Howard Marks, an American investor and billionaire, recounted a conversation that later became one of the guiding principles of Oaktree Capital Management, which he founded shortly after.
In 1990, Marks had dinner with David VanBenschoten, who ran the General Mills pension fund. VanBenschoten revealed something ordinary at first: over 14 consecutive years in the late '70s and '80s, his fund had never once been in the top half among its peers in terms of returns in any single year. This meant that in a class of 100 students (funds) that stayed together for 14 years, this student ranked below 50 every single year. In his best year, he reached only the 47th percentile. And his worst year was at the 27th percentile. Throughout the tenure, the fund ranked somewhere between the 27th and the 47th percentile at the end of each year.
A serious laggard by most measures. Mediocre performer at best, if you’re being generous. Right?
This is where it gets interesting. By the end of those 14 years, cumulatively, the General Mills fund ranked in the top 4% of all performers.
Let that sink in — not in the top half even once in 14 years, but in the top 4% overall! This outcome stunned even Marks, who later claimed that his learnings from this meeting helped shape his investment philosophy at Oaktree Capital, which he founded in 1995.
What also makes this story powerful is the contrast Marks observed around the same time. A prominent value investing firm had just reported terrible results, with its president offering what Marks considered a flimsy justification: "If you want to be in the top 5% of money managers, you have to be willing to be in the bottom 5%, too." The typical notion of risk-reward balance. To this, Marks immediately reacted: "My clients don't care whether I'm in the top 5% in any single year, and they (and I) have absolutely no interest in me ever being in the bottom 5%."
He was right. If I give my money to you to manage for 5 years, all I care about is the total return you give to me at the end of those 5 years. And having the best chance of getting an impressive return is perhaps more about avoiding major mistakes rather than swinging for the fences with every investment.
As Marks himself would put it: "Striving to do a little better than average every year — and through discipline to have highly superior relative results in bad times — is less likely to produce extreme volatility, less likely to produce huge losses which can't be recouped and, most importantly, more likely to work (given the fact that all of us are only human)."
~
Something similar plays out in nature, too.
On the 1-10 Mohs Scale, a measure of hardness, Copper measures 3, which indicates it’s not hard. Tin measures just 1.5 — very soft. But when you mix the two together in the right quantity and under the right conditions, you get Bronze, which measures a 6 on the same scale.
Same with steel. Iron measures 4 on the scale, Carbon measures ~1-2, but Steel? Depending on the type, it can start with 5 and go upto 8 — very hard.
So it’s not just the individual constituents, but their mix and the conditions in which they come together that determine the outcome.
If you’ve taken any serious entrance exam, you’ve likely experienced something similar. To score a 99%ile in an exam that has three different papers, there’s a good chance that someone who scores a 90%ile in all three is closer to 99%ile overall than someone who has a near-perfect score in one, but fails to go past 70-75%ile in the other two.
That’s how life and career happen too, for most of us.
There can only be two types of geniuses. One who is exceptional at the one thing he or she does. Like gold. In that particular domain, very few come close to their level of output and performance. Think elite sportspersons, artists, scientists, etc.
The other is someone who can do multiple things reasonably well without being exceptional at any of them. It’s a combination of the mix of skills and just an adequate depth in them that makes them unique. Like Steel. Most top CEOs, I reckon, would fall under this bracket.
For those who aren’t born with precocious talent in something, which is the vast majority of us, the second route is the only option for prodigal success. The good part, though, is that it doesn’t feel too daunting or beyond reach. Being “not bad” at seven things feels much easier than being asked to be the best in the country at any particular thing. All you need to do is get the basics right. However, the catch here is that you need to do it for a long, sometimes very long, period. It’s more about discipline than genius.
And often, the genius is in the discipline itself.
The late Charlie Munger once noted:
"It is remarkable how much long‑term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent."
Follow Charlie.
A question for you:
What approach do you reckon is right for your career — exceptional at one or good at multiple things? And how has the result so far been for you?
Write to us at plainsight@wyzr.in. We’ll include the most insightful answer in next week’s edition. :)
Readers’ spotlight
Last week, we asked:
In the moments when no one's watching, and the line is easy to break - do you still wait your turn?
Sanjana Rao had an interesting response:
“First come, first betrayed is such an interesting thought. It’s never occurred to me to introspect even though I’ve almost combusted when people do it. I think it comes from a mix of resentment and a strong sense of unfairness, especially since you’ve done your part by following the social norms. What’s interesting is that when VIPs skip traffic or queues, we feel less distraught, not because it’s fair, but because we’ve almost accepted (or given up rather) the VIP culture in India. But when it’s someone of the same status as us, it hits harder. It feels like a direct violation of equality, if that makes sense.”
I second the point about the VIP culture!
What we’re reading this week
Zero To Scale by Arindam Paul. The most original and insightful book one can hope to read, especially if you’re building or working in India, and dealing with Indian consumers. It’s written by someone who has grown Atomberg from a pre-revenue upstart to a 1000+ Cr behemoth, and he has generously laid bare everything he knows about succeeding at business in India.
(I may be a little biased here because we contributed to this book. Luckily, the reviews of people and the book’s performance have confirmed that I’m not the only one who believes this way :) )
Until next time,
Best,
