Howard Marks: how I make money while you worry about a market crash

What It Covers

Howard Marks, co-founder of Oaktree Capital, discusses his revised stance on AI's unprecedented autonomy, how he deployed $7 billion in distressed debt during the 2008 Lehman collapse, the mechanics of raising an $11 billion fund pre-crisis, and the partnership principles behind his 39-year collaboration with Bruce Karsh.

Key Questions Answered

• •AI Autonomy vs. Prior Technology: AI differs from every previous technological innovation — railroads, computers, the internet — because it possesses autonomy. You assign it a task without specifying method, and it self-directs. Marks updated his cautious December memo after his VC son flagged how rapidly capabilities had advanced, treating new evidence as a reason to revise, not defend, prior positions.
• •Crisis Deployment Framework: When Lehman collapsed in September 2008, Oaktree deployed $450 million per week for 15 consecutive weeks — $7 billion in one quarter — from a pre-raised $11 billion distressed debt fund. The decision logic: if financial systems collapse, the outcome is identical whether you invest or not; if they survive, failing to invest means failing your mandate.
• •Pre-Crisis Fundraising Timing: Raise capital before the crisis, not during it. Oaktree built credibility over 20 years by deliberately shrinking subsequent funds after strong performance — signaling genuine opportunity assessment over asset-gathering. This counterintuitive discipline convinced institutional investors that when Marks and Karsh said opportunity existed, they meant it.
• •Second-Level Thinking as Competitive Edge: Outperforming markets requires holding a variant perception — a view that differs from consensus on a company's growth rate, earnings power, or deserved multiple — and being correct. Marks argues this skill cannot be taught directly; you can learn its definition and necessity, but the capacity for accurate contrarian perception is largely innate, similar to how height cannot be coached in basketball.
• •Long-Term Partnership Structure: Marks and Karsh's 39-year partnership at Oaktree rests on two pillars: shared values (identical risk tolerance and ethical standards) and complementary skills (Marks handles investor relations and communication; Karsh manages portfolio construction). Partnerships collapse when one partner believes the other is redundant — structural differentiation prevents that dynamic from developing.