When Walter Schloss founded the funds management firm that bore his name in 1955, markets were a very different place. Schloss harnessed the power of Ben Graham's "net-nets" strategy and managed to outperform the market by more than 5% p.a. over the next 45 years. But could such a simple strategy work in today's deeply researched markets? Steve Johnson, Chief Investment Officer of Forager Funds thinks so. But why isn’t every fund manager pursuing this strategy?

“I still know people who are making exceptional returns doing that… Does it still work? Yes, it absolutely still works if you’ve got $500,000 or $1 million dollars.”

In this week’s episode of The Rules of Investing podcast, we discuss the biases that fund managers and private investors are most susceptible to, how to separate luck from skill, and his approach to properly valuing a business.

Further reading and listening


  • 1:33 - The road from Macquarie to Forager
  • 5:45 - On the millionaire's factory and Walter Schloss
  • 12:30 - The dangers of anchoring and the narrative bias
  • 17:57 - Suck it up and admit you were wrong
  • 22:06 - Luck versus skill
  • 26:16 - Investing mistakes: a couple of real clangers
  • 34:08 - This time is always different
  • 39:12 - The one immutable rule of investing
  • 42:37 - It's not about building complicated DCF models
  • 47:17 - Arriving at the appropriate risk-free rate
  • 50:50 - Superforecasting
  • 52:19 - Find the approach that works best for your skill set
  • 53:20 - Microsoft: robustness and sustainability

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Ross Salmon

Patrick, Thanks for bring Steve to air via your podcast. I am an investor in Forager, both International and local and admire Steves as a fighter especially when the market turns against the populist. Steve showed the grit in your interview which is to be admired . Thanks again for the effort you put in the choice of the guests you bring to air. Ross Salmon

Adam Easter

A cracking, and very honest interview. Thank you Patrick and Steve.

Patrick Poke

Thanks for the comments Adam and Ross, glad you both enjoyed it.

Philomena Humphries

I always find Steve Johnson worth listening to- honest and not ego driven. Thanks both for the interview. The length of the podcast may have put some people off. That’s their loss.

Ben Gow

Great podcast as usual Patrick. Sound quality on Steves end made it a little difficult to hear. Keep up the good work.