Howard Marks was recently interviewed on the New York Times‘s blog DealBook to discuss his new book The Most Important Thing: Uncommon Sense for the Thoughtful Investor.
Marks describes how the book built upon the letter he has been writing for the past two decades building upon his 42-year career in investing. Among other things, Marks discusses how he anticipated the burst of the tech-bubble in 2000 and the influence Michael Milken had on his investment strategy.
Here is an excerpt from the interview:
Q. The book draws heavily on newspaper articles and the writings and quotes of famous investors, even Mark Twain. I have this image of your traveling around with a pair of scissors and a burgeoning file of newspaper clippings. Tell me about your writing process.
A. That’s just what I’ve been doing this morning. I have a clip file spread out on my desk for the next memo. It’s working title is “How Quickly They Forget,” and it’s about short memories and how that dooms people to repeating mistakes. Nobody remembers the crisis anymore.
Q. I recall a John Kenneth Galbraith quote from your book related to that.
A. Galbraith said: “Contributing to euphoria are two further factors little noted in our time or past times. The first is extreme brevity of a financial memory. Financial disaster is quickly forgotten. When the same or closely similar circumstances occur again, sometimes only in a few years, they are hailed by a new, often youthful, and always supremely self-confident generation as a brilliantly innovative discovery.” What could be more true of the years leading up to the crisis?