As an undergraduate at Wharton in the 1960s, Howard Marks (Trades, Portfolio) stumbled upon one of the guiding principles of his life — the Buddhist concept of mujo. In his Japanese studies course, mujo was defined as “the turning of the wheel of the law.” Marks explains: “Change is inevitable. The only constant is impermanence. … We have to accommodate to the fact that the wheel turns and the environment changes.” This constant flux applies not only to human lives but economies and markets. “It’s very helpful to view the world as behaving cyclically and oscillating rather than going in a straight line. Everything is cyclical.”
“You can’t control the environment,” Marks adds. So the key is to recognize how it’s changing, accept it and respond as wisely as possible. “The screwiest thing you can do is to think you’re a Master of the Universe. We’re all just little cogs, and the universe will go on without us. We have to fit into it and adapt to it.” For example, at the time of our interview in late 2014, he sees scant investment opportunity and excessive complacency: “What bigger mistake could there be than to think you can safely get high returns in a low-return world?” Investors should adjust by assuming less risk and lowering their expectations. He cites a favorite quote from Peter Bernstein: “The market’s not a very accommodating machine; it won’t provide high returns just because you need them.
This kind of rational, clear-headed analysis has served Marks well. Since he co-founded Oaktree Capital Management in 1995, it’s grown into an alternative investment behemoth with more than $90 billion under management. Its stellar returns in areas such as distressed debt and junk bonds have brought Marks a fortune that Forbes estimates at $2 billion. His New York apartment cost $52.5 million. As Oaktree’s chairman, Marks oversees its investment strategy and reigns as its philosopher king. His memos to investors have earned a devoted following, as has his classic book, The Most Important Thing: Uncommon Sense for the Thoughtful Investor. One fan, Warren Buffett (Trades, Portfolio), wrote: “When I see memos from Howard Marks (Trades, Portfolio) in my mail, they’re the first thing I open and read. I always learn something, and that goes double for his book.”
Sitting opposite Marks in his corner office on the 34th floor of a Manhattan skyscraper, you sense that you’re in the presence of a most superior machine. His manner is polite and pleasant, but there’s an intellectual intensity and precision in everything he says. He’s a gifted moneymaker, but he’s primarily an original thinker who relishes expressing ideas that others haven’t considered.
continue reading: http://observer.com/2015/06/howard-marks-the-uncomfortably-idiosyncratic-billionaire/
