Second-level thinking—seeing something different from the consensus and being right about it—is the key to superior investing, but it cannot be taught; it's a form of insight some people simply have and others don't, like height in basketball.
Marks explains that while he can teach the concept of second-level thinking, he cannot teach someone how to actually generate correct contrarian insights—that talent is innate, not learnable. ✦ AI generated
Howard Marks · My First Million · 2026-07-15 · original ↗
starts at this moment · 8:50
“Can you talk to that about like what it is that makes someone who is a good investor good, but also how the average person could get better?”
Can you teach me to be a second-level thinker? And the answer is no. I can teach you the importance of being a second-level thinker like I just have in this chapter, but I can't tell you how to have perceptions that are at odds with the consensus of investors and correct. You know, in basketball there's a saying you can't coach height.
verbatim transcript · starts at 8:50
8:50overstates the quality of the company, the growth rate of the company, the earning power of the company, or or maybe the multiple it deserves. And you have to have this variant perception and you have to bet on your perception. And you have to be right. So, that's for that's second-level thinking. I say in the book and when people ask me, I say, "Can you teach me to be a second-level
9:12thinker?" And the answer is no. I I said I say in the book, "I don't know." Uh, but I think it's I think it's more of no than yes. Because I what I say is, "I can teach you the importance of being a second-level thinker like I just have in this chapter, but I can't tell you how to have perceptions that are at odds with the consensus of
9:37investors and correct. You know, 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 and I don't know if AI can have it because when you know, when you talk about artificial general intelligence and and AGI is when a computer or AI can do everything that a human can do. Can it do that? Don't know.
10:09And that when I talk about the the the mysteries of AI, that's that's a big one of them. Are there things it can't won't be able to do even when it reaches full flower? >> Can you think back to some of the biggest calls that you've had? How strong did that feel? Did you still have doubt or was it 100% conviction? I'm curious to hear what it feels like.
10:32>> Great. I think in our last episode we talked about the day Lehman went under, you know, September 15th maybe of '08. And we had thought that there was going to be a mess and we had raised it in the distressed debt world, the biggest fund in history prior to '07 was our '02 fund which was 2 and 1/2 billion and in '07-'08 we raised 11 billion