AcquiredHoward Marks & Andrew Marks: Something of Value
CHAPTERS
- 0:29 – 3:28
Show premise: value vs. growth investing, featuring Howard & Andrew Marks
Ben and David introduce the episode’s central matchup: legendary value/credit investor Howard Marks versus his son Andrew Marks, an early-stage venture investor. They frame Oaktree’s scale and track record and TQ Ventures’ rapid rise and strong early performance, setting up a father-son debate that became Howard’s most-read memo.
- •Episode concept: contrasting value/credit investing with growth/venture investing
- •Who Howard Marks is (Oaktree co-founder; major AUM)
- •Who Andrew Marks is (TQ Ventures co-founder; early-stage focus)
- •Context: their co-authored memo became Howard’s most popular
- •How the discussion will explore markets, decision-making, and investing frameworks
- 3:28 – 7:20
Sponsor segment: Vanta on operating plans, runway, and headcount modeling in a downturn
Vanta CEO Christina Cacioppo shares tactical guidance for operating after raising capital in a changed macro environment. She details how Vanta plans runway, revisits operating plans frequently, and ties hiring to data-driven go-to-market capacity models.
- •Assume last round may be last for 2–3 years; plan accordingly
- •Weekly/monthly operating-plan revisits tied to runway management
- •Expect metric degradation (CAC, retention) and plan for it
- •Role-by-role ‘napkin math’ and sales capacity modeling
- •Different hiring posture: GTM tied to predictability; product/engineering hires opportunistically
- 7:20 – 11:01
How the father–son memo happened during COVID (and why it resonated)
Howard explains how pandemic cohabitation in 2020 led to frequent, spirited investing conversations that evolved into the co-authored memo, “Something of Value.” They reflect on why the memo felt personal and why the collaboration worked despite very different styles.
- •Family ‘incarceration’ during early COVID created daily debate fuel
- •Differences in mindset and investing domains became the memo’s tension
- •Howard’s long memo history (~160) made co-authoring notable
- •Andrew could ‘speak value-investor language’ from early influences
- •The memo’s popularity echoed Howard’s earlier personal memo (“Luck”)
- 11:01 – 13:00
Andrew’s evolution from Buffett-style value to growth/tech investing
Andrew describes how his thinking moved gradually from near-term cash-flow valuation to reinvestment and long-duration compounding, bridging “value” and “growth.” He explains how reinvestment at high returns and understanding what’s truly being expensed vs. invested changes how to assess companies.
- •Started with classic value frameworks; later expanded toward growth
- •Shift from ‘current cash flows’ to reinvestment at high returns
- •Owner earnings and maintenance cash flow as a conceptual bridge
- •R&D/engineering and sales efficiency as ‘investments’ beyond capex
- •Growth vs. value as a spectrum rather than a hard dichotomy
- 13:00 – 17:23
Amazon as the bridge case: founder optionality, accounting vs. cash flow, and depth of understanding
The group uses Amazon to show why simplistic labels fail. Andrew argues Amazon demonstrates management/founder-driven optionality (e.g., AWS) and why surface-level “loss-making” narratives missed the underlying cash-flow dynamics; Howard explains why Oaktree typically puts tech in the “too hard” pile due to predictability needs.
- •Amazon illustrates founder/management optionality (retail → AWS and beyond)
- •Buffett’s ‘idiot-proof business’ vs. Amazon’s ‘bet on exceptional leadership’
- •Income statement losses vs. favorable cash conversion cycle/free cash flow
- •Need to go beyond knee-jerk takes; complexity demands deeper work
- •Oaktree’s emphasis on predictability often excludes tech from its opportunity set
- 17:23 – 25:35
Howard’s early lessons: high-yield bonds, the Nifty Fifty, and price discipline
Howard recounts how he entered high-yield investing when many institutions were barred from buying low-rated bonds. He contrasts the era’s extremes—“no price too high” for the Nifty Fifty and “no price low enough” for junk bonds—illustrating how mispricing and prejudice can create opportunity, and how even “best companies” can be terrible investments at the wrong price.
- •Origins of high-yield investing and the role of excess yield vs. defaults
- •Moody’s categorical bias: B-rated as ‘not a desirable investment’ regardless of price
- •Life insurance analogy: known/analyzable/diversifiable/well-paid risk
- •Nifty Fifty bubble: great narratives, extreme multiples, large losses
- •Core lesson: price matters as much as business quality; disruption wasn’t considered
- 25:35 – 32:21
Why durability is harder now: disruption, faster adoption, and ‘Darwinism turned up’
They discuss how technological change accelerates both opportunity and competitive threat. Howard uses newspapers as the archetype of a once-impregnable moat that collapsed, while Ben and Andrew explore how rapidly shifting consumer behavior and faster adoption curves reduce the number of businesses that can be run on autopilot.
- •Newspapers as a ‘perfect’ business undone by the internet
- •Faster tech adoption increases both upside and fragility of moats
- •‘Backdrop’ vs. constantly changing world: stability then, flux now
- •Question raised: should higher uncertainty reduce how we value long-duration cash flows?
- •Howard’s framing: competitive selection happens faster—‘Darwinism, turned up’
- 32:21 – 36:54
Market evolution and diminishing ‘easy’ edges: from information scarcity to near-efficiency
Andrew argues investing games evolve like poker: once-simple strategies become exploitable as the field improves. He and Howard explain how ubiquitous data and easier transaction access reduce obvious mispricings, shifting advantage toward superior interpretation, second-level thinking, and better future judgment rather than merely reading public numbers.
- •Poker analogy: early edge disappears as players learn and tools improve
- •Old era: high friction to information and trading enabled ‘hidden in plain sight’ value
- •Today: data ubiquity, smart participants, algorithms increase efficiency
- •Howard: mispricings come from ignorance and prejudice; both decline over time
- •Implication: edge must come from better analysis, insight, or future judgment
- 36:54 – 48:12
Why Andrew chose venture: probabilistic bets, qualitative future judgment, and founder work
Andrew explains he didn’t move to venture because it’s ‘easy’ or obviously inefficient, but because it fits his temperament and skills. He emphasizes venture as long-horizon, high-variance expected value investing—imagining what a company could be in 10 years, underwriting probabilities, and supporting winners with additional capital and help.
- •Venture isn’t necessarily inefficient; competition to invest is fierce
- •Personal fit: long-term qualitative judgments and futurism
- •Core venture math: lose often, win big; expected value and power laws
- •Active support: help companies, follow closely, concentrate follow-on capital
- •Contrast with Howard/Oaktree: avoidance of permanent loss vs. venture’s volatility
- 48:12 – 1:00:19
Building an investment firm: Oaktree’s culture + tailwinds vs. TQ’s focus and founder reputation
Howard describes Oaktree’s formation, partner complementarity, and the importance of culture over micromanagement—helped by strong demand for alternatives. Andrew contrasts this with TQ’s deliberate choice to avoid becoming a broad asset manager, prioritizing world-class returns, investing time, and building founder relationships rather than public branding.
- •Oaktree: founders had long shared history; clear role split (Howard fundraising; others investing)
- •Partnership principles: shared values + complementary skills + mutual respect
- •Culture-first approach; less emphasis on tight operational management early on
- •TQ: optimize for investing time and returns; avoid management/strategy sprawl
- •Venture advantage: reputation and relationships with founders more than ‘public memos’
- 1:00:19 – 1:17:05
Judgment, second-level thinking, and evaluating other people’s judgment
They tackle the hardest meta-skill in investing: judgment—where it comes from and how to identify it in others. Howard emphasizes second-level thinking as an intangible that’s difficult to teach, while Andrew breaks judgment into frameworks, rationality, bias awareness, and intellectual humility; both discuss hiring and founder assessment as judgment-detection exercises.
- •Charlie Munger’s reminder: investing is ‘simple but not easy’
- •Second-level thinking/variant perception as the route to outperformance
- •Judgment ingredients: deep understanding, frameworks, rationality, humility
- •Hiring: look for ‘smart eyes,’ team players, and people who see beyond surface data
- •Founder evaluation: scrutinize past decisions and motivations; ‘uncomfortably idiosyncratic’ differentiation
- 1:17:05 – 1:25:40
Selling and holding: ‘unbuy’ decisions, opportunity cost, and the rarity of true compounders
Howard and Andrew debate selling—often driven by regret minimization rather than fundamentals. They argue for reframing selling as an ‘unbuy’ decision grounded in why you bought, how the thesis evolved, and what you’d do with the capital; they contrast capped-upside credit/value situations with venture/public equity compounders where selling early can be catastrophic.
- •Howard’s ‘Selling Out’: most sell because price is up or down, not fundamentals
- •Andrew: selling must consider thesis + fundamentals + opportunity cost
- •Cigar-butt value re-pricing vs. compounding ‘certificates’ that keep growing intrinsic value
- •Upside caps in credit justify profit-taking; equities/venture can have uncapped upside
- •Practical lesson: true generational winners are rare—don’t truncate them lightly
- 1:25:40 – 1:34:51
Wrap-up: where to find the memos, how the memo habit started, and closing remarks
Howard explains where to read/listen to all Chairman’s Memos, tells the origin story of writing them for himself, and how ‘bubble.com’ made him an ‘overnight success’ after a decade. Ben and David close by sharing where to reach TQ and Andrew, and they end with sponsor thanks and community invites.
- •All memos since 1990 available free on Oaktree’s website; also as ‘The Memo’ podcast
- •Memo origin: lessons on consistency vs. justification of extreme volatility
- •Early lack of feedback; wrote primarily to clarify his own thinking
- •Fundraising/AUM discipline: raise more in bad times, less after success when assets get pricey
- •Contact info for TQ/Andrew; episode closes with Acquired community pointers
