John Stuart Mill

John Stuart Mill (1806-1873) was a towering figure of 19th-century British philosophy and political economy. While you won't find him mentioned in many stock-picking guides, his ideas on liberty, societal progress, and economics provide a profound, if unconventional, framework for the modern thoughtful investor. Mill championed a refined version of utilitarianism, the ethical theory that actions are right if they promote the greatest happiness for the greatest number of people. He argued for the importance of individual liberty against the “tyranny of the majority” and, fascinatingly for investors, questioned the relentless pursuit of economic growth. For a value investing practitioner, who prioritizes long-term sustainability and intrinsic worth over fleeting market trends, Mill's philosophy offers a powerful reminder that the “value” in an investment extends far beyond the numbers on a balance sheet. His work encourages us to think critically about a company's role in society, its long-term stability, and the importance of independent, contrarian thought.

A true prodigy, John Stuart Mill was subjected to a famously rigorous education by his father, the philosopher James Mill. By the age of eight, he had read the great Greek classics in their original language. This intense upbringing led to a mental health crisis in his early twenties, but he emerged with a more nuanced and humanistic worldview. His major works, including On Liberty (1859) and Principles of Political Economy (1848), became foundational texts for liberal thought. While an advocate for free markets, he was deeply concerned with the distribution of wealth and human well-being. He was an early proponent of women's suffrage and believed that the ultimate goal of society was not mere production, but the moral and intellectual development of its citizens.

Why should an investor care about a 19th-century philosopher? Because Mill’s big ideas provide a durable intellectual toolkit for navigating the complexities of modern markets.

One of Mill's most radical and relevant ideas was the “stationary state.” While economists of his time feared economic stagnation, Mill welcomed it as a sign of maturity. He envisioned a future where, after a period of growth, the economy would reach a stable equilibrium. In this state, society would no longer be obsessed with capital accumulation but could instead focus on qualitative improvements: social justice, leisure, and the arts. For the value investor, this is a game-changing perspective.

• Embracing Mature Companies: It challenges the market’s obsession with high-growth tech darlings. Mill’s stationary state is the economic equivalent of a mature, stable company that has stopped its explosive expansion but generates enormous, reliable cash flow. These are the “boring” but beautiful businesses that often possess a wide economic moat and can reward shareholders for decades.
• Focus on Sustainability: The concept aligns perfectly with the idea of sustainable growth. A company that grows at all costs may burn out, but one that operates in a balanced, sustainable way can thrive indefinitely. Mill prompts the question: Is this company built for a frantic sprint or a steady marathon?

Mill argued that the “utility” or “good” of an action should be measured by its ability to produce happiness. He also distinguished between “higher” pleasures (intellectual, moral) and “lower” pleasures (purely sensual). This ethical lens is surprisingly useful for evaluating businesses today. It forms the philosophical bedrock of ESG (Environmental, Social, and Governance) investing.

• Beyond the Bottom Line: Does a company create value for society, or does it profit by imposing costs on others (e.g., pollution, poor labor practices)? A business that genuinely benefits its customers, employees, and community is arguably a “higher pleasure” investment and likely a more resilient one in the long run. Its brand reputation and social license to operate are more secure.

In On Liberty, Mill famously argued for protecting individual thought and minority opinions from being crushed by the mainstream. He believed that even wrong opinions were valuable because challenging them forced us to better understand and defend the truth. This is a perfect philosophical defense of contrarian investing.

• The Courage to Be Different: The market is a giant voting machine driven by the “tyranny of the majority.” When everyone is euphoric about a stock, its price is likely inflated. When pessimism is rampant, opportunities abound. Mill’s ideas give intellectual courage to the investor who, after doing their homework, chooses to stand apart from the crowd. As the great value investor Benjamin Graham taught, you are not right or wrong because the crowd disagrees with you. You are right because your data and reasoning are right.

While Mill never managed a portfolio, his wisdom can make you a better, more thoughtful investor. His philosophy encourages a holistic approach that balances quantitative analysis with qualitative judgment. Here are the key takeaways:

• Look for “Stationary State” Champions: Don't just chase growth. Learn to appreciate mature, high-quality businesses that have settled into a phase of stable, cash-generating dominance.
• Be a Contrarian with Conviction: Do your own thinking. When the market shouts, learn to listen to the whispers of reason and evidence. Trust your analysis, even if it's unpopular.
• Invest for the Greater Good: Consider a company's total impact. A business that creates genuine, sustainable value for all its stakeholders is often the most durable and rewarding investment over the long term.