Howard Marks Warning: if you invest like this, you're about to lose everything

If you wait until you have nothing to be

afraid about, probably the opportunity

has passed.

Howard, it's good to see you again. We

had a lot of fun last time and we were

like, look, uh, I don't know if other

people are going to like that, but we

loved that. And then over a million

people listened to the last one. And so

this morning, I was reading you wrote

this blog post about how you changed

your mind about uh AI. you you had

written uh I don't know a couple months

back about the possibility of an AI

bubble and then as a good thinker tends

to do you got new facts you sort of

reassessed the situation you wrote a new

post about AI do you want to summarize

the story of how you you changed your

mind on AI

>> well the story is very simple I have

this son named Andrew he's a VC he's

dealing with a AI every day his

companies use AI some of them create AI

Uh, I had written the first memo around

December 9th as I recall. And then in

early February, he said, "Dad, so much

has happened. You have to update the

memo." And so I I rewrote the memo

entirely. You I was read I was rereading

one of your old books and uh you repeat

this phrase a bunch, which is like it's

important to be rational and you can't

get seduced into thinking something is a

good idea because that's when smart

people can make bad decisions when you

get emotional about something. But then

when I was reading part two, I was

reading it and I was like, Howard, you

sound a little seduced. You sound a

little seduced. You sound like you're

into this. Are you at all approaching

this in an emotional way? You think

>> it it depends on your definition of

emotional? I upgraded my opinion of AI

and its potential because its

u ability to talk about its own

strengths and weaknesses

to use humor

to put information in the context of me

to use what it knows about me. And you

know this is really u uh exceptional

stuff.

There's a quality to AI

uh or more than one quality which uh are

unprecedented in my opinion. The first

the obvious one is autonomy.

All the other technological innovations

from the railroad to computers to the

internet etc were all tools or uh things

to speed up uh and increase

productivity. There's never been

anything with the quality of autonomy.

The idea that it you can give it a job

and not tell it how to do it and it'll

figure it out is really unique. And the

what comes with that of course is this

nagging concern that it may take over.

So that's that's really important. The

other thing,

and this is not uh kind of uh

quantifiable, is there's never been

anything in my opinion so unpredictable.

I don't think anybody knows the shape of

the future. So I I have never had that

sense before. I never said I never

thought that that the internet, for

example, was uh beyond comprehension or

beyond prediction.

Do you think that

AI will be able to do what you do? And I

know you talk about this in the the

memo.

>> And I got to be honest, when I read it,

I

you know, I almost felt like, you know,

you read stories about Warren Buffett,

reading the Moody's manual page by page,

800 companies, and trying to digest that

information. Well, AI, I can do that in

in a heartbeat, right? like you know a

lot of the things that that go into

making investment decisions it can do

very well very fast and then also it's

advancing so fast so you know whatever

we thought it could do 3 years ago is

laughable compared to what it can do

today and as you pointed out even 3

months ago so I guess in your heart of

hearts do you think you know in the in

the future the next Howard Marx is not a

not a human but but maybe a human with

AI or just AI

>> everything I say on the subject I

preface with I'm no expert but I think I

told the story in the memo about the

fact that indexation uh put a lot of

people out of the equity business

because uh you know it it disclosed that

they couldn't do uh what they claim to

do and most active equity investors

underperform the averages and AI

[clears throat] will unfrock or defrock

another group of people whose talents

are not as great as as they purport.

report I used to say about computers.

You know, when I went to school and

learned about computers, uh all they

could do was read, remember,

add, subtract, and compare. They could

do it with a lot of data. They could do

it really fast. They could do it without

making arithmetic mistakes. They could

do it without making emotional mistakes.

So, while the list was limited, it was

still better than most people. Now,

what's the list for AI? Is the list for

AI unlimited or limited? That's that's a

big part of the question right there.

>> I don't and I don't know the answer and

I maybe you do. Um and then is there

anything left that AI can't do?

And one example is I think we've helped

our clients uh over the years by not

investing with bad people

and sometimes you talk to people and for

undefinable reasons you just say you

know what

it doesn't feel right as somebody said

to me the hair on your back on your neck

goes up and if that's true and if AI

doesn't have hair on its neck Then maybe

there's a role left for experienced

investors with judgment. I I believe so.

First of all, there will always be

things for which there is no history to

train on. And to the extent that that

a certain big percentage of what AI does

is uh knowing history and recognizing

and extrapolating patterns. There will

always be stuff for which there is no

history. There are just some people who

have a better understanding of the

probability distribution that defines

future events.

>> I was reading this book on Steve Cohen

and there was this part where they were

describing how he was kind of like the

man at a very young age. They were like

he can just feel the ticker. He just

like is in tune and in flow with it. And

I was like, h that's beautiful, but like

that's I can't replicate that. And I was

always curious about that because I

think in one of your books, I think you

said something like, I can't make I can

make someone better, but I don't think I

can make them great. Can you talk to

that about like what it is that makes

someone who is a good investor good, but

also how the average person could get

better like or do you believe that's not

that's not even possible that you just

you have it or you don't? Well, in in my

first book, the most important thing,

Colombia, which published the book, we

were talking about the book, they said,

"Well, write us a sample chapter." So, I

sat down and I wrote a chapter that I

had never even thought about. And it

turned out to be the first chapter in

the book. And it says,

"On this show, we have spent hours

talking to some of the best investors

alive." Well, lucky for you, the team at

HubSpot, they have pulled out the

principles that matter most and turned

it into a very simple, easyto- read

wealth guide. It's 35 principles from

the top investors. We're talking guys

who have been on the pod like Howard

Marx, Manish Pbry, Morgan Howell, Kathy

Wood, and a ton others. So, these are

all their frameworks, their mental

models, their rules. Basically, how to

play the long game and how to avoid

ruin. You can get it in the link below.

The most important thing is second level

thinking. Second level thinking

basically says if you don't see anything

different from everybody else, you can't

possibly be superior. So to be superior,

you have to at some point see something

different from other people. what's

called a variant perception

that you have to either think that the

the that the consensus of investors

overstates the quality of the company,

the growth rate of the company, the

earning power of the company or or maybe

the multiple it deserves and you have to

have this variant perception and you

have to bet on your perception and you

have to be right. So that's for that's

second level thinking. I say in the book

and when people ask me I say can you

teach me to be a second level thinker

and the answer is no. I I said I say in

the book I don't know. Uh but I think

it's I think it's more no than yes

because I what I say is I can teach you

the importance of being a second level

thinker like I just have in this

chapter. But I can't tell you how to

have perceptions

that are at odds with the consensus of

investors and correct. You know, in

basketball there's a saying, you can't

coach height.

And I think there's something called

insight.

And I think some people have it. And I

don't know if AI can have it because

when you know when you talk about uh

artificial general intelligence and and

uh AGI is when a computer or AI can do

everything that a human can do.

Can it do that? Don't know.

And that when I talk about the uh the uh

the mysteries of AI, that's that's a big

one of them. Are there things it can't

won't be able to do even when it reaches

full flower?

>> Can you think back to some of the

biggest calls that you've had? How

strong did that feel? Did you still have

doubt or was it 100% conviction? Uh I'm

curious to hear what it feels like.

>> Great. I think in our last episode we

talked about the day Leman went under,

you know, September 15th maybe of08 and

we had thought that there was going to

be a mess and we had raised uh in the

distressed debt world the biggest fund

in history prior to ' 07 was our O2 fund

which was 2.5 billion and in 078 we

raised 11 billion

for a distress debt fund because we

thought that that there was a lot of

distress coming and we had it on the

shelf. It wasn't it was for deployment

when the stuff hit the fan and Leman

goes under which I think qualifies as

saying the stuff has hit the fan but

people are talking about the end of the

world

and all the financial institutions are

going to melt down and everything having

to do with money is going to atomize. So

we were faced with the question do you

invest the money and there's no pattern

recognition for the end of the world and

there's no you know uh in the in the uh

pandemic um a Harvard epidemiologist

said when we make decisions we have data

analogies to past experience and

supposition.

Well, at the time of the Lehman

bankruptcy, we had no data and no prior

experience. We only had supposition. So,

this is an interesting question. Can AI

have engaged in this kind of thinking?

And what we said is that if the world if

the financial world melts down and we

invest,

doesn't matter.

But if we don't invest and the financial

world doesn't melt down, then we didn't

do our job. So, we have to do it. And we

invested on that basis. And Bruce, who

runs those funds, invested an average of

$450 million a week for 15 weeks, 7

billion in a quarter on that. Well, was

it only on that? We also on quantitative

measures, assuming the world doesn't

melt down, we were getting great

bargains. We were buying the debt of

companies where we would break even if

companies that had been bought out by

private equity guys 2 3 4 years earlier

if they ended up being worth a fifth or

a fourth of what they had paid we would

still be okay. So that was pretty easy

quantitatively but we we were absolutely

not confident.

>> You weren't confident?

>> No. I thought you were going to say the

the opposite of that.

>> No, no, but I mean we we're the kind of

people who always say

I could be wrong or it could work in a

in a way that's never been seen before.

And so we all we always I wrote a memo

three or four years ago uh called taking

the temperature about the five major

calls uh macro calls that I made uh in

the last uh well in the last 26 years

and they're all with some doubt when the

markets are crashing. Why are they

crashing?

They're crashing because the news is

terrible. I read the same newspapers. I

watch the same shows on TV. I'm I'm I'm

attached to the same news feeds. I see

the terrible news. It looks terrible to

me. I overcome it in some way and

conclude no, I should invest. But I'm

not immune to what everybody else is

reading. If you do these things without

any uh trepidation,

you know, maybe there's something wrong

with you. But, you know, people who look

at the world probabilistically

and admit to uh ignorance and

uncertainty

can't act without trepidation.

Hey, can you tell me about raising 11

billion? because you said that like very

casually like so we raised an 11 billion

dollar fund and that's like if I just

said hey I just turned water into wine I

think for for for most people is I'm

just actually curious how does that

happen is that is that you go to people

and you say hey we think the world's you

make a really persuasive case are you

using a pitch deck is this just prior

relationships are you selling upside are

you selling safety against downside and

fear like what what actually goes in to

raising 11 billion like that so there's

a list things. Number one, certainly

prior experience uh relationships people

have, you know, we started this business

in 1988

and uh so we're talking about uh 20

years later and in the 80 in the 20

years we uh managed a lot of money and

had very good results for a lot of

people and so you can work on that

reservoir of goodwill. Uh number two uh

that this strategy is particularly well

suited for crisis and we had managed

money through a few crises uh 1991 and

0102

and done exceptionally well. So we were

able to convince people that number one

so many of your investments are set up

for prosperity. This is a good way to

hedge it by making an investment that

will do particularly well if if the

stuff hits the fan. But we were also

able to call attention to flaws

in the environment. The things that gave

rise to the global financial crisis we

could talk about and we could point out

and you know the fact that the market uh

was not acting as a disciplinarian which

is its main job. main job is to is to

you know people come in and say I want

money for this this and this and the

market's job is to say no that doesn't

make any sense that's a stupid idea

we're not going to invest in that that's

the job and sometimes the market doesn't

do that job and when the market doesn't

do that job then dumb ideas get nasted

and and when they turn out to be dumb

people lose money so I think we were

able to convince people that some dumb

things were happening and then of Of

course, there's great respect for for

Bruce Kh for the investing he's done of

over the years. I think those are the

main reasons why we were able to do it.

And by the way, you hit the nail on the

head. We did it in advance of the

crisis. The best time to invest is in a

crisis. You can't raise money during the

crisis because the news is so terrible.

So, you know, my wife and I have a

favorite movie we watched called uh Spy

Game with Robert Redford. And uh he says

in the Red Redford says, "When did Noah

build the ark?"

Before the flood. [laughter] You got to

build the ark before the flood. You have

to have some sense that the that there

may be a flood. But one other point in

the in the prior 20 years

there had been these occasions when we

thought there was going to be a great

investment opportunity and it we were

generally right because we took the

temperature of the market accurately and

we raised a large fund and we invested

in it and we made a lot of money but

then our next fund was smaller because

we thought the opportunities weren't as

good. Now, most people in the investment

business, if they have a fund that does

great, the next fund is Binger because

they can sell on the back of those

results.

But we make it smaller because we think

those results mean that things have

appreciated and are not so attractive.

And I think that having done that for 20

years, I think we gained a lot of

credibility. And people tend I think

people tend to say when Howard and Bruce

say there's a great opportunity, they're

not just trying to raise money. They

really believe it and they're and they

tend to be right. And sometimes you have

to speak against your own interest

and admit your limitations and admit

your uncertainties. So in 19 uh 98 we

had the meltdown of long-term capital

management. We had a Russian rubal

crisis. We had a uh panic uh in

Southeast Asia and uh especially with

long-term going under. One of the

skilled portfolio managers, young

portfolio managers at Oak Tree came to

me. He says, "I think this is it. I

think we're melting down.

It's all over." And I said, "Well, tell

me your concerns." And he laid out his

concerns. And I said, "Okay, I I

understand it. Now go back to your desk

and do your job.

You know, a battle hero

is not somebody who's unafraid.

It's somebody who's afraid but does it

anyway. If you're running into a hail of

bullets and you're not afraid, there's

something wrong with you. But you do it

anyway because it's what you have to do.

And I don't want to elevate. I'm not

saying we're analogous to a a combat

hero, but you have to do it despite your

trepidation. And if, by the way, if you

wait until you have nothing to be afraid

about, probably the opportunity has

passed.

>> That's a great point. You mentioned

Bruce and I wanted to ask you about this

because it seems like you guys have had

a very long-term partnership, what 30

plus years. I think people don't talk

about that enough. The value of

compounding in a relationship and how to

be a good partner for the long term. You

know, a bad partnership can ruin you.

But we don't really talk about what it

takes to make a great partnership at the

same time. If you were going to teach me

and Sam, if we said, "Hey, me and Sam

want to do this podcast for 30 years."

Or, you know, I have a business partner,

Ben. I want to be in business with him

for 30 years. What do we got to get

right to do that?

>> Well, it's a great question, John. It's

very important. Uh Bruce and I have been

partners for 39 years this month and

it's one of the greatest things in our

lives. Uh after I think we would both

say that after family and and maybe some

good friendships. Uh it it's really the

best thing we've had. We've worked

together closely for all that period.

We've obviously produced a lot of

success, had a lot of fun. Uh have have

never had a fight. We have intellect

intellectual disagreements but we've

never had a fight probably because uh

neither of us is really a financial

maximizer and a lot of fights uh are

probably about money. The bedrock of our

relationship is mutual respect and I

think it would be very hard to have a

successful long-term relationship with

the partner if you didn't have respect

for each other. And that ties into

something I wrote in O2, I think. But in

O2, I wrote a memo called the most

important thing. And there was a section

in there which talked about having a

successful partnership. And I said the

key to a successful partnership is

shared values and complimentary skills.

If you don't share values, I don't think

you can have a successful partnership.

Let's say one person is super aggressive

and the other is a chicken.

One person is super ethical and the

other one likes to cut corners. I don't

think you can have a successful

relationship partnership. And I've seen

many many you know I mean a friend of

mine when I was a kid AT&T went public.

Can you imagine the days before AT&T was

was but anyway they went public. They it

was the biggest deal in history and and

they had a full page tombstone ad in the

newspaper and it listed all the

investment firms that were the

investment bankers and there were

probably 40 and a friend of mine Ed

Ramdell used to carry that ad around and

every time one went out of business he

would mark it off and eventually I think

they almost all disappeared except for

Goldman Sachs. But why do they dis why

do they go under? You have some cowboys

and some chickens. And you know in in

the when the in bad times the chickens

say the cowboys are getting us killed

and in good times the cowboys say the

chickens are holding us back and they

disparage each other. So you have to

share values in my opinion. The other

thing is you have to have complimentary

skills. So the beauty of a partnership

is when your partner can do things you

can't. That means that you are both

additive to each other. Synergistic. If

I can do everything you can do or if I

think that what do I need you for? It's

not going to last very long. Cuz

eventually I'm going to say you're

overpaid. I don't need you. And the

beauty of my relationship with Bruce is

that we both recognize that there are

things that the other is good at that

we're not and that the other wants to is

willing to do that we don't want to do.

For example, from the very beginning,

Bruce approached me in in ' 87 with the

idea of a distressed debt fund. You

know, I went into the high yield bond

business in 78 and he had a a background

in law and got into uh some distressed

investments which went well and he said

came to me said we should do a stress

debt fund and and it was quite a novel

idea but from the beginning uh you know

I go on the road and talk to people and

Bruce stays back and manages the money.

I go on podcasts with people like you

and Bruce doesn't. But the third element

is you got to be appreciative

and you have to thank your lucky stars

that you have a partner who will do the

stuff you don't want to do.

>> Can you do the same towards parenting

because both on this episode and last

one you referenced your son a bunch. Do

you have any insights into how you've

been able to raise a kid that you not

just love but you enjoy being around?

Well, you know, uh I think it was Forbes

30 or 40 years ago had an article about

soandso who was the only shrink with an

office on Wall Street

and they asked this guy about his

patients

problems and he said that his patients

problems and they were all men of course

because it was Wall Street a long time

ago. his patients problems were

inversely proportional to the support

they got from their fathers. We had

people over for dinner last night. Uh

and one of the guys, and we were talking

about so- and so who was a character of

some kind, and one of the guys said,

"Well, you know what? His father treated

him like hell. I just never wanted to be

that father."

And it's amazing how many men and

especially successful men have to

assert

their superiority over their sons. Maybe

daughters too, but I think it's more

with sons. And I guess it's Freudian or

or something else. But it's what a

terrible thing that you have to you've

had this kid and you have to prove

you're smarter.

And so, you know, I mean, I always let

Andrew be smarter than me in in some

things. Uh, and of course, I always gave

him full support in the things he wanted

to do. If your kids want to do something

and a it's not going to be injurious.

Uh, and uh, yeah, I maybe there's no B,

let them do it. like when when uh when

my daughter was getting out of lower

school and had to choose an upper

school, uh she applied to the two good

schools in LA, got in and we let her

choose. My wife and I had a sense for

which one we wanted her to go to, but we

concluded that

like I always say, we could be wrong.

Her choice could be the wrong choice.

And anyway, of the two choices, while

one might be better than the other,

neither was a bad choice. So if that's

true, let the kid make the choice. And

they get experience with making choices.

And maybe they get experience with

making incorrect choices, which is very

important. On the subject of choice, I

have a I'm interested to know, you know,

when you were younger, you let's say

you're 21 years old and you're trying to

figure out what you want to do with your

life. Probably one of the more important

questions you should figure out at some

point is what do I want to actually do

every day for 8 hours a day that half my

waking hours? And I doubt that, you

know, a lot of 19-year-olds wake up and

say, I want to work with distressed debt

and bonds. You know, that's not that's

not a knowable answer at that stage.

What do you think is the right approach

to figuring out your thing?

>> First, I want to say upfront, Jen, that

the thing you describe, I did a a

terrible job of. I was unconscious. The

decisions I made in my first

20 years, as they say in in in religion,

I did not apply intention. I just I let

other people make the decision. I made

decisions haphazardly. I didn't think

about it a lot. Um I'm embarrassed uh at

at how terrible my decision-m process

was. In fact, it's it's a misnomer to

apply that term. But having said that, I

I think it's desirable to make your

choices with intention, well reasoned,

etc. And what I tell kids is my favorite

quote is from a writer named Christopher

Moley who said there is only one success

to live your life your own way. I think

it's a beautiful quote. You know I go to

Wharton and Harvard and and all these

places and Colombia and and I say and

you know the fact that you're in this

room probably means that you can live

your life your own way. You probably

have what it takes to live your life

your own way intellectually and work

ethic and so forth. But you have to

figure out what it is. That's the hard

part. Who are you? And what I say to

them is try to find something that will

play to your strengths, avoid your

weaknesses, and make you happy. What

that means is, well, that sounds

obvious. Well, who who the hell wouldn't

wouldn't follow that instruction? Well,

the answer is what it means is you can't

let your friends decide what you should

do. You can't do things because your

friends are doing them. You can't let

society decide what you should do. You

can't let your parents decide what you

should do. You have to think it out for

yourself.

Having said that, it's very difficult

because

it's hard to know yourself.

And we know that in 20 years you'll be a

different person.

How can you make a decision today on

what will make that person happy? Very

difficult. But you got to try. That's my

advice which which I didn't take when I

was a kid and I was derelictked. But I

got lucky.

>> Well, you eventually did become as you

described uh living well-intentioned.

Yes.

>> Something must have changed. What do you

remember? Did you do any exercises to

become that way?

>> Not that I recall. Um, I think part of

it, you know, and I said I said for the

next 25 years I didn't do it. That took

me up till uh roughly 95, which is when

I left with Bruce to start Oak Tree.

That was really

>> That's so age. Wait, so you think that

up until the age of 50 or 49, you were

floating or living according to other

people?

>> Well, not not just that, but just not

making good decisions, conscious

decisions. you know wh why did I go to

city bank investment research department

when I got out of University of Chicago

in 1969 because I had a a good summer

there the year before. Uh why did I move

from the equity research department to

the bond department?

Because my work in equity research was

unsuccessful and I was told to get out.

Why did I move to California in 1980?

sunshine, palm trees. I just can't claim

uh that I was making good decisions. I

got sent to the bond department at City

Bank in 1978

and 3 months later, the head of the bond

department calls me up since I was I

didn't have that much to do. I was

fairly idle. And he says, "There's a guy

named Milin or something in California

and he deals in something called high

yield bonds. Do you think he can figure

out what that means?" That was just

luck.

You know, if you if you read Matlin

Gladwell and Outliers, it was just luck.

Right time, right place. And if that

call if that call came at lunchtime and

I had been out at lunch, maybe somebody

else would get the call and and they'd

be me.

Your uh your humility is very striking

to me. We have a lot of people on this

podcast that I I think, you know, claim

to be humble or try to be humble. you

you really are extremely humble person.

I mean, one note I wrote down is from

now on at the top of all my investor

memos, I'm just going to start it with I

could be wrong, but um because I I think

whenever I make an investment, I'm so

boastful about the my my excitement and

my exuberance and why this is right and

why it's the right move to do. And I

think, you know, you've you've kind of

infected me with a little bit of your

your humility there. Well, you you make

the investment because you believe in

it, but it's important to see the other

side and know what you're doing. By the

way, Churchill said he's a he's a humble

man and he has a lot to be humble about.

But Mark Twain says it ain't what you

don't know that gets you into trouble.

It's what you know for certain that just

ain't true. And I always tell people in

line with what you just said, John, no

sentence that starts with I could be

wrong but or I don't know but ever got

anybody into trouble. The sentences that

get people into trouble are I'm 100%

convinced that.

And if you if you really feel that

you're 100% right and you bet like

you're 100% right and it turns out it

was only 8020 and the 20 comes up,

that's how you get into big trouble. So

I think the thing that I think the thing

that Mark Twain said was incredibly

important.

>> Yeah. Last memo Sean sent me about some

deal he had was uh bet everything you

have. This is it. [laughter]

>> Mortgage the house. Um hey, can I ask

you about Buffett? You know, Buffett

famously has said, you know, he reads

your memos. Uh, I assume you guys have

interacted. Do you guys hang out? What's

uh what's he like? You know, give me

some some Warren Buffett stories from

from your your life, your experience.

Well, Bruce actually was always a

Buffett watcher. And if you go back to

the 80s, no, I don't think anybody had

heard of Buffett. Maybe not the '9s. I

don't remember ever exactly. In the in

the late 90s, people said, "Well,

Buffett's lost it because he's not in

tech." And then, of course, tech blew

up. And then they said, "Well, maybe

Buffett knows what he's doing." But

anyway, when Enron melted down, Enron

did most of its misbehavior uh through

uh offbalance sheet uh entities and

there was a lot of opportunity there and

so we became the largest holder of the

debt of one of them. It was called

Osprey and Warren was the second largest

holder and I don't remember how it came

to pass but he gave us us his proxy and

he let us run that position for him and

Bruce did a masterful job of

restructuring that company and we came

out with the big big win. So uh this was

around uh O2. So round off three or

four, Warren writes Bruce a letter and

he says, "You know, nice job on on

Osprey and if you ever find yourself in

Omaha, let me know. We'll have lunch."

So Bruce and I write him a letter or

Bruce writes him a letter says, "It

happens that Howard and I will be in

Omaha to this week. Can we take you to

lunch?" And and so that's how we met.

And the relationship had a lovely start

and it went on like that. We never

actually did any business together after

that because, you know, he was always

looking for something big that he could

acquire and and we don't we don't really

deal in big acquirable things, but it

was a very nice personal relationship.

And uh I don't I've never said this to

anybody else before, but in ' 09

I wrote a memo in which I mentioned him

and I sent it to him and I said I want

to make sure that you see this memo

because it mentions you and he says I do

see the memos and blah blah blah and uh

I have seen this. He says, "And by the

way, you should write a book, and if you

do, I'll give you a a blurb for the

book." And that's why I wrote the first

book. Uh, most important thing. I always

thought I'd write a book when I retired,

but instead, you know, when when you get

that kind of note from a guy like Warren

Buffett, you you can't let it sit. So,

that was that was the start of that.

But, you know, uh I I've been fortunate

to visit him a few times and uh and it's

it's a big plus.

>> Is there any part about the Warren

mystique, the Buffett, uh personality

that you think like popular lore gets

wrong or is inaccurate?

>> No, I think it's mostly what you see is

what you get. The one thing I'll say

that I don't think people know about,

they don't get wrong, they don't know

about is the depth of his love for

Charlie.

And Warren sent out a a note, I think it

was at Thanksgiving last year, and he

said, you know, I'm not going to be at

the Birkshire meeting, and I'm not going

to be writing this or that, whatever it

was. and he talked about his

relationship with Charlie and anybody

who wants to should get a get a hold of

that letter and see it because it's it's

you know we talked earlier about the

importance of the a partnership and how

great a contributor to your life it can

be and uh and that's what that's what uh

he had with Charlie. I think he I think

as I recall he talked about Charlie

being the big brother and and and

himself being the little brother. And uh

I think we can say that about my

relationship with Bruce.

And for one reason or another, he's

always been very kind to me uh about my

role, you know, and uh generous about my

role. And he look he's he's he's

certainly

as smart as I am and as talented as I am

maybe in different ways but there was

always this this feeling of respect and

affection and love and and as the more

time passes the more we're conscious of

of that he and I and that's what Warren

and Charlie had and it was beautiful

thing to watch and also the Warren used

to love telling funny stories about

uh of which there were a lot and their

relationship was always suffused uh with

humor.

>> Did they make a lot of the decisions

together? I mean, I've read a little bit

about them and their relationship was a

a little challenging for me to

understand because I don't think they've

ever lived in the same place. Yeah.

>> Did they talk daily?

>> I don't know exactly how they made their

decisions, but I think I think Warren

used Charlie as a sounding board, a

logic checker. you know, I think this

this this makes sense. That kind of

thing. Of course, Charlie's great credit

is that Warren Buffett used to engage in

what we call cigar butt investing. I

don't know if you know about this, but

cigar butt investing means you're

walking down the street and you look in

the gutter and you see a used cigar and

you pick it up and you conclude that it

has three puffs left. So, you pick it

up. It's a disgusting thought. You pick

it up and you smoke it and you get three

puffs for free. That's the garbot

investing. But and and you know Warren

would buy uh you know really cats and

dogs because they were cheap. And

Charlie's great contribution was talking

Warren out of

cats and dogs, out of cigar butts. And

his revolution was that he convinced

Warren not any company at a great price,

great companies at a good price. Most

people credit that as Charlie's greatest

contribution.

So, but you know, synergistic, mutual

respect, love, complimentary skills. It

interestingly, they probably had the

highest combined IQ of any partnership

in history, but they were different

kinds of IQ. Charlie was more of a

classicist and humanist and a man of

letters. And Warren, of course, was uh

an incredible uh uh computing machine.

>> A man of a man of letters.

>> Sean, we need to bring that back. That

sounds that sounds beautiful.

>> Charlie, you know, when we would get

together, he wouldn't talk about

investments or money or companies

mostly. He would talk about ideas.

>> Well, let let's wrap it with one one

last quick one, which is uh give us some

homework. Give us a book that shaped the

way you think or you thought brought

some good ideas to the forefront. What's

a book we should read as recommended by

Howard Marx. So one is uh a short

history of financial euphoria by John

Kenneth Calra. This was very uh

influential in my thinking and it

teaches you about uh the

mental weakness that gives law give rise

to booms and busts and of course you

know uh taking a uh objective view of

cycles is a big part of what I do. So

that was very influential and I was

lucky to get to meet Galrath. And then

the other book would be fooled by

randomness uh by NASA Nicholas Taleb and

it talks about see I'm a great believer

that a lot in in life is random and uh

so this is one of the reasons maybe it's

my rationale for not being such a a

decisive thinker. TB basically says in

the short run u anything can happen

because of randomness and this

determines our attitude toward risk our

attitude toward portfolio construction

our attitude toward publish records you

know you see a published record the guy

had a great return that year is he great

investor did he get lucky that year etc

and I so I think that I think that

fooled by randomness is really uh and

I've written some memos If anybody wants

to the what we used to call the classic

comic version, uh they can read the

memos rather than reading the whole

book. Um but I think it's very valuable

and I would recommend it strongly.

>> Well, we appreciate you, man. This is

fun.

>> I hope so.

>> We got to do one with your son actually.

That would be a lot of fun. Uh well, we

did one in January of 21 called

Something of Value because uh he moved

in with us during the pandemic and I

thought that the the opportunity to for

three generation of Marxists to live

together was a great was of great value

and we spent most of the time arguing

about value investing. Uh and and uh and

I think that uh I think with the

possible exception of the latest AI

memo, I think that one got the most

positive reception. But but uh we'll

we'll we'll keep working together and uh

uh you guys don't don't need uh an

excuse for uh for another session.

>> Thanks.

>> Thank you for playing therapist for us.

>> Okay.

>> Thank you so much, Howard.

>> That's it. That's the pod.