I appeared on the People by WTF episode with Howard Marks on 4 May 2026, where we discussed his investment philosophy, market cycles, high‑yield bonds, and the emerging role of AI in investing.
Marks embraces the Japanese concept mujo, which he describes as “change is inevitable, unpredictable and uncontrollable.”
The S&P 500 has averaged about 10 % per year over a century, about 20 % per year in the 1990s, and about 0 % per year in the 2000s, and is almost never between 8 % and 12 % in a given year.
Over 48 years, roughly 99 % of Oaktree’s high‑yield bonds paid as promised, while the market’s average default rate is 3.6‑3.7 % per year.
Marks estimates the true default risk on high‑yield bonds at about 2 % per year, roughly one‑third of the market’s 3.6‑3.7 % rate, giving a 3 % spread advantage.
He now believes that “whoever best understands AI (including if it’s overhyped) will likely do best in investing over the next decade.”
Marks cautions that AI “can extrapolate past patterns, but can’t pick which business plan is Amazon or which CEO is Steve Jobs.”
He defines second‑level thinking as being both different from the crowd and right, warning that telling an AI to be non‑consensus “mostly makes it wrong.”
His practical advice: “If you need to be right every time, don’t invest; become a dentist.”
Marks emphasizes continuous learning, saying he stays sharp by learning from younger people, including his son, and values the willingness to adapt even at age 80.