent — has a Mr. Market. The counterparty's mood and liquidity create prices that can diverge from your estimate of value. The discipline is the same: have your own view of value, and treat the market as an option to trade when the spread is attractive, not as a verdict.