Howard Marks and Bruce Karsh have been partners for 31 years. They have a great working relationship because they have different talents but share the same values. In a recent interview, Howard Marks talks to Tim Ferriss about his partnership and advice to others on finding the right partner(s).
Tim Ferriss : If you were trying to hire a 25-year-old version of Bruce, what would you be looking for?
Howard Marks: Well, I’ll tell you what he is. He’s super smart. That goes without saying. He is highly competitive. He’s a chess player. Again, most of the people I know who are good investors are game players – either backgammon, chess, or something like that. We are inherently competitive. He’s also very analytical, and he’s kind of a grinder, and I would describe myself as being intuitive and a quick decider – thinking slow and fast, Kahneman. I’m a fast thinker. You tell me a problem, I tell you my answer in short order and I’m done with it, for the most part.
Bruce will think about it longer, come to his conclusion, and then he’ll come back the next day and say, “You know, I was thinking about it last night. I don’t think that’s right, and here’s why.” Or, “I don’t think you were right, and here’s why.” And he’ll grind on it for hours and days. I think this is part of the secret to our success. Again, something I once wrote on the subject of a good partnership was “Shared values and complementary skills.” If you have a partner that has different values than you do – for example, Bob wants to make the most money possible and Ed wants to operate with integrity. Those are largely contradictory.
So I think it’s very important to share values, but I also think it’s important to not be the same person, a copy of yourself. If it’s a copy of yourself, you don’t need it. The person should bring skills that you don’t bring and maybe operate in ways you don’t, and I think it’s probably helpful that I’m intuitive and he’s analytical.
We normally don’t debate individual investments because he operates more at that level and I operate more at the big-picture level within Oaktree, but I think a good example is in the period we’ve been talking about a couple of time – we mentioned the last 15 weeks of ’08 – it was a very tough period because Lehman Brothers had gone bankrupt, Bear Stearns had disappeared, and Merrill Lynch had been absorbed by Bank of America, Washington Mutual, and Wachovia Bank. It looked like falling dominoes, and people were talking about the fact that it looked like Morgan Stanley was next and Goldman was right behind that.
So you just had to conclude that the financial world was either going to end, or it wasn’t. You couldn’t analyze it, you couldn’t prove anything about the future, and so it required an almost gamesman-like approach to whether you buy or not, and we would talk about that in that sense, and we were both very comfortable talking about it in that sense. What we concluded was that if the world ended, it didn’t matter what we did, but if the world didn’t end and we hadn’t bought, we hadn’t done our job. So buck up and do your job.
Now, the great thing is that half the days, Bruce would come to me – because he would be lying in bed at night, thinking about this stuff – and say, “You know what? I think we’re going too fast. I think we should slow down.” And half the days, he would say, “I think we’re going too slow.” So I would play devil’s advocate and support his decision, but try to show him the other side, and he would do that with me. That’s why we got it done.
But, as I say in the introduction to the book from which you read, I don’t think either of us could have done as good a job alone. I think the devil’s advocacy– but in a supportive way – really held the key. In one of my memos, I wrote about a reporter who called me up a few days after the bankruptcy of Lehman and said, “What are you doing?” I said, “We’re buying.” He said, “You are?” like it was the craziest thing he’d ever heard. My reaction was, “If we’re not buying now, when will we?” But it’s been a great partnership – as you say, 31 years – never an argument.
Tim Ferriss: Never an argument?
Howard Marks: Never an argument. Intellectual disagreements, but never an emotional argument, and the key is respect. Even when we disagree, we respect. The great thing about that is you sit down, you disagree, maybe you don’t come to a conclusion, and then you go back to your corners, and he says, “Well, you know what? Maybe Howard’s right.” I say, “Maybe Bruce is right,” and then you can have a productive discussion. If your reaction is, “That moron,” then you can’t benefit from what he has to say.
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