John Montgomery is founder, Chairman and Chief Investment Officer of Bridgeway Capital Management, which manages $8.4 billion dollars. The firm uniquely donates 50% of its annual profits to non-profit organizations. Charities have included such diverse regions as the Eastern Congo Initiative, and the Human Rights Documentation Initiative at the University of Texas Libraries. They focus on education, community development, disaster relief, and homelessness.
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 has an unusual background for someone in finance: He worked as a transportation engineer, using computer modeling and statistical methods 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.
Along the lines of you cannot manage what you cannot measure, he set up an accountability group called “Firewood.” This is his personal board of directors, and it has the specific purpose for its members for holding each other accountable for their own personal goals.
Some of his favorite books are referenced here.
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Next week, we have Jean Case, CEO of the Jean & Steve Case Foundation, Chairman of the Board of National Geographic.
