Technology simultaneously expands the upside available to winners and accelerates the destruction of companies that fail to adapt. Global distribution and adjacent markets let exceptional businesses become much larger, but faster adoption and competition make unattended advantages less durable.

Fewer businesses can remain unchanged for a decade without active management.
Internet distribution allows companies to address global markets.
Strong companies can leverage advantages into adjacent products and markets.
Success can create bureaucracy that undermines future adaptability.

“it's very very hard to say well with no minding of the ship this business will just stay consistent”
Andrew Marks · 27:30

“take darwinism and turn up the knob a few clicks”
Howard Marks · 32:00

#technology#moats#disruption#scale

Explainer· 3

Explainer13:00

Why Amazon Challenged Traditional Value-Investing Assumptions

Amazon illustrated both management optionality and the danger of judging a business only through reported earnings. Its retail platform enabled opportunities such as AWS, while its favorable cash-conversion cycle made the economics healthier than the income statement initially suggested.

AWS was difficult to foresee from Amazon's original retail story.
Exceptional management can create valuable strategic optionality.
Reported losses partly reflected low prices and continued reinvestment.
Amazon's free-cash-flow profile was stronger earlier than its earnings suggested.

“that shows what happens when you bet on an amazing founder who can leverage their business to create value in really compelling other ways”
Andrew Marks · 13:30

“they actually had a very favorable cash conversion cycle”
Andrew Marks · 15:00

#amazon#aws#cash flow#management

Explainer32:00

Why Yesterday's Easy Investing Strategy Stops Working

Andrew compares market evolution with poker: once participants learn a profitable strategy, that strategy becomes common and exploitable. Cheap information, easy trading, algorithms, and more sophisticated competition have made simple insights based on readily available data much less valuable.

Early online poker rewarded a very basic conservative strategy.
Competitors learned and neutralized that advantage.
Historical investors faced major friction obtaining reports and transacting.
Modern investors need an edge beyond elementary financial screening.

“the winning strategy turned into the very exploitable strategy”
Andrew Marks · 33:00

“it was much more possible for value to be hidden in plain sight”
Andrew Marks · 34:00

#market efficiency#poker#information#competition

Explainer37:30

Why Venture Capital Expects Most Individual Bets to Fail

Andrew describes venture capital as a probabilistic search for investments with enormous upside relative to the entry price. The average investment may lose money, but a portfolio of high-expected-value bets can succeed when a few companies become exceptionally valuable.

Venture rewards long-term qualitative judgment.
Investors imagine what a successful company might look like in ten years.
The typical individual outcome can be a loss.
Follow-on capital can be directed toward companies demonstrating progress.

“what you're doing is you're trying to find extremely high expected value investments where the average occurrence is that you're going to lose your money”
Andrew Marks · 38:30

“make enough of those bets and so it works out to be a great return”
Andrew Marks · 39:00

#venture capital#expected value#portfolio theory#startups

Story· 5

Story07:30

How Lockdown Produced Howard Marks's Most Popular Memo

Howard and Andrew Marks lived together during the early pandemic and turned their spirited discussions about value and growth investing into Something of Value. Andrew supplied many counterpoints while Howard retained control of the keyboard, producing Howard's first co-authored memo after roughly 160 solo memos.

The Marks families lived together from March through June 2020.
Their different investment businesses created productive disagreement.
The discussions were exploratory rather than a formal debate.
Something of Value became Howard's most popular memo.

“we have a lot of differences we're not the same person”
Howard Marks · 08:30

“first of all he didn't get near the keyboard”
Howard Marks · 09:30

#howard marks#andrew marks#investment memos#pandemic

Story22:00

How America's Best Companies Became Terrible Investments

The Nifty 50 were treated as companies so strong that no price was too high, yet investors suffered enormous losses after paying extreme multiples. Some businesses remained sound, while others saw supposedly permanent moats destroyed by imports, changing behavior, or overlooked competitive responses.

Many Nifty 50 stocks traded at 60 to 90 times earnings.
Investors assumed their moats were effectively permanent.
Xerox lost ground to imports under its own pricing umbrella.
Simplicity Patterns showed that consumer behavior could invalidate a celebrated business.

“for the nifty 50 there was no price too high and for the high yield bonds there was no price low enough and of course…”
Howard Marks · 22:00

“the concept of disruption was never considered the moats were considered inviolate”
Howard Marks · 24:00

#nifty 50#valuation#disruption#market history

Story48:00

How Oaktree Built a Durable Partnership Without Micromanagement

Howard says Oaktree's founders relied more on culture and complementary abilities than intensive centralized management. Their long history together, shared conservative values, and explicit division between external representation and investment management supported a partnership lasting decades.

The five founders had worked together for about nine years on average.
Howard concentrated on clients, fundraising, and external representation.
Bruce Karsh and others concentrated on managing money.
Mutual recognition of complementary abilities created respect.

“the key among partners is to have shared values and complementary skills”
Howard Marks · 51:00

“that produces a lot of respect mutual respect”
Howard Marks · 51:30

#oaktree#culture#partnership#firm building

Story1:14:30

Why Brookfield's Oaktree Deal Met a 20-Year Wish List

Brookfield acquired a controlling interest in Oaktree while preserving the firm's identity, management, and direct client relationships. The structure also offered current and former employees staged liquidity rather than forcing an immediate full exit.

Brookfield wanted to add credit to its alternative-investment capabilities.
The transaction initially gave Brookfield slightly more than 60 percent.
Oaktree retained operating independence and its client relationships.
Founders and employees received flexible, staged selling options.

“we had criteria for a transaction that we would contemplate we've had them for 20 years and they were never fulfilled before and brookfield hit…”
Howard Marks · 1:15:30

“we still run the place they consult us they help us they provide resources”
Howard Marks · 1:16:30

#oaktree#brookfield#acquisition#liquidity

Story1:26:00

The Pension-Fund Puzzle That Started Howard Marks's Memos

Howard's first memo emerged from two conflicting stories about investment performance. One pension fund achieved a top-four-percent long-term result through consistently good annual performance, while another manager argued that top results required accepting bottom-five-percent years; Howard rejected that extreme variability for his clients.

The pension fund ranked between the 27th and 47th percentile each year.
Its 14-year result nevertheless ranked in the fourth percentile.
Other investors damaged their own records through severe mistakes.
Howard began writing for himself and received no response for roughly ten years.

“why because some of the other people shoot themselves in the foot”
Howard Marks · 1:27:00

“for the first 10 years i never had a response”
Howard Marks · 1:28:00

#investment memos#consistency#risk management#performance

Takeaway· 2

Takeaway1:04:30

Assess Founders by Investigating Decisions They Cannot Fake

Andrew argues that venture investors should interrupt rehearsed credentials and spend more time understanding a founder's actual history. Past decisions reveal whether someone thinks from first principles, learns, acts independently, understands a real problem, and can sustain conviction without relying on a conventional map.

Rehearsed prospective answers are easy to fake.
A founder's actual decisions provide stronger evidence of judgment.
Strong signals include first-principles thinking and learning from experience.
Exceptional startups require people who can attract other exceptional people.

“the real way to suss out judgment is by going through the person's story and background and understanding why they made decisions”
Andrew Marks · 1:05:00

“you can't fake what you've done”
Andrew Marks · 1:05:30

#founders#venture capital#judgment#hiring

Takeaway1:30:30

Why Oaktree Shrinks Funds After Its Best Performances

Oaktree tends to raise its largest funds before or during crises, when prospective opportunities are strongest. Unlike firms that automatically enlarge a successor fund after excellent performance, Oaktree often raises less because strong past returns usually mean the target assets have already appreciated.

Successful funds often coincide with rising prices in their strategy.
Higher prices can reduce the next fund's opportunity set.
Oaktree's largest funds targeted crisis periods such as 2001-02 and 2008-09.
The firm distinguishes favorable from unfavorable times for its strategies.

“we tend to increase our aum in bad times”
Howard Marks · 1:30:30

“the next fund is always smaller and we're very proud of that”
Howard Marks · 1:31:30

#fund sizing#oaktree#market cycles#capital allocation

Frameworks in this episode

Strength-Fit With Deliberate Evolution

The Four-Part Risk Underwriting Model

The Two-Question Investment Test

The Unbuy Decision

Insights & moments

◆Hot Take· 1

Technology Makes Moats More Valuable and More Fragile

✶Explainer· 3