Cognition

He had another rule, from psychology, which, if you're interested in wisdom, ought to be part of your repertoire—like the elementary mathematics of…

So there's an iron rule that just as you want to start getting worldly wisdom by asking why, why, why, in communicating with other people about…

So the most useful and practical part of psychology—which I personally think can be taught to any intelligent person in a week—is ungodly important.…

And that reaction of the robber barons was so irritating to people that it made it unfashionable to think of an economy as an ecosystem. But the…

Another advantage of scale comes from psychology. The psychologists use the term social proof. We are all influenced—subconsciously and to some…

CBS provides an interesting example of another rule of psychology—namely, Pavlovian association. If people tell you what you really don't want to…

For example, he gave something like 20% of CBS to the Dumont Company for a television set manufacturer which was destined to go broke. I think it…

You can say, "Is this a nice way to behave?" Well, capitalism is a pretty brutal place. But I personally think that the world is better for having…

For example, if you look around at bottler markets, you'll find many markets where bottlers of Pepsi and Coke both make a lot of money and many…

But Patterson, having the kind of mind that he did, didn't think, "Oh, good for my retail business." He thought, "I'm going into the cash register…

Well, so much for the basic microeconomics models, a little bit of psychology, a little bit of mathematics, helping create what I call the general…

If you invested Berkshire Hathaway-style, it would be hard to get paid as an investment manager as well as they're currently paid—because you'd be…

Finally, somebody got the idea to pay all these people not so much an hour, but so much a shift—and when it's all done, they can all go home. Well,…

However, in all fairness, I don't think a lot of money managers could successfully sell their services if they used our system. But if you're…

As I meet with clients and prospects, I repeatedly hear myself say, “the most important thing is x.” And then ten minutes later it’s, “the most…

Hopefully, if I offered to sell you my car, you’d ask the price before saying yes or no. Deciding on an investment without carefully considering…

As expressed by David Swensen of Yale, “. . . investment success requires sticking with positions made uncomfortable by their variance with popular…

At Oaktree we try to sit on our hands. We don’t go out with a “buy list”; rather, we wait for the phone to ring (while we do our research and…

In our funds over the years, we’ve made numerous successful investments that weren’t foreseen when the funds were formed. I think the key to bridging…

I believe strongly that some markets are quite efficient, meaning the collective actions of informed, diligent investors tend to make assets in those…

It also holds that since investors can’t add to returns through active management, the only way to increase returns is by accepting more risk. This…

To be able to do all of these things simultaneously, it helps to have a set of guiding principles and a well-thought-out approach. With these you can…

The reading materials for a meeting of a corporate board on which I sit – and what turned out to be an eight-hour meeting of the audit committee…

According to the academicians who developed Capital Market Theory, risk equals volatility, because volatility indicates the unreliability of an…

Let’s say someone makes an investment that works out as expected (or better). Does that mean it wasn’t risky? Or let’s say the investment produces…

What about illiquidity? Conventional wisdom says liquid investments are safer than illiquid ones. And small holdings are safer than large blocks.…

When the emerging markets melted down in 1998, accompanied by the collapse of Long Term Capital Management and the crisis in Russia, most investors…

Those who have been readers of my memos for any meaningful period of time know there are a few things I dismiss and a few I believe in thoroughly.…

How can non-forecasters like Oaktree best cope with the ups and downs of the economic cycle? I think the answer lies in knowing where we are and…

For decades – literally – I've been lugging around what I thought was a particularly apt enumeration of the three stages of a bull market: the first,…

But somehow, the stocks did stop going up. And then they started going down. I don't think anyone can say just what it was that caused the tech…

Having said that, I want to point out emphatically that many of those who complained about the excessive market valuations – including me – started…

The operators of racetracks take a dim view of bettors who engage in “past-posting”: trying to get a bet down after the race is over (and the…

The economist Hyman Minsky has reminded us, “Each state nurtures forces that lead to its own destruction.” All of history testifies to the truth of…

I touched above on concentration risk, but we should also think about the flip side: the risk of overdiversification. If you have just a few holdings…

Finally, I want to mention a new concept I hear about once in a while: upside risk. Forecasters are sometimes heard to say “the risk is on the upside…

Of course it’s not that easy and clear-cut, but I think that’s the general situation. If your behavior and that of your managers is conventional, you…

Any attempt to compile superior investment results has to entail acceptance of the possibility of being wrong. The matrix on page two shows that…

Keeping in mind, however, that only one event and its consequence will occur (not the weighted average consequence),” agents may not be able to…

Confidence is generally defined as belief in one’s ability to choose a course of action and execute on it. Although it’s not part of the…

The primary impact of confidence on the economy is simple. If people think the economic future will be good, they’ll spend and invest . . . thus…

What will happen when it no longer does? Will rates rise? How much? Will the effect of higher rates on the cost of financing purchases and…

Belief in the things listed above largely eliminated uncertainty regarding the future and contributed to an extremely high level of confidence. No…

I often say the riskiest thing in the world is widespread belief that there’s no risk. And certainly that was the prevailing condition in the…

As mentioned above, I think recently many investors have been holding riskier positions than are natural for them, largely because, thanks to the Fed…