Hey there!

It’s Sparsh here!👋 

Howard Marks spent decades preaching against getting emotional about markets. Then AI happened, and even he admits he sounds a little swept up in it. 🤖

In a recent My First Million episode, Marks walked through why autonomy and unpredictability make this technology unlike anything before it, and what that means for investors, partnerships, and parenting. 🎙️

Let’s dive in to know more.🚀

🤖 What makes AI different this time

Every past innovation, from railroads to the internet, sped things up. AI does something new. 🚀

💼 Will AI replace investors like him

Marks doesn't dodge the question. Indexation already exposed active managers who couldn't beat the market, and he thinks AI will do the same to another layer of underperformers. 📉

But he draws a line. Some decisions have no historical pattern to learn from, like investing when Lehman collapsed and the entire financial system looked ready to melt down. There was no data, no precedent, only judgment. 🧭

That is where he believes experienced humans still hold an edge. 🎯

📊 The 2008 bet that defined his career

When Lehman went under, Oaktree had already raised an unprecedented $11 billion distressed debt fund, up from $2.5 billion pre-crisis. 💰

His logic was simple. If the world melts down and you invested, it won't matter. If it doesn't melt down and you sat out, you failed your job. So he acted despite serious doubt. 💭

🧩 Second level thinking, explained

Marks says the core idea behind his investing philosophy cannot really be taught. 📚

1. First level thinking sees what everyone else sees. 👀

2. Second level thinking means holding a variant perception that the market has mispriced something. 🔄

3. You then have to bet on that perception and be right. 🎲

He compares it to "insight," the same way basketball has "you can't coach height." 🏀

🤝 The Bruce Karsh partnership, 39 years running

Marks and his Oaktree co-founder Bruce Karsh have worked together for nearly four decades without a single fight. 🕰️ He breaks the formula into three pieces.

• 🔹 Shared values — an aggressive risk-taker and a cautious operator will eventually turn on each other.

• 🔹 Complementary skills — Karsh manages the money, Marks does the public-facing work, neither wants the other's job.

• 🔹 Appreciation — genuinely valuing that your partner does the parts of the job you don't want to do. 🙏

🎯 Closing thought

Marks has spent his whole career arguing for discipline over emotion, yet even he admits AI has him a little won over. What stands out is that he still draws a hard line around judgment, the kind that led Oaktree to deploy $7 billion into a market everyone else thought was ending. 💸

That's the real tension here. Machines can process more data than any investor ever could, but conviction under uncertainty, the thing that built the Karsh partnership and the $11 billion fund, is still a distinctly human bet. 🌉