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  • Howard Marks on AI Investing, Second-Level Thinking, Warren Buffett, and Why Waiting Until You Feel Safe Means the Opportunity Has Passed

    Howard Marks, co-founder of Oaktree Capital and author of the investing memos Warren Buffett says he reads first, returned to the My First Million podcast for a wide-ranging conversation with Shaan Puri and Sam Parr. Marks explains why he rewrote his AI memo after his son pushed back, what AI can and cannot take from professional investors, how Oaktree deployed $450 million a week while the world thought finance was ending, and why the sentence “I’m 100% convinced” is the most dangerous one in markets. Along the way he covers his 39-year partnership with Bruce Karsh, personal stories about Warren Buffett and Charlie Munger, parenting, career choice, and the two books that shaped his thinking.

    TLDW

    Marks updated his AI memo because his VC son Andrew told him too much had changed, and he now sees AI as unprecedented on two axes: autonomy (every prior technology was a tool; AI can be given a job and figure out how to do it) and unpredictability (he never felt the internet was beyond comprehension, but nobody knows the shape of an AI future). He expects AI to “defrock” mediocre active investors the way indexation did, while insight, judgment about people, and decisions with no historical precedent may remain human. He retells the Lehman Brothers moment: Oaktree raised an $11 billion distressed debt fund before the crisis, then invested $7 billion in a single quarter on the logic that if the world melted down nothing would matter, but if it did not and they had failed to invest, they had failed at their jobs. The through-line is acting despite fear: the battle hero is afraid and does it anyway, and if you wait until there is nothing to be afraid of, the opportunity has passed. He closes with the recipe for his partnership with Bruce Karsh (shared values, complementary skills, appreciation), stories about Buffett and Munger, advice to live your life your own way, and book recommendations: A Short History of Financial Euphoria and Fooled by Randomness.

    Thoughts

    The most valuable thing in this conversation is not any single call, it is watching a 79-year-old investor with five decades of pattern recognition publicly change his mind. Marks wrote an AI memo in December, his son told him in February that it was already stale, and he rewrote it entirely. When the host teases him that he sounds “a little seduced,” Marks does not get defensive. He distinguishes between upgrading an opinion on new evidence and getting emotional about an asset. That distinction is the whole game. Most people treat their published positions as identity; Marks treats his as drafts. The irony he would appreciate: the willingness to say “so much has happened, I have to update” is exactly the behavior that made his original reputation, and it is exactly what the “I’m 100% convinced” crowd cannot do.

    His AI framing is sharper than most full-time commentators manage. Every previous technology, from the railroad to the internet, was a tool that made humans faster. AI is the first with autonomy: you give it a job, not instructions. And it is the first innovation he has ever called genuinely unpredictable. Notice what that combination does to his old computer framework. Computers could only read, remember, add, subtract, and compare, a limited list that still beat most people. The question that decides everything, for investing and beyond, is whether AI’s list is limited or unlimited. Marks does not pretend to know, which is precisely why his answer is credible.

    The Lehman story deserves to be studied as decision-making under true uncertainty, not as a war story. There was no data and no historical analogy for the end of the financial system, only supposition. So Oaktree reframed the decision as an asymmetry: if the world melts down and we invest, it does not matter; if the world survives and we did not invest, we failed. That logic is available to anyone. What is not available to most people is the willingness to act on it while feeling terrible, and Marks is emphatic that he felt terrible. He read the same newspapers as everyone else. The lesson is that trepidation is not a signal to wait; it is the price of admission. Confidence is not the tell of a good decision. Structure is.

    The quietest and maybe most transferable idea here is the credibility flywheel. After a fund did well, Oaktree raised a smaller fund next, because great results meant assets had appreciated and the opportunity had shrunk. That is speaking against your own economic interest, repeatedly, for twenty years. The payoff came when they asked for $11 billion before the crisis and investors believed them, because Howard and Bruce do not cry wolf. Most people optimize each individual transaction and wonder why nobody trusts them at the moment trust matters. And it is not a coincidence that his partnership advice (shared values, complementary skills, appreciation), his parenting advice (let your kid be smarter than you, let them make choices), and his fundraising record all reduce to the same move: give up small ego wins now to compound trust for decades.

    Key Takeaways

    • Marks wrote his first AI memo around December 9th, then rewrote it entirely in early February after his son Andrew, a venture capitalist working with AI companies daily, told him too much had changed. Updating on new facts is a feature of good thinking, not a flip-flop.
    • He upgraded his opinion of AI because of qualities he considers unprecedented: it can discuss its own strengths and weaknesses, use humor, and put information in the context of the specific person it is talking to.
    • AI’s first unprecedented quality is autonomy. Every prior technological innovation, from the railroad to computers to the internet, was a tool to increase productivity. Nothing before could be given a job without being told how to do it.
    • AI’s second unprecedented quality is unpredictability. Marks never felt the internet was beyond comprehension or prediction. With AI, he says nobody knows the shape of the future, a feeling he has never had about any prior technology.
    • Indexation exposed that most active equity investors could not do what they claimed and pushed many out of the business. Marks expects AI to “defrock” another group of professionals whose talents are not as great as they purport.
    • His old framework for computers: they could only read, remember, add, subtract, and compare, but they did it with more data, faster, and without arithmetic or emotional mistakes, so the limited list still beat most people. The big question for AI is whether its list is limited or unlimited.
    • A large share of what AI does is knowing history and extrapolating patterns. There will always be events with no history to train on, and some people simply understand the probability distribution of future events better. That may be where human investors survive.
    • Part of Oaktree’s value has been refusing to invest with bad people based on undefinable signals, the “hair on the back of your neck” test. If AI has no hair on its neck, experienced judgment keeps a role.
    • Second-level thinking, the opening chapter of his first book, says that if you do not see anything different from everybody else, you cannot possibly be superior. You need a variant perception, you have to bet on it, and you have to be right.
    • Asked whether second-level thinking can be taught, Marks says probably not. He can teach its importance, but not how to have perceptions that are both at odds with consensus and correct. In basketball you cannot coach height; in investing there is something called insight, and some people have it.
    • He is genuinely unsure whether AGI, defined as AI doing everything a human can do, will arrive. Whether there are things AI will never do “even when it reaches full flower” is one of the central mysteries.
    • Before the 2008 crisis, the largest distressed debt fund in history had been Oaktree’s own $2.5 billion fund from 2002. In 2007-08 they raised $11 billion because they saw distress coming, and kept it on the shelf for deployment when the stuff hit the fan.
    • When Lehman went under in September 2008, there was no data and no prior experience for the end of the financial world, only supposition, borrowing the Harvard epidemiologist’s three bases for decisions: data, analogies to past experience, and supposition.
    • The deployment logic was an asymmetry: if the financial world melts down and we invest, it does not matter; if it does not melt down and we failed to invest, we did not do our job. So they had to invest.
    • Bruce Karsh invested an average of $450 million a week for 15 weeks, roughly $7 billion in a single quarter, buying debt of private-equity-owned companies at prices where Oaktree would break even if the companies were worth a fifth or a fourth of what buyers had paid a few years earlier.
    • They were “absolutely not confident.” Marks argues people who think probabilistically and admit ignorance and uncertainty cannot act without trepidation, and that acting anyway is the job.
    • His memo “Taking the Temperature” reviews the five major macro calls of his career; every one was made with doubt. Markets crash because the news is terrible, and he reads the same terrible news as everyone else, then overcomes it.
    • The battle hero framing: a hero is not someone who is unafraid, but someone who is afraid and does it anyway. If you are running into a hail of bullets without fear, something is wrong with you.
    • The signature line: if you wait until you have nothing to be afraid about, the opportunity has probably passed.
    • Raising $11 billion rested on a reservoir of goodwill built since 1988, a strategy purpose-built for crisis with proven results in 1991 and 2001-02, the pitch that a crisis fund hedges portfolios positioned for prosperity, and the ability to point at specific flaws: the market was failing at its main job of acting as a disciplinarian and saying no to dumb ideas.
    • From the Spy Game movie: when did Noah build the ark? Before the flood. You cannot raise money during a crisis because the news is too terrible, so you build the ark in advance.
    • Oaktree’s contrarian fund sizing built its credibility: after a fund produced great results, the next fund was smaller, because great results meant assets had appreciated and opportunities had shrunk. Most managers raise bigger funds on the back of good numbers. Twenty years of that earned them trust when it counted, and sometimes you have to speak against your own interest.
    • During the 1998 LTCM meltdown, a young portfolio manager told Marks “I think this is it, we’re melting down.” Marks heard him out, then said: now go back to your desk and do your job.
    • He and Bruce Karsh have been partners for 39 years and have never had a fight, partly because neither is a financial maximizer and most fights are about money. They have intellectual disagreements, not fights.
    • The keys to partnership, from his 2002 memo: shared values and complementary skills. One aggressive partner and one timid one, or one ethical partner and one corner-cutter, cannot last.
    • The cowboys-and-chickens story: of the roughly 40 investment banks on the AT&T tombstone ad, almost all eventually disappeared. In bad times the chickens say the cowboys are getting us killed; in good times the cowboys say the chickens are holding us back. Mismatched values kill firms.
    • Complementary skills mean each partner can do things the other cannot, so both are additive. If one partner can do everything, the other is eventually seen as overpaid. Bruce manages the money; Howard goes on the road and does the podcasts. The third element: be appreciative, and thank your lucky stars your partner does the things you do not want to do.
    • On parenting: a Wall Street psychiatrist observed that his patients’ problems were inversely proportional to the support they got from their fathers. Marks finds it terrible how many successful men need to assert superiority over their sons, and says he always let Andrew be smarter than him in some things.
    • When his daughter had to choose between two good schools, he and his wife let her decide, on the logic that neither option was bad and kids need experience making choices, including incorrect ones.
    • His favorite quote, from Christopher Morley: there is only one success, to live your life your own way. You cannot let friends, parents, or society decide what you should do. Find something that plays to your strengths, avoids your weaknesses, and makes you happy, while knowing that in 20 years you will be a different person.
    • By his own account, Marks made his early career decisions unconsciously and haphazardly until about age 49-50, when he left to start Oaktree in 1995. He landed in high yield bonds because a boss called him in 1978 about “a guy named Milken in California,” and if that call had come at lunchtime, someone else would have gotten the career.
    • The Mark Twain rule: it ain’t what you don’t know that gets you into trouble, it’s what you know for certain that just ain’t true. No sentence starting with “I could be wrong, but” ever hurt anyone; the dangerous sentence is “I’m 100% convinced.” If you bet like you are 100% right and it was really 80/20 and the 20 comes up, that is how you get into big trouble.
    • The Buffett relationship began with Enron’s collapse: Oaktree was the largest holder of the debt of off-balance-sheet entity Osprey, Buffett was second largest, and Buffett gave Oaktree his proxy to run the position. Bruce’s masterful restructuring led to a thank-you letter, a lunch in Omaha, and a friendship.
    • Buffett is the reason the first book exists: in 2009 he told Marks “you should write a book, and if you do, I’ll give you a blurb.” Marks had planned to write one in retirement, but you cannot let a note like that sit. The result was The Most Important Thing.
    • What people do not know about Buffett: the depth of his love for Charlie Munger. Buffett’s farewell note described Charlie as the big brother and himself as the little brother, and their relationship was suffused with humor. Marks says the same dynamic describes him and Bruce.
    • Munger’s greatest credited contribution was talking Buffett out of cigar butt investing (picking up discarded companies with three free puffs left) and convincing him to buy great companies at a good price instead of any company at a great price.
    • Buffett and Munger probably had the highest combined IQ of any partnership in history, but different kinds: Munger a classicist, humanist, and man of letters who talked about ideas rather than money; Buffett an incredible computing machine.
    • Book recommendations: A Short History of Financial Euphoria by John Kenneth Galbraith, on the mental weakness that gives rise to booms and busts, and Fooled by Randomness by Nassim Nicholas Taleb, on why in the short run anything can happen, which shapes attitudes toward risk, portfolio construction, and whether a great published track record means skill or luck.

    Detailed Summary

    Changing His Mind on AI

    The conversation opens with the story behind Marks’s updated AI memo. He wrote the first version around December 9th. In early February his son Andrew, a venture capitalist whose portfolio companies use and build AI, told him: “Dad, so much has happened. You have to update the memo.” Marks rewrote it entirely. When the hosts needle him that the sequel sounds “a little seduced,” he pushes back on the framing: he upgraded his opinion because of observable capabilities, including AI’s ability to discuss its own strengths and weaknesses, use humor, and contextualize information to the specific person using it. He identifies two qualities he considers historically unprecedented. First, autonomy: everything from the railroad to the internet was a tool to speed humans up, while AI can be handed a job without being told how to do it, which is also the source of the nagging concern that it may take over. Second, unpredictability: he never once thought the internet was beyond comprehension or prediction, but with AI he says nobody knows the shape of the future.

    What AI Does to Investors

    Asked whether AI will be able to do what he does, Marks reaches for the indexation precedent: index funds revealed that most active equity managers could not do what they claimed, and pushed many out of the business. AI, he says, will “defrock another group of people whose talents are not as great as they purport.” He recalls his old line about computers, which could only read, remember, add, subtract, and compare, yet still beat most people because they did those five things with more data, faster, and without arithmetic or emotional errors. The decisive question for AI is whether its list of capabilities is limited or unlimited, and he admits he does not know. The hosts note that Buffett reading the Moody’s manual page by page is now a task AI does in a heartbeat. What might remain human: events with no history to train on, since so much of AI is pattern recognition over history; superior intuition about the probability distribution of future events; and people judgment, the undefinable signal when the hair on the back of your neck goes up about someone. If AI has no hair on its neck, experienced investors with judgment keep a role.

    Second-Level Thinking and the Limits of Teaching Insight

    Marks retells the origin of his first book: Columbia asked for a sample chapter, he sat down and wrote one he had never consciously thought about, and it became chapter one, on second-level thinking. The idea: if you do not see anything different from everybody else, you cannot possibly be superior. You need a variant perception, a belief that consensus overstates or understates a company’s quality, growth, earning power, or deserved multiple; you must bet on that perception; and you must be right. Can it be taught? He says the answer is more no than yes. He can teach the importance of second-level thinking, but not how to have perceptions that are both contrarian and correct. His analogy: in basketball you cannot coach height, and in investing there is something called insight that some people simply have. Whether AI can have it is, for him, bound up with the AGI question and genuinely unknown.

    Lehman, the $11 Billion Fund, and Investing at the End of the World

    Oaktree’s biggest call illustrates decision-making with no precedent. Before 2007, the largest distressed debt fund in history was Oaktree’s own $2.5 billion 2002 fund. Sensing distress coming, they raised $11 billion in 2007-08 and kept it on the shelf. Then Lehman Brothers failed on September 15, 2008, and people were talking about the end of the world, all financial institutions melting down, everything having to do with money atomizing. Marks cites a Harvard epidemiologist: decisions rest on data, analogies to past experience, and supposition, and at that moment there was no data and no past experience. The reframe that unlocked action: if the financial world melts down and we invest, it does not matter; if it does not melt down and we did not invest, we did not do our job. Bruce Karsh deployed an average of $450 million a week for 15 weeks, about $7 billion in a quarter, buying debt of companies bought by private equity years earlier at prices where Oaktree would break even even if the companies were worth a quarter or a fifth of the buyout price. Quantitatively easy, emotionally brutal: they were, in his words, absolutely not confident.

    Trepidation Is the Price of Admission

    Marks generalizes the feeling in his memo “Taking the Temperature,” which reviews the five major macro calls of his career: all were made with doubt. Markets crash because the news is terrible, and he consumes the same news feeds as everyone else, so the terrible news looks terrible to him too. The difference is overcoming it. People who look at the world probabilistically and admit ignorance and uncertainty cannot act without trepidation, and if you act without any, something may be wrong with you. He recalls the 1998 LTCM and Russian ruble crisis, when a young portfolio manager came to him convinced everything was melting down; Marks heard his concerns and sent him back to his desk to do his job. The battle hero is not unafraid; he is afraid and does it anyway. And the line that anchors the episode: if you wait until you have nothing to be afraid about, the opportunity has probably passed.

    How You Actually Raise $11 Billion

    Pressed on the mechanics of raising the fund, Marks lists the ingredients. Twenty years of managing money well since 1988 created a reservoir of goodwill. The strategy was purpose-built for crisis, with excellent results through the 1991 and 2001-02 downturns. The pitch positioned the fund as a hedge: most investor portfolios are set up for prosperity, so it makes sense to own something that does particularly well when the stuff hits the fan. And Oaktree could point at specific flaws in the environment, chiefly that the market was failing at its main job of acting as a disciplinarian, the job of telling people that a dumb idea does not make sense and will not be funded. When the market stops saying no, dumb ideas get financed, and when they turn out to be dumb, people lose money. He adds the Spy Game line he and his wife love: when did Noah build the ark? Before the flood. You cannot raise money during a crisis because the news is too terrible. Finally, credibility compounding: Oaktree repeatedly raised smaller funds after successful ones, reasoning that great results meant opportunities had shrunk. Two decades of speaking against their own interest meant that when Howard and Bruce said there was a great opportunity, investors believed they meant it.

    39 Years with Bruce Karsh: Shared Values, Complementary Skills, Appreciation

    Marks calls his partnership with Bruce Karsh, 39 years old that month, one of the greatest things in his life after family and close friendships. They have never had a fight, which he attributes partly to neither being a financial maximizer, since most fights are about money. His 2002 memo formula: shared values and complementary skills. Mismatched values, like one cowboy and one chicken, or one ethical partner and one corner-cutter, doom a firm; he illustrates with the AT&T tombstone ad listing roughly 40 investment banks, nearly all of which eventually vanished as the chickens blamed the cowboys in bad times and the cowboys mocked the chickens in good times. Complementary skills mean each partner does what the other cannot: Bruce approached Marks in 1987 with the novel idea of a distressed debt fund, and from the beginning Bruce stayed back managing money while Howard went on the road and, later, on podcasts. The third element is appreciation: thank your lucky stars you have a partner who will do the stuff you do not want to do.

    Parenting Without Asserting Superiority

    Asked how he raised a son he not only loves but enjoys, Marks cites a decades-old Forbes profile of the only psychiatrist with an office on Wall Street, whose patients’ problems were inversely proportional to the support they got from their fathers. He marvels at how many successful men need to prove they are smarter than their sons, and says he always let Andrew be smarter than him in some things while giving full support to whatever his kids wanted to do, provided it was not injurious. When his daughter got into both good Los Angeles schools, he and his wife had a preference but let her choose, reasoning that they could be wrong, neither option was bad, and children need experience making choices, including incorrect ones.

    Live Your Life Your Own Way

    On career choice, Marks confesses he did a terrible job himself: his decisions for his first decades were unconscious and haphazard, and by his own account he did not really make intentional choices until he left to co-found Oaktree in 1995, around age 49. He went to Citibank because of a good summer job, moved from equities to bonds because his equity research was unsuccessful and he was told to get out, and moved to California for sunshine and palm trees. In 1978 the head of the bond department called the fairly idle Marks about “a guy named Milken or something in California” dealing in high yield bonds, and a legendary career resulted from being at his desk when the phone rang, a story straight out of Outliers. His advice to students at Wharton, Harvard, and Columbia is built on his favorite quote, from writer Christopher Morley: there is only one success, to live your life your own way. Find something that plays to your strengths, avoids your weaknesses, and makes you happy, which really means refusing to let friends, society, or parents decide for you, while accepting the hard truth that you will be a different person in 20 years and must choose anyway.

    Humility as Risk Management

    When the hosts remark on his humility, Marks turns it into a risk framework via Mark Twain: it ain’t what you don’t know that gets you into trouble, it’s what you know for certain that just ain’t true. No sentence beginning “I could be wrong, but” or “I don’t know, but” ever got anybody into trouble; the dangerous sentences begin “I’m 100% convinced that.” If you bet as though you are certain and the odds were really 80/20 and the 20 comes up, that is how you get into big trouble. You make the investment because you believe in it, but you must see the other side.

    Buffett and Munger Stories

    The Buffett friendship began in the wreckage of Enron, which did most of its misbehavior through off-balance-sheet entities. Oaktree became the largest holder of the debt of one called Osprey; Warren Buffett was the second largest, gave Oaktree his proxy, and let Bruce run the position, which Bruce restructured masterfully for a big win. Around 2003-04 Buffett wrote Bruce a note saying nice job, and if you find yourself in Omaha, we’ll have lunch; Bruce and Howard promptly found themselves in Omaha. In 2009, Buffett told Marks he should write a book and promised a blurb, which is why The Most Important Thing exists years before the retirement book Marks had planned. What people do not know about Buffett, Marks says, is the depth of his love for Charlie Munger, expressed in Buffett’s farewell note describing Charlie as the big brother and himself as the little brother. Munger’s celebrated contribution was talking Buffett out of cigar butt investing, the practice of picking up discarded companies for three free puffs, and toward great companies at a good price. They probably had the highest combined IQ of any partnership in history, but of different kinds: Munger the classicist and man of letters who preferred talking about ideas over money, Buffett the incredible computing machine.

    Homework from Howard Marks

    His two book recommendations: A Short History of Financial Euphoria by John Kenneth Galbraith, which shaped his objective view of cycles by teaching the mental weakness that gives rise to booms and busts (he was lucky enough to meet Galbraith), and Fooled by Randomness by Nassim Nicholas Taleb, which argues that in the short run anything can happen because of randomness, with consequences for how we think about risk, portfolio construction, and whether a hot track record reflects skill or luck. He notes, with characteristic self-awareness, that his belief in randomness may be his rationale for not being a decisive thinker, and offers his own memos as the “classic comic” version of Taleb. The episode closes with a nod to his January 2021 memo Something of Value, written after three generations of the Marks family spent the pandemic under one roof arguing about value investing with Andrew.

    Notable Quotes

    “If you wait until you have nothing to be afraid about, probably the opportunity has passed.”

    Howard Marks, on why great investments are made with fear intact

    The thesis of the whole conversation, delivered in the cold open and again in the LTCM story.

    “Second level thinking basically says if you don’t see anything different from everybody else, you can’t possibly be superior.”

    Howard Marks, explaining the first chapter of The Most Important Thing

    The variant perception requirement: see it, bet on it, and be right.

    “In basketball there’s a saying, you can’t coach height. And I think there’s something called insight. And I think some people have it.”

    Howard Marks, on why second-level thinking probably cannot be taught

    Also his open question about AI: whether machines can ever have insight.

    “But if we don’t invest and the financial world doesn’t melt down, then we didn’t do our job. So, we have to do it.”

    Howard Marks, on Oaktree’s reasoning the week Lehman Brothers failed

    The asymmetry that justified investing $450 million a week for 15 weeks.

    “A battle hero is not somebody who’s unafraid. It’s somebody who’s afraid but does it anyway.”

    Howard Marks, sending a panicked portfolio manager back to his desk in 1998

    His answer to the LTCM-era fear that everything was melting down.

    “When did Noah build the ark? Before the flood. You got to build the ark before the flood.”

    Howard Marks, quoting the movie Spy Game on raising crisis funds in advance

    Why the $11 billion was raised in 2007-08 and kept on the shelf.

    “No sentence that starts with I could be wrong but or I don’t know but ever got anybody into trouble. The sentences that get people into trouble are I’m 100% convinced that.”

    Howard Marks, channeling Mark Twain on certainty

    His practical definition of humility as a risk-management tool.

    “The key to a successful partnership is shared values and complementary skills.”

    Howard Marks, on 39 years with Bruce Karsh, from his 2002 memo

    Plus the third element he adds now: appreciation for the partner who does what you will not.

    “There is only one success to live your life your own way.”

    Howard Marks, quoting writer Christopher Morley, his favorite line for students

    The advice he gives at Wharton, Harvard, and Columbia, and admits he did not follow until age 49.

    Watch the full conversation with Howard Marks on My First Million here.

    Related Reading

  • Lloyd Blankfein on the 3 Sectors Where He Puts His Money Now: Big Tech, Energy, and Financial Services, Day Trading From an iPad, and the Warren Buffett Handshake That Backed Goldman in 2008

    Lloyd Blankfein spent almost 40 years at Goldman Sachs, the last dozen as its chairman and chief executive, and he still trades almost every day from an iPad. In this wide ranging conversation on the My First Million podcast, the former Goldman boss lays out exactly where he is putting his own money right now, why a supportive spouse beats nearly any investment, how Warren Buffett wired five billion dollars into Goldman on a handshake during the 2008 crisis, and why he reads medieval history to stay calm about the present. It is part stock picking, part risk philosophy, and part a frank accounting of money, marriage, and the scars of growing up in the projects.

    TLDW

    Blankfein says he is roughly 98 percent in risky assets, almost all equities, and concentrated in three sectors he knows cold: big tech, energy, and financial services. His personal book leans heavily into single stocks over ETFs, weighted toward the big hyperscalers and a few second tier names, and he trades daily, alone, from an iPad and a phone, using calls and texts as his research network. Yet the advice he gives a normal investor is the boring opposite: a diversified S&P 500 fund like VOO, more risk when you are young because you will outlive your mistakes, the same thing Warren Buffett would tell you. The conversation ranges across the 2008 Buffett investment in Goldman, the cost of trying to legislate risk out of markets, the thin margin between the best and the rest, luck and the myth of the genius, why reputation is the real contract on Wall Street, why a supportive spouse is the highest return asset he knows, the money anxiety he carried out of a Brooklyn housing project, the dignity of a 500 dollar financial aid check, giving with a warm hand versus a cold one, the dangers of gamified investing, the big misses like SpaceX and early cellular, the obituary test a senior partner once gave him, and why reading history keeps the present in proportion.

    Thoughts

    The most useful tension in this interview is the gap between what Blankfein practices and what he preaches. He tells young people to buy a diversified S&P 500 index fund, he holds VOO himself, and he calls the host’s plain 90 percent stocks and 10 percent bonds split sensible. Then he admits his own portfolio is something like 90 percent single stocks that he trades by hand every day. The honest read is that his edge is not a transferable tip. It is a 40 year information network of phone calls and a tolerance for risk that most people neither have nor should want. The replicable lesson is the boring half, not the day trading half.

    The most contrarian idea here is not a stock pick, it is his defense of risk itself. His argument that regulators trying to prevent the hundred year storm also forfeit the 99 normal years of growth in between is a serious claim about the price of safety, and it travels far beyond Wall Street. The same goes for his point that a good risk manager sometimes has to push people to take more risk, not less. The moment after a loss, when everyone goes gunshy, is exactly when the best operators lean back in. That is an uncomfortable thing for a former bank CEO to say out loud, and it is the part of the conversation most worth sitting with.

    The Warren Buffett story is a master class in what actually moves markets, and it is not cash. Goldman did not need the five billion dollars. Blankfein says the money was almost irrelevant because the firm already had money. What it could not manufacture was confidence, and Buffett’s name supplied it. The handshake, the commitment with no paperwork, the line about worrying enough for the both of us, all point to the same thing. At the top, reputation is the collateral. His aside that most trades are never written down because you will never eat lunch in this town again is the same idea wearing street clothes.

    Quietly, the personal finance thread may be the most valuable part for a normal listener. A former Goldman CEO saying that a supportive partner is more game changing than any investment, that a bad marriage is financially worse than being lonely, and that he has not paid a bill in over 40 years because his wife runs the household economy, is a reminder that household stability is itself an asset class. The 500 dollar financial aid check he still remembers half a century later, and his give with your warm hand philosophy, reframe wealth as something measured by how it feels to give and to receive, not just by the size of a pie chart.

    Finally, the history obsession is not a side hobby, it is his risk model. Reading about the black plague, the McCarthy era, and the Vietnam draft is how he keeps the present in proportion. His Mark Twain line, that history does not repeat but it rhymes, is the direct antidote to the in this economy defeatism he and the host both complain about. For an investor, that long view is close to the whole game. It is what lets you hold through the drawdowns that scare everyone else out of the market.

    Key Takeaways

    • Blankfein estimates he is about 98 percent in risky assets, with roughly 95 of those 98 points in equities, and the rest spread thin. He invests in risky assets because, in his words, that is what is fun for him.
    • Within his equities, he is heavily tilted toward single stocks rather than ETFs. He frames it as roughly a quarter to a third in ETFs and the rest in single names, and concedes it could be as lopsided as 90 percent single stocks because picking names is what he enjoys.
    • The three sectors he has concentrated in for years are big tech, energy, and financial services, and he says his outperformance comes from where he focused, not from any special genius.
    • On tech he owns the big hyperscalers, the Googles, Microsofts, and Nvidias of the world, plus a tier just below them, naming Oracle and Larry Ellison as an example of a slightly riskier second tier name. He thinks in categories, not fixed tickers, because he changes positions constantly.
    • He says he has a background in trading energy, which is why energy is a core sleeve, and he knows financial services from the inside after almost 40 years at Goldman, so those are natural areas of edge.
    • He still owns a lot of Goldman Sachs stock, out of affection for the firm he spent his career building.
    • He is bullish on big tech and plans to stay bullish until it stops going up. His foreseeable future, he jokes, lasts until he finishes the conversation and checks the screen again.
    • He trades every single day, alone, with no team. He does it from an iPad and a phone, not a computer, and treats the market like background music rather than a job.
    • His research is human, not algorithmic. He chats and texts with people, then calls them because he is tired of fixing typos, and he reads the New York Post, the Wall Street Journal, the New York Times, the Financial Times, and Bloomberg.
    • The advice he gives ordinary investors is deliberately boring and different from his own behavior: hold a diversified equity portfolio like an S&P 500 fund, with VOO as his own example, and tilt more aggressively when you are young because you have time to outlive mistakes.
    • He notes that broad indexes are already heavily weighted toward tech because of market cap, so a plain index gives meaningful tech exposure, and a tech focused ETF on top can add a disproportionate tilt for believers.
    • He calls the host’s simple 90 percent index and 10 percent bonds allocation sensible, and says this is essentially the same advice Warren Buffett would give a normal person.
    • The older you get, the more conservative you should become, shifting from maximizing gains toward not losing what you have. Young people can afford more risk precisely because they will outlive their errors.
    • During the 2008 financial crisis, Warren Buffett invested about five billion dollars in Goldman through a preferred stock structure, essentially on a phone call and a handshake, with no demand for due diligence.
    • Buffett’s real value was confidence, not capital. Goldman already had money, but it had lost the confidence of the market while peers were failing. Buffett’s name signaled the firm was a good investment being beaten down by circumstances that would reverse.
    • Buffett asked for a verbal commitment that Goldman would not sell shares before he did, and declined to put it in writing. He waved off the worry with the line that five billion dollars going bad would not even be a bad hurricane for Berkshire, an insurer.
    • Most trading is done on reputation, not paper. Blankfein says people buy and sell bonds worth enormous sums without written contracts, relying on probity, because anyone who reneges will never eat lunch in this town again.
    • On risk and regulation, he argues you cannot legislate risk away. Trying to prevent the hundred year storm also forgoes the 99 in between years of growth, and a good risk manager sometimes has to encourage people to take risk, not suppress it.
    • The best traders have resilience. They bounce back, focus on new information rather than the past, and adapt quickly instead of staying gunshy after a loss.
    • The difference between someone who is really good and someone who cannot make it is small. He compares it to a golf tournament won by one stroke with six people tied for second, and notes much of life is winner take all at razor thin margins.
    • Luck matters enormously. He became Goldman CEO partly because his predecessor was nominated to be Treasury Secretary, a reference to Hank Paulson, and the timing of opportunities is often out of your control.
    • He is skeptical of the word genius. He says he can usually see how successful people do what they do, with Elon Musk as a rare exception, and that powerful people are more normal, more insecure, and more flawed than outsiders assume.
    • On democratized investing, he thinks apps that make markets accessible are good in their own terms, but gamifying trading with confetti and high fives can mask real danger for people who can lose more than they can afford.
    • He has missed plenty. He thought SpaceX was overpriced at a 100 billion dollar valuation, now discussed near a trillion and three quarters, and passed on early cellular because he could not imagine why anyone would carry a bulky phone when payphones existed. He says he missed far more than he got.
    • He frames a supportive spouse as more game changing than almost any investment, and warns that a bad marriage, with custody fights and property settlements, is financially and personally worse than being lonely.
    • He has not paid a bill in over 40 years. His wife Laura, a former lawyer he says now chairs Barnard College, runs a bill paying service and manages the household economy. He generates the money, she distributes it.
    • He grew up in an East New York, Brooklyn housing project, the son of a postal worker, and carried money anxiety well into his 30s. He recalls buying a vacation home that cost more than all their savings, with his wife unable to make the math work until they remembered the down payment.
    • A 500 dollar financial aid check, handed to him without shame as a college freshman around 1971, shaped his philosophy on giving. He learned it is not enough to give people what they need, you have to give it in a way that feels dignified.
    • He embraces the give with your warm hand, not your cold hand idea, the notion of giving while alive so you can experience the joy, which connects to the spirit of the book Die With Zero.
    • He admits ambivalence about giving to his kids, the strange feeling of resenting that they have what he provided, and notes the heavy burden carried by children of prominent people who must prove they earned their place.
    • He describes himself as wired for anxiety, inherited from his father, and says looking around corners for what could go wrong actually suited a career in a risky business with a big balance sheet.
    • When he made partner, a senior partner gave him rules of the road, including avoiding misconduct, being conservative on taxes, setting up a charitable foundation, and living so that no more than three of the nine paragraphs in his eventual obituary would be about Goldman. He says he stayed too long to pass that test.
    • He reads history as a discipline, favoring Barbara Tuchman, Robert Caro’s The Power Broker, Ron Chernow, Rick Atkinson, and Stephen Ambrose. His core belief, borrowed from Mark Twain, is that history does not repeat but it rhymes, which is why he would not bet against America.

    Detailed Summary

    The three sectors he actually invests in

    The headline answer to where the former Goldman CEO is putting his money is simple: big tech, energy, and financial services. He says he has been focused on those three areas for a long time, and that his outperformance is a function of where he aimed rather than any unusual investing gift. Energy is natural because he has a background trading it. Financial services is natural because he spent nearly 40 years inside the industry. Tech is where he is most heavily concentrated, and he expects to stay there for good reason, citing the threshold of large changes in technology. He owns the major hyperscalers by category, the Googles, Microsofts, and Nvidias, plus a tier just below, offering Oracle and Larry Ellison as a polite example of a slightly riskier second tier name. He is careful to say he thinks in categories rather than fixed tickers because he changes his positions all the time.

    How the portfolio is really built: single stocks over ETFs

    Asked to describe his portfolio as a pie chart, Blankfein says he is about 98 percent in risky assets, with roughly 95 of those points in equities. He pushes back on the idea that index funds are safe, pointing out that a diversified equity ETF is still equities and still risky, just spread out, and very different from debt or short term money markets. Within his equity sleeve he leans into single stocks, framing it as somewhere between a quarter and a third in ETFs and the rest in individual names, and conceding it might be as extreme as 10 percent ETFs and 90 percent single stocks. The reason is preference, not theory. Picking and trading names is what he likes to do, and he is honest that this is a hobby pursued by a professional, not a model for someone investing for a living.

    How he actually trades: an iPad, a phone, and a network

    He trades every day, by himself, with no team. There is no Bloomberg terminal and no desk of analysts. He uses an iPad and a phone, and admits it takes discipline not to glance at his screen mid conversation. The market, he says, is like music playing in the background while he does other things. His information edge is relational. People text him, he texts back, and then he calls because he is tired of fixing typos with what he calls his fat fingers. He follows general and business news, reads a stack of newspapers starting with the New York Post, and treats companies like little stories, almost like gossip. He even notes, with some delight, that he still watches commercials on Netflix, a small window into a frugality that never fully left him.

    The advice he gives young investors, and what Buffett would say

    For a normal person, his counsel is the opposite of his own behavior. He would hold a diversified portfolio of equities like an S&P 500 fund, naming the SPY and VOO tickers and saying he personally uses VOO. Because of the importance of technology, he might add a tech oriented ETF for extra tilt, while noting the broad index is already tech heavy by market cap. He endorses the host’s plain 90 percent index and 10 percent bonds split as sensible and says it mirrors what Warren Buffett would advise. His one piece of age based guidance is that younger investors should accept more risk through equities, because they have time to recover, while older investors should grow more conservative and focus on not losing what they have rather than maximizing returns.

    The Warren Buffett handshake that backed Goldman in 2008

    The most cinematic story in the conversation is Buffett’s roughly five billion dollar investment in Goldman during the financial crisis, structured as a preferred stock that sits between a loan and equity. Blankfein describes a deal done largely on trust. When he offered to walk Buffett through everything he was worried about, Buffett replied that he knew Lloyd well enough to know he worried enough for the both of them. Buffett also asked, verbally and without writing, for a commitment that Goldman would not sell shares before he did. Blankfein is clear that the cash itself was almost irrelevant, since Goldman had money. What the firm lacked was the confidence of a frightened market, and Buffett’s willingness to invest before things improved supplied exactly that signal. Buffett, he stresses, was acting for his own shareholders, not as a rescuer, which is precisely what made the vote of confidence credible.

    Why you cannot legislate risk out of the system

    Reflecting on the post crisis regulatory push to make sure 2008 never happened again, Blankfein makes a careful argument about the price of safety. Once you are in the business of taking risk, anything can happen, and trying to legislate it away has a hidden cost. You may think you are protecting the world from the hundred year storm, but you also forgo the 99 years of growth in between. He extends this inside the firm too. After a period of big losses, partners had become gunshy and were talking themselves out of every idea. A good risk manager, he argues, sometimes has to promote risk taking rather than repress it, because without risk there is no growth, no entrepreneurship, and no progress. The flip side is real: take risk and there is a meaningful chance you fail and lose other people’s money, which is a terrible outcome. But the alternative, never risking anything, buys comfort at the cost of ever moving forward.

    Small margins, big outcomes, and the role of luck

    Asked what separated the traders who could not outperform from the rest, Blankfein says the gap between the very good and those who cannot make it is surprisingly small. He likens it to a golf tournament decided by a single stroke with six players tied for second, and to acting, where the best performer gets every role and the second best waits tables. Much of life, he says, is winner take all at tiny margins. Luck compounds this. He freely credits fortune for his own rise, noting he became CEO in part because his predecessor was tapped to be Treasury Secretary. He is also skeptical of the genius label. He can usually see how accomplished people do what they do, with Elon Musk a rare exception, and insists the powerful are more normal, more insecure, and more driven by their flaws than outsiders imagine.

    Reputation is the real contract

    A recurring theme is that the financial world runs on reputation more than paperwork. Blankfein notes that most of what traders do is not written down. People buy and sell bonds and other instruments that settle days later, relying on probity rather than signed contracts, because anyone who lies or reneges will never eat lunch in this town again. He references the casual texts between Elon Musk and Larry Ellison around the Twitter acquisition as proof that big does not mean complicated. There are big things that are simple and little things that are complicated. Documentation is good when execution is far off, but when a deal will be performed in two days, dotting every i is often pointless. The point is not that documents do not matter, it is that trust and reputation are the load bearing structure.

    A supportive spouse as the highest return asset

    The conversation turns personal when both men agree that a supportive partner may be the single most game changing factor in a life, more than any investment. Blankfein adds the inverse warning: a bad marriage, with breakups, custody battles, and property settlements, is worse than loneliness. He credits his wife Laura, a former big firm lawyer he says now chairs Barnard College, with handling everything when his career moved the family overseas, from the car to the house to the kids’ schooling, while he took the visible victory laps at work. He has not paid a bill in over 40 years. Laura manages a bill paying service and runs the household finances. As he puts it, he is in charge of generating the money and she is in charge of distributing it. The host contrasts this with his own monthly money meetings with his wife, a discipline he picked up from a personal finance author friend.

    Money scars, the 500 dollar check, and giving with a warm hand

    Blankfein grew up in an East New York housing project, the son of a postal worker who had earlier lost a job, in a household where rent was scarce. He calls himself an urban hick who barely left Brooklyn as a kid. That scarcity left a mark that lasted into his 30s. He tells the story of buying a small beach house that cost more than all their savings, and of his wife driving 30 miles while failing to make the closing math work, until they realized she had forgotten to count the 10 percent down payment. The most resonant memory is a 500 dollar financial aid check handed to him as a freshman around 1971, made out on the spot by a clerk with a generosity of spirit that let him receive it without shame. That experience shaped a lifelong view that giving well means preserving dignity, and he now co chairs a financial aid campaign at his university. It also connects to his embrace of the idea of giving with your warm hand rather than your cold hand, giving while alive so you can feel the joy, the same spirit as the book Die With Zero. He is candid about a strange ambivalence, the way he can resent that his kids enjoy what he himself gave them.

    Robinhood, confetti, and the misses

    On apps like Robinhood, Blankfein takes a balanced view. Democratizing investing and making assets accessible is good in its own terms, and advertising can pull people toward markets they would otherwise ignore. But if you make trading too much like a video game, with confetti and high fives, you can mask the danger and lure people who cannot afford to lose into losing more than they can. He is equally frank about his own misses. He thought SpaceX was overpriced at a 100 billion dollar valuation, a figure now discussed near a trillion and three quarters. He passed on early cellular because he could not imagine why anyone would carry a bulky phone with payphones everywhere. His blunt summary is that he missed far more than he got, and that nobody is great at predicting the future.

    The obituary test, thick skin, and staying too long

    When Blankfein made partner, a senior partner assigned to acculturate new partners gave him rules of the road: avoid anything that would today be called misconduct, be rigorous and conservative on taxes, set up and actually use a charitable foundation, and keep enough balance that, if your obituary runs nine paragraphs, no more than three are about Goldman. Blankfein says he failed that last test by staying too long, even titling his memoir around the firm. He also reflects on having a thick skin, recalling unflattering press and concluding that he could take a punch, a trait not everyone has and one he did not know he possessed until he was tested. He is careful to say this does not make people who cannot take a punch bad, just differently wired.

    Why he reads history: it rhymes

    The final stretch is a love letter to reading history. Blankfein favors Barbara Tuchman, whose A Distant Mirror he has read twice and whose Guns of August he calls fantastic and influential, along with Robert Caro’s The Power Broker on Robert Moses, Ron Chernow’s biographies, Rick Atkinson’s Revolution series, and Stephen Ambrose’s Undaunted Courage. He describes rereading the Robert Moses book after 40 years of trying to get things done and finding his appreciation for the achievements rise, even as the flaws stayed the same, because he had changed. He ties history directly to markets through the Mark Twain line that history does not repeat but it rhymes. Patterns recur, every generation maximizes its own crises and minimizes resolved ones, and reading about the black plague, the McCarthy era, or the Vietnam draft is how he stays calm. His conclusion, echoing a sentiment often attributed to Buffett, is that he would not bet against America, a country he describes as mostly good and able to improve.

    Notable Quotes

    “I invest in risky assets. That’s what’s fun for me.”

    Lloyd Blankfein, describing his own portfolio, which he says is roughly 98 percent risky assets

    “It’s been good to be bullish on big tech, and I’ll stop being bullish on it when it stops going up.”

    Lloyd Blankfein, on why he stays concentrated in technology

    “I’m not at a computer. I don’t have a computer. I have an iPad.”

    Lloyd Blankfein, on how he day trades every day, alone and with no team

    “To me, the market is like music. It’s out there. It’s going on.”

    Lloyd Blankfein, on why trading daily feels like a hobby rather than work

    “Look, $5 billion if it all goes bad, that’s not even a bad hurricane on the East Coast.”

    Warren Buffett to Lloyd Blankfein, waving off the risk of his 2008 investment in Goldman Sachs

    “The difference between somebody who’s really, really good and somebody who can’t make it is not that great.”

    Lloyd Blankfein, on the thin margin between the best and the rest

    “You may think you’re protecting the world from the hundred-year storm, but you’re also going to forego the 99 years of in between when there was growth.”

    Lloyd Blankfein, on the cost of trying to legislate risk out of markets after 2008

    “I’m in charge of generating the money, and she’s in charge of distributing it.”

    Lloyd Blankfein, on his 40-plus-year marriage to Laura and why he has not paid a bill in decades

    “History doesn’t repeat, but to paraphrase Mark Twain, it rhymes.”

    Lloyd Blankfein, on why reading history keeps the present in proportion

    Watch the full conversation with Lloyd Blankfein on the My First Million podcast here.

    Related Reading

    • Lloyd Blankfein (Wikipedia) background on the former Goldman Sachs chairman and CEO whose investing views anchor the conversation.
    • My First Million podcast the show where this interview took place, for the full back catalog of investor and founder conversations.
    • Berkshire Hathaway primary source on Warren Buffett’s company, which made the roughly five billion dollar Goldman investment in 2008.
    • Vanguard S&P 500 ETF (VOO) the diversified index fund Blankfein names as the sensible core holding for a normal investor.
    • Die With Zero by Bill Perkins the book behind the give with your warm hand, not your cold hand philosophy discussed near the end.

  • The Richest Man in Babylon: A Classic Guide to Building and Managing Wealth

    The Richest Man in Babylon: A Classic Guide to Building and Managing Wealth

    The Richest Man in Babylon is a classic personal finance book written by George S. Clason. The book is a collection of parables set in ancient Babylon, with each story offering valuable lessons on how to build and manage wealth.

    The main character in the book is Arkad, a poor scribe who becomes the richest man in Babylon through his wise use of money. Arkad’s success is attributed to the seven “cures” for a lean purse, which include starting thy purse to fattening, controlling thy expenditures, make thy gold multiply, guard thy treasures from loss, make of thy dwelling a profitable investment, ensure a future income, and increase thy ability to earn.

    The book is highly relevant to modern day as its lessons on money management, savings, and investment are timeless. The parables in the book offer simple yet powerful advice on how to achieve financial success, such as living below one’s means, investing in income-producing assets, and seeking wise counsel.