169: Unlocking Investment Wisdom - With Howard Marks, Co-Founder of Oaktree Capital Management
Mar 13, 2025
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Howard Marks, Co-founder of Oaktree Capital Management, is a celebrated voice in investing, known for his insightful memos. In this engaging conversation, he emphasizes that it's not about what you buy, but what you pay. Marks discusses the necessity of being contrarian and warns against the perils of overconfidence. He shares how human emotions influence market cycles and the importance of intellectual humility when navigating uncertainty. Additionally, he touches on the implications of rising government debt while advocating for personal fulfillment over pure profit.
Success in investing hinges more on the price you pay than the asset you buy, emphasizing strategic valuation over mere selection.
Being a contrarian in investment requires courage and a deep understanding of market psychology, as opportunities often lie beyond mainstream trends.
Emotional resilience and the ability to adapt strategies are crucial, especially when navigating unpredictable markets or reevaluating investments.
Deep dives
The Importance of Distinguishing Knowledge Levels
Understanding the difference between data, information, and wisdom is essential for success. Knowledge alone isn’t sufficient; what truly matters is recognizing which information is important amidst the overwhelming noise. Examples from notable figures highlight how focusing on a few key insights can lead to better decision-making in investing and business. This principle emphasizes that cultivating wisdom and insight will yield better outcomes than accumulating vast amounts of superficial knowledge.
Contrarian Investing and Identifying Opportunities
Successful investing often comes from engaging in practices that others shy away from, as demonstrated through the evolution of the high-yield bond market. Being labeled a contrarian requires a solid understanding of market psychology and the courage to act when others are skeptical. The discussion reflects on how those who consistently ventured into underappreciated assets enjoyed notable success. This strategy underlines the importance of thinking independently and recognizing that true opportunities often lie outside mainstream trends.
The Challenges of Timing Investments and Exits
One of the significant challenges in investing is determining the right time to exit positions, particularly when experiencing underperforming investments. Instead of focusing solely on selling winners or cutting losses, successful investors must evaluate their original thesis continuously. This requires a combination of steadfastness and flexibility, acknowledging that sticking with an investment through turbulent times can yield favorable results if disciplined. The importance of emotional resilience in investing decisions emerges as a critical theme in navigating uncertain markets.
The Role of Luck in Investment Success
Luck plays an integral part in investment careers, often influencing outcomes in ways that are beyond individual control. Recognizing personal luck—such as timing and opportunities—is crucial for understanding one's journey in finance. The relationship between preparation and opportunity demonstrates that while luck is uncontrollable, being ready to seize unexpected chances is essential. This perspective encourages a more humble approach to investment success, acknowledging that uncontrollable factors can significantly impact results.
Preparing for an Uncertain Future
Investors must focus on preparing for a variety of potential futures rather than relying on precise predictions, which are inherently problematic. The distinction between predicting and preparing reflects the necessity to design portfolios that can weather numerous economic scenarios. This approach relies on understanding human emotions and market cycles, which often deviate drastically from logical expectations. By fostering adaptive strategies, investors are better positioned to capitalize on fluctuations driven by market sentiment.
When Warren Buffet singles you out for praise, it might be fair to say you have summited the investment equivalent of K2, Annapurna and Kangchenjunga, the most challenging of mountain peaks!
In a capricious investing world, where success is often transient, reputations easily tarnished and hubris punished, to have not only stayed the course for 55 years, but thrived, built Oaktree Capital into one of the largest investors in distressed securities worldwide and cemented a vast loyal following is extraordinary.
His investment memos written over the years are world class: engaging, lucid and approachable.
In this 1 hour conversation, Howard Marks shares some of his most important investing lessons. It’s a conversation everyone interested in investing should hear.
Howard explains, why it’s not what you buy, it’s what you pay that counts, why you need to be contrarian to succeed in investing, why over confidence is the enemy of performance, and - given the inevitable nature of cycles - why he subscribes to Voltaire’s comment that “history never repeats itself, but man always does”.
And that is before he discusses the role of luck, the future of the US, the “illusion of knowledge”, and much more with one of the investment greats!