Howard Marks
Howard Marks (born 1946) is the co-founder of Oaktree Capital Management and the author of The Most Important Thing, a book on investment philosophy built around mental models.
Second-Level Thinking
Marks is best known for popularizing the concept of Second Order Thinking, which he calls "second-level thinking." His key insight: first-level thinking is simplistic and everyone does it, so it can't produce superior results. To outperform, you must think differently and better than the consensus.
"First-level thinking says, 'This is a good company; let's buy the stock.' Second-level thinking says, 'This is a good company, but everyone thinks it's great, so the stock is overpriced. Let's sell.'"
Connections
Marks' writing touches many mental models:
- Probabilistic Thinking — he emphasizes that the future is a probability distribution, not a single outcome
- Margin of Safety — a concept he inherited from Benjamin Graham and applies to every investment decision
- Circle of Competence — Marks argues that knowing what you don't know is an edge in itself