Some people are born smart.
Some people are born lucky.
Some people are smart enough to be born lucky.
- Ed Seykota William "Bill" Miller, manager of the Legg Mason Capital Management Value Trust, was one of the last rock star mutual fund managers. Miller and his fund were best known for outperforming the S&P 500 for 15 years from 1991 to 2005. For this feat, the media revered Miller, whose track record eclipsed even that of the great Peter Lynch, of the Fidelity Magellan Fund. Miller attributed his outperformance to his unique approach to stock picking. Miller had been a philosophy graduate student at Johns Hopkins University. He spent his formative years thinking big thoughts - not working as a bean-counting financial analyst. At an investor conference in Las Vegas in the early aughts, he sprinkled his speech with references to philosopher Ludwig Wittgenstein and poet T.S. Eliot. Miller even became chairman of the Santa Fe Institute, an alternative think tank devoted to studying complexity in nature and society. When asked what he did for a living, Miller would say, "We think about thinking." That's a nice gig if you can get it. Alas, in 2006, Miller's luck ran out. His fund went from being one of the top-performing mutual funds to bringing up the rear. It soon became apparent that Miller's outperformance was less about his profound insights and more about his strategy of making outsized bets on large U.S. stocks. When these stocks performed well, Miller's fund soared. When they tanked, Miller's fund followed suit. The Odds of Success In The Drunkard's Walk: How Randomness Rules Our Lives, Leonard Mlodinow calculated the odds of Miller individually beating the S&P 500 for 15 straight years as infinitesimal. But that would be making the wrong calculation in evaluating his success. The more relevant calculation is this... Assume that 6,000 mutual fund managers are tossing coins once a year and have been doing so for decades. What are the chances that one of them will toss heads for 15 straight years? As it turns out, that probability is much higher. Mlodinow calculated that, over the past 40 years of mutual fund investing, the odds that at least one mutual fund manager would beat the market every year for 15 years were just about 75%. To put it another way... If it weren't Bill Miller who outperformed the S&P 500 for 15 straight years... It could have just as easily been you. You just had to be sitting in the right chair. To paraphrase market wizard Ed Seykota: Miller was smart enough to be born lucky. No "thinking about thinking" is needed. | 
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