TITLE: Howard Marks on Investing -- and Software Development AUTHOR: Eugene Wallingford DATE: February 12, 2017 11:11 AM DESC: ----- BODY: Howard Marks is an investor and co-founder of Oaktree Capital Management. He has a big following in the financial community for his views on markets and investing, which often stray from orthodoxy, and for his straightforward writing and speaking style. He's a lot like Warren Buffett, with less public notoriety. This week I read Marks's latest memo [ PDF ] to Oak Tree's investors, which focuses on expert opinion and forecasting. This memo made me think a lot about software development. Whenever Marks talks about experts predicting how the market would change and how investors should act, I thought of programming. His comments sound like the wisdom of an agile software developer. Consider what he learned from the events of 2016:
Investors who got out of the market for the last couple of months of 2016, based on predictions about what would happen, missed a great run-up in value. If a programmer cannot predict what will happen in the future, or how stakeholders will respond to these changes, then planning in too much detail is at best an inefficient use of time and energy. At worst it is a way to lock yourself into code that you really need to change but can't. Or consider these thoughts on surprises (the emphasis in the original):
- First, no one really knows what events are going to transpire.
- And second, no one knows what the market's reaction to those events will be.
It's the surprises no one can anticipate that would move markets most if they were to happen. But (a) most people can't imagine them and (b) most of the time they don't happen. That's why they're called surprises.To Marks, this means that investors should not try to get cute, predict the future, and outsmart the market. The best they can do is solid technical analysis of individual companies and invest based on observable facts about value and value creation. To me, this means that we programmers shouldn't try to prepare for surprises by designing them into our software. Usually, the best we can do is to implement simple, clean code that does just what it does and no more. The only prediction we can make about the future is that we may well have to change our code. Creating clean interfaces and hiding implementation choices enable us to write code that is as straightforward as possible to change when the unimaginable happens, or even the imaginable. Marks closes this memo with five quotes about forecasting from a collection he has been building for forty years. I like this line from former GE executive Ian Wilson, which expresses the conundrum that every designer faces:
No amount of sophistication is going to allay the fact that all of your knowledge is about the past and all your decisions are about the future.It isn't really all that strange that the wisdom of an investor like Marks might be of great value to a programmer. Investors and programmers both have to choose today how to use a finite resource in a way that maximizes value now and in the future. Both have to make these choices based on knowledge gleaned from the past. Both are generally most successful when the future looks like the past. A big challenge for investors and programmers alike is to find ways to use their experience of the past in a way that maximizes value across a number of possible futures, both the ones we can anticipate and the ones we can't. -----