Studying Ant Colonies and Finance

Money manager Bill Miller’s eccentric approach may be his secret. An excerpt from the Fortune article:

Miller's group is just as likely to be discussing the functionality of ant colonies or river systems as P/E ratios. The man runs a required book club for his investment team, for which he assigns works like "Deep Survival," by Laurence Gonzales, and "The Landscape of History," by John Lewis Gaddis.

Miller is chairman of the Santa Fe Institute, a think tank founded to study complexity, for goodness' sake. "The depth and breadth of Bill's intellect is pretty amazing," says Robert Hagstrom, who works as a portfolio manager at Legg Mason. "You watch the guy converse with someone like [American Nobel laureate in physics] Murray Gell-Mann and you ask yourself, 'This guy's a money manager?'" The fact is that Miller has spent decades studying freethinking overachievers, and along the way he's become one himself.

"What we are really trying to do is to think about thinking," Miller tells me. "Understanding how groups behave is central to understanding how complex adaptive systems - such as the stock market - work."

Miller is obsessive about studying what makes certain people and systems different. In simpler terms, Miller, his scholarly protégé, Michael Mauboussin, and the rest of the employees of Legg Mason Capital Management (the arm of Legg Mason over which Miller holds sway) try to understand how investors are wedded to certain beliefs about a stock - say, Amazon.com - that are completely wrong.