The world of investing is not the exclusive domain of those in formal suits in skyscrapers, but is a daily journey we all undertake to protect our savings and secure our future. In an exceptional episode of the podcast "People by WTF," the host Nikhil Kamath hosted one of the pillars of global investment, Howard Marks (Co-founder of Oaktree Capital Management).

In this deep conversation, Marks presents the essence of his experience spanning decades, shattering complex myths about financial markets, to place in our hands a practical guide that combines mathematical logic, human psychology, and even ancient Japanese philosophy.

Here are the key lessons learned from this conversation, presented in a simplified yet profound manner.

From the Streets of New York to the Top of Wall Street

Marks began his journey from the Queens neighborhood of New York, influenced by his accountant father. This early exposure to the language of numbers, followed by rigorous academic study at the Universities of Pennsylvania (Wharton) and Chicago, shaped a mind that relies on pure logic. Nevertheless, Marks discovered early on that numbers alone are insufficient to make a successful investor; markets are driven by the fluctuating emotions of humans.

The Philosophy of "Mojo": Accepting the Inevitability of Change

One of the most striking points in Marks' philosophy is his inspiration from literature and Japanese philosophy, specifically the concept of "Mujo." This concept simply means that change in life and in markets is inevitable, unpredictable, and beyond our control.

How do we apply this in our investments?

  • Stop Predicting: Attempting to predict market trends with precision is a waste of time and effort.
  • Prepare Instead of Predict: The smart investor doesn't build his plan on a single scenario, but builds a "flexible portfolio" capable of absorbing shocks and succeeding in multiple scenarios.
  • History Doesn't Copy Itself: Events don't repeat exactly, but human responses to fear and greed are always similar, and that's where opportunity lies.

Why is Investing Such a Difficult Task?

Investing is not like engineering or dentistry; there are no fixed physical laws that give you the same result every time. Marks illustrates the difficulty of the game through the following points:

  • Absence of Mechanical Laws: Investing is more like a "complex puzzle" affected by the changing psychology of crowds.
  • Competitor Competence: You're competing with very smart people who have the same data available to you.
  • Psychological Barriers: Even when golden opportunities appear, fear prevents us from exploiting them. And as famous trader Wally Dimers says: "When the time to buy comes, you won't want to."

The Art of "Second-Level Thinking"

To excel in markets, Marks emphasizes that shallow, conventional thinking is not enough; rather, we must move to what he calls "second-level thinking," an approach that moves away from direct reactions to delve into the depths of the scene and crowd expectations.

To illustrate the idea, we can look at how investors respond to recurring events. While the conventional thinking (first-level) owner sees a company announcing good earnings as a direct incentive to buy its stock, the deep-thinking (second-level) owner poses smarter analysis; he realizes that everyone expects these profits in advance, which means the stock price has already absorbed this news and is overvalued, so he makes a counterintuitive decision not to buy.

The same applies during crises; when markets collapse, the conventional investor hastens to sell everything he owns to protect his money, while the savvy investor reads the scene differently, realizing that this collapse is the result of exaggerated collective panic, creating a golden opportunity for him to buy at cheap prices. And instead of just settling for easy investing in popular tech companies that everyone chases, the second-level thinker directs his compass toward searching for real value in places that others ignore or are afraid to approach.

Bonds vs. Stocks: Where Does Opportunity Lie?

While most people chase the glitter of stock markets, Marks finds his passion in distressed bonds (debt). The reason is simple: bonds offer more predictable and stable returns compared to stocks. And most importantly, real success often hides in uncomfortable places that the "herd" avoids, such as high-yield bonds or what is known as junk bonds.

Artificial Intelligence: A Powerful Tool But!

We cannot talk about the future without addressing artificial intelligence. Marks acknowledged his changing view toward this powerful technology, pointing to its overwhelming superiority in analyzing data and historical patterns. But he puts an important red line:

Artificial intelligence depends on "the past," and therefore will be helpless in the face of entirely new events (unprecedented ones). In times of unique crises, human instinct, innovation, and the ability to connect distant dots will remain the most important competitive advantage that machines cannot replicate.

Howard Marks' message to the simple investor is clear: don't look for a crystal ball to tell you the future, and don't blindly follow the crowds. Learn to manage your emotions before you manage your money, and be prepared for continuous change. Successful investing requires the courage to stand alone, the insight to see beyond the numbers, and the humility to acknowledge that we cannot control everything.