This weekend, we sit with John Montgomery, Chairman and Chief Investment Officer of Bridgeway Capital Management, which manages $8.4 billion dollars and quite uniquely, donates 50% of its profits to non-profit organizations. He worked with computer modeling and statistical methods as a research engineer at MIT in the late 1970s. As a student at Harvard, he investigated methods to apply modeling to portfolio management and began applying these methods to his own investments in 1985.
Montgomery believes “things have gotten out of hand at the top end of the pay scale” throughout Corporate America. Because of this, he set up the firm with the highest paid employee earning no more than 7X the lowest paid employee. Additionally, all of the employees are required to be shareholders in the firm, via an ESOP offered by the company. The firm also makes sure to include their “biggest annual mistake” in their annual report.
Bridgeway is an “evidence based investment” firm, relying on quantitative analysis, factor modeling, and other data-driven strategies. Montgomery also references the behavioral aspect to investing, which he points to as explaining why most investors under-perform.
Montgomery, set up an accountability group called “Firewood,” a personal board of directors with the specific purpose of members holding each other accountable for their own personal goals.
Some of his favorite books are referenced here.
You can stream/download the full conversation, including the podcast extras, on Bloomberg, iTunes, Overcast, and Soundcloud. Our earlier podcasts can all be found on iTunes, Soundcloud, Overcast and Bloomberg.
Next week, we have Jean Case, CEO of the Jean & Steve Case Foundation, Chairman of the Board of National Geographic.
John Montgomery’s favorite books
The Honest Truth About Dishonesty: How We Lie to Everyone–Especially Ourselves by Dan Ariely
Daring Greatly: How the Courage to Be Vulnerable Transforms the Way We Live, Love, Parent, and Lead by Brené Brown
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