Howard Marks: The ‘Uncomfortably Idiosyncratic’ Billionaire

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Howard Marks: The ‘Uncomfortably Idiosyncratic’ Billionaire by William Green, Obeserver

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As an undergraduate at Wharton in the 1960s, Howard Marks stumbled upon one of the guiding principles of his life — the Buddhist concept of mujo. In his Japanese studies course, mujo was defined as “the turning of the wheel of the law.” Mr. Marks explains: “Change is inevitable. The only constant is impermanence…. We have to accommodate to the fact that the wheel turns and the environment changes.” This constant flux applies not only to human lives but economies and markets. “It’s very .......................

This kind of rational, clear-headed analysis has served Mr. Marks well. Since he co-founded Oaktree Capital Management in 1995, it’s grown into an alternative investment behemoth with more than $90 billion under management. Its stellar returns in areas such as distressed debt and junk bonds have brought Mr. Marks a fortune that Forbes estimates at $2 billion. His New York apartment cost $52.5 million. As Oaktree’s Chairman, Mr. Marks oversees its investment strategy and reigns as its philosopher king. His memos to investors have earned a devoted following, as has his classic book, The Most Important Thing: Uncommon Sense for the Thoughtful Investor. One fan, Warren Buffett, wrote: “When I see memos from Howard Marks in my mail, they’re the first thing I open and read. I always learn something, and that goes double for his book.”

Sitting opposite Howard Marks in his corner office on the 34th floor of a Manhattan skyscraper, you sense that you’re in the presence of a most superior machine. His manner is polite and pleasant, but there’s an intellectual intensity and precision in everything he says. He’s a gifted moneymaker, but he’s primarily an original thinker who relishes expressing ideas that others haven’t considered.

A turning point in Howard Marks’ intellectual life came when he learned about the efficient market hypothesis as a graduate student at the University of Chicago. This sparked a “moment of enlightenment” — a capitalistic version of Zen satori. It’s tough to find bargains in a widely-followed market, he learned, so he should focus on less efficient niches where hard work and skill were more likely to pay off. In 1978, he launched a fund at Citibank that invested in junk bonds at a time when most investment firms thought them too risky to own — a “powerful bias” that produced marvelous inefficiencies. Likewise, in 1988, he and his longtime business partner, Bruce Karsh, created a distressed debt fund at TCW, profiting from the perception that it was “disreputable” to buy the debt of bankrupt companies.

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