Howard Marks: What We Do Is Take Advantage Of The Mistakes Of Others

Howard Marks’ reflections from the Oaktree Conference 2026 reinforce a core principle that has defined his investing philosophy for decades: markets are driven less by precision and more by human behavior.

At the center of that behavior is a simple but powerful truth about opportunity. As Marks puts it, “what we do is take advantage of the mistakes of others.” This idea is not just a tactic; it is the foundation of generating excess returns.

Markets, in theory, price assets efficiently. But Marks challenges that notion directly. “We want to get returns that are more than commensurate with risk. And to do that, you have to buy assets not at fair prices, but are unfair prices.” The implication is clear: alpha is not created in equilibrium. It is created when others misjudge value, often under pressure or emotion.

That leads to the unavoidable question—who is on the other side of those trades? Marks answers bluntly: “We want to buy from sellers who are making mistakes.” These mistakes arise from complexity, forced selling, or misunderstanding. In credit markets especially, structural dynamics such as mandates or liquidity needs can push prices to levels disconnected from intrinsic value.

Yet opportunity is only one side of the equation. Avoiding danger is equally important. Marks emphasizes that investor enthusiasm itself can become a risk factor.

“Sometimes they love them too much. In which case, we want to avoid it.” This echoes a recurring theme: popularity is often the enemy of future returns. When assets are widely favored, pricing tends to reflect optimism that leaves little margin for error.

This is where discipline around valuation becomes critical. Marks distills it simply: “it’s not what you buy, it’s what you pay that matters.”

Even the highest-quality assets can produce poor outcomes if purchased at inflated levels. Conversely, out-of-favor securities can offer compelling opportunities when priced too pessimistically.

Leverage adds another layer of complexity. While it can enhance returns, it also amplifies risk in ways investors often underestimate.

Marks reminds us, “the more you bet, the more you lose when you lose.” In extended periods of stability, investors grow comfortable increasing leverage, forgetting that downturns are inevitable. When conditions shift, that complacency can prove costly.

Underlying all of this is the cyclical nature of investor psychology. Marks describes the drivers succinctly: “everybody wants to make money… They get tired of watching other people get rich.”

This combination of envy, fear of missing out, and optimism fuels market extremes on both the upside and downside.

For investors, the takeaway is not to predict cycles perfectly, but to position themselves intelligently within them. That means resisting the urge to follow consensus at peaks and maintaining the flexibility to act when others are forced to retreat.

In the end, Marks’ framework is less about forecasting and more about behavior. Markets will continue to swing between excess and caution. Those who can remain disciplined—buying when others err and stepping back when enthusiasm runs too high—stand the best chance of achieving superior long-term results.

Full interview here: