In the spring of 1720, Isaac Newton sold his shares in the South Sea Company at a handsome profit. Then the price kept climbing, month after month, carrying his former neighbors and half of fashionable London upward with it. He bought back in near the peak. When the price collapsed that autumn, the greatest mathematical mind of his age was left holding the bag. He is said to have remarked that he could calculate the motions of the heavenly bodies, but not the madness of people, or for that matter, himself.
If Newton could be undone by speculation, none of us should trust our instincts in the market. On the latest episode of Acton Line, I sat down with David Bahnsen, founder and chief investment officer of The Bahnsen Group and author of Profit from the Profit: The Past, Present & Future of Dividend Growth Investing, to talk about what the alternative to speculation actually looks like, and why the answer is as much moral as it is financial.
David draws a distinction at the beginning of our conversation that governs everything that follows: investing is putting capital into human action and long-term wealth creation. Speculation is something else entirely, a wager on price movements. It is an attempt to profit from the crowd’s next mood rather than from any enterprise’s real productivity.
The trouble is that speculation is increasingly marketed as investing. The gamification of markets: meme stocks, zero-commission trading apps, and the daily churn of financial media has made investing feel like being a shooter at a craps table. David’s finds that human nature, left to its own devices, makes for a poor investor. We are wired to chase what is rising and flee what is falling, which is precisely backwards. Discipline is not one virtue among many in investing, it is the whole game.
So why dividends? The obvious answer is cash flow: a rising stream of income that compounds over decades and does not depend on selling shares into whatever market happens to prevail. But the deeper answer, and the one that animates David’s whole approach, is about accountability.
A dividend is a kind of social contract between a company’s management and its owners. The obligation to return real cash to shareholders, quarter after quarter, disciplines executives in a way no mission statement ever could. Balance sheets must be managed soberly. Vanity projects and empire-building become harder to justify when money must actually be paid out. The dividend, in other words, tells the truth about a business, and it keeps the business honest in the telling.
It would be easy to let the matter rest there as a question of prudent strategy, but our conversation deepened to a discussion of growth itself is a theological concept.
Wealth creation is not a zero-sum scramble over a fixed pile of cash. It is the fruit of human dignity expressed through work and innovation, men and women made in the image of God, meeting real human needs through real enterprise. To invest in that process is to participate in it. The numbers on the screen symbols of something concrete: goods shipped, services rendered, problems solved, and families provided for. Stewardship is not merely the careful preservation of what we have been given but its faithful cultivation over time. The parable’s servant who buried his talent in the ground was not being cautious, he was being faithless.
Which brings us back to Newton. His failure in 1720 was not a failure of intellect but virtue. The madness of crowds is not calculated away; it is resisted, and resistance requires virtues: patience, discipline, humility about what we cannot know, and fidelity to what we can.
Dividend growth investing is not a trick for beating the market but a framework for staying sane inside it, ordered toward long-term stewardship rather than short-term price fluctuations. Newton could chart the heavens, but he couldn’t time the market. Investors need not be speculators, they can simply hold good companies, collect what they produce, and let time and do the work.