Walter Schloss

Walter Schloss (1916–2012) was an American value investor, a student of Benjamin Graham, and one of the most compelling single-data-point refutations of the Efficient Market Theory (EMT). He ran an investment partnership for 47 years (1955–2002) from a single-room office with one file cabinet and no Bloomberg terminal — and produced market-beating returns the entire time.

📝 The Record

• Duration: 47 years of continuous partnership management.
• Method: Statistical value investing using only publicly available financial data — annual reports, balance sheets, earnings records.
• Infrastructure: One room, one file cabinet. No computer in the early decades. No sell-side research. No proprietary data.
• Fee Structure: No management fee. Schloss charged only a carried interest on profits — meaning he earned nothing unless his investors earned first.
• Result: Long-term outperformance of the S&P 500 by a wide margin, across approximately 1,000 securities — mostly unglamorous, "lackluster" statistical bargains.

📝 Why Buffett Invokes Him (2006)

In the 2006 letter, Buffett uses Schloss as the definitive counter-example to the 2-and-20 fee structure and EMT simultaneously:

• Against EMT: If markets are truly efficient and prices reflect all public information, a man with a file cabinet and publicly available annual reports cannot systematically beat the market for 47 years. But he did.
• Against 2-and-20: Schloss's fee structure aligned his incentives perfectly with investors. He only made money when they made money. Contrast with hedge fund managers who collect 2% annually regardless of performance and start new funds after bad years to reset the high-water mark.

Buffett's framing: "He built this record by investing in about 1,000 securities, mostly of a lackluster type. A few big winners did not account for his success. There is simply no possibility that what Walter achieved over 47 years was due to chance."

📝 The Superinvestors Connection

Schloss was one of the original "Superinvestors of Graham-and-Doddsville" identified in Buffett's famous 1984 Columbia speech. His inclusion confirms that the common intellectual DNA of Graham's margin-of-safety discipline — not individual genius or luck — explains the group's collective outperformance.

🔗 Connections

• Concepts: Efficient Market Theory, 2-and-20 Fee Structure, Value Investing, Margin of Safety
• Related: The Superinvestors of Graham-and-Doddsville
• Sources: 2006 Letter