Hi Doug,

Thank you for your passionate response to the topic of margin of safety. I share your passion for the conversation, too!

As I indicated in the piece there is no agreed upon quantitative definition of margin of safety. If you hunt through all of the materials from Graham and Dodd, including The Intelligent Investor and Security Analysis (and through various editions), you will not find a formal definition. If you think about it, this makes sense because the concept of margin of safety is a concept of prudence. Prudence requires judgment, and therefore unique, competent solutions to unique problems. In other words, no cookie cutter solution will work.

I have expressed to many over the years, including here on The Enterprising Investor, that knowing yourself is the most important thing as an analyst. The second most important thing is to develop tools that resonate with your consciousness. So I wholeheartedly support you in creating your own calculation for the margin of safety as it clearly supports how you see and understand the concept. Here I am referring to your statement, "In my mind, the margin of safety can't exceed 100%." In my mind, it doesn't make much difference.

Yours, in service,

Jason