Bill Miller speaks

Bill Miller: The late Puggy Pearson was a professional gambler, lived in Las Vegas, had a 5th grade education, but nonetheless became legendary in poker.

"There ain't only three things to gambling," Pearson said. "Knowing the 60/40 end of a proposition, money management, and knowing yourself."

And if you translate that into investing, knowing the 60/40 end of a proposition means knowing when you have some competitive advantage over somebody else. And you don't bet, you don't gamble, you don't invest, unless you have some competitive advantage.

Second, money management means well, okay, if I've got a competitive advantage, how much do I invest? 10 percent? 20 percent? 50 percent? Three percent?

Finally, there's knowing yourself: That means knowing how you react to stress, how you react to adverse outcomes, how you react when things go well. Do you get giddy and overconfident when things are going well? Do you get morose and difficult when things go badly? Do you make bad decisions at both extremes?