Howard Marks Flags the Uncertainty in AI Investing

요약 보기

Marks는 중앙은행이 예측을 줄여 시장과 기업이 반취약하게 준비해야 한다고 주장. 2022년 10월 이후 낙관주의가 시장을 지배해 가격이 내재가치 대비 높으니 신중함이 필요하다고 진단. AI 투자는 수익 예측 불확실성이 커 가치투자자에게 어렵다고 평가하나, 불확실성이 있다고 투자를 하지 말라는 뜻은 아니라고 함. AI 버블 여부는 '비합리적 과열' 판단이 불가하다며 유보.

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01. Howard Marks joins us now on set here at the Qatar Economic Forum. He's the cochair of Oaktree Capital Management. I'm very keen to talk with you about AI, something about which you've written a lot in in recent memos. Before we get through, though, I'm I'm very curious how you've processed what we've heard from the Fed chair, yes, in this most recent set of remarks that he gave after the Fed's decision, in the limited number of speeches he's done as as Fed chair.

02. Are you satisfied with the level of communication you're getting? How novel is the way that he's communicating with the Marks? Well, I actually think that, less communication is better. I'm not looking for the Fed chair to tell me what to do or even tell me what he's gonna do. But I think that if to the extent that the central banker tells people less about what he's going to do, they have to make their portfolios and their businesses, antifragile, which is better for society.

03. When society think when everybody in society thinks they know exactly what the Fed's gonna do and prepares for that, then the society is dependent on that outcome. And if if if something else happens, then, you know, bad things can happen. So I think it read I think it adds to safety in the environment overall.

04. So you think Bush was on to something with a bit of this tail wagging the dog at the Fed, let the markets decide without relying too much on this forward projection? I've learned a lot about the dot flocks in the last month of my life, things I never knew I needed to know this stuff much about. But Well, my personal preference is for a less activist central bank that normally lets the economy do its thing unless it's in danger of going off the rails too hot or too cold.

05. Yeah. If it's not too too hot or too cold, leave it alone. So, you know, I'm I'm in alignment on that. We talk about something called natural interest rates. Those are the rates that result from negotiations between borrowers and lenders. I think that's a great idea. This is called the free market. Let the market do its thing.

06. Listen. I'm a tough negotiator. Anything that can get that mortgage rate down, you and I will go at it. Howard Marks, what is this environment like for a value investor like yourself? It it occurs to me that we have been obsessing so much over the Fed that maybe to have it take maybe not more of a back seat, be less front and center.

07. That opens the door to relying once again much more on on the fundamentals of Saj than than we have in the past. Well, look. I am what is called the value investor, not with a capital v, but a small v. Uh-huh. And and that means our approach is to figure out the intrinsic value of an asset and see if we can buy it at a fair price relative to that value.

08. That's all it means, in my opinion. And the challenge today is that in my opinion, you know, since roughly 10/01/2022, I believe that the markets have been generally ruled by optimists. And, you know, the S and P has more than doubled in that period. It's been a very strong period. And I think that, you know, you have to recognize that when the optimists rule, prices tend to be high relative to intrinsic value, which means that it's a time for a little bit of caution.

09. It's not it's not it's not the worst thing I've ever seen, but I do think it's it's important to note that the optimists have been in control. Why do you think that is? Because as as someone who comes more from the diplomatic side, watching we talk about this all the time, watching these markets respond positively to any trace of, oh, we've got a deal coming out of either Washington or Europe or The Middle East.

10. I mean, those of us who covered this know it's not gonna happen, but there's this indefatigable optimism that the markets at the moment just can't shake. Why is that? Well, that's a great question. But I think there are certain underlying truths which are positive, which are in the ascendancy. Our economy is doing pretty well in the aggregates.

11. Yeah. It is, in my opinion, the best performing developed world economy. So? So, you know, the old Tina trade, there is no alternative. And and there is the excitement over AI. And so So the optimism is is just coming from the core. Oh, and the and the other thing is that, you know, we haven't really had a bad a really bad time since March of o nine when the stock market bottomed during the global financial crisis.

12. And so people get used to good times and they extrapolate good times, and that contributes to the optimism. So if if I mean, certainly, you there there is no rampant pessimism today. And when when people are personally keeping rampant pessimism on the But but the point is that when the optimists are in charge, they kinda slough off the bad news.

13. Yeah. And, you know, it but it's a it's got they get excited when there's word of a settlement. They don't get depressed when it falls through. That's that's true. So you you have to look at that, and you have to say, well, there's a positive bias in the market today. And when there's a positive bias, you should acknowledge it.

14. And what do you do about it? Maybe you build in a little defense, or may you take care in what you do. Before we get into to AI from a from a market's perspective, what stood out to me, I and think it was two memos back that you wrote, was your engagement with the potential societal ramifications of of AI.

15. And you expressed very clearly acute concern about what AI, if it comes to the fruition that we've been promised, would mean for people across this country, maybe not in cities, but in Middle America, what it means if all of these jobs were were to disappear. You've been listening as we have over the course of the last week or so about the larger existential fears brought about by the the promise perils of of AI.

16. And I'm I'm curious how you're processing those, how that builds upon what you warned about, you know, six months ago. Your fears that you had then, or have they have they gotten worse? Have they compounded as a result of the conversations that we've having? Well, I think that I think that a sentient human being has to think about these things, has to acknowledge there's nothing we can do about it.

17. And when I reach that point in my own process, I kinda let it go because, you know, my wife defines worrying as bleeding before you're shot. Uh-huh. And in this case, there's nothing we can do about it. Nothing certainly nothing I can do about it personally. So, you roll with it. That's all. You acknowledge it.

18. Let you let people think about it, but it it should not be a preoccupation in my Are you satisfied people are thinking about it enough or in the right way? Well, people are. On the other hand, I don't see anything out of government. You know? I I think there should be a task force on the effect of, the coming effect of AI, and there isn't.

19. Now when they form the task force, I don't know what they can do about it, but it it might be nice to think about it. And, you know, if you want one little task to work on how about this? If people are put out of work, they won't pay taxes. If AI takes their place as as workers, will it take their place as taxpayers and how?

20. So what will happen to government revenues when when and if people lose their jobs? Do you use it in your daily life? Do you chat GPT things? Have you integrated it into your business? You know oh, well, Oaktree certainly has integrated into the business, and and and, you know, we use it to marshal data and do early analysis and and, you know, it was a task that used to take a long time.

21. We don't we certainly haven't turned business decisions over to it, investment decisions. And and I think that to the extent you wanna be an exceptional investor, the exceptionalness doesn't come from some computer or algorithm. The exceptionalist comes from being able to do a superior job of, assessing the import of the data.

22. And that superiority, I don't think, is available through AI yet. So Do you see when you hire younger people that they're outsourcing more and more of that critical thinking to AI or have you not come across that? We don't encourage that. Okay. There's a lot of do, so I was wondering. Yeah. There's a lot of work to be done.

23. But number one, if you stop doing critical thinking, you'll lose the muscle, I think. I think so too. And number two, I I continue to say, Christine, that the is is is human. And I think that kinda like indexation did for equity investing, it'll put a lot of active investors out of business, but not the best.

24. It would be great if we could spot a bubble in real time. As you've pointed out, you can't. It's something you do in in hindsight. But I'm curious how bubblicious this this environment looks to you to you right now. So, you know, you you've you've written before when when you're assessing bubble, you're looking kind of company behavior, investor behavior as well.

25. There is such a swirl of, hand wringing about, circular financing, and and the like. Are there things that give you pause or concern when you look at the AI space in particular from a market perspective? Well, look. The main thing is, as I wrote in the last memo on the subject, Allen Greenspan used the phrase in '97, I think it was irrational exuberance, and that is the definition of a bubble.

26. We certainly have exuberance. The question is whether it's irrational. And since nobody, in my opinion, can can spec out exactly what it is that AI has been gonna be doing and with what effect and with what profitability, I don't think anybody can say, that it's that it's irrational, but but but you have to consider the possibility.

27. And so, you know, when you tackle AI from an investment point of view, you have to think about how confident you are that that that in your judgments and, you know, how much like in like in everything else but taken to a higher power, we have to think about how much how important is us to make all the money that's gonna be made by the most aggressive people, and are we willing to take on the uncertainty which is associated with that?

28. Is it difficult for a value investor to warm to AI companies? A number haven't done public, of course. But Well, I I think it's challenging because when and when you're talk certainly, if you're talking about a a, you know, the so so called hyperscalers Yeah. Microsoft and and and and and Amazon and the like, They have other businesses which will support, for example, an earnings estimate.

29. But if you're looking at somebody who's just in the business of AI And probably And and and if they're all in on on AI, their entire business model is dependent on AI. Maybe they haven't produced a profit yet or or have you know, I I just think that there's an unusual degree of uncertainty in coming up with any quantification of earnings potential and thus of what we call intrinsic value.

30. I think it's, you know, it's gonna be hard. And, you know, Warren Buffett always said, oh, oh, oh, we put that on the too hard pile. It may be too hard for the value investor, certainly the one with the capital v. Uh-huh. And and it's and it's challenging for the one with the small v. Yes. But given everything you just said, all of those unknowns, doesn't that make the exuberance kind of irrational?

31. Why have you not reached that threshold? Not necessarily. Okay. Because maybe it's inadequate. But you don't know that. So that's to me seems irrational. Don't know it doesn't mean it's it's that something's true. You're silly. So I'm all we have to think that you take a traditional company today Yeah.

32. You can make an estimate of their earnings. Right. A tech company, you can only have do that with less certainty. Yes. But, you know, a pure AI company, which has never announced results, you you and and what are they gonna make five years from now? You have to say, well, there's an unusual amount of uncertainty.

33. The fact that there's uncertainty present doesn't mean you don't do something. But you acknowledge it and that may inform how you do it, which form of AI investing you do, and it may inform how much you bet on that. Yeah. But the fact that there's uncertainty involved cannot keep you from doing something.