Legendary investor Bill Miller has always been a little unorthodox. During his 35 years at Legg Mason Value Trust, he was best known for beating the returns on the benchmark S&P 500-stock index for an astounding 15 years straight, from 1991 to 2005. Now, as chairman and chief investment officer of his own investment fund, Miller Value Partners, Miller likes to draw market research from nontraditional sources like academic journals and philosophical readings. Fortune Magazine described his investment style as iconoclastic, saying: "You simply can't do what he's done in the supremely competitive, ultra-efficient world of stock picking by following the pack."
Miller’s maverick approach was perhaps borne out of his liberal arts background: prior to his investment career, he completed the coursework for a PhD in philosophy at Johns Hopkins University, ultimately opting to dive into finance instead of writing a dissertation. In 2018, Miller pledged a gift of $75 million to JHU’s Philosophy Department. It’s thought to be the largest-ever gift to a university philosophy program, and it’s definitely the largest for any humanities department at Johns Hopkins. As Miller told the American Philosophical Association in 2018, “The philosophical training I received not only greatly enriched my life, but the critical reasoning and analytical skills that are essential in philosophy proved to be enormously useful to me in my investment career.”
In the following Q & A, Miller discusses the ways in which philosophy informs his investment strategy, how reading the work of philosopher John Searle made him bullish on Bitcoin, and why his best analysts have studied the humanities.
Q: Before you enrolled in a philosophy PhD program at Johns Hopkins University, you had only taken one philosophy class during your undergraduate studies. What was it about philosophy that intrigued you?
Bill Miller: It wasn't even a full-semester class! It was a six-week course on the philosophy of language at the end of my senior year, when you had find something to occupy your time. This is was back in the early 1970s, and my pre-conceived sense of philosophy was, it's a lot of navel-gazing and pontificating about things for which there's no answer. But I was headed to the military after college, and I found out the professor was a former fighter pilot, so I took the class. As it turned out, it was very rigorous and analytical, a lot of careful parsing of arguments and positions, so I got hooked on it at that.
"Philosophy steered me away from confirmation bias. In any philosophical assessment, you’re trying to figure out the validity of an argument, working to pinpoint ways to make it stronger… I think that's very helpful to any profession."
Q: You've said that your philosophical studies have strongly contributed to your success in the investment world, and you're seen as a nonconformist in terms of how you pick investments. What was it about philosophy that was so helpful to you?
Miller: Philosophy steered me away from confirmation bias. In any philosophical assessment, you’re trying to figure out the validity of an argument, working to pinpoint ways to make it stronger. You're not necessarily trying to win an argument, and you're not taking an adversarial position. You're really trying to look at things from a wide variety of perspectives. I think that's very helpful to any profession.
Take Amazon, which has been one of our largest investment positions for a long time. In the early days of the company, Barron's would refer to it as "Amazon dot bomb," and many thought it would fail. But in philosophy, there is a theory of descriptions, and with the case of Amazon, most people thought they understood the ways in which Amazon was similar to other retailers, but they didn't understand how and why it was different from them, especially the way in which distribution and decision-making processes separated Amazon from others. Philosophy encouraged me to think creatively and analytically about issues in markets that aren’t always obvious.
Q: What made you turn to an investment career after you completed your PhD coursework at Johns Hopkins?
Miller: I had been interested the stock market since I was about nine years old, and I've maintained that interest all the way through. When I went to grad school, my wife got a job at Legg Mason, where she later spent 35 years working for one of their senior brokers, and then she became the first woman broker there. It gave me an opportunity to go in after class, pick her up, and hang around there and look at the stocks, look at the S&P tear sheets and see what was going on in the market.
Q: How do you think that philosophy and investment relate to each other?
Miller: Well, I'd say philosophy is about cultivating a certain habit of mind, and it's not that different from any other part of the humanities. Philosophy students are intellectually curious, and they’re conceptually- and abstractedly-oriented.
If you're curious and you tend to look around corners at things that other people aren't looking for, investing is a great way to put that into practice. However, many other fields in the humanities deliver the same skill set. I think there is false dichotomy between the value of the humanities versus the value of a STEM education. I didn't go into philosophy because I thought it would make me a lot of money; I found it intellectually interesting. But I was pleasantly surprised to find that it had great instrumental value as well. The ability to think holistically, with a critical eye, has been critically important to me in terms of thinking through the markets.
For example, a few years ago, Bitcoin was very controversial. All the financial luminaries were dumping on Bitcoin, and they still are. They said it had no intrinsic value because governments don’t back it.
When I thought about a philosophical book called The Construction of Social Reality by John Searle, it got me focused on the potential value of Bitcoin. Searle writes that there are two types of facts: "brute facts,” which are facts that are true independent of whether people exist or not. One of those would be the sun is 93 million miles from the Earth. Then there are facts that are dependent on social construction and people. That would be things like property, marriage, and money. It was very helpful to understand that, and to try and think through the way in which sociological and epistemological perspectives of money have functioned in economies globally.
"I think there is false dichotomy between the value of the humanities versus the value of a STEM education."
Q: How do you feel about the strong drumbeat in recent years that undergraduates and students really ought to focus on STEM subjects in order to be successful in the future economy?
Miller: I don't have any issue with the value of STEM. But some people think that degrees in the humanities don’t have much value. My personal view is that the humanities focus on everything that makes living worthwhile, and enable you to interpret and endure your existence through a variety of different perspectives. They allow you to understand the world you’re in which you’re living.
Ultimately, I think STEM and the humanities go hand-in-hand, and we shouldn’t carve the world into two different realms. It's critical for people to be technically and analytically competent, to understand probability and statistics, that sort of thing. But they can have a much broader take on things via the humanities, which will prove both personally and professionally rewarding.
Q: What advice would you give students about areas of study and being prepared for the working world?
I was recently giving a talk at a conference, and there was a speaker there who specialized in disruptive technologies and had a PhD in computer science. He described all the different technologies that would be changing significantly over the next 10 to 20 years and would upend the work force. During the audience Q and A, somebody asked, "If that's the case, what should we advise our children to do, because so many of the things that they would be trained for might become obsolete?”
He said, "You need to think about this in a way in which an economist would think about it. Mainly, what's the scarcest resource?" The scarcest resources get more valuable, and the abundant resources get less valuable. He said, "In that kind of an environment, the scarcest resource will be critical and analytical thinking, and moral reasoning. That would indicate you might want to have them take philosophy, or other disciplines in the humanities that might encourage those habits of mind."
That was an interesting point, and I think it's exactly right.
Q: What do you look for in your hires? Do the humanities at all contribute to sharpening the attributes which you are seeking?
Miller: I worked at a large public firm [Legg Mason] for over 35 years. On the analytical side, we’re looking for creativity, insight, the ability to write clearly and persuasively, while also having sense of urgency, because the markets are always changing.
Looking back over those 35 years, our best people came from a humanities background. We’ve had analysts with business degrees and math degrees from top schools, but sometimes that kind of training makes you see right answers versus wrong answers. And in capital markets, in many cases, there is no right answer.
The best analyst that we had was a woman who was an American Studies major at Yale. I think the reason she did so well was that she was used to taking a work such as Moby Dick and looking at it from an allegorical perspective, a historical perspective, and in a pure literary perspective, and then as a study of how whaling was done in the mid-19th century. She was used to turning things around and looking at an issue through different lenses, a skill set that's really useful in capital markets.