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Howard Marks on AI and Human Judgment

46:30 recording · EN · 2 speakers

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Brief overview

Howard Marks says AI's autonomy is unprecedented, but judgment, partnership and second level thinking still decide investing.

  1. Autonomy is what makes AI differentEvery prior innovation was a tool that sped things up; AI can be given a job and figure out how to do it itself.
  2. Big calls are made with doubt, not convictionMarks invested through Lehman while absolutely not confident — a battle hero is afraid and does it anyway.
  3. Partnerships need shared values and complementary skillsCowboys and chickens disparage each other in both good and bad times; Marks and Karsh have lasted 39 years on mutual respect.
Executive Summary AI
  • Howard Marks explains he rewrote his AI memo entirely after his son Andrew, a VC who deals with AI every day, told him in early February that so much had happened since the first memo around December 9th.0:50
  • He upgraded his view because AI has two qualities no earlier technology had — autonomy, the ability to be given a job without being told how to do it, and an unpredictability that makes the shape of the future unknowable, unlike the railroad, computers or the internet.2:23
  • On conviction, he recounts Lehman going under on September 15th of 08, when Oaktree had raised an 11 billion dollar distressed debt fund in 07-08 — against the 2.5 billion dollar 02 fund that was the biggest in history before — and Bruce Karsh deployed an average of $450 million a week for 15 weeks, $7 billion in a quarter, with no data and no precedent, only supposition.10:38
  • He credits a 39-year partnership with Bruce Karsh, built on mutual respect, shared values and complementary skills, and says they have had intellectual disagreements but never a fight, partly because neither is a financial maximizer.20:58
  • On careers he admits he made his own early decisions haphazardly until he left to start Oaktree around 95, and now tells students to find work that plays to their strengths, avoids their weaknesses and makes them happy, quoting Christopher Morley that there is only one success — to live your life your own way.28:43
Key Quote
“The idea that you can give it a job and not tell it how to do it and it'll figure it out is really unique.”
— Howard Marks2:48
Key Quote
“And if that's true, and if AI doesn't have hair on its neck, then maybe there's a role left for experienced investors with judgment.”
— Howard Marks6:12
Key Quote
“Second level thinking basically says if you don't see anything different from everybody else, you can't possibly be superior.”
— Howard Marks8:32