Expected-value-only investing logically implies holding a single stock, not a diversified portfolio

Evidence

When Markowitz read The Theory of Investment Value in the library of the University of Chicago’s Graduate School of Business in 1950, he was struck by a different objection to Williams’s dividend discount model, one rooted in the operations research that Koopmans was teaching him. … What would happen, Markowitz asked himself, if one applied Williams’s way of tackling uncertainty not to a single stock but to an investor’s entire portfolio? “If you’re only interested in the expected value of a stock, you must be only interested in the expected value of a portfolio” (Markowitz interview). Simple reasoning based on the operations-research technique of linear programming quickly convinced Markowitz that an investor who focused only on expected value would put all his or her money into the single stock with the highest expected rate of return. — Donald MacKenzie, An Engine, Not a Camera, 207

Categorization

• XREF: This is the intellectual pivot that modern portfolio theory builds from — connects to later chapters on CAPM and to Markowitz’s Nobel-recognized mean-variance model. — connects to: Market-clearing logic forces the single optimal portfolio to be the market itself — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 250; Mean-variance portfolio theory requires the restrictive quadratic utility assumption. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 588; Indexing practice made CAPM’s single-portfolio implication seem less egregious to economists — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 385 (+2 more)

Broader Connections

• Market-clearing logic forces the single optimal portfolio to be the market itself #expands (0.85) — Donald MacKenzie, An Engine, Not a Camera, 250
• Indexing practice made CAPM’s single-portfolio implication seem less egregious to economists #responds-to (0.80) — Donald MacKenzie, An Engine, Not a Camera, 385
• Mean-variance portfolio theory requires the restrictive quadratic utility assumption. #qualifies (0.75) — Donald MacKenzie, An Engine, Not a Camera, 588