In one of his famous “memos” released earlier this week, Howard Marks (Trades, Portfolio), co-chairman of multibillion-dollar asset management firm Oaktree Capital, wrote about our inability to know the future.
The paper, titled “Uncertainty,” starts with a discussion of the “unprecedented (or at least highly exceptional) developments” we are seeing in regard to “the pandemic, the economic contraction, the oil price collapse and the Fed/government response.” As such, Marks noted a number of considerations make the future “particularly unpredictable.”
Marks then makes an extensive list of these considerations and, in turn, the many questions that arise in how to deal with them, writing:
“Where am I going with this? My point is that very few people can balance all these considerations to figure out our collective risk. And that’s just Covid-19. Now think about the many questions that pertain to each of the three other factors. Who can respond to this many questions, come up with valid answers, consider their interaction, appropriately weight the various considerations on the basis of their importance, and process them for a useful conclusion regarding the virus’s impact? It would take an exceptional mind to deal with all these factors simultaneously and reach a better conclusion than most other people. (I believe a computer couldn’t do so either, especially given all the subjective decisions required in the absence of historic precedent.)”
He concludes “the challenge lies in trying to be above average in assessing the future.”
Read Marks’ full memo here.
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
Also check out:
