Bill Miller’s childhood story

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From CNNMoney, the full article is here:

I was nine years old, and I walked in to see my father reading the financial pages of the newspaper. And they didn’t look like the sports pages or the comics or whatever.

So I asked him what they were. And he said they were financial pages.

And I said, “What does that mean?” And he said, “Well, these are stocks.”

I said, “What’s a stock?” And he said, “Well, look at this thing. See this thing? This represents a company.” And he said, “And see this ‘+ .25’?”

And I said, “Yeah.” He said, “Well, that means that if you own this company, one share of it, which cost you like ten dollars, then if you owned it yesterday, then today you have 25 cents more than you had yesterday.”

And I said, “Well, what do you have to do to get that 25 cents?” He said, “You don’t have to do anything. It does it by itself.” (Laughter)

And I said, “You mean, I can go to bed, I can have this thing yesterday, I can go to sleep, wake up the next day, and have 25 cents more than I had yesterday, and not do any work?” (Laughter) And he said, “Yes.”

Now I had come in from mowing the grass, for three hours, to earn 25 cents. So the idea of being able to make 25 cents when I’m asleep, or at least by doing no work, had a great appeal to me. And I immediately said to myself, “This is something I have to understand.”

And so the lesson I took from it, at nine years old, was that in the stock market you can make money without doing any work. And since I have always had an almost infinite capacity for indolence, I thought, “This is great.”

Of course, I only realized many years later that you could earn the market rate of return by doing no work. But to earn an excess rate of return certainly does require some work!

About Bill Miller: As manager of Legg Mason Value Trust, he beat the market for 15 years in a row until his run ended last year (2006).

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