William Green (4:09)

And it's interesting, I remember you pointing out in one of your memos that Graham and Dodd had written all the way back in 1940, that there's something very distinctive about bond investing that's congruent with this, that it's a negative art, as they put it. Can you explain that?

Howard Marks (4:26)

Well, I went back to read the 1940 edition because the owner of the book asked Seth Klarman to update it and Seth asked me to do the part on fixed income. So I went back and reread it and I got kind of mad when I saw that. I said, why are they denigrating what I do, calling it a negative art? And then I realized what they were saying. What they were saying was that if there are 100 high yield bonds out there and they're all 8% bonds, and you know that 90 will pay and 10 will default, it doesn't matter which of the 90 that pay you buy because they're all 8% bond, they all get the same return. The only thing that matters is that you don't buy any of the 10 that default. So in other words, you improve your performance not by what you buy, by what you exclude. So it's a negative art. And in fixed income, where you're promised a return and the only moving part that's remaining is whether the company keeps its promise that all you have to do is weed them out and you get the promised return. So that's what I meant when I said the winners take care of themselves. And it was a very good mindset when I started the high yield bond business in 78 to think that way. I didn't have those words for it, but I thought that way. And then when we went into other businesses like Bruce Karsh's distressed debt funds in 88 and emerging market equities in 98, things like that, now we're not doing straight fixed income. It's not enough to just not have any losers. We actually try to find some winners. But we maintain that motto because I think that the risk conscious mindset is a great guidepost.

William Green (6:08)

You've written several memos over the years, usually about one a decade, about the parallels between investing and sports. You're obviously a keen tennis player yourself. And one of my favorites is called what's your game plan? Which is, I think, from 2003. And you talk about the best tennis players and best baseball players and the lessons. And one of the things that struck me as I was rereading it the other day is you point out that it's very important for them to play within themselves. And yet there's also, when you look at the greatest tennis players, for example, this need at times to be maximally aggressive. And it tallies with what you've said to me before about how risk avoidance usually goes hand in hand with return avoidance. Can you unpack that a little bit, this nuance that it's not about risk avoidance, it's more about the intelligent bearing of risk.

Howard Marks (7:00)

William, it's a great coincidence I happened to have lunch yesterday with a guy named Charlie Ellis. And Charlie Ellis wrote the article In, I believe, 1975 that gave rise to this whole line of thinking. It was called the loser's game. He said there are two styles of tennis. The professional has to win a winner to win a point, because if he hits a mild return, his opponent will hit a winner and put the point away. So they have to hit winners, but they're so good at what they do that it's mostly under their control. And in fact, in professional tennis, they keep track of something called unforced errors because there are so few. But the amateur tennis player, because they don't have control as much, has to just try to content themselves with not hitting losers. And if I can get it over the net and within the bounds of the court 10 times in a row, chances are good that my opponent will stop at nine and I'll win. The point? Not having hit a winner, but only avoided hitting losers. So the point is, if you think about it, that investing is not like championship tennis because we don't have that much control of the outcome. There's too much randomness, too much uncertainty, too many things that are unknowable. And so if you're in a game like we're in, swinging for the fences, trying to hit winners can get you carried out. I think it's better to play within yourself, emphasize consistency, not take the big risk, the grand gesture, but rather strive for consistency and competency. And that's a lot of what we've done.

William Green (8:45)

You've written a lot over the years about various dazzling blow ups like Amaranth, the energy fund that imploded back in 2006, or Long Term Capital Management, which imploded back in 1998. When you think about the lessons of all of the firms that didn't survive over the period that Oaktree has gone from strength to strength, what is it that we need to learn both as professional investors or as regular amateur investors?

Howard Marks (9:14)

Well, one of the quotes that I've been using the most in the last decade or so, William, is attributed to Mark Twain. And he said, it ain't what you don't know that gets you into trouble, it's what you know for certain that just ain't true. And if you think about it, no sentence that starts with I don't know, Bud or I could be wrong, but ever got anybody into big trouble. You get big trouble when you say, I'm 100% sure that X, Y, Z. And then you take bold bets. And if you take a bold bet on a premise which turns out to be incorrect, you can be finished. Long term did that because they thought that their method was infallible and it produced tiny, skinny, tiny returns. But they would lever that up into big returns by using a lot of borrowed money. But when you have a problem on leverage, your losses are magnified and you can get carried out as they were. And I think that Amaranth too bet boldly and incorrectly and got carried out.

William Green (10:15)

You wrote a great memo. I think it was called Pigweed, which is the less glamorous name for Amaranth. And there was a lovely sentence in there where you said, you can successfully invest in volatile assets if you're sure of being able to ride out a storm. But if you lack that certainty and face the possibility of withdrawals or margin calls, a little volatility can mean the end. And then you said, in this very pithy way you have to be able to survive life's low points. Can you talk a little bit about that? That seems like such a simple but really critical point about investing.

Howard Marks (10:50)

Well, another of my favorite imprecations is never Forget about the 6 foot tall person who drowned crossing the stream that was five feet deep on average. And people have to think about that for a minute. But if you think about it, I think you realize that the notion of surviving on average is meaningless and irrelevant. You have to survive every day in order to reach the finish line. And that means you have to survive on the worst days. And if you have a portfolio or an investment which is directed at maximizing the results, if everything you hope comes true, then chances are you expose yourself to the possibility of being carried out if what turns out to be true is something different. So that's really what it's about. And a lot of investment management decisions come down to the question of whether you're going to try to maximize your gains if things go the way you hope and believe, or minimize your losses if they don't. You can't do both at the same time. There's no strategy for having maximum returns under good fortune, but being fine if things turn out badly. You have to make a choice. And in fact, this brings us back in a way to what we were discussing a minute ago. A few years ago, I wrote a memo called Fewer Losers or More Winners. You have to make a choice. And yeah, if you're going to try to win in tennis or in investing, which means win in our business means having superior results, how can you possibly get superior results? And the answer is you either have more of the things that go up or less of the things that go down, or both. Most people can't do both because the skillful, aggressive player might be able to get more of the winners. The skillful defensive player might be able to have fewer of the losers. Very few people have enough equipment to do both. Most people are subject in some way to their biases, either aggressive or defensive. So most people, that means you have to choose, but it should be a conscious choice. And how many people ever sit down and say, I'm going to succeed by having more winners or I'm not going to pursue that many winners. I'm going to succeed by having fewer losers. But if you don't answer that question and make a conscious decision, how can you find a winning strategy?

William Green (13:23)

You wrote an important memo related to this back in 2024 called ruminating on Asset Allocation, where you talked about how one of the keys is to achieve this desired balance between aggressiveness and defensiveness or maximizing growth of capital or maximizing preservation of capital. And you talked about the importance of finding a targeted risk posture and then recalibrating around that appropriate posture. And it strikes me as such a profoundly important and practical idea. Can you talk about that? This idea that we should figure out our risk profile and how we should do it? I mean, what we should think about in terms of our intestinal fortitude or our responsibilities or our time horizon. What's the process that we should go through to decide what that targeted risk posture should be?

Howard Marks (14:14)

Well, I always think about and guess at the process that people follow. And I don't think that many people are that rigorous in their thinking. And I think most people say, well, I'm going to make investments. What does that mean? Well, I'm going to try to buy a bunch of things that'll go up, make me money. But I think especially if you're an institutional investor or investing for others, you have to be a little more thoughtful. So I wrote a memo, you probably remember when maybe it was, I'm going to guess eight years ago or something called calibrating, in which I said that everybody should. Well, you think about the speedometer of a car and 0 is no risk and 100 is maximum possible risk. And every person, every institution, every money manager should figure out where in that continuum they should be normally for this client or for me or for my employer or my institution. What is the right risk posture for me normally? And as you say, I think it's a function. Let's talk about individuals. It's the function of age, wealth, income, the relationship between wealth and income and needs, number of dependence, level of aspiration, proximity to retire. And then the last one you touched on is intestinal fortitude. So you take all that together and you figure out where in zero to a hundred is the right place for you normally. And you say, well, I'm young, I don't have that many dependence. I'm aggressive, I can stay with it. If I make a mistake, I, I have plenty of time left in my career to recover, so I can be an 80 or an 85, you know, so you, you say, okay, that's my posture. And you figure out it's just, it's not, by the way, there's no way you, there's no place you can look to find out, well, which combination of assets will produce an 85. But it's just a, it's just a mind. It's Just a way to direct your thinking. And an 85, you would say, well, that's pretty risky and it's aggressive, but, you know, we're trying to do better and we're going to willing to take the risk of doing worse. And then, then the question is, after that is you're going to stay there all the time, or are you going to try to vary it over time as the opportunities arise in the marketplace? And then the next question is if you will try to vary it. What about today? Where do you want to be today? I think it's a constructive way to think about your posture.

William Green (16:45)

I wrestle with that question a lot, and I was thinking about it a lot this week as I was rereading your memos, because you said, I think in a memo called what really Matters, investors should find a way to keep their hands off their portfolios most of the time. And earlier in one called Selling out, you said, when I was a boy, there was a popular saying, don't just sit there, do something. But for investing, I'd invert it. Don't just do something, sit there. And so there's this tension where for most of us, we just do better not to do anything. And yet sometimes you do have to recalibrate. And I had dinner a couple of weeks ago with Nick Sleep, and I was saying to him, I'm kind of worried at the moment, you know, like, because I've done well over the last 16 years, thank God, I don't really want to give back 50%. And he sort of said to me, don't fiddle, William, just don't fiddle. Stop fiddling. And he's like, if it goes down 50%, that's fine. You'll just buy more and it'll be fine. You know. How do you wrestle with this question as a regular investor?

Howard Marks (17:49)

Well, you. Look, first of all, on all these questions that we're talking about today and the many more that I'm sure you have for me, there are no right answers. There's only a range of possibilities. There are choices, none of them perfect. And the question is, where do you want to come out on the continuum? Usually you don't want to be at either extreme either. You don't want to trade every day, and you don't want to never trade. For example, most people are not 100% maximizers or 100% preservers. So it's a choice and it's a personal choice. And as I say, importantly, no right or wrong. Now, I, I tend to, I mean, Nick's attitude is A little too idealistic, in my opinion. And you know, I believe that there are good opportunities once in a while, not every day. Once in a while, there are good opportunities to become a little more aggressive or a little more defensive. And I wouldn't do a lot because it's easy to be wrong, but I wouldn't let all those opportunities go. And you know that I think we've done good things for our clients by doing that. But I was talking to my son Andrew, when I wrote my book Mastering the Market Cycle, and I said I thought our calls had been about right. And he said, yeah, dad, that's because you did it five times in 50 years. So certainly not every day. There's not something wise to do every day. And by the way, that memo, what really matters, I think, is one of the better ones that garnered roughly the least attention or response. But I told the story in there about there was a study done of clients at fidelities, and they concluded that the best performance belonged to the accounts of the people who were dead. Now, I then added that Fidelity has not been able to find that study and neither has anybody else. So it's probably apocryphal. But you get the point. I think that overtrading is a mistake. And not only is it not productive on balance, and costly, but it can be counterproductive. Because if you get excited and buy at the high and then depressed and sell at the low, you're doing the opposite of what you should do and buy and hold is highly superior. I just think that for people who have ability and temperament, there are occasions when you want to behave counter sickly and become a little more defensive because the market is precarious and a little more aggressive because it is generous.

William Green (20:22)

You've written a lot about the futility of making macro predictions and forecasts and how rarely one should use them. And so I was particularly struck when I was reading one of your memos and you were talking, I think it was probably taking the temperature from 2023 where you were talking about those five very successful market calls, which really are not even over 50 years. They're actually over the last 25 years, I think in 2000, then 2004 to 7, 2008, 2012 and 2020. Can you explain the nuance here? Because I think it's really important, right, that there are. There are times where the market is sufficiently crazy that you've actually sort of jettisoned your usual disdain for macro forecasts. I mean, I guess it's just that the odds of you being right about it being so extreme have been better. Can you talk about unpacking that kind of nuance there?

Howard Marks (21:19)

Well, number one, I think, as you say, there were five times, and you're injured, essentially, you say they're all in the last 25 years. So that means it took me 30 years to get up the nerve and feel that I had enough insight to make a call. And the first one was the first day of 2000. It was about the tech bubble. And the second thing that's worth noting is that I didn't know anything about tech stocks or technology or the Internet or any of those things. And I call the process taking the temperature, because what it is, it's about assessing the behavior of the people around me. And Buffett always says everything best. And he said that the less prudence with which others conduct Eric's errors, the greater the prudence with which we must conduct our owners. So when everybody is behaving like they're carefree, not a worry in the world, there's no risk they don't think they can surmount. And in any way, they don't see that many risks, then we should run for the hills, because their exuberance has probably moved prices so high that it's dangerous. And then, in contrast, when people are depressed and they can never think that there'll ever be another positive step or another up day in the market, and all they want to do is get out and they've had it and all that stuff, their pessimism and level of depression usually renders things so cheap that that's the time to become highly aggressive. And it's called contrarian, is called countercyclical. But I think that, as my son said five times in 50 years, there were compelling times to do it, times when the argument was the logic was compelling and the probability of being right was high. And so we made the call. We took action. I can tell you that I never did it without trepidation, as Mark Twain says, I was never sir, but it felt like the right thing. And so it was worth trying. But in the investment business, even when you're. Even when you think you're right, you shouldn't assume that it's more than 80, 20, and maybe it's really 70, 30 or something like that. But I think if you know what you're doing, it's worth trying. But nobody gets to write all the time. And by the way, I always say, William, if instead of five times, what if I had tried to do it 50 times or 500 times. Or I think about the fact that after 56 years you multiply that by 365. So I'm approaching 20,000 days of my working career, if you count the weekends. And what if I had made 5,000 calls, made a call every four days? What if I said every four days I got to either say buy or sell? I think that my record would be 5050 at best. So you just can't do it all the time. You have to wait until it's compelling and then pray that you're right. Let's take a quick break and hear from today's sponsors. Ever notice how smart investors hedge against tail risk, but almost never talk about financial repression? Here's the uncomfortable truth. It doesn't matter how careful you build your portfolio, because if the rules around your money can change overnight, you're vulnerable. Just ask the Canadian truckers whose bank accounts were frozen, or Cuban families whose remittances were hijacked by state banks. Or citizens in dozens of authoritarian countries watching their life savings evaporate under hyperinflation. These aren't isolated incidents, they're part of a global pattern. That's why the Human Rights foundation publishes the Financial Freedom Report, a weekly newsletter that tracks how governments weaponize money to control people and how Bitcoin is helping individuals resist financial repression. If you care about sound money, personal sovereignty and Financial Freedom, HRF's Financial Freedom Report is essential reading. This is a report that I'm personally subscribed to and learn a ton from. Sign up for free at Financial Freedom Report.org that's Financial FreedomReport.org Smart investors don't just watch the Fed, they watch the world.

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Howard Marks (27:49)

All right, back to the show.

William Green (27:51)

I was very struck by a quote from David Swensen. That's one of your favorite quotes from him. That comes, I think, from pioneering portfolio management, which I'll read because it's very related to this ability to take idiosyncratic positions. And he said active management strategies demand uninstitutional behavior from institutions, creating a paradox that few can unravel. Establishing and maintaining an unconventional investment profile requires acceptance of uncomfortably idiosyncratic portfolios, which frequently appear downright imprudent in the eyes of conventional wisdom. And I'm curious how you've managed to create an institution that even as it grew huge, never became bureaucratic or ruled by consensus or overly conventional and hidebound. Because I think that's actually part of the success of Oak Tree is that somehow you and Bruce Karsh and Sheldon and the like, you've managed to maintain this kind of willingness to be idiosyncratic and unconventional even as you've become kind of much more institutionalized and more globally important.

Howard Marks (29:01)

Well, I don't think we have become institutionalized. I think we've just become bigger. But my dad used to say that marriage is a wonderful institution for people who like living in institutions. And I don't. And I learned the best lessons we learn are learned early. And my first job was at Citibank and I was there 16 years and I learned that I don't like institutional living. And at the bank, if you would say, well, let's try to do this, or let's pay this person this or let's bulk that person that, they would say, you know what? Listen, we can't, because there are institutional constraints. And this word institutional is a hell of a word, by the way. When I was a boy, they said, oh, he lives in an institution. That meant an insane asylum. But anyway, I try like crazy to avoid bureaucratic tendencies. And I wrote a memo in the early days, it must have been around 05 or so called Dare to be Great. And it was mostly a rant against bureaucracy and committees because when I was 29 and the tender age of 29, I became the director of research at Citibank. They put me on five committees, and as I recall, they would meet for a minimum of 16 hours a week. And I almost shot myself. I have a short attention span and I don't talk that much and I don't like to listen to other people that much. And I found that those meetings went as long as the person who wanted them to go to the longest wanted them to go. And if you think about it, if you come up with some brilliant insight, what David called idiosyncratic, and you give it a shot, by the way, it's idiosyncratic. Why? Because everybody else is doing the opposite. That's what makes it great. And you want to do it because you think you have some insight about why they're all wrong and their actions have made it wrong in the market. Can you imagine trying to convince a committee of 10 people to get the majority of them to support it? Well, how the hell can you do that? Because there's a reason why most people in the market aren't taking that approach, because it's hard to see. So if most people are doing A, how can you convince the majority of a committee to do B? If you have idiosyncratic insight, if you have a young Warren Buffett working for you, you better just let him do his thing rather than say, well, you, Warren, you can't make any trades until you convince the majority of the committee. And so this is one of the most important things in investing. And bureaucracy and great investing are counterindicated, as the doctors would say. When Lehman Brothers went bankrupt in mid September of 08, we had raised the biggest distressed debt fund in history by a factor of about three. We had $10 billion sitting on the shelf. Lehman goes under. Most people think the financial world is going to melt down. Question is whether you spend the money. And people say, well, why don't you just analyze the future? There is no such thing as analyzing it, especially when you have unprecedented events taking place. And so Bruce and I figured out that we should spend the money. And he ran the fund in question and he bravely invested an average of $450 million a week for the next 15 weeks. That's $7 billion in one quarter. But I don't think we could have convince the committee. The good news is we had pre raised the money so we didn't have to convince the clients. You can't raise. The best time to invest is during a crisis. You can't raise any money during the crisis because people are frozen into inaction. So it was certainly idiosyncratic. I talked to a friend of mine who wrote for one of the newspapers. He said, what are you doing? I said, oh, we're buying. He says, you are. Like we were insane. It was certainly idiosyncratic and it was certainly uncomfortable. We certainly weren't sure we were right, but it seemed like the right thing to do. So you do it and you have to overcome your discomfort.

William Green (32:59)

What is it?

Howard Marks (33:00)

I wouldn't try to convince 20 people that I was right.

William Green (33:04)

And what is it, Howard, that makes Bruce so extraordinary as an investor? Because clearly I've never really heard him talk much. And then I was listening a couple of days ago to a conversation that you'd had on your podcast, the Oaktree Podcast, where you and he and Sheldon talked about the early days of the firm. And I was surprised that sort of. He just came across this really affable, decent, smart guy with a tremendous focus on. On family and decency and building an enduring institution. Tell us what he's like because he's so clearly been a key figure in, in Oaktree's success.

Howard Marks (33:42)

Yeah, well, I mean, you know, he approached me. I was at TCW. He approached me in 87. He was a lawyer. He had done some investing for Eli Broad, who was the biggest leader in la. And he had this idea of forming a distressed debt fund, which we did in 88. And I think it was one of the very first from a mainstream financial institution. On the first closing, we raised $65 million. And then the second close brought it up to a grand sum of 96. We thought we had all the money in the world. But the point is that Bruce is extremely analytical. He's like a chess player. And he is a chess player and he looks moves ahead, highly competitive in what you describe a low key manner, but really smart and really focused. Great executor. And we have enjoyed a partnership for now, 37 years, 38. And it's one of the shining things in my life after my family, relationships, friendships. Warren Buffett wrote a letter a couple weeks ago about stepping down. And he talked about his relationship with Charlie Mutter. And he said that in Charlie, he had a big brother who was protective. And the way I see it, Charlie was the wise philosopher who gave Warren advice, and Warren was the six years younger implementer who performed the analytical legwork and did the investing. What I really loved in that brief mention, he said, and the words I told you so were never mentioned. And so what Bruce and I have done with each other is our relationship is very similar to that. He's nine years younger than me. And we both acknowledge so healthily, we both acknowledge that the other can do things we can't do, which is such a great thing, because that's the only basis for a healthy partnership. Once you start thinking that you can do everything you can do and everything the other person can do, your partner's ship is doomed. But we both acknowledge that each can do things the other can't. And it's been extremely complimentary. And nobody has ever said, I told you so on any mistakes. There are plenty of mistakes made all the time. And I think that we have supported each other. And spending $7 billion in 4Q0 aid would have been very difficult without support. You got to buck somebody up and never say, I would, I would never have done that.

William Green (36:34)

You know, this fact also that he came to you originally and said, let's get into distressed debt raises a really important point that I think comes up in a, in a lot of your writing going back. I think as far as the Getting lucky memo in 2014, where you said the easiest way to win at investing is by sticking to inefficient markets. And I think actually way back in, in 1995, in how the Game Should Be Played, you wrote, study the micro like mad in order to know your subject better than others. You can expect to succeed only if you have a knowledge advantage. Can you talk about that? Because it strikes me as something that I see again and again with the great investors, like with your friend Joe Greenblatt, where he initially got rich partly through his brilliance in special situations, or Bill Ruane, who told me, I just try to learn as much as I can about seven or eight good ideas. And it seems like this, this focus on specializing narrowly but also in a, in an inefficient market has been absolutely central to Your success.

Howard Marks (37:39)

Yeah, well, let's take the counterfactual. So remember I said you got to be thoughtful when you sit down to start investing, you have to think, what's the process? What are the elements that are going to make me a success? And again, success means doing better than others. So it's not sufficient. You can't say I'm smart. You're not the smartest person in the world and everybody else in the business is pretty smart. You can't say I went to the best schools. That doesn't count for that much. You can't say I have this generalizable intelligence that I can apply to every asset class and no more than others. In every asset class, you have to develop a knowledge advantage and you have to. Usually that comes from, number one, developing an approach which is the right approach and that you implement consistently and from knowing more than the other people. It may be having more data, although that's hard because the SEC's job is to make sure that everybody has the same data. Or it may be doing a better job with the data or having more insight and looking at it, or it may be in what you said, going into inefficient markets where the information is not evenly distributed. But you got to have some source of superiority, otherwise how can you expect to win? Investing is an incredibly competitive game and winning consists of beating a bunch of other people who are similarly intelligent, numerate, computer literate, hard working and very highly motivated. So you have to have an edge. And I think that specialization is one way to try to get an edge. The other thing though is it's really important the concept of the less efficient market. When I try to illustrate market efficiency to people, what I say is, well, what if. When I got out of University Chicago in 69, I had been approached by a guy and he says, look, I'm a bookmaker and I book bets on football and I have concluded that I can make a lot of money on football if I know which team is going to win the coin toss at the beginning of the game. So I'm going to give you 15 PhDs and a crazy supercomputer and all you have to do is predict the coin toss at the beginning of every game. Now, if it's a fair coin, it can't be done. It's a waste of time because there's no edge and that's an efficient market. An efficient market is a market where everybody knows as much as you do and there's no edge and you're wasting your Time. So our definition of a less efficient market is a market where hard work and skill can pay off. And as you said, I wrote in getting lucky in January 14th that I was lucky to find some inefficient markets early in my career. In August of 78, I got the phone call that changed my life from the head of the bond department at Citibank. He says there's some guy named Milken or something in California and he deals in something called high yield bonds. Do you think you can figure out what that is? That was it. But they were called junk bonds. Most people wouldn't touch them with a 10 foot pole. That was 78. I didn't get my first. The big pools of money in America are the public pension funds. States, mostly cities. I didn't get my first public pension fund account for 18 years. They wouldn't go there because they were reputationally and politically unpalatable. Oh, great. You mean it's an asset class that I can buy that nobody else will buy at any price? Well, maybe it's whole bargains. That's the way these things work. But if you look at the things that everybody thinks are great and will gladly buy at any price, why should you think you can get a bargain there? When I started in 1969, Citibank, where I worked, was an investor in what we called the Nifty 50, the greatest stocks in America. And if you bought them the day I got to work in September of 69 and you held them tenaciously, faithfully for five years, you lost about 95% of your money because at the time you bought them, everybody thought they were the greatest thing since sliced bread. So it's something you have to watch out for and you have to look at the things that are less the road less taken.

William Green (42:07)

You talk about the nifty 50 and that blowup which obviously had a profound effect on your career and your philosophy. And I've been thinking a lot about this question that you raise in some of your memos about how we can prepare for these extreme exogenous events, whether it's a market crash or a pandemic or a war or whatever it might be, given that we can't predict them. And you wrote in one of your memos, I think it was the second of your memos, on uncertainty in 2020, we can do so by recognizing that they will inevitably occur and by making our portfolios more cautious when economic developments and investor behavior render markets more vulnerable to damage from untoward events. Can you talk a little bit about that, because I think this whole question of how to deal with uncertainty is at the absolute core of what you do as an investor.

Howard Marks (43:02)

Well, first of all, one of the great sayings is that there are two kinds of people who lose money in the market. The people who know nothing and the people who know everything. So I hope I never know nothing, but I never think I know everything. And specifically, I believe that the macro future is unpredictable. But there are things that can give us a hint at what lies ahead. So I wrote my second book, Mastering the Market cycle, published in 2018, and it talked about tendencies. And I say we never know what the market's going to do, but we can have a feeling for when its tendency will be to do well or its tendency will be to do poorly. And its tendency will largely be determined by where we are in the cycle. So when things have been going great and prices have been rising, as you can say, for 16 years, and PE ratios are high, and bond yield spreads, which are a back barometer fear, are narrow, we can assess that the tendency of the market may be to do less well and act accordingly. You don't have to make any predictions. None of those five calls I talked about a little while ago was based on a prediction. It was based on an observation. And what I say, William, is we never know where we're going. We sure as hell ought to know where we are and our prices and valuations high. Is risk being ignored? Are people acting in an exuberant, buoyant way? These are the questions that can tell you what the odds are, even though you don't know what the future holds. And I never care for the title of that book. I had a more erudite title in mind. I thought Mastering the Market Cycle was a little cheesy, but it's what the publisher wanted because they thought they'd sell more books. But I like the subtitle of the book, and of course subtitles don't get much attention, but the subtitle of that book was getting the odds on your side. You never know what's going to happen. You can have a sense sometimes for what the odds of a certain event are. And when the market is high in its cycle, the odds are against you. And when it's low in a cycle, the odds are in your favor, but the odds can be in your favor and you can lose money for the next year or two or three, and vice versa.

William Green (45:31)

I think when I wrote my book Richer, wiser, happier, where you were one of the central characters, I think in A way that was my biggest revelation over the five years of working on the book and digesting that material was that we have this fundamental problem that the future is unknowable. And yet, as you often write, we have to make decisions about the future. And it struck me, I think, probably deeply influenced by you, was that there are all of these ways in which you, even though you have no control, you can very subtly stack the odds in your favour. And that strikes me, I mean, it kind of is simultaneously like most truths, sort of banal and incredibly profound. Can you talk a little bit about that idea? Because it seems like a sort of guiding principle that actually, I think runs through all of the great investors lives, is this ability, you see it with someone like Ed Thorpe who, you know, just to very subtly stack the odds by, say, not playing games that you're ill equipped to win, or by making sure you analyze the evidence in a very rational, independent way, whether it's about COVID or, or markets or anything like that. Can, can you unpack that a little?

Howard Marks (46:42)

Well, you know, I mean, there's so many thoughts on that subject, but one of the things that Warren Buffett has been most outspoken about is that in baseball, for example, you should get up to the plate and you should wait for a good pitch. And you, you, you, first of all, you have to have a sense for what's a good pitch and what's a bad one. And he tells the story that Ted Williams, not only was Ted Williams waiting for good pitches, but he, he was very studious about his accomplishments and he charted all his batting. And if he, and he figured out where was the pitch and what was the result? And he figured out he broke the strike zone into 18 spots. And he said, well, if the ball is in spot number one, two or four, I tend to get a single. If it's in five or six, I tend to get a double. And if it's, if it's in seven or eight, I tend to strike out. So you got to figure out what's a good pitch and you got to wait for it, he says. And Buffett has always advocated patience and not hyperactivity. But he points out that in investing, unlike baseball, in baseball, if you stand there with the bat on your shoulder and you let three pitches go by in the strike zone, you're out. But in investing, you can wait more. You don't get called out on strikes. Now, it's not exactly true, because if you're a professional investor, you're investing for others, and you sit there with the bat on your shoulder and the market goes up for 16 years, you might be called out. If Warren had the particular benefit that he never thought he might get fired, but the rest of us might. But still, patience is very important. And waiting for a good pitch objectively, and your kind of pitch, your kind of investment, and you can do that. And, you know, we talked before about playing within yourself. Figure out the kinds of things you're looking for. You can't buy something because you think it's attractive to others. It has to be attractive to you. It has to satisfy your criteria. And you should have a set of criteria. So these are the things you can do to get the odds on your side.

William Green (48:39)

I think there's another really critical, related lesson that I've tried to deeply internalize from you over the years, which is not to fool oneself about the conditions, the environment in which we find ourselves. And I often. I couldn't find it when I was rereading your memos this week. But there's a really beautiful quote from your intellectual hero, Peter Bernstein, that I often quote that I'll probably garble, where he said something like, the market is not a very accommodating machine. It won't give you high returns just because you need them or want them.

Howard Marks (49:09)

Right, right.

William Green (49:10)

And can you talk about that? Because I think that's also so distinctive to your approach, and it's such a profound and central idea, this idea of. Of accommodating yourself to reality as it is, not as you wish it might be.

Howard Marks (49:27)

Well, first of all, the good news is that. That on the occasion of the anniversary of the mammals, we published an online digital compilation. And by the way, it's free, so the price is right, but it's searchable, so if you want to find that quote, you can find it next time. And, you know, I mean, the thing is, don't kid yourself. And Charlie Munger always used to say, delightfully, he used to quote the philosopher Demosthenes, who said, for that which a man wishes that he will believe. And we tend to do that. And that's injurious because let's say you're a stockbroker and you get paid on commission, and you say, well, there's always something good to buy. And so you buy every day for your clients and you make a lot of commissions. Well, guess what? Some days there's nothing but to buy. And you have to accept that and be mature about it and be patient and hold back. And so it all goes with being mature, analytical, patient, insightful, understanding yourself and your biases, understanding the process of how money is made, and then waiting until the odds are on your side to turn up the wick. Now, I believe you should have investments all the time, but sometimes you do it more aggressively and sometimes you do it more defensively. You wait for those golden moments to really turn up the wick and become more aggressive.

William Green (50:52)

And you've made the point that Charlie really made most of his hay on about four big bets in the course of his lifetime.

Howard Marks (50:59)

Well, Charlie used to say that four big bets, and I think either he or Warren said that Warren had eight. But yeah, Charlie would say that he made all his money in four things. Let's take a quick break and hear from today's sponsors.

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Howard Marks (54:31)

All right, back to the show.

William Green (54:34)

You've written a lot about Charlie over the years, mentioning for example, his great line, I think at a lunch that you had with him once where he said it's not supposed to be easy. Anyone who finds it easy is stupid. Can you talk a little bit about what you learned from Charlie, not just about investing, but really about a life well lived?

Howard Marks (54:54)

Well, look, he was brilliant. He was extremely well read. He was, he, he, he, he loved thinking and he would just think about stuff. And he developed these things he called mental models for thought. And he had a lattice, what, what he called the lattice work of mental models. And it's like a toolkit. And a lot of what we do as adults and as investors is what you might call pattern recognition. And the great thing about having lived a while and paid attention to what's gone around you and applying some intelligence is that XYZ happens, you don't have to stay. What was that? What is it? Why did it happen? What does it mean? What should I do about it? At some point you might reach a point where you say, oh, that's one of those, I know what to do about that. So you have to have a toolkit so you know which tools to apply. And that was Charlie. And so very smart, very incredibly thoughtful in interior life, very outspoken, said exactly what he thought all the time, regardless of who he was saying to or what it was or whether it would be. You know, he was one of the, he was, he was a good, kind person, but he was the furthest thing from PC that you ever met. And he would just say what he thought was right. And in fact, I think he has a biography. Yeah, there's a biography of him out. It came out maybe 20 years ago or something. And the title is Damn right. Because that's what he would say. Well, you, Charlie thinking, damn right. I, you know, emphatic. And so, I mean, he just was obviously brilliant, but had this process. And unharnessed brilliance will get you only so far. But he harnessed it into a process and he came up with a lot of the philosophical points that guided Warren. The big one he's credited with is that he convinced Warren to stop looking in the gutter for cigar butts that others had thrown away that had one puff left. And instead, instead of trying to buy okay companies at great prices, try to buy great companies at okay prices. And that's why Buffett and Berkshire became what they did.

William Green (57:12)

You talked there a little bit about patent recognition and the ability to say this is one of those. And obviously there's a lot of interest at the moment in your view of the current investment environment. And I know you've been on a big trip around Asia and the like of the last three weeks, meeting with lots of clients. I'm sure you're hearing a lot of these questions. In August, you wrote a piece called the Calculus of Value where you said the market has moved from elevated to worrisome. And I'm wondering, when you look at this period compared, say, to 1973, 74 or 99, 2000 or 2007 to 2008, what is it that rhymes in terms of where we stand in the pendulum between greed and fear and optimism and pessimism and risk tolerance and risk aversion? And what makes you not think that we're at that kind of extreme yet, if that's still the case, that you don't yet think we're at that kind of extreme? Most likely.

Howard Marks (58:09)

Well, I don't have my finger on the poll, so I don't know where we are today or this week. But I think that when you look for comparisons, the strongest comparison, not a perfect comparison, and I'm not saying this is true in degree, William, but in kind. The strongest comparison is to the TMT Internet.com bubble of 98, 99, 2000. The Nifty 50 was different because it was not around one novel technology, and it was around established great companies for the most part. I mean, there were no technological marvels that cracked out in the Nifty 50. And then the years 0567 with the subprime and the mortgage backed securities. Subprime mortgage backed securities is not comparable because that was not a technological innovation, that was a financial invention. Nobody thought that oh, subprime mortgage is going to change the business of housing. The houses were unaffected. It's just that they said well, we can make money by giving financing to a new class of buyers. Which turned out to be a bad idea. People who wouldn't document their earnings or their assets. So this is comparable to the Internet bubble. People said the Internet will change the world. Guess what? It did. Can you imagine today's world without the Internet? It's completely changed in a million ways in fact, including the fact that we're talking over it. And so this is comparable. It's a technological innovation that I think is going to change the world. But my recollection is we had a clearer view of how the Internet would change the world. And the view of many in 99, 2000 has become true. And I think a lot of the excitement surrounded E commerce and E commerce has become a major force. So it just feels to me like we had a vision of how that was going to work out and it mostly came true. Today I think we have less of that. I personally, I'm not an expert. I'm the furthest thing from an expert in the world. But I've never heard anybody tell me how AI is going to change the world. We know it's a powerful force. It can think, it can process data, it can, it has access to all the data that's ever been compiled. Exactly what it's going to do, how that's going to be a business, how people are going to make money at it, how it's going to impact life, I think is less clear. But I do think that the two are comparable. And in both cases there was a new new thing that fired the imagination. And most bubbles are around something new. In 69 it was growth stock investing. In 06 it was subprofit mortgages. In 99 it was the Internet. In 1720 was the South Sea Company and in 1620 it was Tula bulbs in Holland. So I always make this point that the bubbles are very around something new because the imagination is untrammeled and it can take go off on a flight of fancy and you can imagine trees growing to the sky. You're never going to have a bubble in paper stocks or timber stocks. You know, it's too prosaic and people can say well, you know, we can tell how many houses are going to be built. We know how much wood is needed in each house. We can tell where we're going to get it from. And so, you know, you can't have these tree grow the sky moments in the prosaic areas. It's always something new.

William Green (61:45)

You had a very interesting conversation recently, Howard, that I was listening to yesterday with Edward Chancellor, author of Devil Take the Hindmost, which had had an important impact on you when you first saw the, the 2000 bubble. And one of the things you said in that conversation, you, you made two bold statements. You said, number one, AI will change the world. Number two, most of the companies people are investing in today, in other words, to profit from AI will end up worthless. And then you said when the naive or hopeful investor takes the leap that the irresistible trend will produce sure profits. That's when you get into trouble.

Howard Marks (62:22)

Well, I should go back and reread that memo, I think. But that's right. And change the world and investors making money are not the same thing. And in fact, Warren Buffett pointed out, and I think he said this about the Internet, that I think it was in his 2000 annual meeting. There's no doubt that the Internet will produce a great increase in productivity. It's not clear that it'll have a positive impact on profitability. And I think the same is true of AI. AI is going to, I mean, my concern is I saw CNN is running an ad on my travel. I watched CNN International and they had a, you know, they're drumming up interest in a show and the anchor says to a guest, you say that AI has the ability to eliminate half of entry level jobs. That was the whole conversation because then they cut to something else. But the point is that may be true. And obviously if you can produce the US GDP and eliminate half the entry level jobs, it could be more profitable or certainly more productive. But the question is, will it be more profitable? To whom will the savings accrue? If different companies are competing to provide the AI service, maybe they'll compete on price to the point where it's not profitable for them. Or if the people who employ AI service compete for market share, maybe all the savings will go to the consumer in the form of lower prices. So exactly how the labor saving tool of AI is going to turn into profits, I don't think anybody can say.

William Green (64:06)

You often like to ask Howard, what's the mistake here? And, and so obviously we don't have any idea how this is going to pan out. But when you ask yourself what would be the likely mistakes worth avoiding at a time like this, particularly for either naive and credulous investors or just for smart investors who get sucked into euphoria. What are the likely mistakes we ought to be trying to avoid here?

Howard Marks (64:35)

Well, what I've seen in euphoria after euphoria is, number one, you shouldn't make the assumption that today's leaders are certain to be the leaders of tomorrow. They may well be, but you shouldn't bet your life on it. Number two, you shouldn't assume that because the leaders are selling at high prices that it's a good idea to invest in the laggards because they're cheaper. People say, well, they have a low probability of success, but maybe a big payoff, so I should buy it. And that's what I call lottery ticket mentality. And if they have a low probability of success, you should accept that that means chances are good upon success. And then on the AI, I've led to believe, I am led to believe that you can make binary bets in companies that have nothing else going on, which will be sink or swim bets, or you can invest in, in through great tech, you know, pre existing great tech companies, which will get moderate benefits from AI if they're successful, but still be in business and profitable if it's not that big a deal. And now we're back to the very beginning of our conversation. Do you want to have a novel entrepreneurial startup, Pure Play, which has no revenues and no profits today, but could be a moonshot if it works, or do you want to invest in a great tech company which is already existing and making a lot of money, where AI could be incremental but not life changing? It's a choice. What's your style, what's your game plan? But I mean, if you're going to make binary bets on novel companies, you have to understand how risky that is.

William Green (66:20)

There's also been a lot of speculation, obviously, both on gold, which recently hit more than $4,000 an ounce, and on bitcoin. And I was looking back at one of your old memos where you were saying either you believe in gold or you don't. And you compared it to whether you believe in God or not, that there's no analytical way, in my opinion, you wrote, to value an asset that doesn't produce cash flow. And I've never been able to bring myself to buy bitcoin either. And it's now down about a third since October to $90,000 a coin. And you, you've debated this obviously a lot with your son Andrew, how Do you feel now when you look at bitcoin and gold and you kind of try to wrestle with whether they belong in someone's portfolio?

Howard Marks (67:06)

Well, you know, look, I and Oaktree consider ourselves value investors. And what the value investor does is you look at a situation, whether it's a stock, a company, a bond, a building, whatever it might be, and you try to figure out its intrinsic value. And then you see how the price today compares to that intrinsic value. And intrinsic value invariably comes from the fact that it can make money, that it can be profitable and produce cash flow. And so let's say I have a building and it produces a million dollars a year in profit and I'd like to sell it and you'd like to buy it. We can have a discussion. And I say, I'd like $12 million for it, in which case you'll get an 8% rate of return. And you say, no, I want to pay $8 million for it because I want a 12% return because it's risky. And I say, no, you have to pay $11 million, but I'll give you a 9% return, but that'll go up over time and it'll make you the reason. And you say, so we can talk, but we're talking in a range centered around the value. But if you're doing bitcoin or gold or diamonds or. Or paintings, there is no intrinsic value. And I always talk about oil. Oil, as I recall, oil, William, was $147 a barrel in June or July of 07, and then $35 a barrel in January. Nothing changed about oil. It was still black. It still made the lice go. And we were using it faster than we were finding it. Oil doesn't have an intrinsic value. And all these assets, all they're worth is their price, is what the market will bear. But how can you invest analytically? If I say to you, if I say to a gold fan or a bitcoin fan, well, what do you think the price will be in a year? How do they reach that conclusion? What do they base it on if they don't have cash flow to base that conclusion on? And what I think I said in the memo, you probably remember it better than I do since it's 15 years ago and you probably read it yesterday. But I think I said, you can invest in it out of superstition. Gold. You can invest in it because you think it'll go up. You can invest in it because you think it'll be a store of value, because it always has. But you can't invest it in it analytically on the basis of something called intrinsic value. I still think that's true. So the people who bought gold a year ago have made a ton of money. The people who bought gold at the time. I just happened to look at the numbers at my lunch before coming here to do this phone call with you. And if you bought gold at the end of 2010, I think you've had a 7.7% annual return since then. And if you bought the S and P at the same time, you've had a 12.7% rate of return. So it's not that gold was a disaster, but you shouldn't be distracted by the gains of the last month. It's been a lackluster investment.

William Green (70:12)

You wrote a really important memo called Sea Change In, I think, December 2022 where you talked about really the end of an era where we could rely on declining interest rates that had gone on since 1980. And one thing you wrote in that memo was investors can now potentially get solid returns from credit investments. Sorry, from credit instruments, meaning they no longer have to rely as heavily on riskier investments to achieve their overall return targets. Can you talk a little bit about the best way for regular investors to take advantage of opportunities in areas like high yield bonds and the like? Because this is an area where my ignorance really runs deep. And obviously your knowledge runs very deep. Like, if we actually want to get equity like returns in a fairly worrisome environment, what do you do? What's a smart, practical way for a regular investor to do that?

Howard Marks (71:08)

Well, you know, high yield bonds, for example, are part of a group of assets. I call them lending assets. The world calls them debt or fixed income or bonds or notes or loans, but they all fall under the same heading. And they're all instruments where you give somebody your money, they rent it from you, and they promise to pay you interest every six months and then give you your money back at the end. And you can take those facts and do a calculation and figure out what the rate of return will be if you lend them money at that rate of interest today, and then they pay you back at the end. And it's called fixed income because the outcome is fixed. It's a contractual relationship that promises a fixed return. And so there's only one moving piece in the whole equation. Once you've bought it and the interest rate is set and the price at maturity is set, and you've paid a fixed price, there's only one moving piece, which is the probability that they'll keep the promise of, of interest in principle. And it's the job of the credit analyst to assess that. And it's, it's a fairly arcane thing. You can't, you can't buy like, you know, people buy stocks because they like the idea of the company or they like the product or something like that. I don't think it's a great idea, but they do. Credit analysis is more arcane. You can say, well, I like. They make good hamburgers, so I'm going to buy their ponds. It's a totally different story. So for most people who are listening, well, let me say this. In most areas, the amateur should go into funds or ETFs or some managed product. Remember what Charlie Munger said, it's not easy embedded things. It's easy and stupid. And so that's true in the things I do, but it's also true in, in my opinion for stocks, mutual funds, ETFs, index funds, something like that. And investing is a funny business. It's very easy to get an average return. It's very hard to get an above average return. But if you're content with an average return, you can get managed products at a relatively low cost and have a high probability of getting an average return. And the point is that, you know, high yield, bonds yield around seven other forms of credit may have a slightly higher return. And if you're happy with that, there are lots of managed products that'll deliver.

William Green (73:39)

Going back to this general question that we've been discussing about dealing with risk and dealing with uncertainty, you often quote one of your favorite adages, which is from Elroy Dimson, who said, risk means more things can happen than will happen. And, and it, it feels like the range of possible things that can happen today is wider than it's been in the past. And I'm wondering how you deal with it not only as an investor, but actually personally. This sense that, you know, as you, as you talk to your kids or as you talk to your grandkids, like how. How one actually keeps an even keel in a period where you often quote a lovely line from Peter Bernstein, who said, we walk every day into the great unknown. How do we deal with it?

Howard Marks (74:30)

Well, first of all, I've concluded in the last few months, William, that the toughest questions I get are the ones that start with how. Because I can tell you what you have to do. You have to keep an even keel. I can tell you that it may be desirable, if you want to be safe, to have a more defensive portfolio. But how to make that decision and how to keep an even keel is a little harder. But obviously if you let your emotions run away with you, if you buy when things get exciting, which usually means when prices are high, and you sell when things get depressing, which usually means prices are low, it's obviously going to be very counterproductive. So I think the even keel is essential. And I think most of the people that you've met with and written about have a pretty even keel. So that's my strongest recommendation. And this goes back to not being hyperactivity, not trading, not trading all the time. Don't just do something, sit there investing. It's not a fluke that it works. It's not a pachinko game or a roulette wheel. It works over time because economies grow and companies improve their profitability over time. And the most important thing for investors is to get on that gravy train and stay on it. Invest, invest early, invest a lot and don't tamper with it. And having your emotions under control is essential if you're going to be able to do that. Last thing of don't tamper with it. And getting on the gravy train and staying on it and not tampering with it is much more important than getting on, getting off, picking the right times to get in and pick the right times to get out, picking exactly the stocks that'll go up the most and avoiding the stocks. That's all kind of just embroidering around the edges. The most important thing is to be a long term investor.

William Green (76:34)

You also said to me something that really helped me in the, the chapter that I wrote about you in my book about just not overreaching like, like the big question being how much you push the envelope. And I, I, I think that's another really key thing is just in ensuring survival. But I was also very struck. You, you, you quoted something in your Risk Revisited again memo from 2015 where you said, in my personal life I tend to incorporate another of Einstein's comments, which is I never think of the future. It comes soon enough. And I was wondering whether you were being kind of facile, a little bit facetious, or whether actually that is something that helps you get through uncertainty. That, that, that idea.

Howard Marks (77:17)

Well, I don't think, I'm not a futurist, I don't think that my vision of the future is bound to be more right than anybody else's. So no, I don't think about it that much. And I just try to. Do you know, all these things are kind of a little bit counterintuitive and a little illogical. I just try to think of laboring in the here and now to buy things that are going to do okay. Well, then you say, yeah, but Howard, in order to know whether something's going to do okay, don't you have to have a view of the future? Yeah, well, you kind of do, but. So, again, don't think you know everything. Don't think you have it right. You've quoted Elroy Dempson. The future is not a set single thing that if you're smart enough, you can figure it out what it's going to be and it's going to materialize and make you right. It's a probability distribution. It's a range of possibilities in each thing, whether it's GDP growth next year or inflation next year, or who's going to win the next election, who's going to win the next World Series, or whether we're going to have geopolitical peace or any of these things. Only one thing will happen, but many things can. And you should accept that. You should accept that it introduces uncertainty into the equation. And you shouldn't form a certainty around one outcome and bet heavily on it unless you have special expertise, which very few people do. So I think that humility is a great way to start out of trouble. And I once wrote in some memo or other about my favorite fortune cookie. You probably read that one, too. But it said that the cautious seldom err or write great poetry. Every person has to decide for themselves. Do I want to try to write great poetry and get rich if my bets are right, or do I want to avoid erring and be sure that I'll do okay if my bets are wrong? It's a choice. You can't have both, or you can try to do both, but you have to put your emphasis on one or the other. You can't emphasize both at the same time. And so I think that this is a matter of mindset that I think most people should adopt. And life is uncertain. The future is uncertain. Investing is uncertain. Are you going to go for winners or are you going to try to avoid losers?

William Green (79:38)

I wanted to ask you one last quick question, if I may. You've been very generous with your time. I was struck the other day when I was listening to a conversation between you and your Oaktree co founders, Bruce Karsh and Sheldon Stone, that Sheldon said that when he first met you back in 1983 and came to work with you in high Yield debt. You talked even then about the importance of having a balanced life and having time to enjoy your personal life. And Bruce also talked about the importance of family to you and all of the founders of Oaktree. And I was very struck, as I was looking back on your life, that you found plenty of time to play tennis and backgammon and card games with friends like Bruce Newberg, and to buy and decorate and fix up houses and spend time with your kids and grandkids. And you mentioned even that you'd spent thousands of hours playing backgammon and card games with Bruce Newberg over 40 years. What advice do you have for investors or other professionals who clearly need to work really hard to compete, and yet you also want to have a balanced life in some form, and you don't want to just look back and be like, yeah, I made an enormous amount of money and I never got to hang out with my family at all or my friends or to enjoy my hobbies.

Howard Marks (80:54)

Well, we all have to choose what's important to us. Charlie Munger used to say, oh, that guy's a maniac. A maniac was somebody who only cared about working hard and making money. You have to decide whether that's for you and it's not for me. And there's an old the tritest of all the sayings is that nobody on their deathbed ever said, I wish I worked more. And I think it's true. And that's not how I'm living my life. And I have, as you say, pursuits that I enjoy greatly. I wouldn't give them up. And once you have enough money or more than enough money, why should you give away part of your enjoyment to have more? I think the greatest saying that I always use when I give advice to young people is from the writer Christopher Morley, who said, there is only one success to be able to live your life in your own way. Now the hard part is figuring out what your way is. What is it that you're 22, you're figuring out a career course. What is it that will make you happy at 70? Not easy to know. We change. We sometimes have an inaccurate vision of ourselves. If I described myself to you 40 years ago, I would not describe the person I am today. Mainly because maybe I was wrong and maybe I changed. But yet our goal should be to get to the end and say, I'm happy with the choices I made. But again, that should be a choice that is made consciously and just pursuing work and money and career and prestige because other people are doing it because it's glorified in the media or because you want to emulate xyz, become the richest man in the world, you shouldn't do it unless it's really right for you. And I don't think it's right for most people. So I think live your life your way. Figure out what's good for you and pursue it.

William Green (82:50)

I feel like when I look at your life, you've done a great job of setting things up so that it suits you. So you're. You're writing memos, which you love doing. You're not making individual investments yourself. You're not managing lots of employees. You're. You're setting the firm's investment philosophy and meeting clients. And there's something really lovely about seeing the way you. You've set yourself up in this sort of very internally aligned way. So it's a. It's a great model for us all.

Howard Marks (83:16)

Thank you. Well, you know, William, my idol Warren Buffett always says he skips to work in the morning, and I feel. I do, and I'm happy to go to work. And I like what I do. And, you know, I hope to keep doing it for a long time to come.

William Green (83:30)

I hope so, too. Thank you so much, Howard. It's been a real delight chatting with you, and I really learned so much from you over the years, and I really tried to not just read these memos, but really, truly internalize the lessons. And I know that I'm one of many thousands of people whose lives are actually tangibly better because you've shared these lessons. So thank you.

Howard Marks (83:50)

Thank you. It's a pleasure speaking with you. And let's do it again.

William Green (83:53)

I look forward to it. All right, take care. Thanks, Howard.

Howard Marks (83:56)

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