Howard Marks, co-chairman of $122 billion asset management firm Oaktree Capital, shared his thoughts on the relationship between gambling and investing in one of his famous "memos" on Monday.
The paper, titled "You Bet!" starts with a discussion of the first book he read as a freshman at Wharton in 1963. The book, which was titled "Decisions Under Uncertainty: Drilling Decisions by Oil and Gas Operators," was written by C. Jackson Grayson Jr.
In the book, Grayson explained that the success of an individual's decisions will be impacted by two things: relevant information they might lack and luck or randomness. Marks wrote:
"Because of these two factors, well-thought-out decisions may fail, and poor decisions may succeed. While it might seem counterintuitive, the best decision-maker isn't necessarily the person with the most successes, but rather the one with the best process and judgment. The two can be far from the same, and especially over a small number of trials, it can be impossible to know who's who."
Marks then turns the conversation toward the relationship between investing and gambling, where a variety of factors that one can benefit from while playing card games and other "games of chance" can be applied to finding successful investment opportunities and strategies.
Read Marks' full memo here.
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This article first appeared on GuruFocus.