Howard Marks: The Route To Superior Performance Will Continue To Be Humans With Superior Insight

Howard Marks has just released his latest memo titled – Investing Without People. Marks also released a short video (below) which summarizes the memo saying:

“If the day comes when intelligent machines run all the money, won’t they all see everything the same? Won’t they reach the same conclusions? Design the same portfolios? And thus perform the same? What then will be the route to superior performance?”

“Humans! With superior insight. At least that’s my hope!”

Here’s an excerpt from that video:

Hello. I’m Howard Marks. It’s after hours here at Oaktree’s Los Angeles trading desk. But this quiet room wasn’t so quiet a few hours ago.

The question posed in my latest memo is – In the future will it be like this all the time? In short, will we be investing without people? As I see it securities markets seem to be moving toward dispensing with us mere mortals and relying more and more on index investing and other forms of passive investing, quantitative and algorithmic investing, and artificial intelligence and machine learning.

There’s no doubt that computers can do an unmatched job dealing with the things that can be counted. Things that are objective and quantitative. But many other things, qualitative subjective things, count for a great deal and I doubt computers can do what the very best investors do. Exceptional investors have creativity, taste, discernment and judgment, and thus the ability to see the merit and qualitative attributes that other investors miss. Unless computers develop these things too I doubt the best investors will be retired anytime soon.

If the day comes when intelligent machines run all the money, won’t they all see everything the same? Won’t they reach the same conclusions? Design the same portfolios? And thus perform the same? What then will be the route to superior performance?

Humans! With superior insight. At least that’s my hope!

Regardless of how you lean on this subject the markets will open tomorrow morning and trading floors, including Oaktree’s, will be buzzing with people and activity. Without that buzz life around here would be too quiet for me.

You can watch a summary of Howard Marks’ memo here: