481 of 540 people found the following review helpful
on April 24, 2011
Just so you know where I'm coming from, I got the Kindle version early because I deeply respected Howard Marks and was excited to learn more about what he thought was the Most Important Thing (yes, I already read the oaktree memos). This book is intended to be Howard Marks' statement of investment philosophy, or his "religion" as he puts it. He counts among his peers Galbraith, Buffett, Munger, Klarman, Bernstein, Grantham, Greenblatt, Grant, and Bogle, all superinvestors in their own right, but also great investment authors (the two qualities don't necessarily coincide as we shall see).
I set out reading the thing, and even took notes. However, I soon realized that what I was reading wasn't worth noting down. I am writing this to provide fair warning to experienced readers, in full knowledge that this runs counter to the personal endorsements of Buffett and co. So I will be as specific as I can in my criticisms, and by all means buy it if you think I'm way off point. Caveat emptor.
First, the organization isn't great. Marks chooses to simply reprint a lot of his past stuff. This results in the book not being as crisp as it could be. I am not talking about a "magic formula for investing" in equations or sentences, which he explicitly says he is not providing and anyway I am not seeking. I am just asking for the basic, minimally repetitive, coherent flow of thought any investment author ought to provide to his readers in a single book.
Second, he even sort of tricks you in the title. I don't think you'll mind me spoiling this for you because it is so... lame: There is No One Important Thing. In fact, there are 18. And oh, yeah, a lot of them are minor variations of each other (Chapter 2 is on Understanding Market Efficiency. Chapter 19 is on Adding Value. You Add Value where Markets are Inefficient. wow!) Therefore the book, while short, is also much too long - Marks' entire philosophy is succinctly stated within Chapter 20 alone. I do not find anything that is said in any other chapter that is not better said in Chapter 20, except for the one new jargon that he coins, "second level thinking" (which is code for not being an idiot - "first level thinker" being a strawman hypothetical typical investor who invests like a headless chicken). In turn, this entire philosophy can be found in the eponymous memo that spawned all this verbiage: [...]
Further, experienced readers of investment books like myself will not find a lot new here. There is the obligatory anecdote about the prof walking away from the $10 bill lying on the ground. There is the distinction between an informational and an analytical edge, and the need for that over the rest of the market. There are -way- too many pithy quotes about the importance and difficulty of being contrarian. None of this is new, in fact it is the convention among investment authors, ironic for someone who stresses unconventional thinking. (Perhaps what is unconventional is that he actually practices these things. But if you're smart enough to get that, you don't need this book as anything more than a paperweight or conversation starter.)
I have found that the best way to describe this book is that "it must have been co-written by Captain Obvious". I have one final example for you if you remain on the fence about whether to buy the book. In chapter 19 he introduces the reader to the concepts of alpha and beta (yes, this book really is that introductory) and states his belief that alpha is not zero. The key to achieving nonzero alpha is apparently "superior insight". I have now entirely spoiled chapter 19 for you - it gets no more insightful than that. Ditto the rest of the book, this chapter was just the most fresh in my memory.
I'm sorry, but NOTHING in this book will tell the experienced investment reader anything he doesn't already know. By all means buy it if you still respect the guy anyway, I sure did. But absolutely do not buy if you (again, speaking only to the experienced reader) expect to gain anything new from it.
(5/5/11 - original review edited for errata and writing style - didn't feel the original review reflected what i wanted to say as it was written hastily and late-at-night.)
46 of 48 people found the following review helpful
on June 10, 2011
I have read Howard's memos for years so was excited to see a book come out under his authorship.
I highly recommend buying this book if you are unfamiliar with Howard. His views on investing are invaluable.
If you are like me, however, you may find this book to be a bit of a let down as it relies heavily on his old memos (all of which are free on the Oaktree website). The book literally rewrites important segments of his memos and then adds a bit of color here and there. I find it convenient to have the most important points of his memos in one place and nicely summarized, but that's about it.
20 of 20 people found the following review helpful
on March 16, 2012
How does one write a review for a book when it has been praised by Jack Bogle, Jeremy Grantham, Joel Greenblatt, Seth Klarman, and Warren Buffett? I am a midget among giants. I can't write this, but I am going to try.
Being a teensy part of the investment fraternity that calls itself value investors, I do have some perspective on this book. The joke of sorts is that there are many things that are "the most important thing." But I think the point of the author is that what is most important shifts, depending on the market environment.
But all of "the most important things" can be boiled down to four main concepts:
Margin of Safety
Buy it Cheap; Valuation
Think beyond the initial effects to secondary effects. Think holistically.
By margin of safety, there are many things implied -- a strong balance sheet, strong cash flows, conservative accounting, and/or protected market position. The important thing is to prevent a large loss. If you can prevent large losses, the gains will come eventually.
Buying it cheap is also a simple concept, though hard to implement well. What metric to use? Price to Earnings, Cash Flow, Book, Free Cash Flow, EBITDA? Where to look in the capital structure for value? The equity may be too risky, but maybe the preferred stock or bonds might be interesting.
Contrarianism means looking for what others rely on that may not work, and investing against it, whether positively or negatively. It can't be mere opinion; the other side has to be invested, and relying on their hypothesis to succeed. That is the situation where investing contrary to the consensus can succeed.
Thinking holistically comes from being a bright student whether in the sciences or the liberal arts. It comes from being a life-long learner, and applying oneself to the problem until it yields at least a hint of an answer. Where it doesn't, cutting losses pays off.
I recommend this book to all who aspire after value investing.
Who would benefit from this book:
All value investors, and those who want to be value investors can benefit from this book. Those that want to understand how the economy really works will benefit as well.
63 of 74 people found the following review helpful
on April 26, 2011
Mr. Marks states that when he was attending client meetings over the years he noticed a pattern. He would say in one meeting that that such and such was the most important thing about investing and in later meetings he found himself referencing other items that he titled the most important thing to understand. Upon reflection about this pattern he decided to write a memo in July of 2003 that covered all these critical areas in his investing philosophy.
This new book expands upon the ideas he covered in that original memo. Topics that are covered include: market efficiency, value, risk, investment cycles, contrarianism, finding bargains, patient opportunism, circle of competence, luck, avoiding pitfalls, etc... In short all the topics that a focus investor needs to understand and be able to place, and use, in their own mental models.
What does Mr. Marks want his readers to gain from his book? Here are his own words from the introduction of the book:
"I didn't set out to write a manual for investing. Rather, this book is a statement of my own investment philosophy. I consider it my creed, and in the course of my investment career it has served like a religion. These are the things I believe in, the guideposts that keep me on track. The messages I deliver are the ones I consider the most lasting. I'm confident their relevance will extend beyond today.
You won't find a how-to book here. There's no surefire recipe for investment success. No step-by-step instructions. No valuation formulas containing mathematical constants or fixed ratios - in fact, very few numbers. Just a way to think that might help you make good decisions and, perhaps more important, avoid the pitfalls that ensnare so many.
It's not my goal to simplify investing. In fact, the thing I most want to make clear is just how complex it is. Those who try to simplify investing do their audience a great disservice. I'm going to stick to general thoughts on return, risk and process..."
Mr. Marks has succeeded in his goals in a brilliant manner. There is, quite simply, an incredible amount of wisdom between the covers of his book and an investor is doing them a disservice if they don't read, and re-read, this book. I will be placing it on my shelf right next to the great investments classics of Security Analysis, The Intelligent Investor, the Berkshire Hathaway annual reports, and Margin of Safety. Quite simply I can't recommend it highly enough.
13 of 14 people found the following review helpful
on February 8, 2012
A disappointing read given Howard Marks' reputation and thoughtful investing style. The book is a clumsy cut-and-paste job performed on the Oaktree shareholder letters (freely available on their website). After a promising first few chapters, the book fails to launch into any real meat. Clearly we need to use "second level thinking" to take into account the expectations of the rest of the market - but how does one put that into practice? Some nitty-gritty real world advice would not have gone amiss.
If you're looking for some investing wisdom from a successful practitioner read the Intelligent Investor by Ben Graham or Contrarian Investment Strategies by David Dremen. Both will provide a lot more value for your time and money (something you'll clearly appreciate as an investor!)
7 of 7 people found the following review helpful
on May 11, 2011
Oddly enough, I think it is important to start off with a disclaimer. The Most Important Thing is not a how-to book about investing. Marks doesn't provide a Joel Greenblatt-esque magic formula or any shortcuts to becoming a great investor. In fact, on the very first page of chapter one Marks reminds us that no investing rule always works. The book also does not separate out specific investment techniques for different asset classes. Instead, in the tradition of Ben Graham's The Intelligent Investor and Seth Klarman's Margin of Safety, it is a book on how to think about investing. In reality, Marks builds on the ideas of the most famous value investors by adding his own insights and anecdotes. For people who are devoted value investors, the philosophy he articulates will sound familiar and certainly will not drastically alter the way you invest. However, what is both unique and striking about this book is the way he breaks down the important aspects of his investment approach into very approachable and wisdom-filled sections. When the reader has finished the book, the lasting impression is that Marks was able to provide a comprehensive and detailed overview of his investment approach in less than 200 pages.
In his thoughtful and didactic way, Marks aims to help the reader develop the mental tools and investment framework that are required for success in this very difficult and treacherous domain. Specifically, using his four decades of experience as a basis, Marks introduces the reader to his investment philosophy with a combination of new material and a brilliant integration of passages from previous memos. The transitions between the original and previously articulated ideas are so seamless that Marks comes off like a wise grandfather who always has a perfectly poignant story to tell, no matter what the context.
I highly recommend The Most Important Thing to anyone who is interested in investing. I think both novices and experts can gain from being exposed to Marks's experiences and investment approach. I meet a lot of investors and read dozens of letters to investors and I rarely hang on the next word, anticipating that something earth shattering will be forthcoming. But, with Marks, there was constantly the feeling that the next sentence or paragraph could cause a light bulb to go on over my head. Somehow, in the most unassuming and modest manner, Marks is able to consistently articulate his insights in way that anyone can comprehend and learn from. Therefore, if you are like me and have been wishing to better understand what makes Marks and Oaktree different, I humbly suggest that you check out this new book.
16 of 19 people found the following review helpful
on December 29, 2011
I bought Howard Marks' book after seeing it advertised in The New Yorker magazine. A glowing short recommendation by Warren Buffett sold me! Yet I put down my highlighter after page 2, never to use it again. The first surprise is that the title is completely misleading. There is not one "most" important thing -- rather, 19 chapters are devoted to a total of 16 "most important things." Oddly, this doesn't make the book more helpful, because it is extremely repetitive & provides no details on the nuts-&-bolts of investing or how to determine value.
Part of the problem is that Marks structures his book around excerpts from monthly newsletters published by Oaktree Capital Management, his investment firm. One gets the sense that he paged through scores of old newsletters, seized on sections he liked most, and assembled chapters based on their themes: risk, economic cycles, contrarianism, value, et al. The result is a choppy, repetitive tome that, frankly, reads like one long advertisement of Oaktree, which is highly praised throughout as following all the principles Marks labels prudent. This self-satisfaction marred my enjoyment of the book.
I was also troubled by the fact that Marks referred several times to problems leading to the economic collapse of 2008, without once using the word "fraud." This is but one example of the book's vagueness & lack of specificity. Its overall theme can be summed up thus: "Don't do what all the other investors are doing." By contrast, John Bogle's remarkable "Little Book of Common Sense Investing" is not only filled with very specific tips as well as overarching analysis of broad trends in the world of investment, but shows a canny grasp of the reader. Bogle tells readers just what they should do to achieve "a fair share of stock market returns," then toward the end says in effect, "But I know you'll almost surely fail to adopt all my advice -- so here's what to do if you're tempted to 'play roulette.' " Brilliant! Would that Mr. Marks had taken such care with his book, or understood his readers as well as Mr. Bogle understands his.
7 of 7 people found the following review helpful
on September 3, 2011
For back to principles, especially for value investors, this book is one of the best. I'm a value investor and will probably read this book repeatedly over the years, especially when going through a rough patch economically or personally.
This isn't for specific financial analyses or specific stocks, if you're looking for that; it's about principles!
5 of 5 people found the following review helpful
on May 16, 2011
i liked this book overall. Marks does a good job digging into the importance of defining where the market is from a cycle perspective. This more than anything determines how much risk to embrace or when to reduce risk in an overall portfolio. No one has a clue how or when macro events may adversely impact prices down the road, but simply ascertaining where we are in the market cycle may prevent untimely leveraged plays or simply adding too much risk at the wrong time. Also i found myself highlighting great quotes and sound advice thoughout the book. No magic formulas here to make you rich just sound investment principals to keep you rich.
7 of 8 people found the following review helpful
on July 28, 2011
As an ardent reader of Oaktree's memos to clients, I had high hopes for this book. Unfortunately, the first five chapters read like Cliffs Notes for "The Intelligent Investor," a book on which the reader's time would be much better spent for both experienced an inexperienced investors alike; the ideas there are more thoroughly developed, more compellingly illustrated, and come directly from the father of value investing. I wish I could comment on the remaining two thirds of the book, but I put it down to re-read "Intelligent Investor" (again) instead.