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Howard Marks
Co-Chairman, Oaktree Capital Management
Born 1946 · Oaktree Capital Management
Howard Marks is widely read in the investment world for his work in credit markets, distressed debt investing, and market cycle analysis. He co-founded Oaktree Capital Management in 1995, which grew into one of the largest alternative investment firms globally, managing over $190 billion in assets. Marks is perhaps best known for his client memos, which he has written since 1990 and which are read by tens of thousands of investment professionals, including Warren Buffett, who has said he reads them as soon as they arrive. His books, "The Most Important Thing" and "Mastering the Market Cycle," are widely used in investment education. Marks played a significant role in developing distressed debt investing from a niche strategy into a broader asset class. His framework for understanding risk, which distinguishes between the probability of loss and volatility, has influenced how many investors approach portfolio construction and capital preservation.
Biography
Howard Stanley Marks was born on April 23, 1946, in New York City. He grew up in a middle-class family in Queens and showed an early aptitude for analytical thinking. Marks attended the Wharton School at the University of Pennsylvania, where he earned a Bachelor of Science in Economics with a major in finance in 1967. He then pursued his MBA at the University of Chicago Booth School of Business, graduating in 1969. At Chicago, Marks was influenced by the efficient market hypothesis and the academic study of risk, which would shape his contrarian investment philosophy. The gap between academic theory and real market behavior stuck with him, eventually leading him to conclude that while markets are generally efficient, they are far from always efficient, and the greatest opportunities arise precisely when they are not.
After completing his MBA, Marks joined Citicorp (now Citigroup) in 1969, where he spent 16 years building his career in investment management. He started in equity research before transitioning to the fixed-income side, a move that proved important. In 1978, Marks was tasked with building Citicorp's convertible and high-yield bond portfolios, putting him at the edge of what was then a small, poorly understood market. During his time at Citicorp, Marks developed his expertise in credit analysis and his deep understanding of the risk-return spectrum in fixed-income securities. In 1985, he moved to Trust Company of the West (TCW), where he was hired to establish and manage groups devoted to distressed debt, high-yield bonds, and convertible securities. At TCW, he built a track record in distressed debt investing that attracted significant institutional interest.
In 1995, Marks co-founded Oaktree Capital Management with six partners, including Bruce Karsh, Sheldon Stone, Larry Keele, Richard Masson, Stephen Kaplan, and David Kirchheimer. The firm was built on the philosophy that superior returns could be achieved through disciplined credit investing, particularly in distressed assets and other alternative credit strategies. Oaktree's founding principle was that risk control, rather than aggressive return-seeking, should be the primary focus of investment management. The firm grew rapidly, becoming one of the largest distressed debt and credit investors globally. Oaktree went public in 2012, listing on the New York Stock Exchange, and by the mid-2020s managed over $190 billion in assets across multiple credit and alternative strategies. In 2019, Brookfield Asset Management acquired a majority stake in Oaktree, though Marks and his partners retained operational independence.
Marks began writing his now-famous client memos in 1990, initially as a way to communicate his investment views and market observations to Oaktree's clients. Over time, these memos became detailed essays on topics ranging from market psychology and risk management to the nature of investment success and the role of luck versus skill. The memos attracted a readership far beyond Oaktree's client base, with Warren Buffett publicly stating that Marks's memos are the first thing he reads when they arrive in his inbox. In 2011, Marks distilled the wisdom from his memos into his first book, "The Most Important Thing: Uncommon Sense for the Thoughtful Investor," which became a bestseller and is now standard reading in investment education. He followed it with "Mastering the Market Cycle: Getting the Odds on Your Side" in 2018, which provided a comprehensive framework for understanding and navigating market cycles.
Throughout his career, Marks has stood out for his emphasis on understanding market cycles, controlling risk, and thinking differently from the consensus. His concept of "second-level thinking" -- the idea that successful investing requires deeper, more nuanced analysis than the surface-level conclusions most investors reach -- has become a standard concept in investment education. Marks has consistently argued that the most important thing in investing is not what you buy but what you pay for it, and that the key to long-term success is avoiding large losses rather than chasing outsized gains. His approach to contrarian investing is rooted not in simply doing the opposite of the crowd, but in understanding when the crowd's behavior has pushed prices to levels that no longer reflect fundamental value. Marks serves as a trustee of the Metropolitan Museum of Art and is a major philanthropist, having signed the Giving Pledge alongside his wife Nancy. He has received honors from the CFA Institute and other professional organizations.
Howard Marks's Investment Principles
1.Second-Level Thinking
Successful investing requires thinking that is different from and better than the consensus.
Marks argues that first-level thinking is simplistic and superficial -- "This is a good company, let's buy the stock." Second-level thinking is deep, complex, and convoluted -- "This is a good company, but everyone thinks it's a great company, and it's not. So the stock is overrated and overpriced. Let's sell." To achieve superior results, an investor must hold views that are not only different from the consensus but also more accurate. This means thinking about what range of outcomes is possible, which outcome is most likely, what expectations are embedded in the current price, and how one's own expectations differ from the crowd's. Second-level thinking recognizes that the relationship between quality and price is the key to successful investing, not quality alone.
Source: The Most Important Thing (2011), Chapter 1
2.Understanding Market Cycles
Markets move in cycles driven by psychology, and recognizing where we stand in the cycle is essential.
Marks considers the understanding of market cycles to be among the most valuable tools available to investors. He identifies multiple interrelated cycles -- the economic cycle, the credit cycle, the profit cycle, and the psychological cycle -- that together determine the investment environment. Marks emphasizes that while we can never predict exactly what will happen or when, we can develop a sense of where we stand in the cycle based on observable indicators such as investor sentiment, credit availability, asset valuations, and risk premiums. When investors are euphoric, credit is loose, and valuations are high, the cycle is likely near its peak, and caution is warranted. When fear dominates, credit tightens, and prices are depressed, opportunities are most abundant. The key is not to predict the future but to understand the present conditions and position accordingly.
Source: Mastering the Market Cycle (2018)
3.Risk Control Over Return Seeking
The primary goal of investing should be controlling risk, not maximizing returns.
Marks distinguishes between risk and volatility, arguing that true investment risk is the probability of permanent capital loss, not short-term price fluctuations. He believes that most investors focus too much on the return side of the risk-return equation and not enough on risk management. Marks frequently emphasizes that investment success is not about making a lot of money in good times -- almost anyone can do that -- but about avoiding catastrophic losses in bad times. His philosophy at Oaktree has always been that if the firm controls risk properly, good returns will follow. Marks uses the analogy of a batting average in baseball: the best investors are not those who hit the most home runs but those who maintain a consistently high batting average while avoiding strikeouts. Risk, in his view, stems primarily from paying too high a price, from excessive use of leverage, and from overconfidence in uncertain outcomes.
Source: The Most Important Thing (2011), Chapters 5-7
4.Contrarian Thinking
The best opportunities arise when you go against the crowd, but only when you have good reason to.
Marks argues that superior investment results require deviation from the crowd, but he is careful to distinguish thoughtful contrarianism from reflexive naysaying. Simply doing the opposite of what everyone else does is not a viable strategy. The key is to understand why the crowd is behaving as it is, to evaluate whether the crowd's behavior has pushed prices to unsustainable levels, and to have the conviction and patience to act differently when the evidence supports doing so. Marks points out that the most profitable investments are often those that feel the most uncomfortable at the time of purchase, because the best buying opportunities tend to arise when fear is at its highest. Conversely, the riskiest moment is often when everything feels safest, because complacency leads to overvaluation. True contrarian investing requires not just intellectual conviction but emotional discipline -- the ability to buy when others are fearful and to sell when others are greedy, as Buffett famously put it.
Source: The Most Important Thing (2011), Chapter 11
5.Patient Opportunism
Wait for the market to offer bargains rather than constantly seeking action.
Marks believes that one of the most important qualities of a successful investor is patience. He advocates for what he calls "patient opportunism" -- the discipline to wait for the market to offer attractive risk-adjusted returns rather than feeling compelled to always be fully invested or constantly trading. This principle was exemplified during the 2008 financial crisis, when Oaktree deployed approximately $6 billion in distressed assets over a period of just 15 weeks, having patiently accumulated dry powder during the preceding years of market excess. Marks draws an analogy to a batter in baseball who does not have to swing at every pitch. Unlike in baseball, where three strikes result in an out, investors face no penalty for letting opportunities pass. The penalty comes from swinging at bad pitches -- investing in overpriced assets simply because cash feels uncomfortable. This patience must be paired with decisiveness: when genuine opportunities arise, investors must have the courage and capital to act aggressively.
Source: Oaktree memos and The Most Important Thing (2011), Chapter 13
6.Knowing What You Don't Know
Intellectual humility and acknowledging uncertainty are essential to sound investing.
Marks places enormous emphasis on recognizing the limits of one's knowledge and the inherent unpredictability of financial markets. He frequently cites the distinction between "knowable" and "unknowable" information, arguing that macro forecasting -- predicting GDP growth, interest rates, or market direction -- falls largely in the unknowable category. Rather than trying to predict the unpredictable, Marks advocates focusing on what can be known: the value of individual assets, the current state of the market cycle, and the margin of safety embedded in a price. He argues that the investors who get into the most trouble are those who are overconfident in their ability to forecast the future. Intellectual humility leads to more conservative positioning, wider margins of safety, and ultimately better long-term outcomes. Marks often quotes John Kenneth Galbraith: "There are two kinds of forecasters: those who don't know, and those who don't know they don't know."
Source: The Most Important Thing (2011), Chapter 14, and various Oaktree memos
Notable Quotes from Howard Marks
“The most important thing is not what you buy but what you pay for it.”
His core idea: that price relative to value determines investment success.
“Experience is what you got when you didn't get what you wanted.”
Reflecting on the educational value of investment mistakes and the importance of learning from failure.
“You can't predict. You can prepare.”
Summarizing his view that investors should focus on understanding where they are in the cycle rather than trying to forecast the future.
“There's a big difference between probability and outcome. Probable things fail to happen -- and improbable things happen -- all the time.”
Explaining why risk management requires humility about the range of possible outcomes.
“The biggest investing errors come not from factors that are informational or analytical, but from those that are psychological.”
On why emotional discipline matters more than brilliance in investing.
“Being too far ahead of your time is indistinguishable from being wrong.”
A reminder that timing and patience are critical components of contrarian investing.
Recommended Reading
The Most Important Thing: Uncommon Sense for the Thoughtful Investor
Howard Marks (2011)
Marks's first book draws on insights from his widely read memos across twenty chapters, each covering what he considers "the most important thing" in investing. Topics include second-level thinking, understanding risk, recognizing market cycles, combating psychological influences, and the role of luck. The book has been praised by Warren Buffett and is a frequently recommended investment book. It provides a clear framework for thinking about investing that emphasizes risk control, intellectual humility, and contrarian discipline.
The Most Important Thing Illuminated
Howard Marks (with commentary by Christopher Davis, Joel Greenblatt, Paul Johnson, and Seth Klarman) (2013)
An expanded edition of the original work that includes annotations and commentary from four prominent investors: Christopher Davis, Joel Greenblatt, Paul Johnson, and Seth Klarman. Their perspectives add depth and alternative viewpoints to Marks's original text, creating a richer dialogue about investment principles. This edition is particularly valuable for readers who want to see how different investment practitioners interpret and apply Marks's ideas within their own frameworks.
Mastering the Market Cycle: Getting the Odds on Your Side
Howard Marks (2018)
A deep exploration of the various cycles that drive financial markets, including the economic cycle, the credit cycle, the real estate cycle, and the psychological pendulum that swings between greed and fear. Marks provides a framework for identifying where we stand in each cycle and explains how this understanding can be used to tilt the odds of investment success in one's favor. The book draws on decades of experience and numerous historical examples to illustrate how cycles repeat in their patterns, even if the specific details differ each time.
Fooled by Randomness
Nassim Nicholas Taleb (2001)
Marks has frequently recommended Taleb's exploration of the role of randomness and luck in financial markets and life. Taleb's work aligns with Marks's emphasis on intellectual humility, the limits of forecasting, and the importance of recognizing that outcomes are influenced by factors beyond our control. The book challenges conventional thinking about skill versus luck and encourages investors to build robustness into their strategies rather than relying on prediction.
Against the Gods: The Remarkable Story of Risk
Peter L. Bernstein (1996)
A historical account of humanity's efforts to understand and manage risk, tracing the development of probability theory, insurance, and modern finance. Marks has cited this book as an important influence on his thinking about risk, uncertainty, and the limits of quantitative models. Bernstein's narrative reinforces Marks's belief that risk cannot be reduced to a single number and that the history of finance is fundamentally a history of grappling with uncertainty.
Howard Marks's Investment Checklist
Is the price below intrinsic value?
Marks emphasizes that the quality of an investment is determined not by the quality of the asset but by the price paid relative to its intrinsic value. Even a great company can be a bad investment if purchased at too high a price, and a mediocre company can be a great investment if bought cheaply enough.
Check this on Billiver →Where are we in the market cycle?
Assess whether current conditions suggest we are closer to a market peak or trough. Look at indicators such as investor sentiment, credit availability, deal activity, risk premiums, and valuation levels relative to historical norms. Position more aggressively when cycles favor buyers and more defensively when they favor sellers.
What is the downside risk?
Before considering the potential upside, rigorously analyze what could go wrong. Estimate the range of possible outcomes and the probability of permanent capital loss. Focus on the margin of safety -- the gap between price and value that protects against errors in analysis and unforeseen events.
Check this on Billiver →Is the consensus wrong?
Determine whether the current market price reflects consensus expectations that are too optimistic or too pessimistic. Superior returns require a non-consensus view that turns out to be correct. If your view matches the consensus, you cannot expect to outperform even if you are right.
Am I being emotionally disciplined?
Check whether your investment decision is driven by analysis or by psychological factors such as greed, fear, envy, or the desire for action. The best investments often feel uncomfortable at the time of purchase. If an investment feels easy and obvious, it may already be fully priced.
Is the balance sheet sound enough to survive adversity?
Examine whether the company or asset can withstand a prolonged economic downturn, credit contraction, or other adverse scenario. Marks stresses that surviving difficult periods is essential to realizing long-term value, and excessive leverage or fragile financial structures can turn temporary setbacks into permanent losses.
Check this on Billiver →Howard Marks's Notable Investments
Distressed Debt During the 2008 Financial Crisis
2008-2009During the global financial crisis, Oaktree deployed approximately $6 billion over a 15-week period in late 2008 and early 2009, primarily into distressed corporate debt and other credit instruments that had been heavily discounted during the market panic. Marks had been writing cautiously about market excess since 2005 and had accumulated significant dry powder in anticipation of better opportunities.
Outcome: The investments generated strong returns as credit markets recovered. Oaktree's distressed debt funds from this vintage reportedly produced returns well above historical averages, validating Marks's patient opportunism philosophy and reinforcing Oaktree's position as one of the largest crisis-era credit investors.
High-Yield Bond Market Pioneering
1978-1985While at Citicorp, Marks was among the first institutional investors to build a portfolio of high-yield (non-investment-grade) bonds when the market was still in its infancy. At the time, most institutional investors avoided these securities due to their perceived riskiness and lack of analyst coverage.
Outcome: Marks's early entry into high-yield bonds generated strong risk-adjusted returns for Citicorp's clients and established his reputation as a pioneer in credit investing. The experience gave him deep insight into the relationship between perceived risk, actual risk, and return -- a framework that became central to his investment philosophy.
COVID-19 Pandemic Distressed Opportunities
2020When the COVID-19 pandemic caused a sharp selloff in credit markets in March 2020, Oaktree moved quickly to deploy capital into distressed and discounted corporate bonds, leveraged loans, and other credit instruments. Marks wrote a series of influential memos during this period analyzing the crisis and articulating his framework for deciding when and how aggressively to invest.
Outcome: Credit markets recovered faster than many expected, and Oaktree's pandemic-era investments generated strong returns. Marks's real-time memos during the crisis became widely cited reference points for understanding investor behavior and market dynamics during periods of extreme uncertainty.
European Distressed Debt
2011-2013During the European sovereign debt crisis, Oaktree expanded its distressed debt operations into Europe, investing in corporate and financial sector debt that had been depressed by the region's economic turmoil. European banks were deleveraging and selling loan portfolios at significant discounts, creating opportunities for specialized credit investors.
Outcome: Oaktree's European distressed investments benefited from the eventual stabilization of the European economy and the European Central Bank's supportive monetary policy. The firm established itself as a major player in European credit markets, diversifying its geographical footprint beyond its traditional US focus.
Frequently Asked Questions
What is Howard Marks's investment philosophy?
Howard Marks's investment philosophy centers on three core ideas: second-level thinking (developing views that are both different from and more accurate than the consensus), understanding market cycles (recognizing where we stand in the recurring patterns of investor psychology and credit availability), and risk control (prioritizing the avoidance of large losses over the pursuit of large gains). He believes that the most important factor in investment success is not what you buy but what you pay for it, and that superior returns come from buying assets at prices below their intrinsic value with an adequate margin of safety. His approach is contrarian, but he distinguishes thoughtful contrarianism from simply doing the opposite of the crowd.
What are Howard Marks's famous memos?
Howard Marks has been writing client memos since 1990, originally intended for Oaktree Capital's clients but now widely distributed and read by tens of thousands of investment professionals worldwide. The memos cover topics such as market psychology, risk assessment, the current investment environment, and broader philosophical questions about the nature of investment success. Warren Buffett has said he reads Marks's memos as soon as they arrive. Notable memos include "bubble.com" (January 2000, warning about the dot-com bubble), "The Race to the Bottom" (2007, warning about excessive risk-taking before the financial crisis), and multiple memos during the COVID-19 pandemic analyzing the crisis in real time. The memos are publicly available on Oaktree Capital's website.
What is second-level thinking?
Second-level thinking is Howard Marks's term for the deeper, more nuanced analysis required for successful investing. First-level thinking is simplistic: "This is a good company, so let's buy the stock." Second-level thinking asks: "This is a good company, but everyone already knows it's good, so the stock price already reflects that view. Is it priced for perfection? What could go wrong that the consensus isn't considering? Is there a better risk-adjusted opportunity elsewhere?" Second-level thinking requires considering what expectations are embedded in the current price, how one's own analysis differs from the consensus, and what the range of possible outcomes looks like. It is the foundation of Marks's approach to generating returns that exceed the market average.
How did Howard Marks perform during the 2008 financial crisis?
The 2008 financial crisis was one of the defining moments of Marks's career. Having written cautiously about market excess and deteriorating credit standards in the years preceding the crisis, Oaktree had accumulated significant dry powder (uninvested capital). When credit markets collapsed in late 2008, Oaktree deployed approximately $6 billion over a 15-week period, buying distressed corporate bonds and other credit instruments at deeply discounted prices. Marks later described this period as the most important investment opportunity of his career. The investments generated strong returns as markets recovered, and the experience reinforced Marks's philosophy of patient opportunism -- the discipline to wait for the best opportunities and then act decisively when they arrive.
What is Oaktree Capital Management?
Oaktree Capital Management is a global investment management firm co-founded by Howard Marks in 1995 with six partners. The firm specializes in alternative investments, with particular expertise in distressed debt, corporate bonds, real estate, private equity, and other credit strategies. As of the mid-2020s, Oaktree manages over $190 billion in assets. The firm's philosophy, shaped by Marks, emphasizes risk control, value investing in credit markets, and disciplined contrarianism. Oaktree went public on the New York Stock Exchange in 2012, and in 2019, Brookfield Asset Management acquired a majority stake while Marks and his partners retained operational independence. The firm is headquartered in Los Angeles, California.
What books has Howard Marks written?
Howard Marks has authored two major investment books. "The Most Important Thing: Uncommon Sense for the Thoughtful Investor" (2011) distills the key insights from his decades of client memos into twenty chapters, each addressing what he considers a critical aspect of investment success, including second-level thinking, risk assessment, market cycles, and the role of luck versus skill. An expanded edition, "The Most Important Thing Illuminated" (2013), includes commentary from Seth Klarman, Joel Greenblatt, Christopher Davis, and Paul Johnson. His second book, "Mastering the Market Cycle: Getting the Odds on Your Side" (2018), provides a comprehensive framework for understanding the economic, credit, and psychological cycles that drive financial markets and explains how investors can use cycle awareness to improve their decision-making.
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