Mr. Marks focused his presentation on the general themes that are covered in his forthcoming book, The Most Important Thing, scheduled for release on May 24, 2011. As a broad theme, “the most important thing” refers to the need for investors to go beyond the simplistic and mechanistic approaches that essentially present the recipe for successful investing as one would read a recipe from a cookbook. Mr. Marks refers to his approach as “second-level thinking”.
Second-level thinking boils down to the ability to ascertain the set of probable outcomes that can occur and to think in probabilistic terms when it comes to weighing the consequences of different scenarios. In contrast, most investors tend to develop working theories about how the future will unfold and then invest as if that outcome will occur, ignoring the broad range of possible outcomes and particularly the “fat tail” outcomes that have been appearing with more frequency than expected in recent years, to say the least. Mr. Marks refers to this flawed approach as “single scenario investing”.
Book: The Most Important Thing