Oaktree Co-Chairman Howard Marks joins the podcast to discuss his investment philosophy, risk management, and decision-making quality. They explore key investing principles, market dynamics, sound risk management, and lessons from card games for investing. Marks emphasizes patience, wisdom, and understanding market cycles in decision-making, highlighting the importance of risk control for achieving investment goals.
Investment success requires prioritizing risk management and focusing on less efficient markets.
Quality decisions in investing involve navigating uncertainty, emphasizing skill over luck, and understanding randomness.
Deep dives
Howard Marks' Investment Philosophy
Howard Marks' investment philosophy centers on six key points: prioritizing risk control to make money while keeping risks manageable, aiming for consistency in returns, focusing on less efficient markets, specializing deeply in chosen areas, avoiding macro forecasting, and not relying heavily on market timing. These principles have remained consistent in his approach over the years, with a growing conviction towards concepts such as market efficiency and the limitations of macro forecasting.
Assessing the Quality of Decisions
Marks emphasizes the importance of understanding that good decisions may not always yield positive outcomes and vice versa due to the role of randomness and uncertainty in markets. He highlights that the quality of a decision cannot solely be judged based on its outcome, which is crucial in a field where luck and varying factors play a significant role. Marks underlines the need to navigate through unpredictability and emphasize skill over luck for sustainable success in investment.
Risk Management and Probabilistic Outcomes
Marks advocates for sound risk management, emphasizing that risk should be intelligently borne for potential profit rather than avoided entirely. He delves into the probabilistic nature of outcomes in finance, where multiple possibilities exist due to the influence of luck and human behavior. By acknowledging the uncertainties and potential outcomes, investors can make informed decisions while steering clear of excessive certainty that can lead to financial challenges.
Contrarian Investing and Decision-Making
Contrarianism plays a vital role in Marks' approach to finance, challenging consensus beliefs and seeking opportunities where the market may diverge from popular sentiment. He stresses the significance of deep analysis beyond contrarian actions, focusing on understanding one's convictions, questioning consensus views, and identifying potential errors in the market's collective thinking. Marks highlights the importance of intellectual independence, analytical rigor, and the willingness to withstand criticism in pursuing contrarian investment strategies.
Oaktree Co-Chairman Howard Marks (https://www.linkedin.com/in/howardmarksbook/) joined the In Good Company podcast with Nicolai Tangen (https://www.linkedin.com/in/nicolai-tangen/). They discussed Howard's investment philosophy, risk management, and how to determine the quality of a decision.
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