AcquiredHoward Marks & Andrew Marks: Something of Value
CHAPTERS
Cold open banter and show setup
The hosts warm up with a quick tech joke and musical sting before launching into the special episode. This sets a light tone ahead of a dense investing conversation.
- •Quick pre-roll banter between Ben and David
- •Theme song / intro audio sting
- •Transition into the formal episode introduction
Meet Howard Marks and Andrew Marks: value vs. venture head-to-head
Ben and David introduce the two guests and frame the episode as a conversation between value investing and growth/venture investing. They also contextualize Oaktree and TQ Ventures’ scale and track records, and tee up the co-authored memo that sparked the episode.
- •Howard Marks (Oaktree) and Andrew Marks (TQ Ventures) introduced
- •Oaktree’s focus on credit/alternatives and scale
- •TQ’s rapid rise in early-stage venture and reported top-decile returns
- •The memo "Something of Value" as the central artifact for discussion
- •Housekeeping: community, merch, LP show
Sponsor: Vanta — operating with discipline in a tougher 2022 environment
Vanta CEO Christina Cacioppo shares tactical guidance for founders operating post-fundraise as capital markets tighten. The focus is on runway planning, weekly/monthly plan review, and hiring tied to measurable go-to-market capacity.
- •Assume the last round may be the last for 2–3 years; plan accordingly
- •Build a 2.5-year operating plan, revisited weekly and updated monthly
- •Use role-by-role “napkin math” to justify hiring in uncertain times
- •Sales capacity modeling (quota/attainment) to forecast revenue and support headcount planning
- •Different approaches for GTM hiring vs. engineering/product hiring
How a father–son debate became Howard’s most-read memo
Howard explains how the pandemic brought the families together physically, creating daily investing discussions that turned into a memo. Andrew describes his personal evolution from value investing roots toward growth/tech, enabling a shared language for productive disagreement.
- •The Marks families quarantined together in 2020, sparking intense discussions
- •Howard’s memo-writing legacy (~160 memos) and why co-authoring was unusual
- •Andrew’s investing “arc” from value/Buffett to growth/tech
- •Differences in temperament and frameworks become the memo’s energy
- •The memo’s popularity ties to its personal and dialectical format
Amazon as the bridge: optionality, management, and cash-flow misunderstandings
The conversation uses Amazon to illustrate why the value vs. growth divide is often overstated. Andrew highlights founder-led optionality (e.g., AWS) and why superficial profitability analysis can mislead; Howard notes Oaktree’s “too hard/predictability” bias as a credit investor.
- •Amazon demonstrates management-driven optionality beyond the initial business model
- •Value frameworks often prioritize business model over management; Amazon flips that
- •Accounting losses vs. healthy free cash flow (cash conversion cycle) as a key insight
- •Howard’s credit orientation: predictability and the “too hard pile”
- •Core memo theme: avoid rigid labels—value and growth aren’t hardwired camps
Howard’s high-yield origin story: when “undesirable” becomes mispriced opportunity
Howard recounts moving from equity research into high-yield bonds, where the market’s blanket aversion created opportunity. He explains how excess yield can compensate for defaults—using life insurance as an analogy—and why price always matters, even for “great” or “bad” assets.
- •Early high-yield bonds were taboo; institutional rules prohibited them
- •Milken/Hickman insight: lower-rated bonds delivered higher realized returns historically
- •Moody’s definition of B-rated: “not desirable regardless of price” (a logical error)
- •Life insurance analogy: known, analyzable, diversifiable risks priced for margin of safety
- •Lesson: opportunity appears when others refuse to bid—mispricing via prejudice
The Nifty Fifty and disruption: great companies can be terrible investments at the wrong price
Howard contrasts high-yield mispricing with the Nifty Fifty era, when investors believed there was “no price too high.” The group discusses how disruption undermines perceived moats (newspapers as the canonical example), and why every equity investment ultimately rests on future judgments.
- •Nifty Fifty mindset: “nothing bad can happen” and “no price too high”
- •Overpaying (P/Es 60–90) led to severe drawdowns despite perceived quality
- •Disruption ignored in earlier eras (e.g., Xerox, Simplicity Patterns)
- •Newspapers as an “impregnable moat” that collapsed within decades
- •Andrew’s framing: all equities equal discounted future cash flows—assumptions always matter
Faster change, bigger TAMs: Darwinism turned up in modern tech markets
Andrew and Howard debate whether faster disruption should reduce valuations, concluding it’s a double-edged sword. Modern distribution creates global and adjacent-market expansion, but competition accelerates too; winners and losers emerge faster, raising the premium on adaptability and avoiding the “negative effects of success.”
- •Modern tech increases addressable markets (global + adjacent expansion)
- •Faster paradigm shifts make durability harder without active management
- •Brian Arthur’s “Increasing Returns” thesis: the best can get disproportionately bigger
- •Howard: success requires staying lean, flexible, and non-bureaucratic
- •“Darwinism turned up”: outcomes more extreme and faster-moving
Markets evolve like games: why old value edges erode and future-judgment edges matter more
Andrew uses poker to explain how strategies become crowded and then exploitable as information spreads. Both argue that ubiquitous data and easier transacting make simple “hidden value” harder to find, pushing investors toward qualitative insight, second-level thinking, and true advantage.
- •Poker analogy: early easy edges disappear as the player base learns
- •Historical frictions (information, liquidity) made classic value mispricings easier
- •Today: data ubiquity + algorithms compress many obvious inefficiencies
- •Howard: mispricings come from ignorance and prejudice; both shrink over time
- •Investing advantage shifts toward qualitative judgment about the future
Why Andrew chose venture: probabilistic bets, founder obsession, and personal fit
Andrew explains venture as a better match for his long-term qualitative forecasting strengths and comfort with probabilistic portfolios. Howard contrasts this with his own conservative, credit-oriented temperament and emphasizes that strategy must fit the investor’s psychology to be sustainable.
- •Venture isn’t “easy inefficiency”; competition for great deals is fierce
- •Andrew’s edge: imagining what a company could be worth in 10 years
- •Venture math: many losses, a few outliers drive returns; follow-on strategy matters
- •Howard: he’s a conservative credit investor—wouldn’t succeed in venture temperamentally
- •Both emphasize matching strategy to demeanor and comparative advantage
Building investment firms: culture, partner complementarity, and staying close to the work
Howard describes Oaktree’s early tailwinds, partnership design, and culture-first approach, including complementary roles (capital raising vs. investing). Andrew explains TQ’s deliberate choice to stay narrow, prioritize world-class returns, and avoid growing into a management-heavy organization that would dilute what they love.
- •Oaktree: demand for alternatives + strong culture + exceptional people
- •Partners’ “shared values and complementary skills” as a durable foundation
- •Role split: Howard client-facing; others focused on portfolio management
- •TQ: optimize for investing time and founder relationships, not broad asset-manager scale
- •Public thought leadership vs. quiet operating styles—do what suits you
Judgment, recruiting, and founders: second-level thinking and being “uncomfortably idiosyncratic”
The group tackles where investing judgment comes from and how to identify it in others. Howard emphasizes second-level thinking and the intangible nature of insight; Andrew focuses on deep reasoning, rationality, humility, and examining past decisions—especially when evaluating founders, where people quality dominates outcomes.
- •Judgment as the core differentiator; investing is “simple but not easy”
- •Second-level thinking / variant perception: different and more correct
- •Traits Andrew highlights: deep understanding, rationality, self-awareness, humility
- •Oaktree hiring: “smart eyes,” team players over lone wolves, collaboration-first incentives
- •Founder evaluation: story + decisions reveal real judgment; great ideas need exceptional executors
Selling vs. holding: opportunity cost, “unbuying,” and the compounding certificate
Howard and Andrew unpack selling as a surprisingly emotional part of investing. They argue selling should reflect fundamentals and opportunity cost—not price moves or regret minimization—and discuss why exceptional compounders are rare but catastrophic to sell too early (especially in venture).
- •Howard’s prior instinct: take profits; memo "Selling Out" explores selling neglect
- •Psychology: people sell because assets are up or down to avoid regret
- •Andrew: selling must be tied to thesis evolution + opportunity cost
- •Key model: “dollar for 50 cents” vs. “compounding certificate” (don’t sell great compounders)
- •Reframe selling as the decision to “unbuy,” mirroring the buy logic
Oaktree–Brookfield deal and Howard’s memo legacy: distribution, consistency, and becoming public
Howard explains the Brookfield transaction as an “ideal” liquidity event that preserved Oaktree’s autonomy and client relationships. He then shares how his memos began as private client notes, gained traction after bubble.com, and ultimately expanded to podcasts and broad distribution—while reinforcing Oaktree’s cycle-aware fund sizing discipline.
- •Brookfield sought credit capability; structure preserved Oaktree independence
- •Liquidity with optionality: founders can sell gradually, keep control and culture
- •Origin of the memos (1990): consistency lesson and rejection of bottom-5% risk-taking ethos
- •Breakout with 2000’s bubble.com: correct and quickly validated
- •Oaktree fund sizing: raise bigger into distress, smaller after success to avoid crowded opportunity
Where to find the memo, TQ contact info, and closing thoughts on social media
The episode wraps with pointers to Howard’s memo archive and podcast feed, plus where to reach Andrew and learn about TQ. They close by discussing social media avoidance as a personal-choice strategy for focus, family, and durability.
- •Howard’s memos available free on Oaktree’s site; also as "The Memo" podcast
- •Andrew’s contact: tqventures.com and email; minimal social media presence
- •Social media as a personal fit issue—opting out to protect focus and relationships
- •Hosts thank sponsors and invite listeners to continue discussion in the Acquired community
- •Final outro and sign-off
