What’s better, growth or value investing? Should you break the piggy bank to buy companies that are growing way faster than the market? Or should you find unloved diamonds in the rough that are trading for less than they’re worth? Investors have been duking it out for decades, waving P/Es like flags and quoting gurus like scripture. Spoiler alert: both are missing the point.

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The typical conversation between a “growth investor” and a “value investor” goes something like this:

G: “Let me guess… You’re a value investor. I feel sorry for you, buddy. NVIDIA, Palantir, Microsoft… You’re missing out, grandpa. Everyone knows that value is dead. Get with the times.”

V: “Wait, don’t tell me you’re a growth investor. Only an absolute clown would buy the same thing as everybody else and think they’re going to beat the market. You couldn’t find great value if you were at the clearance aisle in a thrift shop.”

As you’ll see, both of these people should deactivate their brokerage account and read a book about investing.

Most people call the first “value” and the second “growth.” But in both cases, you’re just trying to make money by paying less for the amount of cash you’ll get back.

Labels make it sound like two religions; it’s really one question: how much cash will this thing throw off, and what are you paying for it?

Figuring out what a stock is worth means putting a price today on the cash a business can send you over its lifetime.

If that cash stream is expected to grow (because the company sells more or raises prices), the pile of future cash gets bigger, so the business is worth more. If the cash stream is expected to be flat or shrink, it’s worth less than one that is growing. That’s common sense.

A common shortcut is to call low-multiple stocks “value” and high-multiple stocks “growth.”

But in reality, a paying a high multiple doesn’t mean you’ll get growth, and paying a low multiple doesn’t mean you’ll get “value.”

Sometimes the market pays up for predictability: the steady, boring cash machine that rarely surprises. Other times it marks down a faster grower because the cash is lumpier or the business feels cyclical.

Think of a rock-solid retailer like Walmart: slow and steady, easy to model, often priced like a safety belt. Walmart currently trades at 60x cash flows (pay $60, get $1 of yearly returns), which is double the S&P500, despite the fact that its cash flows haven’t grown in 10 years.

Now compare that to Booking Holdings: cash flows surged 20% last year, but travel headlines make people twitchy, so it can trade for less than you’d expect. Booking trades for 20x cash flows, much less than Walmart.

Which one is “value”? Which one is “growth”? That’s difficult to answer because the question makes no sense.

Here’s the core of the “value vs growth” mess: people confuse the multiple (a price tag) with the business (the engine).

When someone says, “I invest in growth stocks,” they often mean, “I buy high-multiple stocks because I hope the growth shows up.” But a high multiple doesn’t tell you how fast the company is actually growing; just how much the crowd is willing to pay today for each dollar of current cash flows.

Think of a multiple as a price on a restaurant menu. A $25 salad isn’t always healthier or tastier than a $9 one. Sometimes you’re just at the airport, or in front of the Eiffel Tower.

Stocks are similar. There’s some link between price and quality, but hype, fashion, and fear can push prices around more than the underlying ingredients.

What actually creates value is the cash the business can produce and reinvest, and for how long. Growth is an input to that value, along with return on capital, durability, and risk. The multiple is an output: a reflection of expectations, comfort, and sometimes wishful thinking.

Let’s look at the other side of the coin. When people say they’re “value investing,” they often mean they’re buying low-multiple stocks. Yes, a low multiple can be a bargain. But it can also be a clearance sticker.

Let’s keep the food analogy going: a half-price avocado is great… unless it’s brown inside. Low multiple, rotten cash flows. A fully priced avocado that stays fresh all week might be the better buy.

Two common value trap types:

In both cases, the multiple you would pay is low (the price is cheap) for a good reason. Look elsewhere to find value.

The key lesson here is this: the price you pay for a stock says nothing about value or growth. These are not rival religions. Shifting a portfolio from “growth” to “value” or vice versa is mostly marketing copy.

Value already bakes in growth (or shrinkage) plus durability and risk. Your job never changes: buy more future cash than you’re paying for today.

If only there was a way to put the great “value vs. growth” debate to rest… Turns out, the king of investing himself has taken care of that for us.

The last sentence in that quote is a real mouthful, but it’s so important to understand for successful investing.

Let’s say you own a coffee shop, and you expand by buying three more coffee shops in the area. There is no doubt that you will grow the business. You will sell more coffees.

But is this growth good or bad? That depends on how much you will earn on that investment over time. If each shop costs $1m to open and only throws off a few hundred dollars a month, that’s like trying to fill up a cup with a gaping hole in the bottom.

As Warren Buffet says: “If you tell me that you own a business that will grow to the sky, and isn’t that wonderful, I don’t know whether its wonderful or not until I know what are the economics of that growth.”

Let’s look at another real world example: the airline industry.

Air travel has been a growth business since the Wright brothers took off in 1903. Every year, more people board planes and travel by air than the year before.

Funny enough, this growth has been the worst thing that’s happened to the air travel business. It’s been great for consumers around the world, but it has been a curse in the airline industry because more and more cash has been invested for lousy returns. A bonfire of shareholder capital.

You always want to buy growth at a good value. Which means intelligent investing is always value investing. You valued what the future cash flows are worth to you, and you bought it for less than that.

It doesn’t matter if you’re buying a high flying stock like Palantir or a bank stock with declining cash flows, both can be value investing.

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