The Most Important Thing: Uncommon Sense for the Thoughtful Investor [Hardcover]

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.)

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.

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.

› Go to Amazon.com to see all 36 reviews  4.0 out of 5 stars