Howard Marks: There’s Much Less Than 100% Probability That Investing In Any Given AI Company Or Sector Today Will Be Profitable

In a recent interview with Global Money Talk, Howard Marks reflected on his 35 years of writing investment memos, beginning with a simple belief: “I thought I had an interesting story to tell.”

That story, from his very first memo, highlighted a pension fund that achieved top performance through remarkable consistency, teaching “the important of consistency and risk control as opposed to trying for grand gestures.” This foundational idea has guided his approach ever since.

Marks argues that the core of investing is inherently uncertain. “It consists of positioning your capital to benefit from future events. And yet I believe very strongly… that you can’t predict the future.”

Since superior returns cannot reliably come from prediction, he believes the answer lies elsewhere. “I think the answer lies in risk control.” The ultimate goal is not just to participate in rising markets but to build a durable practice. “If we can accomplish a similar return to others with less risk, I think that’s a substantial accomplishment.”

His philosophy was shaped early on while managing high-yield bonds. When challenged on how one could invest in assets where some will default, he responded with a powerful analogy: “How can a life insurance company give people insurance against death when they know they’re all going to die?”

The principle is the same—it’s about understanding, analyzing, and being well-paid for a known risk. This mindset leads to a clear motto for his firm, Oaktree Capital: “If we avoid the losers, the winners take care of themselves.”

Applying this to today’s market, which he described in his recent memo ‘Bubble Watch’ as having moved from “elevated to worrisome,” Marks advises caution without alarm. He acknowledges the profound potential of AI but cautions against the assumption that this translates directly into investment profits.

“I think there’s a near 100% probability AI will change the world but I think there’s much less than 100% probability that investing in any given AI company or sector today will be profitable.”

His final advice for investors is: “Investing is an optimistic activity… You have to be optimistic to be an investor.” However, this optimism must be tempered with prudence. “We concentrate our investments to take advantage of what we think we know and we diversify to protect against what we don’t know.” This balanced approach, focusing on risk control above all, is the enduring message from his decades of memos.

You can watch the entire interview here: