But it's interesting that his motivation is to stay out of the bottom 5%, to be consistent and control risk, while mine would be to be in the top 5%, and take the biggest risks I can find, because only the big risks give the big returns. I'm still thinking why that is through.
Thanks Jerry, and you know, I read Howard's piece when it dropped and still neglected to include it in my piece. Keeping track of relevant citations continues to be a challenge! Regarding the differential applications of the "avoid unnecessary errors" strategy, my sense is this is a reflection of the underlying asset class? Your power law returns require finding that one investment to rule them all, so eliminating obviously bad investments gets you more at bats to achieve this. Howard has expressed that venture-style distributions don't match his personality (and he can invest vicariously through his son in this regard), and Oaktree thus plays a diversified game across a number of classes - credit, real estate, etc - that don't demonstrate the same winner-takes-all dynamic.
I suspect at least some of this appetite for risk (aside from distributional differences) is your not investing others money!
Hey, thanks for mentioning me. I was thinking about that same post myself after reading this from Howard Marks recently: https://www.oaktreecapital.com/insights/memo/fewer-losers-or-more-winners. He says in it "If we avoid the losers, the winners will take care of themselves."
But it's interesting that his motivation is to stay out of the bottom 5%, to be consistent and control risk, while mine would be to be in the top 5%, and take the biggest risks I can find, because only the big risks give the big returns. I'm still thinking why that is through.
Thanks Jerry, and you know, I read Howard's piece when it dropped and still neglected to include it in my piece. Keeping track of relevant citations continues to be a challenge! Regarding the differential applications of the "avoid unnecessary errors" strategy, my sense is this is a reflection of the underlying asset class? Your power law returns require finding that one investment to rule them all, so eliminating obviously bad investments gets you more at bats to achieve this. Howard has expressed that venture-style distributions don't match his personality (and he can invest vicariously through his son in this regard), and Oaktree thus plays a diversified game across a number of classes - credit, real estate, etc - that don't demonstrate the same winner-takes-all dynamic.
I suspect at least some of this appetite for risk (aside from distributional differences) is your not investing others money!