Jan 20, 2020 · 32m · 20vc
20VC: Oaktree Capital's Howard Marks on The Most Important Skill An Investor Can Have, The Right Way To Think About Price Sensitivity & Where Are We At Today; Take More Risk or Less?
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of The Twenty Minute VC, host Harry Stebbings interviews Oaktree Capital Co-Founder Howard Marks about market cycle positioning, risk management, contrarian investing, and building high-trust organizational cultures.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 35.1% of the talking time here. How this is scored →
Harry as informed peer 2.3 Guest teaching 3.6 Guest disagreement 1.3 Harry pushing back 0.8
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 8:56 Rejection of 'insertion point' premise
Howard explicitly rejects Harry's terminology and framing by telling him to get away from the phrase 'insertion point', insisting that market timing cannot be reduced to a single entry moment.
Hardest push from Harry ▶ 8:33 Harry presses on precise deployment timing using 2008 dataHarry uses detailed quantitative facts from Oaktree's 2008 track record ($600M per week deployment) to challenge Howard on how an investor determines when to be aggressive versus when to pull back.
Biggest teaching moment ▶ 6:26 Howard corrects Harry on market cycle position versus forecastingHoward corrects Harry's assumption that identifying market cycle stages implies predicting immediate market downturns, explaining that cycle position indicates probability distributions rather than concrete forecasts.
Harry holds his own ▶ 15:23 Harry quotes Howard's 1993 memo to query the performance matrixHarry demonstrates strong subject expertise by directly quoting Howard's 1993 memo regarding consensus forecasts and asking Howard to break down his framework for non-consensus decision-making.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Howard Marks' Early Career & The Recruiter Mix-Up | 1 | 2 | 0 | 0 | Harry warmly introduces Howard Marks and prompts him about a legendary early career rejection. Howard shares an entertaining anecdote about a campus recruiter mix-up that led him to Citibank rather than Lehman Brothers. | |
| Assessing Market Cycles and Evaluating Current Conditions | 2 | 5 | 2 | 1 | Harry asks about current market cycle positioning while expressing confusion that the market expansion continues despite looming bust signals. Howard reframes Harry's confusion by clarifying that knowing cycle positioning is about evaluating probability distributions rather than making short-term forecasts. | |
| Risk Positioning & The Pro-Risk Environment | 3 | 6 | 4 | 2 | Harry cites Oaktree's $600M weekly deployment rate during the 2008 financial crisis and asks about identifying the right insertion point. Howard explicitly rejects the concept of an insertion point, instructing Harry to move away from binary timing and view risk positioning as a continuum. | |
| Price Sensitivity, Investor Psychology, and Market Optimism | 2 | 4 | 1 | 0 | Harry asks for advice on evaluating price sensitivity and investor psychology in high-valuation environments. Howard breaks down how psychological factors like fear of missing out drive prices higher relative to fundamental values. | |
| Navigating Booms and Busts Through Contrarian Strategy | 1 | 4 | 1 | 0 | Harry notes his lack of experience living through market busts and asks how surviving multiple cycles shapes investment mentality. Howard outlines the necessity of contrarian thinking and cites Warren Buffett to explain acting aggressively when others are terrified. | |
| The Unconventional Performance Matrix | 4 | 3 | 0 | 1 | Harry demonstrates deep familiarity with Howard's work by citing a 1993 memo on non-consensus forecasts and asks Howard to elaborate on his matrix. Howard details why unconventional behavior is required to achieve unconventional returns and shares how he and co-founder Bruce Karsh navigate disagreement. | |
| Building a Non-Hierarchical Culture at Oaktree | 3 | 2 | 0 | 1 | Harry asks about creating psychological safety for junior team members and brings up Oaktree's transaction with Brookfield. Howard details Oaktree's non-hierarchical culture and explains the strategic alignment and terms of the Brookfield deal. | |
| Quick Fire Round: Books, Motivation, Maxims, and Future Outlook | 2 | 3 | 2 | 1 | Harry runs a fast-paced quickfire round covering favorite books, motivations, and future outlook. Howard playfully resists brief answers before explaining his preference for Nassim Taleb's work, his passion for investing, and his expectations for the next five years. |
Statements from this episode (13)
Marks: Missing out on Lehman Brothers saved his investing career
“If it wasn't for that little bit of bad luck, I could have spent 40 years at Lehman Brothers and had nothing to show of it”
Marks: The market is in an advanced, elevated cycle stage
“I do think that we are in the upper advancing part of the cycle. You know, we've been in, it's been a long economic expansion, a long bull market, in both cases, the longest in history. Valuations of stocks are higher than usual. Interest rates and yield sprea…”
Marks: Risk positioning should be a speedometer, not a binary choice
“Now, people always wanted me to say, buy or sell, in or out, and those judgments are too black and white. It should be more nuanced. Where on the speedometer between zero and a hundred should you be today?”
Marks: Investors should reduce risk and take chips off the table
“I don't think we're in a massive bubble. I don't think this thing is gonna collapse anytime soon, but I do think that there is more risk than usual, which means that you should be more cautious than usual. I'm not saying that we're not going higher. I'm not sa…”
Marks: FOMO and greed dominate early 2020 markets
“That's when you get the best bargains, and that is not a very good description of today. Today, people are eager to invest. Fear of missing out seems to have taken over from fear of losing money. People are risk tolerant. They're greedy. They're optimistic. Th…”
Marks: Outsized returns come from taking risk when others refuse
“So you make the big money as an investor for taking risk when others won't.”
Marks: Asset prices reflect fundamentals combined with investor optimism
“If I could know only one thing, I would think I'd want to know how much optimism there is in the price. You know, prices are not the result of investment fundamentals. They're a result of the combination of fundamentals and psychology. And, you know, the highe…”
Marks: Investors should be aggressive when others are terrified
“When others are fearless and risk oblivious and aggressive, we should be terrified. When others are terrified, we should be aggressive.”
Marks: Intellectual humility means accepting the other person could be right
“One of the most important characteristics for any of us in our lives is Intellectual humility. And it's very simple what that means. It means the other guy could be right.”
Marks: Brookfield's Canadian culture lacks the ego of New York finance
“They have a positive culture, a lot like ours, informal, casual, respectful. I say that the beautiful thing is that they're Canadians, not New Yorkers. So there's not an excess of ego or testosterone, no sharp elbows, no competitiveness.”
Marks: Brookfield spent $5 billion to acquire 60% of Oaktree Capital
“They spent five billion dollars to own 60% of Oak Tree.”
Marks: Oaktree missed top returns from 2016 to 2018 due to caution
“Several years ago, so we turned somewhat cautious several years ago, and clearly that was not needed. And the highest returns in the last few years, and certainly the last, well, certainly 1617, 18, the highest returns went to the people who took the most risk…”
Marks: A period of market distress will occur by 2025
“The bull market is 11 years old. If there's not one in the next five years, that means we'll have gone 16, which would be a record by a wide margin. So my guess is that in the next five years, we'll have a period of distress, and my hope is that Oak Tree will …”