Chapter 12 of The General Theory of Employment, Interest and Money is more about psychology and sentiment than number crunching models.
Our knowledge of the factors which will govern the yield of an investment some years hence is usually slight and often negligible.
If human nature felt no temptation to take a chance, no satisfaction in constructing a factory, a railway, a mine or a farm, there might not be much investment merely as a result of cold calculation.
The daily revaluations of the Stock Exchange, though they are primarily made to facilitate transfers of old investments between one individual and another, inevitably exact a decisive influence on the rate of current investment.
For there is no sense in building up a new enterprise at a cost greater than that which a similar enterprise can be purchased; whilst there is an inducement to spend on a project what may seem like an extravagant sum, if it can be floated off on the stock exchange at an immediate profit (tobin's Q).
Conventional valuation is established by the mass psychology of a large number of ignorant individuals...the market will be subject to waves of optimistic and pessimistic sentiment.
The social object of skilled investment should be to defeat the dark forces of time and ignorance which envelope our future.
The private object of the most skilled investor is to beat the gun...to outwit the crowd, and to pass the bad, or depreciating, half-crown to the other fellow.
A game of Old Maid, of Musical Chairs - a pastime in which he is victor who passes the Old Maid to his neighbor before the game is over, who secures a chair for himself before the music stops.
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