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In weighing efficient and inefficient markets, Howard Marks, ’69, endorses the success found on the inefficient side. The president of Oaktree Capital Management has made a career of identifying inefficiencies and capitalizing on other’s mistakes.
“The most important single thing as an investor is to be a contrarian. Watch what everyone else is doing and do the opposite,” Marks said, speaking May 12 to students at the Hyde Park Center.
Yet seek the contra-opportunity with cautious thinking and an awareness that change is inevitable, Marks added. ”It’s very important that you realize that no investment has the birthright of a high return or a high-risk yield. Things change. So question, question, question. Why this market? Why at this time? Why me? Why am I the only person? You know, half the time when you’re the only person that sees it, you’re wrong.”
Be open, Marks said. “You came to Chicago to learn how to think and you should never stop. To me being successful is to think more and better than others.”
Success is also based on having a philosophy that “organizes your thought process and your work process,” Marks said. “You and your organization that you work for must stand for something other than profit maximization.”
However, he said, “I believe very strongly you can’t start with a philosophy, or you can’t expect it to be a good integrated one, because philosophy has to be informed by practical experience…”
You should use and be familiar with finance theory, “but it shouldn’t dominant your thinking,” he said. “I think it’s very important when you come out of here and go into the investment area, for example, to understand the implications of issues. If you ignore them it’s at your peril.”
Jenn Q. Goddu