Value Investing and the Musket Line: An Open Letter to Joel Greenblatt

Dear Mr. Greenblatt, 

I’m writing to thank you for The Little Book That Still Beats the Market — and to let you know that a bit of military history you mention in the book, rather than hurting your argument, actually helps prove your point. 

For context, I’m a former U.S. Army officer whose specialty was interpreting enemy capabilities and intentions. Today, I work as a financial advisor at Bastion Fiduciary, a fee-only, veteran-led value investing firm. We also both have been blessed to grow up near New York City and attend grad school in Philadelphia (not far from Valley Forge, a location whose relevance will soon be clear). Suffice to say, the connections between military discipline, long-term strategy, and steady investing run surprisingly deep.  

To that end, my friend and investing expert John Rotonti — a former longtime analyst at The Motley Fool — recommended your book to me, and I must confess your “magic formula” is one of the clearest and most reliable investment strategies I’ve seen. So for the benefit of other readers, here’s a simple summary of said formula: 

• Return on Capital (ROC) measures how efficiently a company uses its money and equipment to generate profit.
• Earnings Yield (EY) measures how cheap a company is compared to the money it earns. 

You rank the largest 3,500 public companies by both ROC and EY. Then you add those rankings together and pick the companies with the lowest combined scores. For example, if Company A is ranked 87th for ROC and 223rd for EY, its total score is 310 — a better deal than Company B with a higher score of 406. (Just like in golf, lower is better.) 

The math is simple, and it works. The hard part is sticking with it. Over a 17-year test using the largest 1,000 U.S. stocks, the magic formula made money in every rolling three-year period, with returns ranging from 11% to 46%.^[3] That kind of steady performance is what makes your message so important: process beats prediction, and value wins over hype. 

So that’s why I was surprised by something in chapter seven. You joke about British redcoats in the American Revolution and say, “Complete idiots — after all, the British strategy left a lot to be desired. Shooting in unison. I’m sure it looked quite nice.”^[4] It’s a funny line, and you admit you’re not a historian — but the truth is, the British weren’t foolish. In fact, their period-specific uniforms and tactics actually help support your core argument. 

Here’s how. 

The red coats were practical. Red dye was cheap, plentiful, and minimized the appearance of dirt and blood — making it easier for Soldiers to maintain a professional image and avoid showing weakness to their foes.^[5] It also helped troops recognize each other in the thick black powder smoke of battle, thus reducing the risk of friendly fire.^[6] And beyond the battlefield, the uniform projected authority and discipline to civilians and potential resistors. Red coats were standard issue for roughly 200 years, only being relegated to ceremonial roles circa 1880 — after the widespread adoption of firearms that were not only more accurate, but much easier to reload.^[7] 

As for their tactics — the standard-issue smoothbore muskets of the time were slow to reload and wildly inaccurate beyond 50 yards.^[8] To make up for it, British troops lined up shoulder to shoulder in the open, eschewing protective obstacles in favor of coordinated, continuous firepower. While one group fired, the others reloaded. It wasn’t flashy, but it kept pressure on the enemy during 18th century battles. ^[9] 

It’s kind of like index investing. If you can’t pick one perfect stock, you spread your bets and apply a steady, consistent process. It may not be exciting, but it’s effective. The magic formula does something similar — it spreads smartly, but also uses filters like ROC and EY to improve results the way a scope improves aim on a rifle. You’re not guessing — you’re recalibrating. 

Now, growing up, many of us heard that the American colonists won by hiding behind trees and using guerrilla tactics. That was somewhat true early in the conflict — especially for militias defending their homes. But George Washington knew that wouldn’t be enough to win the war. He needed a professional army that could fight head-on. 

At Valley Forge (Winter 1777–1778), a Prussian officer named Baron von Steuben relentlessly trained Washington’s troops in the fundamentals of European tactics — bayonet use, formation movement, and coordinated volley fire.^[10] But these concepts weren’t new to the future president — after all, he was a veteran of the French and Indian War (1754 to 1763). Rather, G.W. developed a hybrid of British, French, and Prussian techniques, instilled discipline in an all-volunteer army, and — most importantly — he trusted the process.^[11] 

Washington was like a value investor with a long time horizon. He stuck with a system that didn’t impress anyone at first. But others eventually noticed his gains over time. France had been quietly helping the fledgling Americans since 1776.^[12] But after seeing the results, they gave full support in 1778 — sending ships, money, and soldiers that that helped lead to final victory in 1781 at the battle of Yorktown.^[13] 

That’s how smart investing works, too. It starts slow. It doesn’t wow people early. But if you stay consistent, the results grow — and when outside investors notice, things accelerate. 

So yes, redcoats firing in lines may look strange now. But they weren’t dumb. They were using the best system available. And Washington didn’t beat them by sneering — he knew their system, improved on it, and stuck with it. 

That’s exactly what your book teaches. Don’t chase fads. Don’t give up on a good process just because it isn’t flashy.  Because in the end, that’s what wins. Thank you again for equipping a new generation of investors with tools that deliver — even if they’re counterintuitive. 

Respectfully, 

Ian Gates 
Former U.S. Army Intelligence Officer 
Candidate for CFP® Certification† 
Financial Advisor, Bastion Fiduciary 

P.S. If you’re ever in the Florida Keys, feel free to look us up. We can talk shop about Warren Buffett while listening to Jimmy Buffett.