Howard Mark on Can You Really Invest Without Fear? | Talks at GS 2022

[Transcript]

KATIE KOCH: I want to talk a little bit about emotion for a second. And you've said that you need to either be unemotional or act like you are. And I wanted to go actually back to the story you talked about before, which is that you—this 2008, which a lot of people in this audience weren't here. And I think if you weren't there, you might not appreciate how scary that actually was. I mean, you went through the dominoes of all the banks falling. But were you scared when you and Bruce were putting the capital to work? How did you—or if not, how did you keep yourself from being emotional?

HOWARD MARKS: Well, first let me say, if you think about the norm, what happens? Things are going well. The economy is performing well. Companies are reporting good earnings. Stock prices are rising. Everybody's optimistic. And the longer this goes on, people become more and more and more positive until they buy here. And when they run out of money, then things turn around. Then, eventually, the economy weakens, then the corporate profits aren't so good and stock—prices start going down and people start losing hope. And as this continues, they get more and more depressed and more panicky. And they start fearing further losses until they sell out down here. In other words, they tend to buy more here and sell more here, which is the opposite of what we all should do. My mother said, "Howie, buy low. Sell high." And so, emotion is our enemy. Emotion tends to get us to do the wrong thing at the wrong time. And we have to resist that.

And one thing I point out is that the influences that affect the crowd and make it do what I just described, those influences are universal. And I feel them too. And you feel them too. And everyone in here. We read the same newspapers. The news is the same for all of us. In order to outperform, by definition, you have to depart from the crowd. You have to hold a different position. And you have to have resolve to do it. And, you know, it can't be easy. You know?

I had one of my colleagues came to me in '98, talking about ancient history. Long term capital. I just melted down and we had the ruble default and the Southeast Asian crisis, and there were a lot of things going wrong. And one of the guys who considers himself to be very thought—

KATIE KOCH: This is at Oaktree, right?

HOWARD MARKS: Yes, Oaktree. Comes to me and he says, "This is it. I think it's all over. I think the financial system is going to melt down. I think—." And he explains to me all these things. And I say, "Great. Thank you for sharing that with me. Now go back to your desk and do your job." I said, "A battlefield hero is not somebody who's unafraid. It's somebody who's afraid, but he does it anyway." I mean, if you're in scary circumstances, to be unafraid, you kind of have to be a nut. But the key is can you be afraid and do your job anyway?

Source: https://www.youtube.com/watch?v=wkJXQ46ma8I&ab_channel=GoldmanSachs

 

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