Howard Marks On Why Most Investors Lose, AI Bubbles & India | Nikhil Kamath | WTF is Finance

**Nikhil Kamath** (0:52)
Could you also say that indexation and ETFs have taken over because the markets have been in an uptrend?

**Howard Marks** (1:00)
My answer is that indexation has taken over as it has, not because it's so good, but because active management was so bad.

**Nikhil Kamath** (1:09)
Because a lot of the distressed bonds that you are in, is the chance of a downside zero?
So, I'll give you a little bit of a background. So, most of these are like conversations. Most of the interviews that we do are conversations. They're fairly free flowing. And the audience we cater to are entrepreneurs of Indian origin, who are around the age of 25 to 30 Everyone's looking to invest in the market, trade the market, start a business, building something from the bottom up. So, we are speaking to them. So, most of today is around that. Can we start with a little bit about you and how your own journey began from Queens to Wall Street? Maybe like a, how do you describe your story in your words?
Your story, your origin story.

**Howard Marks** (2:22)
Well, you know, I was born in Queens, New York, as you know. One of the, one of what are called the outer boroughs. Middle class upbringing. Neither parent went to college.
But my father was a very intelligent man and an accountant. And I think he did his job well. And so we lived a comfortable middle class existence.
I went to the public schools of New York at a time when you could get a good education in the public schools of New York. And I think I got one. And oddly enough, ended up taking courses in business law and then accounting in high school and really connected with accounting, with the orderliness and the symmetry. It just clicked for me. So I decided to go to business school. I applied to Wharton as the best business school for undergraduates in America. I was told I wouldn't get in, but I did. Went to Wharton as an accounting student, switched my major to finance.
Then went on to get an MBA in accounting from the University of Chicago Business School. And between years of business school, I had a job in the investment research department of City Bank. Liked it, went back. That's my background.

**Nikhil Kamath** (4:08)
Is Wharton, would you say, still one of the better schools?

**Howard Marks** (4:12)
No, I think I have no reason to believe it's not still the best undergraduate business school. There are other good graduate schools that are very competitive with Wharton. I'm not, I'm no expert. I'm going to say that a hundred times on this tape, but I believe that Wharton is still the best undergraduate business school.

**Nikhil Kamath** (4:38)
And you studied Japanese literature at Wharton?

**Howard Marks** (4:41)
Yes.
When I went to Wharton, there were two very enlightened requirements. You had to have a semester of the literature of a foreign country, and you had to have a non-business concentration, what we call a minor.

**Nikhil Kamath** (5:05)
Right.

**Howard Marks** (5:06)
And the wonks would take stat or economics or poli sci.

**Nikhil Kamath** (5:11)
What are the wonks?

**Howard Marks** (5:12)
Wonks? Yeah. Oh, people who just think about making money.

**Nikhil Kamath** (5:16)
Okay.

**Howard Marks** (5:18)
Or just think about numbers and business. But for my literature requirement, for some reason I don't remember, I took Japanese studies, Japanese literature.
I think perhaps it was the exoticism. And I just fell in love with it. And so I ended up taking a second semester of Japanese literature, then two semesters of Japanese civilization, then one semester of Japanese art.

**Nikhil Kamath** (5:53)
And what did that teach you?

**Howard Marks** (5:54)
Well, it taught me a lot.
But the main thing I've carried away have been some aspects of the Japanese philosophy. The most important one, the most relevant one, is something called Mujo, which literally means the turning of the wheel of the law. And what it means in everyday life is it means the inevitability of change. That change is inevitable, unpredictable, and uncontrollable. And that we have to accommodate to it and make the most of it, rather than think we can control it.

**Nikhil Kamath** (6:54)
Should one expect it?

**Howard Marks** (6:56)
One should. It's inevitable. Yes, of course, one should expect change. One should not expect a specific change because it's unpredictable.

**Nikhil Kamath** (7:05)
I once read somewhere that a Western man, if it rains for five days, will expect it to rain on the sixth. Whereas East Asian person, say Japanese, for example, if it rains for five days, will expect no rain on the sixth.