1965 - Prices are Random

Watching Grass Grow
Watching Grass Grow
Paul Samuelson

In 1970, MIT Professor of Economics Paul Samuelson was the first American to be awarded a Nobel Prize in Economics. Samuelson has long been credited with contributing more than any other contemporary economist to raising the analytical and methodological levels of economic science. Influenced greatly by Louis Bachelier, Samuelson proved, expanded and refined Bachelier's work in his famous paper, "Proof that Properly Anticipated Prices Fluctuate Randomly,"1  published in 1965. His findings can be summarized as follows: a) market prices are the best estimates of value;
b) price changes follow random patterns; and c) future news and stock prices are unpredictable. Samuelson's wisdom is reflected in his words, "Investing should be dull, like watching paint dry or grass grow. If you want excitement, take $800 and go to Las Vegas. It is not easy to get rich in Las Vegas, at Churchill Downs, or at the local Merrill Lynch office." The painting on the next page illustrates Samuelson's belief that investing should provide as much excitement as watching grass grow.

    -1 Paul Samuelson, "Proof That Properly Anticipated Prices Fluctuate Randomly," Industrial Management Review 6 (1965): 41.
Step 2Paul SamuelsonNobel Prize in EconomicsLouis Bachelier