December   26,   1997

Philosophers Find the Degree 
Pays Off in Life And in Work

By   CAROL   MARIE   COOPER

hat can you do with a philosophy degree? In an age of M.B.A.'s and computer scientists, more than 4,000 American college students graduate each year with a bachelor's degree in the ancient discipline. Sometimes their parents and friends wonder what will happen to them. 

One thing is certain: Not many of them will go on to make a living as philosophers. Even those who persevere through a doctorate may wind up doing something else. More than 1,000 people with Ph.D's in philosophy applied for the 448 openings listed in the last year in "Jobs for Philosophers," said Eric Hoffman, executive director of the American Philosophical Association. And many of those jobs were temporary or nontenure-track teaching positions. 

Yet students majoring in philosophy -- the study of the principles underlying conduct, thought and knowledge -- seem passionately unconcerned. 

Shaharyar Khan, a philosophy major at the University of Virginia in Charlottesville, is one of a handful of seniors selected to live in the early 19th-century academic village designed here by Thomas Jefferson. He awakens each morning in a dormitory room that opens onto the university's mist-covered lawn, with the rotunda that Jefferson modeled on the Pantheon rising to his left. 

"We look at what we do, how we justify things," the 22-year-old said of his philosophy classes. "In that there is sublimity and nobility." 

Mr. Khan plans to go to medical school -- if he is not seduced by an academic career. He considered majoring in a science but decided he would get enough of that later. Philosophy was his personal luxury. "This was something I could do for myself," he said. 

But what of other philosophy majors? What do they do when confronted with the real world, where there are groceries to buy and mortgages to pay? How do they compete for jobs with all those sensible accounting and engineering majors? 

For all the jokes about them, philosophy majors appear to do remarkably well. That, at least, is the conclusion one can draw from an unscientific survey, 20 years after graduation, of the class of 1977 at four schools: Princeton University, the University of Virginia, the University of Nebraska and Texas A & M University. 

These 40-somethings fell in love with philosophy almost by accident and went on to careers in other fields. But for the most part they are convinced that their studies, which covered logic and ethics among other topics, helped them in their jobs and their lives. 

Their professional success may stem from the fact that philosophy students seem more likely than those with other degrees to attend graduate or professional school. Of 20 philosophy majors interviewed from the four universities, only four had not added a graduate or professional degree. 

"I suppose I'm lucky I got into medical school," said Joseph P. Bruner, who graduated from Nebraska. "I would have probably wound up parking cars otherwise." 

Or maybe not. Jorge Secada, director of undergraduate studies in philosophy at Virginia, said his students almost always found jobs -- though not in philosophy. "We are doing better in finding employment for graduates than most majors in the arts and sciences area," he said. "Apparently people in the real world think philosophy majors are well trained. They are trained to think, to analyze. They express themselves well. They write." 

At Texas A & M, philosophy majors -- like math and music students -- are benefiting these days from a job market desperate for computer scientists, said Dr. Leigh Turner, director of the university's career center. Students with such majors are thought to have an aptitude for technology jobs, she said. 

In the early days of this century, philosophy was thought of as fundamental to a well-rounded liberal arts education, Mr. Hoffman of the American Philosophical Association said. Considered more than just the teachings of Socrates, Aristotle and Plato, philosophy was regarded as a broad search for knowledge, encompassing the latest scientific and social theories. 

But that was before those concerns became independent fields of study, leaving philosophy with a narrower focus. And it was before college-age baby boomers gave way to a baby bust. Cash-starved colleges started looking for departments to trim. And students, watching the cost of a college education at selective private schools soar, turned into pragmatic consumers weighing the economic value of a diploma that could put them in debt by more than $100,000. 

By 1994, one survey found that a philosophy course was required at only 18 percent of colleges, Mr. Hoffman said. Between 1992 and 1996, more than 400 standalone philosophy departments disappeared, according to the Directory of American Philosophers. Schools offering a major in the subject slipped from 683 to 660; those offering even scattered courses plummeted from 947 to 606. 

All this occurred despite the fact that philosophy, in the last 20 years, has taken a more marketable turn as the issues faced in industry and the professions have grown more complex. 

Dr. Bruner's career hints at the changes. He heads a medical team, including two ethicists, at Vanderbilt University Medical Center in Nashville that developed a surgical procedure for repairing spina bifida in fetuses. The procedure raised several ethical issues -- whether, for instance, it is appropriate to perform an operation that could kill a fetus incapable of giving consent to repair a condition that is not life-threatening. 

"We've published almost as many articles on the ethics issues as on the medical issues," Dr. Bruner said. 

While so many other schools were cutting back, Princeton has maintained what is widely considered one of the best philosophy departments in the country. Its famous graduates include Carl C. Icahn, the financier, who earned his B.A. in 1957; his senior thesis was titled "The Problem of Formulating an Adequate Explication of the Empiricist Criterion of Meaning." Philosophy majors in the class of 1977 have spent the last two decades building striking resumes -- just not in philosophy. 

Jay M. Behmke, 42, did what so many philosophy majors do: He became a lawyer. But he built a practical career with a twist. After a few years in corporate law, followed by a year teaching in France as a Fulbright Scholar, Mr. Behmke returned to American wine country and became the chief financial officer at a winery. He then opened a law practice in Sonoma County, Calif., representing vineyards. 

"Some days I'm sorry I didn't go on as a professor, because I did have some things to say," said Mr. Behmke, who taught undergraduate philosophy courses at Yale while attending law school there. "I have a fantasy of making a fortune and retiring early and teaching philosophy." 

More men than women study philosophy; Nanci Heller McAlpin, a freelance writer in Manhattan, was the lone female philosophy major in Princeton's class of 1977. She knew from the start that she was not earning a practical degree. 

"When we entered the department, we were handed a paper and it said, 'Why not to go to graduate school in philosophy,' " Ms. McAlpin recalled. 

Such discouragements by Princeton and other schools apparently worked. The number of students earning doctorates in philosophy dropped to 298 in 1995 from 382 in 1976 and dipped as low as 215 in 1984, according to various studies. 

But almost 92 percent of those with doctorates in philosophy were employed full time in 1995, compared with 85 percent of those with music Ph.D.'s and 87 percent with Ph.D.'s in art history, according to a study by the National Research Council. The median income for philosophy Ph.D.'s that year was $46,800, compared with median 1995 earnings of $48,100 for engineers and $124,000 for family doctors. 

Unlike students who choose a major with a career in mind, philosophers typically fall into the subject by taking a class they enjoy, said Mr. Secada of the University of Virginia. One recent day here, students listened as Prof. James Cargile lectured on the utilitarian theory of justice, which holds that justice can be arrived at by weighing such things as the total happiness an act produces. But if that makes sense, he asked, should the person who enjoys wealth the most have more of it than others? In another class, Richard Rorty, one of the nation's best-known philosophers, discussed Nietzsche's thoughts on homosexuality and celibacy. 

Like Princeton's, Virginia's class of '77 produced its share of lawyers, but graduates also headed for such typical philosophers' occupations as medicine and computing. And some who chose law came to it circuitously. 

After graduation, Ralph Gilbert 3d turned to a profession of which Jefferson would have approved. He raised soybeans, sheep and pigs on his family's North Carolina farm for five years before drought, corn mold and mounting debt drove him from farming into law. 

Mr. Gilbert, who is 45, said he still read philosophy and enjoyed philosophical discussions with a friend who is an Episcopal minister. He toys with the idea of going back to school for a divinity degree. But he credits philosophy with helping him neither in farming nor law; it has only improved his life. 

"I think it influences the way I go about doing things," Mr. Gilbert said. "I think it's given me a sense of the complications that we face as human beings. It gives me a sense of the beauty and wonder of life. It helps me understand people in dire circumstances." 

Of all the gifts that his philosophy degree has given him, said Dr. Bruner, the Nebraska graduate, creativity is probably the most important. Those who majored in science, then headed straight for medical school and years of practice can have a narrow outlook, he said. 

"They don't have enough raw data outside their scientific training to provide those insights, those flashes of creativity," he said. 

Philosophy has many strains, of course -- not all of them quite so evocative of those moments of Romantic inspiration. Briggs Myrick, a 1977 Texas A & M graduate, became a sales clerk and manager at a hardware store after college. But within three years -- and without further training -- he was programming computers at the university. The leap was easy, he said: A lot of the early computer scientists were philosophers. 

"In philosophy, we study logic," he said. "We have a very mathematical way of going about it. Computers are a lot like that as well." 

Both philosophers and computer programmers use Boolean logic, Mr. Myrick explained, though philosophers are more likely to call it Aristotelian logic. "Any assertion is either true or false," he said. "If it is true or false, it can be on or off. And it can be a switch. And computers have a lot of little, tiny switches." 

Of course, philosophy majors work in fields other than law, medicine and computer science -- especially if they set out into the working world with just a bachelor's degree. 

One Princeton graduate shelved books in libraries to support his interest in acting before returning to school years later for a master's degree in library science. One 1977 Virginia graduate sells herbs and flowers; another owns a service station. 

Some 1977 philosophy graduates earn less than $30,000 a year; the herb seller expects to clear $6,000 in 1997. But more common are incomes of $50,000 or $60,000, and a few earn more than $200,000. 

Money aside, Dr. Bruner figures that his philosophy degree helped make his medical career possible -- though there were moments of doubt. The 44-year-old obstetrician still recalls sitting before the admissions panel at the University of Nebraska College of Medicine, scrambling to explain why he wanted to be a doctor after majoring in philosophy. 

"I told them that I could get a medical degree and still, to some extent, practice philosophy," he said. "But if I stayed in philosophy and tried to practice medicine, they'd probably try to put me in jail. 

"Not one of them cracked a smile."

January   10,   1999

To Beat the Market:
Hire a Philosopher

By   EDWARD   WYATT

ALTIMORE, Md. -- Perhaps it is the references to the fiction of Jorge Luis Borges, the late Argentine author whose metaphysical imagery he uses to illustrate a point about price-to-earnings ratios. Or maybe it is the nods to the philosophy of William James, whose theories are called upon to justify why America Online is a value stock. Certainly some hint is in the "thought experiments" that he calls upon his staff to perform.

The performance of his fund speaks to that. In each of the last eight years, the $6 billion Legg Mason Value Trust has outperformed the Standard & Poor's 500-stock index. Since the beginning of the 90s, shareholders of the fund have seen their investment grow by 453 percent, or 20.9 percent a year, on average -- well ahead of the 17.8 percent annual return of the S&P.

None of the thousands of other mutual fund managers currently plying the trade has equaled that feat; barely 1 in 10, in fact, have beaten the benchmark over the last three years. Anyone else aspiring to the mantle of fund manager of the decade should note that not even Peter Lynch, the legendary former overseer of the Fidelity Magellan fund, ever strung together such a consistent record.

Yet almost nothing that Miller does would seem to fit within the traditional parameters of the religion he claims to practice: "value investing," the method of buying assets for a small portion of their true worth whose best-known evangelist is Warren E. Buffett.

By contrast, Miller, 48, oversees a portfolio whose two largest holdings are Dell Computer and America Online, stocks whose market values have been hyperinflated by the craze for anything to do with the Internet. Such stocks are all but shunned by strict value types.

That those two stocks account for more than three-quarters of the gains in the Legg Mason Value Trust over the last two and a half years only adds to the skepticism of people who doubt that Miller is anything more than a crowd-follower. Without those investments, Miller might be just another value fund manager, struggling to keep up with a runaway bull market.

At the least, the holdings raise questions for current and prospective investors in his fund -- including whether he can realize profits without causing huge tax burdens for fund shareholders.

Soft-spoken and unflappable, Miller expresses confidence in both his methods and the results, steadfastly defending his style as holding to traditional value methods.

"Most people don't want to figure out what a company is worth," Miller said. "They want to know where the stock is going. We're always trying a Rubik's Cube approach, looking at something from all different directions. We want to know, 'What's the best description of what's going on?' "

It is an approach he honed in the mid-1970s at Johns Hopkins University as a graduate student -- not in business, but in philosophy.

Michael Hooker, a former philosophy professor at Johns Hopkins who is now chancellor of the University of North Carolina at Chapel Hill, recalls his first impressions of Miller. "Every morning I was the first faculty member to get to work," Hooker said. "And when I would arrive, Bill would be sitting in the faculty library reading The Wall Street Journal. It was odd."

Over months of talking to Miller about a dummy portfolio he was managing and hearing Mr. Miller's excited explanations of the theories of Buffett and Benjamin Graham, the father of value investing, Hooker began to discern in the student "an ability to connect the dots where other people don't even see the dots."

Hooker encouraged his protege to quit philosophy -- before earning the doctorate he had been studying for -- and to try his hand at finance.

The principles that have had the greatest influence on Miller are those of William James, the father of the school of philosophy known as pragmatism. James believed that the way one knows that an idea is true is if it is useful, and that knowledge can be rightly understood only in its context. To Miller, that means that the value of companies like America Online and Dell Computer must be considered in light of how technology is changing the ways in which companies do business and people communicate.

For example, technological advances that let companies better control their inventories have taken some of the big swings out of the economy -- and, as a result, out of the fortunes of historically cyclical companies, like makers of heavy equipment.

Traditional value investors might be tempted to buy those relatively cheap, cyclical stocks, in anticipation of the next big upturn in the economy. Miller, however, thinks any such swings will be longer in coming and of smaller significance than history teaches.

By contrast, Dell serves companies capitalizing on this new economy -- and its own inventory controls are the envy of its industry.

"It is a lot like the change from an agrarian economy to an industrial economy," Miller said. "It didn't happen all at once; it happened very subtly, year after year, but the accumulated change was very large."

That way of thinking also informed the discussion of America Online on a recent blustery December morning at the offices of Legg Mason, hard by Baltimore's Inner Harbor. The evening before, American Online had been selected as the newest addition to the S&P 500. Its stock was certain to open higher, as investors anticipated the surge of buy orders that would come from index funds that track the S&P.

On that morning, Miller was meeting with his team of analysts and portfolio managers, who contribute to the Value Trust but who also manage four other funds, Legg Mason Special Investment Trust, Total Return Trust, American Leading Companies and Focus Trust. The topic was whether America Online's rising value should lead the fund to sell some of its shares.

The fund had bought the stock in late 1996, when a flood of new subscribers to America Online overwhelmed the capacity of the service's computers. Investors, fearing that subscribers would flee from the service, sent the shares down 50 percent from their high.

But Lisa Rapuano, an analyst on Miller's team, believed that Wall Street misunderstood the significance of America Online's problems. The higher demand meant customers loved the service, she figured -- that it was changing the way that millions of people gathered and shared information. She convinced Miller to buy a million shares for the Value Trust.

Now, two years later, America Online's shares were trading at about $138, about 15 times the $9 or so that Value Trust had paid. Based on Ms. Rapuano's models, which calculate the immediate value of the future cash flows of America Online's business, the stock was close to its full value.

But in the longer term, Ms. Rapuano said, America Online's potential remained great. "The company has a $60 billion market value," she said. "In our long-term model, this is potentially a gigantic company -- $200 billion to $300 billion over the next 10 years. Over the next 12 to 24 months, we shouldn't have quite so much in AOL, but that doesn't mean we don't want to have a large position over the 5-to-10 year horizon." The fund sold a few hundred thousand of its eight million shares that day.

In the roughly two years after Miller bought America Online and Dell Computer for the Value Trust, those stocks grew to account for 14 percent and 9 percent of the fund's assets, respectively. But even though the fund took in more than $3 billion in new cash from investors over that period -- by itself enough to triple the fund's size -- the fund has made no additions to those holdings. On balance, the fund has sold more than $100 million of those stocks since its first purchase.

Still, it is unusual for a fund called the Value Trust to be holding on to stock that trades for 600 times the company's earnings, as America Online does. The issue is not lost on Miller.

"There are a lot of value funds out there with good long-term records and not-so-good one- and five-year records," he said. But he said the Value Trust's superior performance this decade goes beyond Dell and America Online.

In the early 1990s, Miller invested a big portion of the fund in bank and financial stocks, which were depressed because of high interest rates and worries over loans to developing countries. Since then, financial stocks have been among the market leaders, and the fund still counts many of them among its holdings.

In the mid-1990s, the Value Trust snapped up shares of health care companies when they were beaten down by concerns over President Clinton's health care plan.

"I'll easily trade no rate of return in the near term for higher confidence that a stock will outperform in the long term," he said.

There are plenty of examples of that philosophy in the Value Trust's portfolio. Consider Circus Circus, the casino stock that Miller bought in the first quarter of 1996 -- at the same time he bought Dell Computer.

While Dell's shares have since increased 35-fold, Circus Circus has fallen from the mid-30s to $12. Miller has responded by gradually quadrupling his holdings of Circus Circus, to more than five million shares -- more than 5 percent of the company. And recently he has been adding shares of Mirage Resorts and MGM Grand as well.

"The stocks are flat, but the cash flows of gaming companies have been growing," he explained. With new construction slowing down in Las Vegas, Nev., Miller expects those companies' cash flows to soar.

Low-priced assets, high cash flow, a business turnaround -- all traditional value-investing approaches, Miller points out.

How to detect the signs of change that will lead to big turnarounds in a company's market value is the subject of an exercise occasionally used by Miller for his team of analysts and portfolio managers. He calls the drills "thought experiments."

In a recent example, Miller -- drawing on the work of Douglas North, the 1993 Nobel laureate in economics -- asked the group to think of two continents with the same climate, land mass, indigenous populations and natural resource base that were settled at about the same time. Then, he asked them to figure out why one had created enormous wealth and the other had not.

Like many experiments in a science lab, the "answer" lies as much in the process as in the results. The continents, he explained to his team, are North and South America, and the application of traditional economic theory might lead one to conclude that, because the two continents started with equal assets, they should have been able to create equal levels of wealth.

But when viewed in the context of the ideas and institutions that guided the settlement and development of North and South America, Miller said, those assets have very different values -- and the outcomes, of course, have been far different, too.

What does any of that have to do with managing a mutual fund?

"It gives us a framework to think about things," said Jay Leopold, who follows health care and finance companies for Miller's team. "He doesn't cram philosophy down our throats. But he gets us to think about how the context of something affects the anticipated outcome."

Miller also draws on the work of the Santa Fe Institute, a research organization in New Mexico devoted to studying the science of complexity -- things like swarm behavior, the collective actions of groups of bees, ants, birds or portfolio managers.

Just as managers have swarmed to stocks with even a glancing connection to the Internet, so have traditional value investors fled from the high price-earnings ratios that those stocks carry.

"People look at price-earnings ratios like the Aleph," referring to the Borges short story by the same name. "The Aleph" is a mystical tale of a man who discovers in his cellar a point in space that contains all points in time, a center of infinite knowledge where, Borges writes, "without admixture or confusion, all of the places of the world, seen from every angle, coexist."

To perceive the P/E ratio as an Aleph, a be-all indicator of a company's value, Miller says, is a "pathetically simple view," one which would have led him to sell his most successful investments months ago. No simple ratio can tell everything that any investor -- value or otherwise -- needs to know about a stock.

One of the monumental tasks ahead of Miller is dealing with new investors, who likely believe that the fund's 40 percent annualized returns over the last four years should continue.

"The probabilities favor those returns being a lot lower in the future," he said. "Our record looks great right now," he added. "But I've had streaks that look really bad. We could have a streak that makes us look really mediocre."

In fact, he eschews summing up his legacy. "As William James would say, we can't really draw any final conclusions about anything."

October   24,   1995

The Value of Philosophy

[Excerpt]