Second-Level Thinking

Howard Marks emphasizes the necessity of 'second-level thinking' for successful investing. This involves going beyond surface-level analysis to consider deeper implications and contrarian perspectives. For instance, while first-level thinking might conclude that a company is performing well, second-level thinking evaluates whether this success is already reflected in its stock price. Marks states, 'To outperform the average investor, you have to be able to outthink the consensus.' This approach enables investors to identify opportunities overlooked by others.