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Tim FerrissHoward Marks — How to Invest with Clear Thinking | The Tim Ferriss Show (Podcast)
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Chapter summaries
Clear thinking beyond investing: poem, Japanese studies, and mujō (impermanence)
Tim frames Howard Marks’ work as a study in clearer thinking, then opens with a poem meant to capture Howard’s mindset about being ready when trouble comes. Howard explains his unexpected deep dive into Japanese studies at Wharton and the concept of mujō—impermanence and the unpredictability of the future—as a formative influence on his investing and life approach.
- •Tim introduces the episode’s theme: investing as a vehicle for clearer thinking
- •Tim reads an A.E. Housman poem about being prepared for trouble
- •Howard recounts studying Japanese literature and philosophy despite not learning Japanese
- •Howard defines mujō as impermanence and the unpredictability of what’s ahead
- •Howard says recognizing constant change helps you live with uncertainty rather than try to control it
“You can’t predict, you can prepare”: how Oaktree positioned for the 2008 crisis
Tim asks why Oaktree put money to work during 2008 when others were fleeing. Howard distinguishes prediction from preparation, describing how he and Bruce Karsh sensed markets were dangerous in 2005–2006 due to deteriorating deal quality, then raised distressed-debt capital without knowing the specific trigger that would burst the bubble.
- •Howard explains the origin and meaning of “You can’t predict, you can prepare”
- •He describes early warning signs: “crappy deals” getting done and lax investor standards
- •He cites Buffett’s line about being more prudent when others are less prudent
- •Oaktree sold assets, became more selective, and raised a large distressed-debt fund
- •Howard notes they didn’t foresee subprime mortgage-backed securities as the trigger, but were prepared for a crisis
Timing is hard: raising capital without naming a date
Tim presses on how Howard communicated timing expectations to investors when raising distressed-debt funds. Howard explains that you may have an idea of what could happen but not when, and describes how funds may have time limits but shouldn’t be built around precise dates.
- •Howard calls “when” one of the hardest questions in investing
- •A partner’s rule: “If you name a price, don’t name a date…”
- •Howard says they didn’t name a specific date for deployment
- •He notes commitments may expire after a set period if not invested
- •There was a general sense it could come within a few years, not a timetable certainty
Why write Mastering the Market Cycle: knowing where you are, not forecasting
Howard explains why he wrote this book now, tying it to his memos and his earlier book, The Most Important Thing. He argues that while he doesn’t believe in forecasts, investors should assess the current environment—especially where they stand in the cycle—because that’s a major driver of risk and opportunity.
- •Howard says Buffett’s 2010 letter prompted him to write a book sooner than retirement
- •He explains The Most Important Thing’s structure: multiple “most important things”
- •Howard says one key “most important thing” is knowing where we stand in the cycle
- •He emphasizes: “We never know where we’re going, but we sure as hell ought to know where we are”
- •Howard links cycle positioning to risk and to “getting the odds on your side”
Deploying capital in a meltdown: “catching falling knives” and acting unemotional
Tim admits he held cash but couldn’t turn aggressive at the bottom, asking how Howard decides when to deploy during panic. Howard explains that the best bargains appear when fear is highest, and that great investors either are unemotional or behave as if they are—because waiting for clarity usually means missing the bargains.
- •Howard says most people have an inherent bias: cautious or aggressive
- •He describes the common failure mode: staying cautious after the crash bottoms
- •He argues bargains are greatest when “knives are falling” and people are terrified
- •Howard explains why buying in a rising market becomes self-defeating at scale
- •He highlights the role of emotional control and notes examples of investors who “couldn’t care less” in crises
Can contrarian calm be learned? limits of coaching emotion and second-level thinking
Tim asks whether stoic composure is born or trained. Howard is skeptical that people can reliably teach themselves to be unemotional or contrarian, likening it to the uncoachable trait of height in basketball, and noting that being as emotional as the crowd tends to produce the crowd’s errors.
- •Howard says it’s much easier if you’re “born that way” emotionally
- •He frames emotional mastery as fighting human nature
- •Tim asks about teaching contrarianism and “second-level thinking”
- •Howard offers no easy method and questions how teachable it is
- •He warns that matching the crowd’s emotionality tends to recreate the crowd’s mistakes
A 31-year partnership playbook: complementary skills, crisis debates, and respect
Howard details what makes his partnership with Bruce Karsh work: shared values, complementary styles, and a supportive form of devil’s advocacy—especially under stress. He describes how their daily push-pull during late 2008 helped them keep buying through fear, and why respect prevents disagreements from becoming destructive.
- •Howard clarifies their partnership length and how it predates Oaktree
- •He profiles Bruce: super smart, competitive, analytical, and a “grinder”
- •Howard contrasts himself as intuitive and a faster decider
- •He defines great partnership as “shared values and complementary skills”
- •He recounts late-2008 discussions: if the world ends it won’t matter; if it doesn’t, they must do their job; emphasizes respect and “never an argument” emotionally
Avoiding founder/partner blowups: hiring decisions, humility, and a “no assholes” rule
Tim asks for tactics to prevent high-stakes disagreements from escalating in partnerships. Howard says the real solution starts before partnership—choosing people with shared values and compatibility—then adds practical principles: reference-check temperament, enforce cultural rules, practice humility, and avoid confusing “winning” with making the best decision.
- •Howard says partnership problems often start with the initial combination/hiring decision
- •He likens partnership choice to marriage: don’t partner with people you can’t live with
- •He emphasizes reference checking beyond intelligence and money-making ability
- •Howard describes Oaktree’s “no assholes” rule and its long-term value
- •He recommends humility (“I don’t know”), emotional control, and separating argument-winning from decision quality
Probability thinking: confidence levels, randomness, and alternative histories
Tim reads Howard’s passage on treating predictions differently based on how knowable they are. Howard expands: the future is a range of possibilities, not a single predetermined path, and investors should act with awareness of uncertainty; he cites Taleb on randomness and “alternative histories,” and highlights dangers of excess certainty.
- •Howard says people always believe their opinions are correct, but they may be wrong
- •He distinguishes having an opinion from acting as if it must be right
- •He frames the future as a probability distribution, referencing an IBM exhibit that formed a bell curve
- •He recommends Taleb’s Fooled by Randomness for understanding randomness in investing outcomes
- •He cites quotes emphasizing uncertainty: Galbraith on forecasters and Twain on “what you know for certain that just ain’t true”
Staying calm, balancing humility with action, and why investing can’t be reduced to rules
Tim asks about Howard’s routines, calmness, and how to balance “I don’t know” with conviction and action. Howard argues there’s no universal method for that balance and rejects fixed rules like stop-losses as all-purpose solutions; he emphasizes judgment as the central skill and repeats that none of this is meant to be easy.
- •Howard says he doesn’t have stylized routines and prefers a calm life; avoiding “negative energy” like getting exercised by political TV is one example
- •He describes the core conundrum: too much certainty and too much uncertainty both cause trouble
- •Howard rejects preset rules as universally reliable; he says the market confounds rule-makers
- •He recounts Charlie Munger’s line: anyone who thinks investing is easy is “stupid”
- •Howard defines judgment as encompassing information, analysis, conclusions, and knowing when to hold or reconsider
The key valuation question: “How much optimism is factored into the price?”
Tim highlights Howard’s favorite question for evaluating an investment: how much optimism is already priced in. Howard explains why great companies can still be terrible investments at the wrong price, why low optimism creates the possibility of favorable surprises, and why absolute language (“never,” “always”) is dangerous in uncertain markets.
- •Howard contrasts losing money in the “Nifty50” versus making steady money in junk bonds to show price matters more than “quality”
- •He states value investing’s core: pay a low price relative to intrinsic value
- •He argues high optimism makes favorable surprises impossible; low optimism leaves room for upside surprises
- •He warns against absolute words like “never,” “always,” “has to,” and “can’t”
- •Tim and Howard touch on public narratives around high-profile stocks while keeping the focus on pricing and expectations
Taking the market’s temperature: checklists, bull-market stages, and where things stood in Aug 2018
Tim asks how to gauge fear and greed and where the market sits at the time of recording. Howard offers qualitative “temperature” checks (fundraising ease, cocktail-party attention, media framing), shares the three stages of a bull market, then describes his view of the environment: late-cycle conditions, mixed fundamentals, and risk-taking driven by low yields.
- •Howard references a checklist-style approach to assessing market mood (fund flows, social signals, media tone)
- •He shares the three stages of a bull market: few see improvement, most recognize it, everyone believes it lasts forever
- •Howard says he views the period as late in the cycle (“eighth inning”), while noting markets don’t have a fixed number of innings
- •He outlines positives he sees (strong economy, declining unemployment, earnings impact on valuations) and negatives (rising rates, macro/geopolitical/political uncertainty, trade-war risk)
- •He says psychology isn’t extremely frothy, but people are “acting bullish” by taking more risk due to low safe yields—calling them “handcuffed volunteers”
Practical allocation mindset: comfort levels, twin risks, and “move forward but with caution”
Tim poses a scenario with cautious investors holding cash at different wealth levels and asks what Howard would say. Howard emphasizes that the first job is keeping investors comfortable enough not to panic-sell, then frames investing as balancing two risks—losing money and missing opportunity—arguing the current environment calls for staying invested but choosing lower-risk implementations.
- •Howard says pushing people beyond their comfort level increases the chance they’ll panic-sell at lows
- •He differentiates capacity to absorb losses between smaller and larger pools of capital, while noting people often overestimate their tolerance in advance
- •Howard describes Oaktree’s posture: investing daily but with more caution than usual
- •He frames the two key risks: losing money vs. missing opportunity, and says most people should balance them rather than pick extremes
- •He argues this is not a time for maximum defensiveness (all cash) or aggressiveness, but for “lower risk ways” to pursue investments
Risk tolerance through games, cycle misconceptions, patience, and closing recommendations
Tim asks what games reveal about risk tolerance and what smart people miss about cycles. Howard discusses how chess and backgammon expose decision style, stresses recognizing recurring patterns without forcing rigid “rules,” and emphasizes patience and acceptance (“It is what it is”), tying back to mujō; he closes with reading recommendations, his views on crypto valuation, respect for multiple investing styles, and where listeners can find his memos.
- •Howard says games can reveal risk posture; chess has no randomness, while backgammon mixes dice with skill and highlights aggressive vs defensive choices
- •He says the biggest cycle mistake is ignoring the repetitive nature of patterns; he cites the value of recognizing “another one of those”
- •He emphasizes “History does not repeat, but it does rhyme” and warns against overfitting numeric rules (like default timing myths)
- •Howard stresses patience in a low-return world and advocates acceptance: “It is what it is,” linking back to mujō
- •He recommends Grant’s Interest Rate Observer and the book Factfulness; he explains he can’t value Bitcoin intrinsically and views last year’s surge as speculative; he notes respect for successful investors in other styles and points listeners to Oaktree’s free online memos and social channels for contact
Final wrap-up and Tim’s 5-Bullet Friday mention
Tim closes by pointing listeners to show notes and Howard’s resources, then adds a brief mention of his 5-Bullet Friday email. The episode ends with post-show promotional content beginning afterward.
- •Tim recaps where to find the book, Oaktree, and Howard’s social profiles
- •Howard reiterates that his memos are available online and free, with signup notifications
- •Howard says reader feedback is rewarding, especially when people say complex things were made clear
- •Tim directs listeners to show notes for links and resources
- •Tim briefly promotes his 5-Bullet Friday email as a short weekly list of interesting finds
