Howard Marks & Andrew Marks: Something of Value

**Andrew Marks** (0:00)
All right, I think we figured it out.

**Ben Gilbert** (0:02)
Andrew, I think you have a bright future in technology.

**Andrew Marks** (0:04)
I appreciate it, especially Windows technology.

**Howard Marks** (0:07)
Yeah, you should invest in some tech startups.

**Ben Gilbert** (0:29)
welcome to this special episode of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert. I am the co-founder and managing director of Seattle-based Pioneer Square Labs and our venture fund, PSL Ventures.

**David Rosenthal** (0:42)
And I'm David Rosenthal and I am an Angel Investor based in San Francisco.

**Ben Gilbert** (0:47)
And we are your hosts. Today, we have two guests with very different investment styles, a value investor and a growth-oriented tech investor head-to-head, but not just any investors. We are joined today by the legendary value investor, Howard Marks, the co-founder of Oaktree Capital Management, and his son, Andrew Marks, the co-founder of TQ Ventures. Oaktree, for those who don't know, is one of the leading investment management firms in the world, specializing in alternative investments, with $159 billion in assets under management as of the end of June 2022

**David Rosenthal** (1:28)
Probably far fewer of you know Andrew and his firm, TQ Ventures, but what they've accomplished so far is pretty equally impressive in a very different field. So as we'll talk about, TQ is an early stage venture firm that Andrew and his partners started about five years ago. They have a billion dollars under management now, including I think a $500 million third fund that they just closed just a couple months ago. I can say I do know that their returns so far have been top decile across all venture funds raised during that time period in all of those. Vintages. We got to know Andrew over the years as a acquired community member and listener, and then I've gotten to know him in the context of kindergarten ventures, my Angel List Fund that I managed with Nat Manning. A little over a year ago, Andrew and Howard co-authored one of Howard's famous memos together in a departure for Howard, where they were debating over COVID together as a family, as father and son, value investing versus growth investing, tech investing and what was going on in the markets, and they turned it into a memo, and it ended up becoming, we'll talk about it on the episode, Howard's most popular memo ever, which is incredible in a career spanning many, many decades as one of the most popular authors of investment memos.

**Ben Gilbert** (2:58)
Oh, Howard's memos and books are among the most coveted in the entire investing landscape. Even Warren Buffett is quoted in saying, When I see memos from Howard Marks in my mail, they're the first thing I open and read. I always learn something. Well, if you want to discuss these topics with us after you listen, you should come join the Acquired community at acquired.fm slash slack. Our new merch store is available at acquired.fm slash store. You can listen to the LP show by searching Acquired LP show in the podcast player of your choice or get new episodes two weeks early at acquired.fm slash LP. This is a great time to tell you about one of our very favorite companies, Crusoe.

**David Rosenthal** (3:37)
So Crusoe, as listeners know by now, is a clean compute cloud provider specifically built for AI workloads. NVIDIA is one of their major partners and literally Crusoe's data centers are nothing but racks and racks of A100s and H100s. And because Crusoe's cloud is purpose-built for AI and run on wasted, stranded or clean energy, they can provide significantly better performance per dollar than traditional cloud providers.

**Ben Gilbert** (4:02)
Yes, we talked about that on our ACQ2 episode with Crusoe's CEO, Chase Lockmiller.

**David Rosenthal** (4:08)
The other element that makes Crusoe special is the environmental angle. Crusoe, of course, locates their data centers at stranded energy sites. So think oil flares, wind farms that can't use all the energy they generate, etc. And uses that power that would otherwise be wasted to run your AI workloads instead.

**Ben Gilbert** (4:27)
Obviously, it's a huge benefit for the environment and for customers on costs since Crusoe doesn't rely on the energy grid. Energy is the second largest cost of running AI after, of course, the price you pay NVIDIA for the chips. And these lower energy costs get passed on to customers.

**David Rosenthal** (4:42)
It's super cool that they can put their data centers out there in these remote locations where quote-unquote energy happens, as opposed to the other hyperscalers such as AWS, Google and Azure, who need to build their data centers close to major traffic hubs where the Internet happens because they are doing everything in their clouds.