Bill Miller (00:03:53):
Then, if you go over to the crypto space, MicroStrategy, Michael Saylor’s company, yesterday MicroStrategy got down to where it was trading, before he started to buy Bitcoin. It’s given back all of the gains that it’s done from there. It was like 160 or 170 yesterday, and where was it at peak? 1200 or something like that. Clearly, people are shooting at MicroStrategy and shorting it. Saylor came out the other day when they asked him, “What price would Bitcoin have to go to before you’re forced to sell it?” He said, well, the loan that he got from Silvergate Capital, Silvergate Reserve is a bank that lends and operates mainly in the crypto-space. Silvergate, by the way, in the $60 range, I think is an absolute bargain.

Bill Miller (00:04:32):
Silvergate loaned him the money to buy the last charge of Bitcoin, $250 million. He said he wouldn’t have to sell any Bitcoin until it was $3,000. Where is it today? Close to $30,000. It’s got to go another 90% to have that. That’s an example. I would say that the reason for that is, and this is probably the more important thing, is that we’re in a regime change. The inflationary environment, the environment that basically most people who are operating in the markets have seen since, certainly the ’09 lows. Really going back into the 1990s and stuff like that.

Bill Miller (00:05:02):
If you’re of working age, meaning you’re under 65 years old and you’re in the investment business, you have never invested in a secular rising rate and secular rising inflation environment. I’m one of the few, Lee Cooperman is probably another, Mart Merrigabel is another, that was of adult age back then. I remember that period very, very well. It’s a different investing environment when you have secular rising interest rates, the fed tightening, we have war in the Ukraine. On October 6, 1973, I was in the army at the time, and I was the duty officer when the Arab, Israeli war broke out, October 6th for our intelligence unit.

Bill Miller (00:05:35):
That’s what kicked off, that Arab, Israeli war. That’s what kicked off the inflationary environment, just like the Ukraine thing kicked off the rise in the oil environment over there. It’s a replay of that. It took 10 years, finally, for Paul Volcker, from ’79 to ’82 to engineer a severe recession. We had a recession in ’73, ’74, but that was part of a come down from the nifty ’51 decision stocks that’s peaked in December of ’72. Our version of those, the disruptive innovation stocks peaked in November of last year. They’re suffering a similar decline to what those Nifty ’50 stocks suffered in ’73 and ’74.

William Green (00:06:10):
Your traditional view has just, your posture has just been to be bullish. You’ve often said, “Well, the market goes up 70, 75% of the time. Your default position should be bullish.” At the same time, I remember you were studying earthquakes and the like, and trying to think, “Well, are there ways of predicting when something is changing and actually things are going to collapse.” I’m wondering, is this one of those situations where it’s just the same as always, and it merits your standard approach of being bullish, or is this some sort of bigger earthquake, bigger tremors that we are feeling?

Bill Miller (00:06:41):
The other thing that I’ve said is that nobody can predict these things, the future, no one has privileged access to the future. Could this be the end of days? Maybe it is. I don’t know. Keynes made a point back in the 1937 when the market went down 50%. He made the point, “Well, look, if you can’t buy into the market when prices are falling, and falling a lot, then you can’t buy at all. Because if it’s the end of the world, well, it doesn’t matter.” Lower prices are always more attractive than higher prices. The most attractive prices are at, or just close to the lows. I don’t know if we’re there or not in this, but I do know that with six new highs today and 2000 new lows, there’s a fair amount of pessimism in the market.

Bill Miller (00:07:16):
Every correction that we’ve had in the past regime, so 2011, 2014, 2015, I think it was 2018, 2020. Those particular lows were reached when we had about 40% of the S&P 500 making 52-week lows. Yesterday, I think we had 25% of the S&P 500 on the new low list, but another 25%, actually more than that, are within about a percent or two of making new lows, which would tell me that any selloff from here, we’re down 1.3% today. If we get a bad day tomorrow, a bad day Monday, we’ll be, in my opinion, based on the previous lows, we’ll probably be there close to it, at least for an intermediate term rally.

William Green (00:08:00):
Do you almost perversely look forward to times like this? Because it seems like so much of your advantage over the last 40 years of being in this business has been your ability actually to step up during periods of tremendous disruption, when other people are making emotional mistakes and assets are getting mispriced. It seems like these are actually the periods that you almost wait for.

Bill Miller (00:08:19):
I don’t like these periods because of the tuition payments that I’m giving to the bear market, and it’s been extraordinarily costly and painful. On the other hand, it’s a much better time to invest right now. I’ll just give you some examples that just front and center today. OneMain Financial is a subprime lender. It has an 8% dividend yield. That’s secure, in my opinion, and it trades at five times earnings. This is the perfect environment for them, where you have rising wages and rising inflation, so that the credit is getting progressively better, because people are flushed with cash.

Bill Miller (00:08:54):
It shouldn’t be five times earnings, it should be 10 times earnings, in my opinion. General Motors is five times earnings. Every car they make is already pre-sold and even Cathie Wood, the famous owner of Tesla, has just started buying General Motors, because Mary Barra has got the right strategy. Paul Jacobson, the relatively new CFO is really, really good and their margins will be increasing with electric vehicles. I think that’s cheap. Then to get even a little bit crazier, we talked to Taylor Morrison Homes yesterday, Cheryl Palmer, a long time, an excellent CEO there, it trades it 2.9 times this year’s earnings. With basically a 20 plus percent return on equity and they’re buying back stock and the balance sheet is in good shape, they have a little bit more debt in the average home builder, but nothing to worry about.

Bill Miller (00:09:36):
Either home prices will have to go down 30 to 40%. That’s going to be hard, we’re short 4 million homes in the country. Home prices are actually rising. Home builders should typically trade at 10 times average earnings. It’s 2.9 times average earnings. All the home builders, the really good ones, Lennar, Pulte, they’re all buying back stock, as they should be. We have a Ben Graham special on sale right now in the market with Bausch Health, which was the old, what was the company called? Went to 200 and then it collapsed and Ackman owned it, the Canadian health company. I forget what it was.

William Green (00:10:09):
Valeant, yeah.

Bill Miller (00:10:11):
Valeant, so that’s now Bausch Health. They did an IPO of their iCare business. They sold 10% of their iCare business last week. They reported earnings on the core business, which were a little bit below what people thought. The stock is around 10 right now. The market cap is 3 billion. The iCare company is going to come with relatively low debt and they’re keeping all the debt on the old non-growth business, but they’re 90% ownership of Bausch and Loan, the iCare business, which they are going to spend out probably late this year, early next, their 90% ownership of that is worth more, well more than what the current stock is trading for. They’re going to spend that out to people. You’re going to get that basically an investment grade business, and you’re still going to have a company that’s trading at 2.1 times earnings in your portfolio. That just makes no sense whatsoever, in a bear market, you see that.

William Green (00:11:01):
In a sense, your competitive advantage among other things is that you can remain dispassionate in these moments of tremendous turmoil, where lots of stuff is getting mispriced because people are throwing the baby out with the bath water. Is that fair to say?

Bill Miller (00:11:18):
Yeah. Lower prices, other things equal are always better than higher prices if you’re actually an investor and you’re going to own stuff for the long-term. I would say that there are periods like them, I mean, this was, ’08, ’09 was like this. ’73, ’74 was like this, 1982 was like this. 1987 after the crash was like this. You don’t get these opportunities that often. I’m just looking at, we own Citibank. Citibank got about $70 tangible book value. Today, it’s $45. The tangible book at Citibank is pretty tangible. It’s pretty, I just say predictive of most banks if they’re accounting in their capital, the tangible book value is a reflection of the underlying value of those assets, which are mostly liquid.

William Green (00:11:59):
I wanted to get a sense from you of how you viscerally actually feel at the moment of what it’s actually like to be in your mind and body at a time like this. Because I remember when I first wrote about you, we traveled together back in 2001 in the days after 9/11, when the market had crashed. I was writing a profile of you for Fortune. I think the market had just suffered its worst week since the great depression and stocks were crashing, geopolitical situation was pretty terrifying and your fund was down over 40% from its peak at the time.

William Green (00:12:28):
You just seemed really calm and cheerful and unflustered. You were just buying hundreds of millions of dollars’ worth of stocks that everyone else was scared to touch, and that later soared. I always had this image of you as being very, very unemotional, but at the same time, I don’t think you are immune to emotion. You clearly felt a lot of emotion when things were falling apart in 2008, 2009. Can you just give me a sense of that nuance of what it actually feels like to be in these periods?

Bill Miller (00:12:57):
I would say that the worst period was ’08 and ’09, worse than ’01. That was because in ’07, we’d come off a long run and had a runway ahead of us of beating the market. Even though we were down a lot, we outperformed in ’01. We underperformed in ’07 and ’08 and ’09, if I remember correctly, or ’06, ’07, ’08 and ’09. We’d lost a lot of assets and we had to lay off a bunch of people. That was a much worse period than when we were still in the midst of a long period of out-performance, even though we were down.

Bill Miller (00:13:31):
This again, we don’t have that level of assets, and it’s basically a family office with some publicly available vehicles and I’m the largest investor in those vehicles. They represent a pretty good proxy for the amount of money that I’ve lost from the peak. I’m not too concerned about it as I was in ’08. Basically, we don’t have people to lay off and we don’t have clients firing on the spot right and left. That was more stressful to me than just losing money.

William Green (00:13:56):
I remember Charlie Munger saying to me at one point when I was asking him what it felt like in 2009 to buy something like Wells Fargo in March 2009, whether it was emotional, whether he felt fear and worrying. He was like in this monosyllabic way, “Nope. No.” I said, “You’re not really fighting those emotions because you don’t feel them.” Is that similar with you that you don’t really feel those emotions, like fear and anxiety and worry during these times?

Bill Miller (00:14:21):
No. I would say that the anxiety for me comes when, I can always tell when the market is close to a bottom when I get margin calls. Because despite what Buffet and Munger talk about, with respect to borrowed money, I mean, my view is that, if you can borrow money at negative real interest rates to buy productive assets, then you should do that. I’ve gotten margin calls here and that’s painful, because you have to sell stuff that you do not want to sell and just to do that.

Bill Miller (00:14:45):
Then once the things are sold, and you also have to pay tax then, so I don’t like to pay tax any more than the next person does. My cost basis on Amazon is effectively zero. My cost basis on Bitcoin is effectively zero. Selling those things to meet margin calls, because they’re also highly liquid, is going to be very painful next spring, because they got to pay tax on that.

William Green (00:15:06):
For a regular investor who feels these emotions much more intensely, do you have advice for them on what to do? Because one of the recurring problems obviously that you and countless other really exceptional money managers have had over the years, is that people bail at exactly the dumbest point, at exactly the moment when they should be buying your funds because they’re getting clobbered. They lose heart, despair and bail out and then they buy again when they’re doing really well.

William Green (00:15:32):
Just looking back on the last 40 years and having seen all of these mistakes that shareholders make, what would you advise people? Not just your shareholders, but regular people to do when they’re feeling barraged by these emotions as they open up their portfolio in the morning and they look and they go, “Oh, my God. Really?”

Bill Miller (00:15:49):
Well, my advice to them is what JP Morgan said. When somebody said to him, he can’t sleep for all the money he’s losing in the market and what should he do? JP Morgan said, “Sell down to the sleeping point.” I think that’s the answer. It’s funny, you mentioned that because yesterday, I’m not going to mention the person’s name for obvious reasons, but yesterday, a well-known money manager, one of the best in the world, redeemed our fund, so millions and millions and millions of dollars. Like, really? I don’t think he went out to buy a mega yacht or anything. I’m guessing he just was worried about how much money he’s losing.

William Green (00:16:25):
Well, you got in a similar situation where you had to redeem from Nomad, Nick Sleep and Zak’s fund, at the height of the crisis. You’d been really prescient in seeing how smart they were and betting on them very early, and then you had to sell your yacht as well. They’re brutal, these situations.

Bill Miller (00:16:43):
Yes. I had more money out with people at that time. That’s why instead of selling my own stuff, I love Nick and Zak and they’re great guys and I’m going to London in a few weeks, I think, to stop by and see them. I had to pull money from stuff that I had out with other people.

William Green (00:16:58):
The amazing thing that you did back then that I don’t think many people realized is that, you really amped up your bet on Amazon, which you’d owned for about 20 years. At the height of that mayhem, can you explain what you did to beef up your bet on Amazon? Because I actually, I think it’s one of the great contrarian bets and at a time when people were reviving you for getting hit and suffering from hubris and overconfidence, you were quietly actually making one of the great investments of your career. Can you talk about what you did back then with Amazon?

Bill Miller (00:17:31):
We bought Amazon on the IPO and I think you’ve heard me say when people say, “What’s the best investment decision you ever made was buying Amazon on the IPO.” What’s the worst ever? Selling a share of Amazon. We bought it, we doubled, we sold it. Then we came back in at $88 a share on the then stock in 1998 and then it promptly fell to six. When it started falling, we bought a little bit more. When it finally got crater in 2002, I guess was the bottom in it, and that was when people thought Amazon was going to go bankrupt. That analyst, Ravi Suria, I guess at Lehman Brothers, had said they were going to be bankrupt by the end of the year, and their bonds were going into tangible assets. Their bonds were going down.

Bill Miller (00:18:11):
We knew that wasn’t the case, because then they just sold books, music, and video. There’s mostly books. The book business, as you probably know, you can send the books back and get your money back for the books that you bought and held in your warehouse. They didn’t have any problem in that regard, they had some issues with suppliers who were wanting to be paid, because they were listening to Ravi Suria, but that was not, they had cash flow. They didn’t have to worry about that. in any case, I had told Jeff Bezos at the time that I said, “Look, if you need capital, we still had money flowing into our funds.” We had a lot of fire power. I said, “If you need some money, 100 million, $200 million, we’ll buy some bonds from here.” Do that, loaning the money in. They didn’t need it.

Bill Miller (00:18:50):
The reason it was is, I had a lot of confidence. In fact, I think Jeff came to Baltimore and we had dinner there and I asked him at the dinner, I think this was actually probably close to the bottom. I said, “Well, what are you spending your time on?” When I asked him that in 2001, he said, “The balance sheet. I’m making sure that the balance sheet is as bulletproof as I can make it because of the recession and the collapsing prices and stuff like that.” In 2002, when I asked him the same question, he said, “The customer experience.” That meant that he was playing offense and not defense and whatever the market thought was going on there, that wasn’t the reality at Amazon. We were buying the stock anyway, but that gave me a lot of confidence that it was headed the other way.

William Green (00:19:37):
You, back then, when I was writing about you for Fortune, you owned 15% of the company. I remember seeing you getting absolutely beaten up at some event that we’ve discussed before celebrating the release of Bruce Greenwald’s book, where everyone was telling you why you were going to lose %100 of your money. What was the thing that you saw that nobody else saw back then? Because it’s hard for people to cast their minds back to just how contrarian that bet was at that point after you lost 90% of its money. I remember you telling me, “Look at this guy in Barron’s every single week, who just is so biased against Amazon.” He just looks for another reason to say why it’s going bankrupt every week. What were you seeing?

Bill Miller (00:20:16):
Well, first of all, they had positive free cash flow. Actually, I’d had dinner with Warren Buffet and Chris Davis out in Omaha about that time. Warren had owned, he was like the largest holder of their bonds, their senior bonds, which again, gave me fairly good confidence that he knew quite well what the business is worth. Again, he didn’t own the stock, but I would say that the thing was that first of all, you had a business which was clearly the leader and the winner in its space. Now, the space is very much larger now than it was then, and it’s generating positive free cash flow. Jeff was as good a decision-maker in terms of process of decision-making and rationality, as I’ve ever seen. Warren knew him them, but didn’t know him as well as he knows now. He’s called an authentic business genius, up there with John D Rockefeller and people like that.

Bill Miller (00:21:01):
I think that’s now proven to be the case. Even then, he was very, very impressive. As Peter Lynch said, when somebody says, “The stock is at a hundred and now it’s six, how much more can I lose?” As Peter Lynch said, “You can always lose %100. No matter what the price is, you can always lose %100.” That was the thing. I didn’t think we’d lose %100, but we could certainly lose 50, as we’d done a couple times before.

William Green (00:21:22):
You saw a cost advantage that I remember you telling me was very similar to the cost advantage that you’ve seen at Fannie Mae. That was obscured by the fact that Amazon seemed to be losing a fortune and anyone who was using gap accounting was just saying, “Look, this is a disaster.” You saw that it had a cost advantage that sooner or later would be born out. Is that fair to say?

Bill Miller (00:21:45):
Yeah. That was the time when she alluded to, when I was on a panel with Bruce Greenwald when he came out with, I guess the second edition of his book on value investing. I was on a panel with Gabelli and Cooperman and Seth Klarman, about value investing. Bruce proceeded to attack me as not being a true value investor, because I owned Amazon and that Walmart was going to put them out of business. Then I guess, who’s the dean of the business school at the time, later went to the president’s council of economic advisors. He said, he interrupted Bruce and said, “Well, can you let Bill at least answer your attack?” That’s when I said, “Amazon is Fannie Mae.” I explained exactly what Peter Lynch had taught me about Fannie Mae.

Bill Miller (00:22:25):
I went through with Amazon and I said, “I don’t see the difference there.” Walmart’s got all these warehouses around the world and they got this long supply chains and they basically are getting stuff and putting them in the stores and Amazon sell direct to the consumer. They miss all of that kind of stuff and they basically have one big, at that time, one big one or two big warehouses and they have an inventory, which could be put back to them and they were generating free cash. There was no way that Barnes and Noble could compete with them the same way that IBM couldn’t compete with Dell in terms of their selling personal computers, one via stores and one via direct.

William Green (00:22:57):
You wrote the stock up massively for years and then when ’08, ’09 came and there was carnage, what did you do personally in terms of playing with long-term calls and the like to turbo charge your own bet on it?

Bill Miller (00:23:14):
I don’t think it was ’08 and ’09, I think it was, the real turbo charging came, I want to say it was maybe 2012 or ’13. When the stock had come down and it was in half from where it had sold in one of these big declines in the market. That’s when I bought a lot of calls on Amazon. Because basically, buying the stock, if it went back, the way the options market was acting at the time, basically was, if Amazon went back to its old highs, you doubled your money. If Amazon went back to its old highs, you made five times your money in the calls, put a two or three-year leaps. I just bought a lot of those. Then also, when I went back and I made five times my money, I exercised those calls. I didn’t sell them. I exercised them. That’s a tax-free thing. I basically also deferred the taxes on all that.

William Green (00:23:58):
When we spoke about this in 2020, I think when I was fact-checking my book, you had 83% of your personal portfolio in Amazon. You said to me that you’d had a discussion with Bezos where you said, “Wait, is your proxy statement correct? Because if so, I’m the biggest individual shareholder of Amazon who’s not named Bezos.” This is before he divorced his wife who has a different name and now presumably, he has more shares than you. I mean now, how big a percentage of your personal portfolio would Amazon be?

Bill Miller (00:24:27):
It would be about 40 to 50%, I guess. It’s come down a lot, so is Bitcoin. Both of them were a lot more than they currently are, because both of them are, Amazon’s down 30% or so from the peak or maybe more, and Bitcoin is more than half from the peak.

William Green (00:24:43):
What percentage of your portfolio would be Bitcoin now?

Bill Miller (00:24:47):
About the same as Amazon, about the same dollar amount.

William Green (00:24:50):
You told me at one point that you had something like 96% of your portfolio. I think this is last year when I interviewed you for Barron’s. You said you had something like 96% of your personal portfolio was in Amazon and Bitcoin with a few other odds and ends, but not much. What would it be now overall between those two?

Bill Miller (00:25:06):
80s, probably.

William Green (00:25:09):
What would the other main thing be, anything major?

Bill Miller (00:25:13):
Well, I’ve got money in the funds, obviously, in our funds. Then other big positions, Silvergate Capital, the crypto bank is a big, I spot more of that yesterday. Now, it’s down 13% today. Facebook is a big holding. I mean, there’s a variety of things that I own. I can give you a quick sense here. Baidu is a big holding, Mattel is a big holding, ADT is a big holding. Gannett is a big holding, relatively speaking. Not as big as Amazon or those other things.

William Green (00:25:42):
What’s the common denominator here? Because if I look at something like Baidu, for example, which I remember you were buying last time we spoke, everybody hates China at the moment. There are all sorts of people saying, “China is uninvestible.” Just as people said that Amazon was going bankrupt when you were building a big position there. What do you see when you look at Baidu and China? I ask you this as someone who looked at my investment in Alibaba this morning and saw that I’m down 58% so far since I bought it a few months ago after it had already crashed. What do you see when you look at China and Baidu and Alibaba and the like?

Bill Miller (00:26:14):
Alibaba is down now. We have Alibaba, it was down 2.6% today, $79.60. I think it’s not today.

William Green (00:26:21):
That’s a good day for me, Bill, where my Alibaba stakeholder goes down a couple of percent, I’m winning. What do you think about China?

Bill Miller (00:26:28):
Charlie Munger set it at the Berkshire meeting. China, he’s bullish on the Chinese internet and tech companies. He says that they’re great companies and they’re a lot cheaper than the US version, so I think that’s right. I think you have the, obviously, you have the regime there, which is, I mean, the problem there is it’s an autocracy and with the lunatic COVID policy, which is creating a fair amount of unrest. That’s the problem with autocracies, is they don’t care how much unrest they create when they want to basically make a point. I think that’s your risk in China. I think that, I mean, President Xi has said that he’s now going to support the infrastructure companies in China and the Chinese national champions. I think that the…

Bill Miller (00:27:03):
… companies in China and the Chinese national champions. So I think that the regulatory regime with respect to those companies that have been in crosshairs is going to be getting better. They’re not going to let them do the free will and stuff where Jack Ma can go around and criticize the government with, I guess he thought, impunity. So I think that lesson’s been learned. But I do think the stocks are just … It’s like Facebook, it’s just a very cheap stock, now.

William Green (00:27:22):
It seems like one of the really distinctive things about your approach to investing over all the years that I’ve been interviewing you, which I think now is 21, 22 years, something like that, is that you’re very comfortable with uncertainty. And I wonder if you could talk a little about that, about the distinction you make between uncertainty and risk.

Bill Miller (00:27:41):
Yes. It’s a distinction that was, I guess, first pointed out by Frank Knight, the economist. And so, risk is basically what insurance companies are managing, right? Which is, all kinds of bad things happen, and they promise to pay you if you have a policy with them, if these bad things happen. And so, what they do is, they look at the experience of those things happening, the probabilities of those things happening, and their exposures, if those things do happen, and they manage to that. So if the probability of being struck by lightning is whatever it is and choking on a piece of meat or being in a car accident, they have a lot of data which tells them that, within two or three standard deviations, of what they’ll have to pay if those things happen. And that’s what insurance companies do.

Bill Miller (00:28:22):
But when people talk about risk management in stocks, that’s not what they’re talking about. They’re talking about what [Cannes 00:28:27] called irreducible uncertainty. Because you just don’t know. Because you don’t know the probabilities. The base rates and the probabilities are not known, and therefore, you can’t manage that. You just have to deal with it and look at what happens if you’re wrong and these things occur. So people are very, very uncomfortable with that and that’s why they freak out when the market goes down, because they don’t know if the market’s going down 5% or 50%. Because they don’t know what’s going to happen in the world.

Bill Miller (00:28:50):
So I think that’s the big difference. And for me, I do make a distinction about that, and look, there’s Amazon. I don’t know how much Amazon can go down, but I know Amazon isn’t going bankrupt, and I know that they can generate cash under basically any and all circumstances. And the only reason they wouldn’t generate cash is when they’re spending on CapEx because their business is so good, and then they got to build warehouses and trucks and stuff to deliver goods. So again, it’s a Charlie Munger point about, the best business to own is the one that when it stops growing, gushes cash. And that would be Amazon. It’d be casinos too, for that matter.

William Green (00:29:22):
I remember you telling me, not long ago, that you have, in some ways, a different attitude to uncertainty than someone like Buffett where, Buffett, you pointed out in March 2020, when the market was getting killed by that initial COVID pandemic panic, and also in 1987 during the flash crash, that Buffett actually didn’t do anything, that the uncertainty was so extreme that he stepped back and was almost paralyzed. Maybe that’s the wrong word for it, but certainly just waited. Can you talk a bit about that? Because it seems to me very distinctive, that difference between you and him, your willingness to do stuff at times where there’s a great deal of uncertainty, that would make someone like Buffett extremely uncomfortable.

Bill Miller (00:30:01):
Sure. Going to go back to, I think it was 1990. I remember that they do the Barron’s Roundtable every January, the first couple weeks of January. And so Saddam Hussein had invaded Kuwait, and president Bush had given him an ultimatum that he needed to be out of that by January 20th or something like that, around that date, or he was going to send in the troops and the bombers. And so the market sold off when he invaded Kuwait. Oil prices shot through the roof, the market sold off significantly, and they asked the people on the Roundtable what they were doing. And it was John Neff and Peter Lynch and a bunch of luminaries, Paul Tudor Jones is on there. And every one of them said that, “Well, we don’t know what’s going to happen. There’s too much uncertainty that’s going to … But we have this deadline and we don’t have any idea.”

Bill Miller (00:30:47):
And so they were very cautious, they’d raised cash and all. And as Paul tutor Jones tells the story, afterwards, after the Roundtable was over, he went back to his office and said, “Wait a minute, these are some of the smartest investors in the world, and they’re all cautious and/or worried. And so, if they’re all worried, then the whole world’s worried. And therefore, it’s the right thing to go the other way.” And so he bought a bunch of stuff, and of course, as soon as the bombs started dropping, the market started rising, and the market made all of its gains between whatever it was, January 20th and like February 10th or something like that. 20 days, all the gains for the year.

Bill Miller (00:31:24):
And so that’s a good example. That’s one of the things I try to do, I say, “How much fear is in the market, how much caution is in the market when you have, as I said yesterday, six new highs and 2000 new lows?” Well there’s pretty much fear in the market. Now, historically, it’s taken more than that, and the technicians who have been mostly right, say that we’ve got downside maybe another 7% to 10%, best case. And then maybe down to 3,400 from wherever we are today, 4,000 or 3,900, something like that, where we have … We’re 3860, 69. Yeah. So I think the ones that are the better technicians that I’ve seen, that I actually pay attention to, are thinking 37, 3,800. And if that holds, you’re going to have a big snap back rally. [inaudible 00:32:06]-

William Green (00:32:06):
It’s funny, I’ve always assumed that technical analysis was nonsense, that it was voodoo. That’s what Damodaran signed to me a few weeks ago where he said, “Actually, maybe it can be useful in certain circumstances.” And I remember Jeff Vinnick once telling me the same thing. Why is it useful and not just like studying entrails and finding patents that don’t exist?

Bill Miller (00:32:24):
Well, it’s actually more useful than it’s ever been, in my opinion. I don’t know, the academics have done a lot of work on the various technical patterns, and they found that some of them actually worked for a while, but once they published about them, they stopped working. Because people could incorporate that into their stuff. I was on a call, a Santa Fe Institute call, several months ago, maybe it was in the fall. And one of the guys who was on the call was a guy who was a quant. And they asked him about quantitative methods and methodologies and stuff, because he was going into the theory of that and correlations.

Bill Miller (00:32:53):
And he said, “But you know,” he said, “Basically, so-called technical analysis,” he says, “I’ve never found it to be that useful. Quantitative stuff, and when you can do some sophisticated math, you can maybe figure out some patterns.” He said, “But in crypto, technicals work great.” He said, “There’s no fundamentals, and so it’s all psychology.” And he said, “And B, it’s a lot of people that don’t know what they’re doing.” And he said, “So they behave as people behave when they don’t know what they’re doing.” And he said, “So technicals, they’re pretty predictive.”

Bill Miller (00:33:19):
And I think that’s right, but I don’t view technicals in the sense of, I’m looking for particular patterns. I’m looking at them as a way to basically visualize a supply and demand. So obviously, economics is all about supply and demand, and stock prices are about the supply and demand of securities at various points in time and in different phases of the economy. So I’m just looking at what the supply-demand fundamentals are. And so when the demand is dropping and the supply stock for sale is greater than the demand for stock at that price, then obviously that imbalance is going to be met by lower prices.

Bill Miller (00:33:51):
And finally, there’s so much that begins to equilibrate after a while. And I think we’re close now. Again, external events could make that different. So, from my standpoint, I’m trying to buy, if I’m buying, and not getting margin calls, I’m basically buying stuff that I think is, if I look out a year or two, I think is going to be a lot higher. I mean, this is one of the rare times in the market when, if I look at Amazon, for example, which again, is my largest holding, that in Bitcoin. I look at Amazon right now, and I think Amazon easily be up with now, 2,100, 2,200, if I find it on the screen somewhere. It’s 2100, the high was 3,500, 3,600. So that’s 50% up, to get back to where it was.

Bill Miller (00:34:29):
There’s a lot of stuff down that’s down where, it’ll be 100% to get back to where it was, and I’m pretty sure they’ll get back there. So it’s one of those rare cases where, Amazon isn’t unequivocally better than other stuff that I can find in the overall market, if I want to look out a year or two. Now, if I want to look out 10 years, different matter.

William Green (00:34:44):
So would you not be buying Amazon at this point or you would be?

Bill Miller (00:34:49):
Oh, no, no. If I didn’t own it, I’d absolutely buy it right here.

William Green (00:34:53):
I remember last time we talked, you were saying to me, if you were starting fresh, you would happily put 20 or 30% of your assets in Amazon. What would you do now if you were looking at it today?

Bill Miller (00:35:02):
I would probably put 20. There’s a lot of other stuff to buy, not a lot of stuff that’s of that quality, but I think you could put … If you put 20 in Amazon, you could put 10 in Facebook or Alibaba or Google, for example. I think Microsoft’s expensive. I think Apple’s expensive. Apple broke down today, actually. So that probably tells me that it’s got more downsides, it’s way above its trend line. And most of the other stuff has broken the trend line.

William Green (00:35:27):
One of the things, obviously, that you did that was revolutionary in terms of value investing, where you really changed the way value investing was done, I think, is that you did start investing in these great businesses like the Googles and the Facebooks and the Amazons and the like. And when I asked you about this a few months ago, I think, you said something that had a huge impact on me, where I was saying to you, when I was trying to simplify the way that people invest, what I’d learned about how to invest. Said it was all about basically valuing things and buying them for much less than they were worth. And you corrected me and talked about how you had amended it.

William Green (00:36:02):
What you basically were saying, if I remember rightly, you said that all of these guys like Mario Gabelli or Bill Nygren or Buffett, Chris Davis, Mason Hawkins, these friends of yours who are classic traditional value investors, you said they would buy businesses at big discounts to what they’re currently worth. And I said to you, “So is that the key?” And you said, “No, no. For me, it’s about buying them at a huge discount to what you believe they will be worth.” And that stopped me in my track. So I was thinking, that’s actually a really profound shift. And that seems to describe what you were doing with Amazon, Google Facebook. Can you talk about that different way of valuing businesses and thinking about what you want to own?

Bill Miller (00:36:40):
Yes. And that’s actually the way that I do think about it. I mean, one of the things I’ve said is that, 100% of the information that you have to use to value a business is based on the past. Even if it’s an earnings forecast, it’s a past earnings forecast that you or the company might have made, or a growth rate forecast. But 100% of the value depends on the future. And so, to the extent that the future replicates the past, all that past data is very valuable. So the stability of in essence, the returns on capital, and the competitive position, and that kind of stuff, if those things are forecastable into the future, then they’ll be very valuable in terms of figuring out what the business is currently worth and what it might be worth.

Bill Miller (00:37:17):
But to the extent that they’re not, and the other issue is that growth investors tended to basically invest the way that I think value investors should invest, which is that basically, the growth investors have too little patience with the inevitable pickups in company’s growth rates. So they’re willing to pay a lot for something based on the current visible fundamentals. So when those fundamentals change, they flee. And whereas, with value investors, mostly if they’re comfortable with the visible fundamentals, then if the stock price goes down, they don’t flee. Or if the [inaudible 00:37:46] going into a recession.

Bill Miller (00:37:48):
So you really want to own companies where basically the growth rate can be, and especially the competitive advantage period, as Michael Mauboussin would have it, or Buffett would say, the moat, you can project that out for many years, and therefore, you can have some confidence that if you’re just patient, that even if it looks expensive … Buffett’s a lot of times talked about the market looking expensive and being expensive, but it’s not as expensive as it looks. And that’s when interest rates are low and valuations tend to be high. But yes, so we’ve tended to look for things that, ideally, you wouldn’t have to sell, because they’ve hit your valuation target. If that valuation targets keep moving forward at a pretty rapid rate, then that’s great. As Buffett says forever, the kind of business he likes to buy, sticking Berkshire Hathaway.

William Green (00:38:28):
So when you were describing your personal portfolio a few minutes ago, and you were talking about things like Meta, formally Facebook, and Amazon, and the like, that’s sort of this approach to investing, right? It’s these companies that you are able to buy at a huge discount to what you believe they will be worth.

Bill Miller (00:38:45):
Yes. Yeah. I mean, one of my biggest holdings is Gannett. The, who is it, John Gunn, the former CEO of a big firm out the West Coast, his name escapes me. He described the kind of companies that they own as cakes in the rain. The longer you own them, the worse they’re going to get, because they’re secularly declining businesses. And so there’s no doubt that the newspaper business is secularly declining, but Gannett, it’s the largest newspaper company in the country, and they’re generating free cash, and they’re converting over from the big printing press, high fixed cost stuff to digital. So that they shut down a few of their regional newspapers in the last few months, and they’re just going digital. And the New York Times has had a huge turnaround just because of its digital business, which Gannett can actually probably get more subscribers than the Times can.

Bill Miller (00:39:30):
And so we think Gannett, which is now $3.70, we think Gannett can be 20 bucks in three or four years. And that’s just on the current trajectory that they’re on. And then with valuations being … Then at the time, they’ll be paying down debt. They’re already paying down debt, but then the debt will be largely gone. And then they’ll be just a free cash generator, and it won’t be a $3.70 stock anymore. So that’s an example of a company where basically, what you’re doing there is, you’re just buying a bad balance sheet that’s going to get a lot better, and that the debt is going to disappear from the company.

Bill Miller (00:40:01):
That’s one of the things that I really like in this market, is that you can buy things like that to where, the only thing you have to be … Putting it differently, you can buy public LBOs. So they’ve got a lot of debt on their balance sheet, but that debt is going to disappear over the next several years. And the best thing that could happen to them is inflation, because the debt’s fixed cost, and interest rates are rising and the value of their debt obligations are falling in real terms.

William Green (00:40:24):
I wonder if we could turn to Bitcoin and crypto. I have a lot of questions on this front, and I think the obvious context to look at it in is this whole idea of misperception. Because, as we were talking about with Amazon, you had a very different perception than the rest of the market. And here again with Bitcoin, there are just these very, very heated, ideological differences about Bitcoin. It’s almost like a religious or political difference about Bitcoin. And it seems to me, traditionally, part of your advantage has been to step back somewhat dispasionately and to say, what actually is this thing?

William Green (00:40:58):
Can you talk first about where this way of thinking about the world comes from? Because it clearly stemmed in part from your study of Wittgenstein and William James, and this whole idea of seeing things more clearly, not being so biased, and trying to say, “What actually is this thing?” And so before we get to the detail of Bitcoin, I wonder if you could actually talk about that philosophical problem of how you actually describe things and see things clearly, so that you’re not just caught up in your own prejudice and bias.

Bill Miller (00:41:26):
Yeah, I would say, this came out of a lot of, initially, William James, Wittgenstein, and then John Dewey, and then Richard Rorty in the 20th century. In the sense of, you go back to Kant, for example, or Schopenhauer. And so, Schopenhauer is interesting because he spent countless years just studying Kant, and concluding that Kant had things mostly right, but he missed a few big things. And the thing that he really missed was when he talked about the ding an sich, the thing in itself. And so what you have is, you don’t have no ability to see things as they are themselves. What you see is effectively your representation of them, which may or may not fit the way that things actually are. And Schopenhauer’s insight was, then you don’t have any need of the hypothesis of things as they are. And it doesn’t do any work for you because it’s inaccessible. And therefore, all you have is your representation of things as you perceive them.

Bill Miller (00:42:19):
And therefore, then if you then go forward to William James, one of the points that he made is it’s … Or [inaudible 00:42:27] made, I guess initially, was, “Yes, that’s exactly right.” And therefore, what you really care about is just how useful are these views that you have, to navigate the world that you’re in? And I think this comes to mind, if I’ll get it right, there’s a story of the three baseball umpires, and they’re asked how they call balls and strikes. And so the first baseball umpire, who could be called a Kantian, or a near Kantian, and he says, “Well, I call them as they are. If they’re strikes, I call them strikes, and if they’re balls, I call them balls.” In philosophy, you call that realism, right? So, “I call them the way that they are.”

Bill Miller (00:43:00):
And then there’s basically the coherence theorists who believe that truth is basically things that cohere consistently together. And the coherence theorist umpire says, “Well, I call them as I see them. If I see them as strikes, I call them strikes, and I see them as balls, I call them balls.” So obviously leaving open that he could be calling them the wrong way, but that’s the way he sees them. And then you get the pragmatic umpire, he says, “They aren’t anything until I call them.” So I think that’s the key. And from my standpoint, I don’t have a particular view one and way or the other about Bitcoin as it is. Charlie Munger thinks it’s a threat to currencies, it’s evil.

Bill Miller (00:43:34):
A lot of finance mavens were very negative on Bitcoin in 2017. Now, some have come around, Paul Tudor Jones, Larry Fink now, Howard Marks at Oaktree, who were denouncing it then, and now they’re, “Well, this can be okay. We were probably wrong about that.” Jamie Dimon says it was wrong to call it a fraud, and stuff like that. But Buffett and Munger are still out there. And my view is, how useful is this thing? Whatever it is, how useful is it? Does it do a job in my portfolio that I can’t have done with something else? Under what circumstances will it do well, under what circumstances will it not do well? My key to Bitcoin is that it’s the only economic entity in the world, certainly monitored, but still probably economic entity in the world that the supply is unaffected by the demand. So if gold was just, what’s gold, $1,800 today, something like that? If gold was $18,000, instead of 1,800, there’d be a lot more gold mined. So gold that was uneconomic to mine today would become economic. And I mean, Charlie Munger has said, I think at the Berkshire meeting that he expects that any Fiat currency in a hundred years will be worth zero compared to what it’s worth today. That’s because they keep creating more of it. And with Bitcoin, the supply this year will grow about 1.7%, maybe. And so the only question you have to ask about Bitcoin is, over long term, will the demand exceed, in essence, 1.7% and 1.5%, then all the way down to zero? And I think it’s going to grow, the demand’s going to grow faster than that. And again, it’s-

William Green (00:45:00):
I’m sorry, Bill, just to explain that for people like me who are not experts on this, this is basically because the supply is fixed at about 21 million coins, and about 19 million have been mined so far. So we know that-

Bill Miller (00:45:12):
Yes.

William Green (00:45:13):
Can you just explain that for the idiot’s guide to Bitcoin?

Bill Miller (00:45:16):
The supply of Bitcoin, it’s a little bit like, you’ve ever seen that, who was the inventor who just died recently, who invented that black box? You know when you flipped the switch and the lid came up and a hand came out and it turned the switch back off again and went down in the box? So basically, that’s what Bitcoin is. It’s a protocol, and effectively, the number of Bitcoins has a certain feature that it basically goes in half, the new supply goes in half, every four years. And so I think it’s, what is it 12? 12 Bitcoins every 10 minutes, are created. And then all the computers and the miners are solving equations just so they can get those Bitcoins, which are given to them, if they verify that the protocol is functioning properly, and there’s no double counting, and stuff like that. But that’s fixed and it’s 21 million in 2140. That’s when the supply will run out.

Bill Miller (00:46:02):
And then for Bitcoin, so who’s going to maintain the … What are the minors going to do then? Well, they’re still going to maintain the ledger, and they’re going to do that, they’ll get fees for that, instead of getting Bitcoin. So the same process will be underway unless they go from what’s called proof of work to proof of stake, which I think is a potential risk to Bitcoin right now, but not a big one.

William Green (00:46:21):
So when you explain the essence of the bull case for Bitcoin, and you have this gift for simplifying things and reducing the complexity to something more graspable, is the essence of the case basically the supply/demand argument that there’s very limited supply, the supply is growing in this paltry way that you just described? And yet there’s enormous potential and growing demand. Is that the simple essence of it?

Bill Miller (00:46:46):
It is, but let me make it maybe more concrete. And I give two examples, one that everybody will understand, the second one they’ll understand theoretically, but maybe not the details. So the one that everybody will understand is, what Buffett says is that Bitcoin is a non-productive asset. He said, “I wouldn’t give you $25 for all the Bitcoins in the world.” But if I buy farmland, that I can grow stuff with it. If I buy a company, it can generate dividends and earn some cash for me. Bitcoin doesn’t do any of that stuff. So he says it’s like gold. He can sit there and look at it, or it sits in a place in your portfolio, but it’s not productive, and therefore, he can’t value it. And I think, fair enough. I mean, if the only thing that you think you can value are productive assets, then no one’s making to buy it, so ignore it.

Bill Miller (00:47:27):
Now, the other, maybe the more mundane thing for most people, would be that, I’ve used this, I think I might have told you, I use this with my good friend, Chris Davis. And I said to Chris who’s been in every major meeting that I’ve been in on Bitcoin, going back to when it was $200, and he’s never bought it. And his argument is, “Well yes, I understand that could be digital gold. In fact, it probably might be better than gold, but I don’t own gold either. It’s a non-productive asset.” He’s got a Buffett view on that. “So why would I own Bitcoin?” And my first answer to him is, “Well, the objective of investing is not to own productive assets. The objective is to make money. So the question is, can you make money with this thing? Not because it gives you dividends, but if you can make money with it.”

Bill Miller (00:48:04):
So what I said to him, I said, “But look, here’s a better way to think of it, Chris. You’re an expert in insurance, right?” And he’s like, “Yes, Miller, I purport to be my grandfather’s insurance commissioner of New York, and my father was a longtime insurance analyst. And I published a newsletter when I was young called The Insurance Analyst Observer or something like that.” And I said, “So how do you evaluate an insurance policy?” And he said, “Well, you can evaluate an insurance company really easily. You can look at the exposures, you can look at the capital. You can look at the experience they’ve had. You can look at the quality of their investment portfolio, on and on.” I said, “I didn’t say an insurance company. I said an insurance policy.” And he paused a second. And I said, “Well here, let me tell you the way I think about that, and you tell me where I’m wrong.”

Bill Miller (00:48:41):
I said, “You owe insurance, right? You have health insurance, you have car insurance, you have homeowners insurance, life insurance, stuff like that. Property insurance.” He’s like, “Yeah.” I said, “What’s the intrinsic value of those policies? You write a check every year for those policies.” And I said, “And what’s the value of those?” And I said, “The way I look at that is, you are paying somebody else, basically, and you for a policy that you hope is worthless. You don’t want to die prematurely, you don’t want to get serious illness, you don’t want have your house broken into. And it’s valuable to you to have something that will pay you if something really bad happens. Except if company goes bad, it’s yours. You own it, and it’s going to solve your problem with that if that happens.” Well, right now, we have something called gold, which could do that. But again, its supply is isn’t fixed. But everything else out there is something that, if you live in Venezuela, you live in Nigeria, live in Lebanon, you live in Ukraine when the war broke out, all of that stuff, Afghanistan when the US pulled out.

Bill Miller (00:49:39):
When the US pulled out of Afghanistan, Western Union stopped sending remittances there or taking them from Afghanistan. But if you had Bitcoin, you were fine. Your Bitcoin is there. You can send it to anybody in the world if you have a phone. And so I consider Bitcoin basically an insurance policy against financial catastrophe of one sort or another. And it doesn’t have to be all or nothing. Doesn’t have to be like, there’s some war in the United States, there’s some kind of thing where the banks are all shut and stuff like that.

Bill Miller (00:50:05):
Look what happened to the money supply when the pandemic hit. When the Fed stepped in in that pandemic and started gunning the money supply and bailing out, in essence, the mortgage rates, and the other people are doing commercial paper and stuff like that, Bitcoin functioned fine. There was no run on Bitcoin. It went down a lot initially, but the system functioned without Fed and without any interference, and everybody got their Bitcoin and the price adjusted, and then when the Bitcoiners and newer Bitcoiners realized, “Wait, we’re going to have inflation down the road, bitcoin went through the roof. So that I think is a … It’s an insurance policy, the way I look at it.

William Green (00:50:37):
You also said something that had a profound impact on me, I think the last time, or the previous time we talked about Bitcoin, where you explained to me that back in about 2014, 2015, when you first started to get fascinated by it, it was because you heard, Wences Casares talking about it, and that he was explaining exactly what you were just saying. That if you came from the US, where you had a functioning legal system and pretty good financial governance and property rights and the rule of law and all of that stuff, it was actually very hard to understand why this would be so valuable. And that he came from Argentina, where he had a totally different perspective, which fits into what I’m trying to talk about in terms of perception. Can you talk about what he said? Because that seems to me, profoundly important, this idea that he just viewed things differently because he wasn’t living in Omaha, for example.

Bill Miller (00:51:25):
Yeah. I mean, what he said was, his family had been in Argentina for 150 years, and had been wiped out multiple times by the government. Nationalizing the banks and taking the bank accounts away, inflating them away through that. There were three different things. Nationalizing the banks, inflation, and I forget what the third one was. But in any case, the fact is, he said, “We’ve been wiped out several times.” And he said, “But with Bitcoin, we can’t be wiped out by the government.”

William Green (00:51:49):
Yeah. The government just seized your assets at certain points, right?

Bill Miller (00:51:51):
Yeah. Yeah. And he said, “With Bitcoin, we can’t be wiped out. The government cannot take it away from us.” I might have told you the story of Bob Short. He went to, where was it? Estonia, I guess it was. And had met with the business people there, and he was on his way to Davos, where he was going to be on a panel about Bitcoin. And so he was curious about if anybody, of the business people that he had met, he was in a room with 100 of them, and giving a talk on whatever. And he asked if any of them owned Bitcoin, and everybody raised their hand. And he said he was shocked.

Bill Miller (00:52:23):
And I asked him why, and they said, “Well, because when Russia took us over after World War II, what they did is, they nationalized the banks, and they stole all of our money. Not our money, but our grandfather and grandfather’s money. That’s if you’re a regular citizen. But if you actually owned a business, you were sent to Siberia.” And he said, “And we sit right up here against Russia. They can do that again.” And he said, “But they can’t take our money this time, because we got Bitcoin, and we can just send it anywhere we want.”

Bill Miller (00:52:48):
That was what happened also with Wittgenstein’s father, who was one of the wealthiest people in the world, and he had money invested outside of Austria. He had the United States and England and everywhere, because he said he couldn’t trust the Austrian government not to steal it. And then when Hitler took over Austria, he did. He basically took all the money from everybody that was Jewish, and then sent them to concentration camps. And the Wittgenstein family actually got some decree where, they weren’t sent to the concentration camps, because they had all this money outside the country and they agreed to give it to Hitler. And then he said, “Okay, well, I’ll count you as only partially Jewish then, and you’ll be spared.”

Bill Miller (00:53:26):
So that’s one of the things about Bitcoin. That’s not the case with gold. You can’t carry gold around in sacks, trying to get across the border. So that’s another advantage that Bitcoin has. Fidelity had one of the best pieces they wrote recently on Bitcoin, Fidelity Digital Assets. And one of the points they made was that, it was one of the arguments against Bitcoin, one of the perceptions is that, Stan Druckenmiller used to say, I know he still says it, but, “Well somebody’s going to invent something better. There’s thousands of these tokens and coins out there, and technology is always changing in crypto. And so somebody’s going to invent one that’s better. Just like Ethereum was better than Bitcoin according to many people. And Solana is better than Ethereum. And the Fidelity people said, “Well, let’s-”

Bill Miller (00:54:03):
… is better than Ethereum. And the fidelity people said, “Well, that’s actually wrong in our opinion. Because basically, Bitcoin is like the wheel, nobody needed to reinvent the wheel after it was invented.” Now, Ethereum is actually a specialized type of entity, it’s maybe like a wheel for giant tractors, or it’s maybe a wheel that’s a run flat wheel, or it’s got these things that Bitcoin doesn’t have. But it’s basically a wheel, and so Bitcoin is the wheel, it’s the perfect wheel. And therefore if somebody invented it, something that did better, let’s call it a proof of stake Bitcoin. Okay, so I’m going to do a Bitcoin protocol that’s proof of stake now, instead of proof of work. And therefore, it will only use less than 1% of the energy that Bitcoin uses.

Bill Miller (00:54:41):
And one of the big arguments against Bitcoin is that it’s a climate catastrophe, and uses as much energy as Argentina does, all this kind of stuff. And proof of stake, which Ethereum is changing to for that very reason, doesn’t do that. Okay, well, if you then invent a proof of stake Bitcoin, what happens? Well, if you would own Bitcoin, if it was proof of stake, you might buy some Bitcoin then. But again, why would you buy Bitcoin when you already have Ethereum, which is proof of stake and it can do stuff Bitcoin can’t do? So, why would you do the Bitcoin proof of stake? The other thing is, with proof of stake one of the big problems that people talk about as a problem in the United States is inequality. Well, proof of stake basically is the most unequal thing you can imagine, because the rich people make all the decisions.

Bill Miller (00:55:19):
And if you have more stakes, if you have more Ethereum at stake, meaning you own more of it than somebody else, you get whatever the votes are. It’s like if you own more shares than… If you own 50% of the shares of Berkshire Hathaway, you can determine what’s going to happen with Berkshire Hathaway. And if you own 50% of the Ethereum, you decide what’s going to happen with it, and nobody else can say it. That’s a problem that Bitcoin doesn’t have, it’s truly democratic.

William Green (00:55:38):
So when you think about the comments that Warren and Charlie made in the last few weeks in Omaha, these guys are… I mean, you’ve said to me before, they’re bona fide geniuses, they’re incredible investors, they’re incredibly thoughtful. Is there some sort of bias, or prejudice, or blind spot that makes it particularly difficult for them to understand Bitcoin?

Bill Miller (00:55:59):
Yes, there’s several. I think everybody’s got blind spots in one way or another, and they’re error-prone. But certainly one of them is that they’re old, and they’re not used to new things, and they’re not the type of people who embrace new technologies and different ways of doing things. They look at the tried and true and tested, and they also don’t want to take a lot of risk. Buffet has said many times, I’ve heard him say to me that he’s taken enough risk in the insurance business, and he didn’t even realize how much risk he was taking until like 9/11. Like, “Uh-oh. If we get all this property casualty stuff out, I didn’t think about that.” So it’s not just what your experience is, because we had no experience with somebody flying into buildings before.

Bill Miller (00:56:36):
It’s also your exposures, and so he had to rethink his sense of exposure there. But I think the analogy that I’ve used on that one, which I think stands up well, is that it’s like the Buffet and Munger and all the traditional finance people, and a lot of people who are just involved in looking at Bitcoin and hating it. They’re like the Sherlock Holmes story Silver Blaze, where Silver Blaze was a famous racehorse, and he’s getting ready to run in the big race, then he was stolen. And so Scotland Yard of course is called in, and they cannot understand how somebody stole this racehorse. And so they called Sherlock Holmes and they say, “Can you figure this out?” And so Sherlock Holmes does some investigation, and he says, “Yes.” He says, “The key to solving the mystery is the guard dogs.”

Bill Miller (00:57:18):
And the inspector says, “The guard dogs? Well, the guard dogs didn’t bark.” And he said, “That’s the key, because the guard dogs knew who the thief was. And because it was known to them, they let him go by.” And so, the way that I say this is that all the people who are complaining, or all the people who are dissing crypto and Bitcoin are effectively like the detective in Silver Blaze. And as Marc Andreesen memorably said the first time that Buffet dunked on… It was 2017, that Buffet dunked on Bitcoin. He said, “The record of old white men who don’t understand technology crapping on new technologies they don’t understand is 100%.” Which then, when I heard Marc say that, that that Silver Blaze story jumped out at me because I said, “Aha, there’s guard dogs here that aren’t barking about Bitcoin.

Bill Miller (00:58:09):
And they’re called venture capitalists, and venture capitalists’ job is to assess new technologies, and to decide which ones might be worthwhile and which ones aren’t. There is a whole ecology of them out there, and there is not a single one of them that I ever heard dumping on the technology of Bitcoin. Now, they might not have invested in it early, because they weren’t sure about it. But they certainly didn’t dunk on it, and that’s the case where… And now that there’s probably… There’s certainly not a prominent venture firm in the country, if not in the world that doesn’t have exposure to Bitcoin. And in fact, many of them, the biggest ones like Andreessen Horowitz for example, all of them are doing their own dedicated crypto funds. So, last year was, $27 billion went into crypto venture investments. That’s more than the previous…

Bill Miller (00:58:53):
All the history of Bitcoin combined, they did that just in one year. This year, in the first quarter, more… Five times as much money went into Bitcoin ventures as did it last year, which is the all-time record. So, the money is pouring into this space, which again is a measure of what the demand is for these sorts of things. So, I conclude… I mean, I just saw Goldman just did their first loan, I believe, backed by Bitcoin. So, I think that you’re going to see… And Goldman wasn’t… I’ve talked to Pete Brieger, and some other people talked to the folks at Goldman and the management team there a couple of years ago, and they had the curiosity but no interest. And now they have a high degree of interest, and fidelity has been all over this stuff from the beginning.

William Green (00:59:33):
When I asked people on Twitter to send questions that I could ask you, I was pretty amazed. I think I got over a hundred questions, and as you would imagine a lot of them were about Bitcoin. Some of them insulting, and were like, “What is this guy thinking?” And one person, Bob Flynn, who I promised to send him a signed copy of Richer Wiser Happier to thank him for his question, said, “Could you ask Bill, what disconfirming evidence would make you change your mind about Bitcoin?” And I remember you talking to me before about the importance of the supply/demand dynamic. Could you give a sense of what would have to change for you to start thinking, “Maybe I made a mistake here, maybe I shouldn’t have half my net worth in this, or maybe this was a bad bet.” What disconfirming evidence would change our view?

Bill Miller (01:00:12):
You know, I was interviewed by Dan Morehead, who’s the founder of Pantera Capital, which is the biggest hedge fund, and one of the biggest investors in Bitcoin and the tokens, and ventures out there, and he interviewed me for their annual summit a couple of months ago, or a month or so ago. And he asked after the interview was over a similar question. He said, “So, have you read anything that you thought was thought-provoking about the case against Bitcoin? Like, anybody written a thoughtful piece on that, that would cause you to say, “Oh, I didn’t think of that before.” And I said, “No,” and he said, “Me either.” And then I read a piece about a few weeks ago, and I’m like, “Oh, okay. That’s the first piece I’ve read.” And it’s pertinent right now, and it’s by… It was a woman who’s interviewed…

Bill Miller (01:00:56):
You can get it on the internet, and if you look up The Atlantic magazine and Bitcoin, you’ll find it. There’s an interview by a guy who works on these newsletters for The Atlantic, and he’s interviewing this woman law professor named Hillary Allan about crypto. And she had written an article for a law review which kind of explained her concerns about crypto, her expertise is financial crises. And basically, the title of the law article was something to the effect of, Cryptocurrencies are Shadow Banking 2.0.” And her point is that, what set off the collapse in 2008 and nine was the collapse of first the Bear Sterns hedge funds, and then the real one was… I disagree with this, but conventional wisdom is that was reasonably well-contained until Lehman Brothers ran into trouble. And then when the government wouldn’t bail Lehman Brothers out, and did bail Fanny and Freddy out, but that was what led to the whole collapse.

Bill Miller (01:01:50):
Because right after that, then it was AIG, and [inaudible 01:01:53] to buy country-wide. And then the next one, this is where she drove the point home, was the reserve fund, the big money market fund that broke the buck. And because it wasn’t insured by anybody, like a bank, a bank account. And so when that happened, that’s when the whole commercial paper market froze up, and everything stopped, and the fed then stepped in. And Colson, having no authority to do so, basically guaranteed all the money market funds, and said the government will insure them if they break the buck. And that stopped that thing, and now when Congress didn’t pass the bailout of the banks worth giving a preferred stock, and then there were no more bank failures after that. So, what Hillary Allen said is that the stablecoins are like the reserve fund, there is no backing from them.

Bill Miller (01:02:34):
And it’s worse because there’s no fed to bail them out, they’re all decentralized finance on an algorithm. And that’s exactly what happened, and they’re opaque. So, there’s Tether, and there’s… But Terra’s the one that started to collapse over the weekend I guess, and then went to effectively… I don’t know where it is today, as low as 20-some cents yesterday. I guess they halted it today, I saw. So, there’s nobody to bail them out. So now, if you thought that was a stablecoin, well it’s not stable anymore, you lost your money. And I think that’s the risk, and her solution to that in the interview was… They said, “So, what do you do about that?” And she says, “You either regulate it, the same way now that we’re regulating money market funds, a lot of new regulation after the financial crisis.”

Bill Miller (01:03:17):
But the main one being that they had to be totally transparent about what their assets were, and you could verify them. And she said, “Either we do that, or you wall it off so it can’t infect the financial system, and it’ll collapse on its own if it collapses.” And so, I think both those things are right, and I think that it’s one of the reasons I like Silvergate, which is a bank that it basically services the crypto world, they’re the ones that lent the money to MicroStrategy for their latest $250 million purchase of Bitcoin, secured by Bitcoin itself as collateral. But they’re the ones that… Silvergate bought the DM technology from Facebook, now called Meta, which they were going to use for their own stablecoin. And they were trying to use that payment mechanism on Facebook, but it rendered a buzz saw of regulation. And consequently, they couldn’t get it done because the regulators were all over it.

Bill Miller (01:04:05):
So, they sold it to Silvergate for $182 million, and Silvergate, in my opinion, will use it to do a stablecoin. But it will be a stablecoin which is subject to the banking laws, as Garry Gensler had said that he thought changes at delta and Bitcoin and all should be subject to regulation the same way banks are. Well, Silvergate is already a bank, so that will solve that problem, and I think that’ll be good for Silvergate.

William Green (01:04:30):
I of course temperamentally am now pretty intrigued by Bitcoin, now that it’s more than halved. So, now suddenly it becomes really interesting to me after… Because I couldn’t bear to chase it when it was surging, but now that it’s halving this suits my temperament. But there’s a part of me… Sorry?

Bill Miller (01:04:44):
Hey, listen, it was up $700 when we started talking, and now it’s down $180. So, it’s had a reversal.

William Green (01:04:51):
It knows that I’m thinking of buying it, it’s already collapsing. It’s doing an Ali Baba on me. But last time we spoke, I think I asked you what the various ways to play it were. And you were saying, “Well, you could just set up a Coinbase account,” which I think you said your sister had done. You could buy Micro Strategy, you could buy the Grayscale Bitcoin Trust. And now when we look at the news, and we see talk of, well, there are people that… This rumor mongering that Coinbase could go bankrupt, and then what would happen to your assets? Would they get locked up, and nobody really knows what would happen to them. MicroStrategy is getting hit with margin loans. I’m just wondering if your advice on how actually to do it in practical terms has changed at all, what would be sort of the idiot-proof way to invest in this if you wanted to put one or 2% of your portfolio in it?

Bill Miller (01:05:35):
MicroStrategy’s down seven bucks to 160. So, that price, 160 now, is where MicroStrategy’s traded before they started to buy Bitcoin. And so, that’s just the value of their business intelligence software platform, which is profitable and growing, and generates cash. Now, they do have debt, they have convertible debt, they had that secured loan with Silvergate. But Sailor was asked yesterday that question about margin calls on his Bitcoin, and he said, “Well, they’re protected down to about $3,800 on Bitcoin, so about a 90% or 85% drop from here.” So, I think that’s when you can be sure, if you’re sure of anything, you can be sure that if Bitcoin rallies, it will rally. Because Bitcoin is locked away in cold storage, and Coinbase is a little bit riskier because it’s basically that entire crypto business.

Bill Miller (01:06:29):
On the other hand, it’s a very profitable crypto business. So, the whole system would have to collapse for Coinbase to be a problem. Silvergate serves that ecosystem as well, so if that ecosystem goes bad and goes to zero, Silvergate… But it’s still a bank, and so it can shift its business. But it was $10 before it started doing this stuff, and now it’s $60. So, that would be a nice drop from there.

William Green (01:06:52):
And I was looking at the Grayscale Bitcoin Trust, which has fallen from something like 55 to 19 since November. Is that still something that’s an okay way to play Bitcoin?

Bill Miller (01:07:02):
Well, the problem with Grayscale, which is down 6.7% today, and Bitcoin is down .34% today, is that the Bitcoin is worth one Bitcoin. And Grayscale owns Bitcoin, but you own a security, not Bitcoin directly. And so, Grayscale now trades at a whopping 34% discount to the NAV of the Bitcoin that it holds. And actually, I think that’s about as wide a premium as it’s ever had. So, it may not widen from here, but they’ve… I guess Grayscale is having a campaign right now to try and put pressure on the SEC to approve the ETF spot Bitcoin ETF, instead of just a futures-based ETF. But Gary Gensler, the head of the SEC, has said that he’s not going to do that until basically Bitcoin… He can be assured that there are investor protections with respect to the instrument to the ETF, that apply to other ETFs.

Bill Miller (01:08:02):
And so Grayscale said if he doesn’t approve it this time around, they reject… Because Grayscale has filed to convert their current GBTC into an ETF, and he’s rejected that I think at least two times. And if he rejects it again, they say they’re going to sue the SEC, because they don’t think they have the legal authority to do that. In any case, Canada and Switzerland and Australia and Brazil have all approved Bitcoin ETFs, and why can’t… Why is it good enough for their regulatory authorities but not good enough for ours? The risk of Grayscale is the premium widens.

William Green (01:08:31):
I wanted to ask you a couple of non-cryptocurrency questions, but investing questions before we change the subject totally. One of which is, how do you guard against your own prejudice and bias, and also against this character quirk that I think you have, which is that you are so contrarian by nature that I think when really smart people like Warren and Charlie oppose something, you actually get almost more excited about it. Like, what do you do to kind of, yeah, guard against your own prejudice, and your own personality quirks?

Bill Miller (01:08:59):
Oh, I don’t have any. I would actually dispute the first thing, which is to say that I’m a contrarian by nature. So, I would say that in philosophic terms, I’m not a naïve contrarian. If there’s a lot of enthusiasm for something, I don’t immediately say, “Well then, because everybody likes it I don’t like it, or everybody hates it I like it.” What I do is, I try to understand what the prevailing views are, and where… Either there’s a lot of exuberance, or there’s a lot of fear and pessimism, and just see what the evidence is on both sides. And we know from the psychological literature, and from [inaudible 01:09:33] and Traversi that the coefficient of loss versus gain is two to one. So, losing your dollar is twice as painful as making a dollar, or winning a dollar. And so, in order to get people to bet, you’ve got to give them two to one odds just to basically risk a dollar on each side where the odds were 50-50.

Bill Miller (01:09:52):
They don’t take that, because they’re afraid of losing. So, when you have a market that’s got 2,000 52-week loans and six new highs, like we have today, then there’s basically owners of 2,000 of those companies really aren’t happy because they lost money last year, the last 12 weeks. So, as I said before, the only think better than a stockette of 52-week loans is a stockette of a three-year loan, or a five-year loan, or a 10-year loan, or an all-time loan, because everybody hates it, because they lose the money. So, at least there’s a prima facie taste to take the other side, and let’s take a look at really what’s the case here. So again, if you see Warren and Charlie and Jamie Dimon and all these people dumping on some financial thing is our road… And I showed her a letter in 2017, you have to have pretty good evidence on it to take you to the other side of that one.

Bill Miller (01:10:34):
Because they’re rarely wrong about stuff like that, and especially when they’re all lined up, some of the best financial minds in the country, that is like, “Yeah, I’ve got to have a pretty big threshold to go against them and to understand what they’re saying about stuff.” But mostly with Bitcoin it’s been the case that people basically make up their mind first, and then look for the evidence, the confirming evidence. Again, with Warren and Charlie it’s easy, it’s not a productive asset, that’s all they need to know, and therefore they don’t like it. Charlie thinks it’s evil because it’s anti-government, and the government monetary system has all these laws in it and stuff that have been in development for a long time, and protect people. So, it’s even worse than that because it encourages people’s greed, and it encourages people to behave outside the bounds of the regulatory system and he thinks that in itself is not good.

William Green (01:11:18):
For me, the whole argument of Bitcoin I think that’s been really interesting to me, it just seems such a perfect example of people filtering things through a bias. And it just reminds me very much of something that you got me to read maybe 20 years ago, which was an essay by William James, I think it was on certain blindness in human beings, maybe it was a talk he’d given in the 1890s. This really had a kind of life-changing effect on me, because he talked about going to a forest in North Carolina that had been just absolutely ravaged, and he said it was like an ulcer, he said it was jus absolutely hideous with no redeeming characteristics. And then this mountaineer comes to him and says, “No, no, this is like a triumph of human spirit. This guy has built his little cabin for his wife and babes.” And then William James takes this and says, “Yeah, and if this guy came to my study in Cambridge, at Harvard,” where he was teaching psychology at the time.

William Green (01:12:08):
“He would have thought, ‘God, how strange, the way this guy is living.'” And I just thought that was a really beautiful insight into just how blinded we are by our own prejudice and bias.

Bill Miller (01:12:18):
I’m not sure if it’s in that essay or in another one, I think it might be in that one. Does he refer to Robert Louis Stevenson’s story in that one or not?

William Green (01:12:25):
I don’t think so, but I may just have-

Bill Miller (01:12:27):
Okay, that’s in a different one. He refers to a story in a different essay about Robert Louis Stevenson called The Lantern Bearers, where it’s a similar kind of thing, where Stevenson’s writing about that they had these what were called bullseye lanterns that were these small, little lanterns, and they’d hide them in their coats, and they’d go to places, and then they… That were dark, and they could take the lantern out and see. And he’s like, “Other people think it’s really stupid to be doing this, because you could burn yourself, and set yourself on fire.” And he’s like, “We’re never happier than when we’re all together with our lanterns, hidden and going and doing stuff together.” And then he pivots and says, it’s the same basic thought.

Bill Miller (01:13:01):
And he says that, in his study on Beacon Street in Boston, he said his dog is completely insensitive to the idea, that why would you sit there in a chair and stare at something all day long like a newspaper or a book, when you could be out sniffing the ground, and chasing squirrels, and running around, and doing stuff like that? And he says of course, “I’m completely unmoved by the act of sniffing the ground and chasing other dogs around, so that’s not what I want to do.” It’s the same kind of thing, is you have a certain set of attitudes. One thing that I… Is used in order to protect yourself against stuff is like, when I see a statement that can be quantified, but there’s no quantification, there’s just your emotional description, or I should say a normative description, then I’m like, “Where’s the evidence for this?” And so it’s like, they say Bitcoin’s a climate catastrophe, it uses more electricity than Argentina.

Bill Miller (01:13:48):
How much is that exactly? I mean, we know how much it is. It’s basically, according to the Cambridge Energy Institute at Cambridge in the UK, it’s 0.62% of the electricity usage in the world. It’s basically all the Bitcoin in the world is less than 1%, a little bit more than one half of one percent. I mean, laundry uses like 7%, air conditioning uses a lot more than that. And so do we say, “Why don’t we just turn the air conditioning off, so we don’t use all this electricity? You’re contributing to climate change.” I think actually there’s more natural gas flared, many times that than Bitcoin usage. But we don’t stop using natural gas because it’s worse than Bitcoin.

William Green (01:14:27):
When I think of you after 20 or so years of interviewing you, I feel like you’re this hyper-rational machine who goes through the world, looking at the gap between perception and reality over and over again, whether it’s Amazon, or Google, or China, or Bitcoin. And that seems to me a tremendous competitor advantage for you, that you have that philosophical background as well that gave you this perspective very early on about misperception, and the importance of seeing things as they are. But I’m also wondering if at a certain point you turn off that kind of analytical, rational mind, and listen to your intuition and your gut. Whether there are times where you’re looking at these investments, whether you’re looking at this market now that’s been falling apart, and there’s actually… There’s a role that you’re intuition and gut are playing?

Bill Miller (01:15:11):
In markets, I would say… Again, I would dispute one thing, that I am this hyper-rational person. I think I’m quite rational when it comes to monetary matters and things like that, but I’m actually a very emotional person with… I’m sort of like Lenin, where Lenin said he couldn’t listen to classical music because it made him cry. And so he says he wouldn’t listen to it then, because he didn’t want his emotions to get in the way of things. And my grandfather, he could not attend a funeral because he’d get too upset. So, I’m that way of things like that, but not on markets, I’m not that way. But again, and I’m not… I mean, ’08 was pretty terrifying to me. The crash of ’87 wasn’t… Maybe that’s a better example, because I remember that very distinctly, first it was twice as deep as… On one-day basis than the ’29 crash, 20% versus 10.

Bill Miller (01:15:58):
The markets were completely unglued, the financial futures markets were within a hair’s breadth of being shut down, and then just stopped trading for a while. And then after the market crashed, I don’t know of a single person except for me, and I’m sure there were. But everybody was saying, “We have to get out of stocks.” I mean, look what happened after ’29. I mean, the market crashed, and then it rallied, and then it went down another 80%. Was it 80%? Peak to trough it was 80, I think, after the bottom of July of 1932. And when you have these crashes in markets, like in 1931 in Austria, then you get the Depression. So, we’re going to have depression, and you can’t own stocks in a depression, you’ve got to own bonds. So my view, and I wrote about this, I’m like, “Well, that’s wrong, because this isn’t 1929. In 1929 industrial production was falling already in July, and it was continuing to fall into October as the market was rising.”

Bill Miller (01:16:45):
And so, we were already rolling over. Now, the market now crashed because the economy’s too strong, and inflation is rising, and as you may or may not remember back in ’87, but interest rates got to… I think I wrote a piece in the end of the third quarter, a shareholder letter, where I basically said, “Why would anybody own stocks?” Even though we own stocks in our fund. Because the feds were raising interest rates, because inflation is running hot, and the economy is too strong, and unemployment is low, and the yield curve has been shifting significantly. So where now, again, this was in September, it got to 9% on the 30-year treasury, which was then the benchmark. And October, it go 10%. I said, “Why would you do this? Because right now, the market’s 22 times earnings,” and that’s about where it was back in 1929.

Bill Miller (01:17:36):
And I think that the dividend yield on the market was around three, or something like that. And the long-term growth rate of stocks was around six, so… And therefore kind of an implied return of nine, so six plus three. And I said, “But you can get nine in 30-year treasuries guaranteed, so why would you own stocks? Because first of all, the yield could go up because the market went down.” Second, the dividend growth rate was six, not the long-term growth rate of stocks. The dividend growth rate was six long-term. And so, if the market stays at 22 times earnings, you can earn about the same as you can get guaranteed bonds. But, that’s a very high PE ratio, if it goes back to 14, 15, you’re going to lose all of that. And so, we had a lot of high dividend-paying stocks at the time. But when the market crashed 20% and the fed cut rates immediately, then it’s like, “Well, hold on a second.

Bill Miller (01:18:25):
“Fed’s cutting rates into a strong economy. So, why would the economy collapse just because stocks are down? What’s going to likely happen is that the economy, the feds cutting rates will get some cushion, and we’re probably going to have a good stock market in 1988,” which we did, and our fund was the single best-performing fund in the country. Because from October, we had 25% cash going into the crash, and we put all that to work in the next month, and month and a half. So again, that was a case of being rational, just looking at the economic circumstances were different at the time than they were in ’87.

William Green (01:18:53):
And do you think intuition does come into any of this stuff for you? I mean, is there some kind of tell where you… I don’t know, maybe it’s like Soros and his back pain, or something like that. Is there something where you start to sense, where you can almost switch off your rational, analytical mind, and there’s some other part of you that kicks in?

Bill Miller (01:19:13):
You know, in epistemology, one of the questions that is addressed is, can you know something without knowing how that you know it, or explaining how that you know it? And the answer is yes, you can. And just because you can’t articulate it doesn’t mean that you don’t know it. You can have an emotional sense, you can have, “I strongly believe X. I don’t know why I believe that, except it just seems to me that X.” And so that’s been I think both philosophically and experimentally kind of explored. For me, it would be… I would say that if that’s going to work for me, it’s going to be because I think I’ve seen this kind of market before. It’s like this, and this, and this. I’ll reason by analogy, and not necessarily by a strict quantitative thing, or an economic rationale. I mean, the most common thing is just, when do you think that the market is reflected, is discounted, whatever it’s worried about?

Bill Miller (01:19:57):
Or, when is the market on the other side, over- discounted? What’s clearly going to happen, like all these disruptive technologies? And so that’s the case. I think we’re close on the market right now, it looks to me like it’s getting a little stronger, a little bit. So, it’s down 1.5%, it was down 1.7% 15 minutes ago. But again, six new highs and 2,000 new lows, there’s at least owners of 2,000 companies that are not happy, they’re losing money for the last year.

William Green (01:20:23):
So, there’s pattern recognition from having down this for 40 years, and there is also some sense of feel?

Bill Miller (01:20:30):
Yeah, it’s a sense of when are people too excited, and when are people too cautious? And as Buffet has said before, something like, you pay a high price for a cheery consensus, and I think that’s right. And so, you can see it right now, because the market peaked in November, and that was when three of certainly the best records in money management peaked, which is Cathy Wood, James Anderson at Baillie Gifford, and Dennis Lynch at Morgan Stanley. And so, they’re all down 50%, I think, from the peak. And in fact, I was on the board at Johns Hopkins on the Investment Committee, along with James Anderson from Baillie Gifford, who’s a great…

Bill Miller (01:21:03):
On the investment committee, along with James Anderson from Baillie Gifford, who is a great investor, and a very rational investor and one of the few investors that was involved relatively early on at Santa Fe Institute. He’s been one of the funders, along with me, of the London Mathematical Institute. We were having a discussion about growth investing versus value investing in the fall at our board meeting, this was in December, so right after the peak of the market. And so, the question was, is value investing going to come back into favor? Is the record of the last 10 years going to be born out in the next 10 years when the growth stocks to the venture funds and all have killed it?

Bill Miller (01:21:34):
And so, the CIO asked that question of the committee, and I said, well, I said, the question can be framed a lot simpler than trying to figure out all of the arguments for and against value versus growth. The question can be framed as, when will James Anderson start to underperform? And so, that’s the question. And actually he had just started to underperform then. And I’m like, so now he’s underperform before, of course, but he’s always come back stronger. And I guess it was the spring, I guess that was 2020 that I had that conversation. It was 2020, and he was killing it in that market too. And then in 2021 in the first quarter, he announced that he was going to retire, I guess effective June one of this year. And his fund was up in the previous 12 months, 120%. And I said to him, good timing there, James. I said, I wish when I was up that much, I’d retired, done the same thing at about age 50. And again, now their investment strategy and style, all three of them is very well documented in terms of what problem they’re trying to solve for.

Bill Miller (01:22:36):
Then the problem they’re trying to solve for is all of the returns in the S&P come down to about 4% of the companies that are publicly traded. And therefore, 96% of the time, 96% of the companies you pick will not outperform. And in fact, most of them will underperform cash. If you’re trying to build a diversified portfolio with a lot of stocks in it, you’re almost guaranteed to underperform. You got to pick a very concentrated portfolio with a very particular set of companies in it. And one of the things that James has always said, which I think is right, is that’s well documented evidence. He says, so what he asks himself or his team, it’s not just him, is this particular company likely to be one of the 4%. And we know what the characteristics of the 4% are.

Bill Miller (01:23:14):
Is this one of them? For example, I think they sold their Tesla. Tesla was one of them that they rode huge run and they sold it, as he said, too soon, but they said, well, it got to be more than all the other auto companies combined, I think, right? He said, this has been one of the 4%, but it won’t be one for the next 10 years. And it’s always a 10 year rolling, 10 year horizon because the auto industry hasn’t changed. It’s still a mature industry and it’s not going to be a growth industry. Electric vehicles will be, but not autos. And so it’s very different from an Amazon or something where they’re upending whole industries and moving to cloud computing and that kind of stuff.

William Green (01:23:49):
You mentioned your friend’s retirement and you announced in January a succession plan for Miller Value Partners, your firm, and the two funds with Samantha McLemore and your son, Bill Miller IV taking over management of the funds and you becoming a minority owner of the investment firms that they run. And I’m wondering, what on earth were you thinking, Bill? Why did you announce that you would retire? What’s the game plan here, because I know that your ex-wife tried to convince you that you should retire at the peak of your fame during your 15 year bull run of beating the market every year, and you didn’t listen because you were too young and too many people were dependent on you. Why this time around did you decide to declare victory and hang up your spurs?

Bill Miller (01:24:28):
Yeah. When they asked me about regrets, I do regret that I didn’t retire then because I would’ve come back in 08 and 09 and then it looked like a hero was coming right at the bottom. It basically that Samantha and Bill are certainly ready and eager to manage money, they’re the same age I was when I took over the sole management from my late partner, Ernie Keeney. And they got plenty of experience, at least as much as I had or if not more on Samantha’s part. And I’ve passed my biblically allotted three score in 10 years and want to have a little bit of time not having to basically be an owner and responsible for all of this stuff and dealing with all the regulatory issues that go with running a business. And I’m still going to be an investor.

Bill Miller (01:25:06):
I’ll be an investor in the funds and I’ll be an investor in my own account and stuff like that. I’ll still be doing similar sorts of stuff, I just won’t have to feel an obligation to the… And I mean, one of the things is the ethics roles, the compliance roles are, in a market like this, very problematic for me, because I’m always on margin. And when the market goes down like this or my portfolio, I typically run a high beta portfolio too, and with concentrated positions. And so, when Amazon’s down 30% year to date and Bitcoin’s down 50% year to date and Tucker wears down 70% year to date, it’s one of my big holdings. When I get margin calls, normally it’s no problem. But now, because of the way the markets been, Bill and Samantha are both actively trading, not guessing trading, they’re just repositioning the portfolio.

Bill Miller (01:25:51):
We got a big redemption the other day from that well known money manager, as I mentioned. And so I didn’t think much of it, but what Samantha did was she had built both up, sort of day to day trading discretion to do stuff that’s strategically what we’ve talked about in terms of broad strategies and position sizing and then… But if they get gains, if they have influence, they could buy stuff that they want to buy without asking me if they get outflows, they can sell stuff to meet the outflows if we don’t have any cash. Anyway, so Samantha sold just a little bit of almost everything in the portfolio. Well, since my portfolio overlaps a lot with the public portfolio, I was prohibited from transacting for seven days. And I had margin calls and I’m… The only thing that she didn’t sell Amazon, because they’re already down a lot, and she didn’t sell Bitcoin because she didn’t own it.

Bill Miller (01:26:35):
I had to sell some Amazon and Bitcoin to meet the margin calls, which I hated doing because I think there are a lot of more attractive things in the portfolio and stuff that I didn’t want to own as much of, not that… It’s stuff that basically had much greater margin against it, in the sense of on stuff, if I own the grayscale Bitcoin trust, I couldn’t borrow money at all out on that. I own GNET, I think I’ve got to hold 75% of the value of GNET, and I can’t borrow 50% like a normal margin thing. It’s very annoying to me to have to sell stuff I don’t want to sell because of some arbitrary internally imposed the client comes first thing. I agree the client comes first on everything, I don’t agree that it’s going to be disruptive to the market if I have to sell some stock on anything like the seven days of non-transacting will allow the market to settle down because I’m such a big owner of it.

William Green (01:27:23):
It’ll give you a whole lot more freedom, basically.

Bill Miller (01:27:25):
Yeah.

William Green (01:27:25):
Which seems to always have been a kind of guiding principle and desire for you. Over the 22 years or 21 years I’ve been interviewing you, it just seems you’ve progressively become less and less constrained and more and more true to who you are, is that fair to say?

Bill Miller (01:27:42):
I would say that’s probably fair. I’m not sure what you’re referring to, but certainly I’m not front and center the way I was 10 or 15 years ago with the funds and when I was at Lake Mason. You had a whole different layer of stuff there because you were part of a large public company.

William Green (01:27:57):
Yeah. You had oversight by the board, you had to report to people, you kind of dressed up to go to work. And it seems to me that you’ve become kind of freer over the years to dress the way you want, write the way you want.

Bill Miller (01:28:08):
Yeah.

William Green (01:28:08):
Not write what you want, not write if you don’t want write a shareholder letter or something. It seems like, I don’t know. I remember once interviewing your house in Baltimore, just thinking God, it’s Miller unconstrained, he’s become unbound.

Bill Miller (01:28:23):
Well, I will say that one of my remaining things that I will be looking forward to is so I’ve always felt compelled to, first thing in the morning, I’ll still check the markets just to see what the futures are doing. And also overnight I was kind of in that habit during the financial crisis. But nonetheless, I feel compelled to read the Wall Street Journal carefully, I read the New York Times carefully first thing in the morning to make sure there isn’t anything there at a macro level or a micro level or company announcements or things that I’m missing. And then after I read the papers, I’ll typically go turn on the Bloomberg machine to see what’s going on there. And when I’m finally not the majority owner anymore and I’m not the name PM… What I do now is when I read stuff that I actually really want to read and not feel I have to read, so I still haven’t been through Schopenhauer, The World is Will and Representation. I have read Brian McGee, Brian McGee’s The Philosophy of Schopenhauer, which is longer than Schopenhauer book. But nonetheless, I have read that, but I’ve delved Schopenhauer, did some pieces. I haven’t read all of it.

William Green (01:29:26):
Last time I spoke to you, you’d been rereading William James’ Varieties of Religious Experience and you were reading Crime and Punishment, which I’m struggling with at the moment a little bit. And I think you’d read Middle March by George Elliott fairly recently. And War and Peace.

Bill Miller (01:29:40):
I used to read Schopenhauer almost every, certainly every other year. But I haven’t read that now in a number of years. I get through War and Peace, which I really struggle with for a while, but it was actually really worth it. The one that’s next on my list of that hill, because I haven’t read Ulysses.

William Green (01:29:54):
Oh that’s amazing.

Bill Miller (01:29:55):
This is the 100th anniversary of Ulysses being published and I do have a first edition of Ulysses in my rear book library.

William Green (01:30:02):
That was the… As a pretentious young English literature graduate, when I had my son Henry, the first thing I did when he got home to Westchester, New York was I read him a little bit of Ulysses because I thought he should have a little bit of the music of the greatest literature of the 20th century. And then when he went to Columbia and was studying creative writing and literature, he became obsessed with Ulysses and James Joyce.

Bill Miller (01:30:23):
Really?

William Green (01:30:23):
And then got a tattoo on his arm, an enormous tattoo of James Joyce with an eye patch. A famous portrait of James Joyce. I paid the price for getting my son obsessed with Ulysses from day one.

Bill Miller (01:30:36):
How about that? Oh, I saw it today. Somebody had sent me a picture of Mike Novogratz where he got a Luna tattoo on his arm months ago, of the Wolf howling at the moon. And it’s this big and it’s like, whoops, maybe you should have got a beef or Bitcoin on your arm, it’d be a little more enduring than that one.

William Green (01:30:54):
Yeah. I felt bad for him when I saw some story of him going from something like $10 billion to $2 billion and I’m like, yeah, that’s really tragic.

Bill Miller (01:31:01):
Yeah.

William Green (01:31:01):
Now he’s only worth a couple of billion.

Bill Miller (01:31:02):
Yeah.

William Green (01:31:03):
And so part of your game plan for retirement is really actually to read more and to-

Bill Miller (01:31:08):
Oh, absolutely.

William Green (01:31:09):
Do philanthropic stuff mostly. I mean, what will you do with your time now that you are even more unbound and untethered?

Bill Miller (01:31:17):
Well, I have substantial philanthropic commitments. I just did another big one that’s not public the other day, and I might do it anonymously just because the problem is that when I did this stuff at Hopkins in Santa Fe, immediately I get on the list of everybody in the world who wants to ask me for money. And-

William Green (01:31:33):
Yeah, I was meaning to ask you about that, Bill. Adopt a podcaster.

Bill Miller (01:31:37):
Yeah. I don’t need to bring a whole new hoard of people asking me for money and stuff. I might do it anonymously, but anyway. Those commitments are sufficiently large that I’m going to take several years to get them fully, I think, paid down, but I’m getting there, but I’m not there yet. I mean, it’s not that I’m not going to do anything more philanthropic, but I do want to build up some cushion and again, this market has taken away a big part of the cushion.

William Green (01:32:02):
And the fact that the market has taken away a big part of the cushion is sort of, to some degree, eroded some of your massive out performance of the last few years. Has it made you second guess yourself at all and think God, really? Why should I retire now? Maybe I should give it another couple of years.

Bill Miller (01:32:17):
No, actually, if I look at the funded, way behind the market last year, and it is a good sign of me not paying that close attention to the performance on an hourly basis or something. But as of a week or two ago, we were a couple hundred behind the market, which I thought… I wouldn’t call it triumph, but given the carney’s that’s been in the market, it’s certainly not problematic, because we have a mix of stuff. We got a mix of the daily different stuff and a mix of the three times earning stuff. It’s a little bit more balance in there, but actually a large part of the under performance last year was due to me not asserting myself in the way that I should have and telling Samantha, you need to do this, but not telling her you got to do it a lot faster, you got to…

Bill Miller (01:32:57):
We had a lot of things. We sold a lot of stuff last year that had gone up. I mean, far fetch, we had a $9 cost in, it went to 75 and we sold about half the position. It was our biggest position at one point, we cut it in half, but now it’s down 75% this year. It’s cost us a lot. And when it was $75, it was screamingly overpriced on any sensible near term basis. But using a Bailey Gifford thing on a 10 year basis, it wasn’t. And I’m like, we should cut it back, but we don’t need to get out of it. It was going to generate short term gains. And so a lot of our under performance last year was due to me not stepping in front of stuff. And that was me also owning the room, which went down 90%.

Bill Miller (01:33:33):
And now we sold it before it went down 90%, but still, that cost us. This is a long winded way of saying that. And I don’t know, I think the income fund is behind its benchmark too. Although, interesting thing going on there that I will tell you, because it’s not public now, but actually it is public, I guess. But I can safely blame myself for the under performance if we end up underperforming two years in a row for the opportunity trust and then Samantha will probably have the wind at her back next year because it’s two years underperforming in a row. We’ve only done three years in a row once, I think. That was 08, 09. 07, 08, 09, I guess it was.

William Green (01:34:08):
When you look back over the last 40 years, I mean it’s been an amazing run that’s been very… I mean, it’s kind of a historic run, right? You had the period of beating the market for 15 years running, which is kind of unprecedented. You got crushed in 2008, 2009 and everyone kind of ruled you out. Then you had this extraordinary comeback and got kind of marvelously vindicated, which was really fun to watch. When you look back on all of this, what are you proudest of? What gives you the most satisfaction?

Bill Miller (01:34:36):
I would say that actually the comeback, and not because I came back because just… I mean, anybody that actually just stayed the course after 08 and 09 and didn’t puke out the stocks and get defensive and stuff like that was going to have a good run at some point in time. It was more the fact that the 10 year period from 09 to 2021, I guess it was, through 2020. That 10 year or 11 year period, whatever it was, that period was, in my opinion, a far more impressive period than the 15 years in a row. Now some would dispute that because that 15 year period had a couple of years where only 10% of the money managers beat the market. And other periods where we’re 60% beat the market, but on one, three, five and 10 year period, I think in 2020 going back, we were in the top 1% for every period. And so not just ahead of the market, but in the top 1%. And that was a much harder thing to do that than it is just to be ahead of the market, within the market. I found that satisfying, lets just put it that way.

William Green (01:35:39):
I think what’s also striking for me is just the resilience that you showed. I mean, you could easily have packed it in and sort of laid down in fetal position and kind of groaned a bit and stopped playing the game. And you kind of kept going in a really remarkable way. And I don’t know, I found that kind of very heartening to see. And I was kind of wondering just where you got the strength to do that.

Bill Miller (01:36:03):
I’ll answer it a little bit facetiously and just say that it didn’t take a lot of strength to keep doing the exact same thing that I’ve been doing for 30 or 40 years, right. I mean, as I get up in the morning, the exact same pattern. Just like if you’ve got a dog, a dog eats at a certain time of day, goes out at a certain time of day, it’s not a trick to get the dog to keep doing that. I actually, retrospective, and I’m not sorry I did it, right? For sure because I find it super intellectually interesting and challenging and I’m competitive. And so that’s it, but I do think that probably Nick and Zach got it more right than I did or Peter Lynch did. I mean, Peter’s been retired, but not been retired, he’s been at Fidelity for over 50 years, but he’s been retired for, since what, 1987? No, no, 1986, something like that, right. I think that’s when he retired.

Bill Miller (01:36:49):
That’s a long time. And Nick and Zach are still young and Nick is actually in some kind of road race the last time I… He sent me an email last week. Those guys have a long runway ahead of them to do exactly what they want. I’ve got much shorter runway, but again, I don’t want to race from Beijing to Paris with my kids.

William Green (01:37:07):
Yeah.

Bill Miller (01:37:07):
Or grandkids for that matter.

William Green (01:37:10):
Yeah. You must look back on it with great satisfaction. I mean, you’ve done something kind of almost unprecedented, right? I mean, it’s great that Peter Lynch crushed the market over 13 years, thereabouts, but I mean, to build a 40 year record, that’s kind of quite something.

Bill Miller (01:37:24):
Yeah. I mean, I typically get asked whom do you admire in the business? And I mean, anybody who can survive in the business over, let’s say 30 years. And I didn’t have that number in mind particularly, but I think I might have told you that I was at a dinner in London, and it was probably about 10 years ago. And whoever the guy was sitting next to me was the Times of London’s longtime financial guru. And he said to me, who do you admire? I said, anybody who can survive. And he said… I don’t think I said 30 years. I said, anybody who can survive, right, and without getting fired. And he said, well, I’ve actually done work on that. And he said, and do you know what the answer is? And I’m like, yeah. He says, you know what survival means for it to be actual predictive of ability?

Bill Miller (01:38:06):
And I’m like, what? And he said, 30 years. He says, not 20 years of beating the market. It’s not 25 years of beating the market, it’s 30 years of beating the market. And he said the sample size isn’t that great, but it’s pretty clear that’s the threshold if you can do that. That was heartening to hear. It wasn’t all luck as Bill Gross said, with respect to me, when Barons asked him. I thought it was a great line. I had beaten the market 12 years in a row and they said, what do you think of Millers beating the market 12 years in a row? And he famously said, anybody can throw snake eyes 12 times in a row. And it’s like, well, no, that’s not exactly the case. There’s millions to one chance of that. And he was, of course, he was a card counter, but he just popped off his head and he had to come back and say later, oh, well actually that’s not what I meant.

William Green (01:38:53):
When I originally wrote that profile of you for Fortune, I remember showing it to Carol Loomis who was her grand figure at Fortune then and now. And she spotted an error, thankfully, a really stupid error that I’d missed that I managed to get out before it was published, thankfully. And I said to her at the time, so this is 20 years ago. You think he’s the real deal, this guy? You’d beaten the market for 11 or 12 years at that point. And she’s like, yeah, yeah, he’s the real deal. I thought that was interesting. I was just thinking of that this morning.

Bill Miller (01:39:21):
Yeah, it is. Yeah.

William Green (01:39:21):
She had-

Bill Miller (01:39:23):
I don’t think you told me that before.

William Green (01:39:23):
No.

Bill Miller (01:39:25):
Although one of the things that… She wrote a piece about Amazon in Fortune, probably around that time, I think. And I think she interviewed me for it and I’ve made some comments about Amazon and we owned it and I really liked it and she wrote in Fortune that even if I was right about Amazon and it turned out to be the kind of company that I thought it might be, she said the results will not accrue to the shareholders because their option program will eat up a huge amount of that because they’re adding all these employees and they’re giving them all stock options and stuff like that. And what was interesting about that, that was just about the time that Amazon changed from an option program to be a restricted stock program.

Bill Miller (01:40:04):
And they did it because I complained to Jeff. It was around the time Buffet was writing about stock option programs and they should be expensed and stuff like that. And I complained to Jeff about the fact that they had replaced their option program in 2002 or 2003 when the stock was way down. And actually I complained to the… Yeah, I complained to Jeff. And then he said to me a little bit later is he said, would you be willing to talk to the board about stock options versus restricted stock? And I said, sure. And so I did a presentation to the board on that. And shortly thereafter they switched to restricted stock. And then Jeff told me later that he was in favor of restricted stock, but the board was against it because they said tech companies don’t issue restricted stock, they have stock option programs.

Bill Miller (01:40:47):
And generous ones and we won’t be able to compete for employees if we give them restricted stock. But what was funny about that was it was right after Carol Loomis wrote this article. And the thing that was interesting about that was I think at the time they had 460 million shares outstanding. And I think right now they have about 480 million shares outstanding. It may be 5% dilution in the last 15 or 20 years, it’s virtually nothing. And now they’re buying back stock. They do issue restricted stock, but again, the dilution is virtually zero because it’s never worth zero. It’s always worth something.

William Green (01:41:22):
When I wrote my profile of you for Fortune back then, which I think it came out December 2001, something like that. I said that I guess Amazon had fallen to around six at the time from 90 something. And I said, if Miller is right, this will prove to be one of the greatest contrarian investments of all time. And so I think I was smart enough to see-

Bill Miller (01:41:40):
Good call on that one.

William Green (01:41:41):
Yeah. As a journalist, I was smart enough to see this is a really interesting story, but I was dumb enough as an investor that I didn’t buy the thing.

Bill Miller (01:41:48):
Yeah.

William Green (01:41:48):
And so the joke is on me. Congratulations on this amazing, amazing run. And I hope you realize that the fact that you are going to be retiring at the end of the year doesn’t mean that I’m not going to keep asking you for interviews over the years to come.

Bill Miller (01:42:01):
Oh sure.

William Green (01:42:01):
There’s no escape, Bill.

Bill Miller (01:42:03):
Well, I’ll have more time for interviews, although I’m going to be more selective of who I have interview me.

William Green (01:42:08):
That’s great. Well, thank-

Bill Miller (01:42:09):
You’re always in the camp, so you’re good.

William Green (01:42:11):
Ah, thank you. Well, thank you for teaching me so much over all of these years. It’s really been an amazing experience. I’ve always loved interviewing you and this has been a delight once again. Thank you so much, Bill.

Bill Miller (01:42:20):
Well, yeah, I’m in the William Green fan club-

William Green (01:42:22):
Ah, thanks.

Bill Miller (01:42:22):
Because you’re certainly among the most thoughtful and insightful of financial journalists and your book sitting right behind you is one that I give to anybody who wants to know what they should read about about investing.

William Green (01:42:32):
Ah.

Bill Miller (01:42:32):
And about life too.

William Green (01:42:36):
Ah, thank you. That’s really kind of you to say, I really appreciate. And you and my mother, the two members of my fan club. Thank you, much appreciated. Bill, thank you so much and take care. I hope to talk to you again soon. Take care. Bye.

Bill Miller (01:42:48):
Just wanted to say it, bye.

William Green (01:42:50):
All right, folks. Thanks so much for joining us today. If you’d like to learn more about Bill, you may want to check out what I wrote about him in my book, Richer Wiser Happier, particularly in the epilogue, which tells the story of his trial by far during the global financial crisis. How he survived it partly by drawing on stoic philosophers epic Titus and Marcus Aurelius, and then how he staged a miraculous comeback over the following decade. I’m grateful to everyone who took the time to write to me on Twitter to suggest questions for Bill. In all, I think I got over 100 questions. Thank you. I ended up using a question from Bob Flynn, a listener who lives in Columbia. And I’m sending Bob a signed copy of my book as a way to say thanks. Please feel free to follow me on Twitter at williamgreen72, and do let me know how you’re enjoying the podcast. I’ll be back with you soon with my next guest, who’s Mohnish Pabrai. Until then, stay well, take care.

Intro (01:43:45):
Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by The Investor’s Podcast Network. Every Wednesday we teach you about Bitcoin, and every Saturday, we study billionaires and the financial markets. To access our show notes, transcripts or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.