The Indispensability of Risk

Oaktree

Howard Marks

Research

4 Pages

Howard Marks explores the essential role of risk in achieving investment success, drawing analogies from chess and backgammon to emphasize the value of calculated sacrifice. He argues that while risk does not guarantee returns, avoiding it altogether is often the riskiest move of all.

Key Takeaways

Risk and reward are inseparable: Generating superior returns requires embracing uncertainty—avoiding risk may ensure safety but can also guarantee underperformance
Success requires real sacrifice: Like in chess, investors must accept intangible, delayed, or uncertain payoffs to pursue meaningful gains
Consistent wins aren’t the goal: Great long-term records often come from a mix of decent results, a few big wins, and a willingness to tolerate losses
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