Paul Johnson has taught value investing at Columbia and Fordham for decades and co-wrote the book that carries Roger Murray's lectures. He tells Bogumil Baranowski why he pushes back on the phrase "value investing" whenever he hears it, walks through his own start in a gold penny stock, and gives what he calls a debut theory of what the 1970s did to the business.
👤 Guest: Paul Johnson, a veteran value investor who teaches at Columbia and Fordham and co-wrote The Enduring Value of Roger Murray, Pitch the Perfect Investment and The Gorilla Game
🎙️ Host: Bogumil Baranowski, founder of Blue Infinitas Capital, an author and TEDx speaker who advises families investing over a lifetime and across generations
📰 Published: 31 August 2026 on Talking Billions
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Key Takeaways
A teenage bet on a gold penny stock taught him money could work without a body
He bought it after the dollar came off gold in the early 1970s: "So, I think I spent $250 buying the stock."
"And within a year, I had $2,500, which I took with me." — set against a father who could bill only by the hour
The route to Wall Street ran through a Unix resume service, not a finance program
He audited the graduate finance courses at Berkeley, took computer science on a roommate's advice, and interned at a Dean Witter office
He flew east on People Express and slept on the couch of the friend who had sold him the gold stock
What changed after Graham was the scoreboard, not the analysis
Nobody talked about relative performance before the 1960s; Graham's goal was "to maintain permanent capital"
The '73-'74 crash arriving on top of that, he said, "changed the game permanently"
The phrase "value investing" is redundant, because nobody sets out to overpay
He asks panels what they mean by it and finds they cannot agree
Buffett's answer, in the annual report Johnson dates to 1991: value and growth investing are the same thing
The consultants cleaved growth from value when the real split is fundamental against quant
"That's the better cleave between the two." — fundamental, quant, momentum or high-frequency, not growth against value
Inside the big tent, the only live question is how much of the future growth you paid for
Value investing did not disappear after Roger Murray — teaching it did, and Chicago filled the gap
Markowitz's paper made risk into volatility; Fama, Lintner and Sharpe built on it
"Statistically wrong, but mathematically very elegant."
Modern portfolio theory started as a rejection of a 13-year-old book
Markowitz's advisor sent him to John Burr Williams' 1938 book; he decided the forecasts would always be wrong, and diversification followed
Johnson wrote to ask whether the story was true: "And he wrote me back a letter, which I have, that said yes, it is true."
August 1982 is the month performance won
Rates broke, consultants arrived, and index funds had already started at Barclays and Vanguard
"The idea of capital preservation, that's what falls away."
Roger Murray's lectures exist because Mario Gabelli decided to record a living legend
Murray came out of retirement at 81 and lectured four Fridays in a row
"Four 90-minute lectures, no notes whatsoever."
The Gold Penny Stock That Showed Him Money Could Work Without a Body
Baranowski opened by asking whether Johnson grew up around stocks. Both at once, Johnson said. "I did not grow up in a family that had investing." His father may have owned some mutual funds late in life, but "I suspect my dad never owned a stock."
What he did grow up near was Alaska, and Alaska has gold. "And in the early 1970s, we came off the gold standard." A high-school friend, still a friend today, was convinced the price would keep going up.
"And he convinced me to buy this gold stock." He flagged his own memory before giving any of the numbers: "Now, if somebody goes back and does the historical record, I'm going to get the prices wrong, but the effect was is correct."
"So, I think I spent $250 buying the stock." Money he had saved working in restaurants and delivering newspapers
"And within a year, I had $2,500, which I took with me." He sold the stock and took the proceeds to college
The lesson was not the trade, it was the mechanism. "And that experience just stayed in the back of my mind obviously until today, because I realized you could make a lot of money with no physical labor."
The counter-example was at the dinner table. "My father was an attorney and he used to complain that the problem of being an attorney is you had to charge—you only could charge by the hour."
"So there was this kind of theoretical limit how much money you could make."
The Route to Wall Street Ran Through a Unix Resume Service
"And then I went to UC Berkeley, which I absolutely adored." His brother was taking a JD and an MBA at the same time and pushed him to "audit all of the graduate finance courses" at the business school there.
A spring-semester internship settled it. He had "the opportunity to do an internship at a Dean Witter office—unless you're a historian you don't even know what that is, but it was a brokerage firm that ultimately got absorbed by, I think it was, Shearson Lehman." The broker he worked for was a stock picker
The goal he set at 19 or 20 needed explaining to everyone he told it to. He said he wanted to be a Wall Street analyst and got back "What's that?" — "And that became the goal."
The technology came in sideways, through a roommate. "He convinced me to take some computer science courses, which I did."
"Unix had just come to the Berkeley campus." and "So he and I ran a resume service where we would use type setting."
"The IBM PC had been introduced."
A second internship, at another firm that ended up inside Lehman: "I got a summer internship at a local brokerage firm called Davis and Skaggs, which was just a small regional shop that ultimately got bought by Lehman as well."
The move east was done on a discount airline and a friend's couch. "People Express, $99 round trip, San Francisco to New York, stayed on the couch of my high school friend that introduced me to stocks." — the same friend who had introduced him to the gold stock
He graduated a year late and took a first job working for a semiconductor analyst. "So that had been kind of the dream and it all fell into place for me."
Work That Tires the Mind Instead of the Back
Baranowski said the appeal is hard to unlearn: "I like that story, that once you see that you can make money with money, you cannot unsee it." He added the qualifier himself — "It is work finding good ideas."
Johnson agreed and drew the distinction carefully rather than claiming the job is easy.
"No, there's a ton of work, but it's not physical labor in the sense of, there are some people that do seriously hard work, construction, manufacturing." Those people, he said, come home physically tired and often dirty, because it is dirty work
"But you know, at the end of the day I'm not physically—emotionally maybe—intellectually tired." He allowed that it sometimes takes a physical toll anyway
Baranowski pushed the point to its limit with Buffett: "Buffett works incredibly hard his whole career, but he's turned that into hundreds of billions of dollars with the same constraint of 24 hours a day that you and I face now."
Johnson's reply was that Buffett brought other skills to the equation but the same clock. "He's pretty talented."
He liked the host's phrasing enough to repeat it: "You know, once you see it, it's hard to unsee it."
The Debut Theory: Two Things Arrived at Once in the 1970s
Baranowski asked what happened in the 70s and 80s — the stretch when value investing seemed to go quiet between Graham and the rediscovery of Roger Murray. Johnson prefaced his answer by saying he had never published it. "I've never seen anybody write this. I've never written it." — "So this will be kind of a bit of a debut."
"What came into the world is two things at the same time. The '73-'74 crash, really important, and performance."
Relative performance is the part he thinks nobody dates properly. "You know, prior to the 60s, no one talked about relative performance."
"If you go read anything that Graham says, there's almost no reference whatsoever to relative performance." Graham thought in absolute terms
"And his goal, and really the essence of value investing, was to maintain permanent capital." Position yourself correctly, he said, and you can live with downside volatility and possibly take advantage of it
"And in the 60s relative performance becomes the game."
The bear market then locked it in. "The '73-'74 bear market, which was economically driven—market driven, but economically driven—really, I think, changed the game permanently."
What shifted was the horizon, not the method. "It's not that people stopped being value investors." Their time horizons shortened and they cared a great deal about relative performance, and those, he said, are the big shifts
"The Phrase Value Investing Is Redundant"
Johnson then pushed back on the question's own vocabulary, which is a thing he does on purpose. "One of the things I spend a lot of time certainly in class, and if I want to be a jerk on a panel, I ask people what do they mean by value investing" — and the answers, he said, are not uniformly defined.
"And the way I think about it is fundamental investing." He defines it as trying to determine, evaluate and calculate the underlying fundamental value: "We're using fundamentals—I'm going to use a fairly big tent, fundamentals—to determine the economic value of the underlying security. Then we look at price." — "Now we have some nuances there, but that's kind of the idea. Price versus value."
Buffett got there first, in the annual report Johnson dates to 1991 while allowing it might have been 1992. "They're both fundamental investing and value investing is redundant."
"The phrase value investing is redundant, because why would you ever pay more for something than what it's fundamentally worth"
He is blunt about who created the growth-versus-value split and what it cost. Wall Street wanted to classify investors as one or the other, and he understands the commercial logic: "They probably did a great service for their business, but the consultants did a huge disservice by separating those two, because that's the wrong separation."
The line he would draw instead is about method, not style. A fundamental investor, a quant-driven investor, a high-frequency trader — "That's the better cleave between the two."
Inside the tent, one question is left. "And then in the big tent of fundamental investing, the real question is how much you're willing to pay for growth, future growth."
More traditional value investors, he said, want to focus on the tangible, "what they could see"
For anyone paying for growth, the test becomes comparative: "And now what we care about is, what is the actual growth versus what you've paid for?" and "What is the actual growth versus investor expectations?"
Two Things Happened After Roger Murray, and One of Them Was Chicago
Coming back to the host's question about what became of fundamental investing after Murray, Johnson gave two causes and spent most of the answer on the second.
"Now number one, we stopped teaching it, and that there's an important component there."
"Second, which is the obvious elephant in the room, the rise of the Chicago school academic finance, really driven by Markowitz's paper where he says that volatility—risk is volatility"
The origin story he told for that paper is the part he chased down himself. Markowitz was "bouncing around, young man looking for his PhD thesis." — "His advisor is a guy named Kendall." Kendall asked whether he had read John Burr Williams.
The book Markowitz was sent to was already old. "This is 1951, by the way." and "Which at the time, John Burr Williams got published in 1938. The book's 13 years old."
Johnson's own view of it: "And John Burr Williams is a fantastic read."
Markowitz read it and rejected it. "And Markowitz says he's wrong."
"And what he was wrong about is, John Burr Williams said what you want to do is look at the expected return for all the available stocks, and of course you're going to have a portfolio with the highest expected return."
"And Markowitz says, the problem is you're going to be wrong in your forecast." Because the forecast will be wrong, "You actually have to have a diversified portfolio." — one where the futures are uncorrelated
"Well, it's only one more step to his modern portfolio construction."
The definitional switch is the thing Johnson still disputes. At the time, he said, people felt risk was being wrong — "I happen to still believe that." Markowitz instead treated the volatility of a stock as changes in investor expectations, and built the portfolio to absorb them
He checked the story with the man himself. He got it from Peter Bernstein: "Peter Bernstein, in his book Capital Ideas, talks about that story; that's where I got it." He then wrote to Markowitz to ask whether it was true
"And he wrote me back a letter, which I have, that said yes, it is true."
The rest of the edifice followed. "And then you've got Fama, and Fama says, wow, if we play with this then there's an efficiency here" — idiosyncratic risk can be diversified away — and Lintner and Bill Sharpe produced the capital asset pricing model
"The nice part about all that is it's mathematically very elegant. Statistically wrong, but mathematically very elegant."
August 1982: Rates Break, Consultants Arrive, and Capital Preservation Falls Away
Johnson dated the turn precisely, and noted in passing that 1983 is when he got into the market himself.
"You roll back interest rates: because of Volcker, he took interest rates very high to fight inflation, they're coming down, they break in August of 82, market takes off, consultants are there, performance is there, relative performance becomes important"
Academic finance already had a hold on the field by then, and index funds had already started at Barclays and at Vanguard
"Performance-driven money management is now all in the vogue" — and what fell out of favor was not the analysis but the objective
"The idea of capital preservation, that's what falls away." Graham, he said, really cared about principal preservation
"And if you want to call that value investing, I don't have a problem."
His summary of the causal chain: the business became a game of increasing performance and increasing the value of the assets, rather than protecting the underlying principal
Baranowski drew the period together his own way: the market falling, everyone looking for answers, and theories that were already decades old coming forward to fill the gap.
Mario Gabelli Taped Roger Murray Because He Was a Living Legend
Baranowski set up the lectures that produced the book: "Murray retired in 77, but in 1993 a few of his former students, who were very accomplished investors—I'm sure going to bring up some of the names today—organized four lectures for him." — "He came out of retirement at 81 and without a single note gave four lectures."
Johnson wanted one sentence in front of that answer.
"So one of his most successful former students, certainly visible former students, is Mario Gabelli." Gabelli had stayed in touch with Murray and the two had a professional friendship
"Mario decided that he wanted to tape the lectures as a living legend."
The format was as demanding as it sounds. "He lectures on a Friday, four Fridays in a row" — "Four 90-minute lectures, no notes whatsoever."
"And he really is talking about his sense of value investing." — though, as Johnson had spent the previous half hour arguing, that is not the phrase he would use for it
Johnson's bottom line is that growth against value was never the real dividing line — fundamental investing against quant and momentum is — and that what disappeared after Roger Murray was not value investing but the goal of preserving capital.
Products, Companies & Tools Mentioned
Columbia University and Fordham University (Where he teaches, and where he asks students and panelists what they actually mean by value investing)
UC Berkeley (The university he "absolutely adored," where he audited the graduate finance courses and where Unix arrived on campus)
Dean Witter, Shearson Lehman and Davis and Skaggs (The brokerage firms of his start: an internship at a Dean Witter office with a stock-picking broker, and a summer at Davis and Skaggs, a small regional shop he says was later bought by Lehman)
People Express (The airline that got him from San Francisco to New York for the "$99 round trip" that started his Wall Street career)
Barclays and Vanguard (Where index funds had already started by the time rates broke in 1982, one of the forces he says pushed capital preservation aside)
IBM (The IBM PC had just been introduced while he was running a typesetting resume service on Berkeley's new Unix machines)
Books & Resources Mentioned
The Enduring Value of Roger Murray – Paul Johnson (The book built on the four Murray lectures Gabelli had taped; named in the host's introduction)
Pitch the Perfect Investment – Paul Johnson (His guide to investment analysis and the pitch, named in the host's introduction)
The Gorilla Game – Paul Johnson (His technology-investing book, named in the host's introduction)
Capital Ideas – Peter Bernstein (Where Johnson found the Kendall and John Burr Williams story that he then wrote to Markowitz to verify)
Markowitz's paper (The paper he says drove the rise of Chicago school academic finance by defining risk as volatility)
John Burr Williams' 1938 book (The 13-year-old book Markowitz's advisor sent him to read, and the one he decided was wrong; "a fantastic read," Johnson said)
Warren Buffett's Berkshire Hathaway annual letters (The source of the passage Johnson dates to 1991, saying value and growth investing are the same thing)
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