Howard Marks sent a memo to clients of Oaktree Capital Management in September 2015 speaking of the need for what he called second-level thinking. “The first-level thinker simply looks for the highest-quality company, the best product, the fastest earnings growth or the lowest price-to-earnings ratio,” said Marks.

“The second-level thinker goes through a much more complex process when thinking about buying an asset. Is it good? Do others think it’s as good as I think it is? Is it really as good as I think it is? Is it as good as others think it is? Is it as good as others think others think it is? How will it change? How do others think it will change... And that’s just the beginning...”..

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