Hey Friend, Can We Really Break the Laws of Economics? (Howard Marks Memo Summary)
Hey Friend, Can We Really Break the
Laws of Economics? (Howard Marks Memo Summary)
I just read Howard Marks' latest memo, and wow – he's asking the kind of
question that keeps me up at night.
You know Howard Marks, right? The
legendary investor who's been crushing it for decades. Well, he just dropped
this thought bomb:
"There are basic economic laws tied to how people behave. And when
we try to break or ignore them, things can go sideways fast."
It got me thinking about all the times we've tried to outsmart the system
lately.
Grab your coffee ☕️ and let me walk you through some
examples that'll make you go "oh, that makes sense now."
Rent Control – When Good Intentions Meet Reality
So rent is crazy expensive in cities like San Francisco and New York. The
government steps in with rent control, saying, "You can't charge more than
this amount." Sounds fair, right?
Here's what actually happens:
ü Landlords stop
maintaining properties (why spend money if you can't make it back?)
ü Developers say
"nope" to building new apartments
ü Suddenly, there are
even fewer places to live
It's like putting a Band-Aid on a leaking pipe – you feel good about
doing something, but the problem just gets worse underneath.
California's Insurance Nightmare
This one really hits home. California's been getting hammered by
wildfires, but when people tried to get fire insurance, companies started
bailing out of the state. Why?
The government wouldn't let insurers raise their rates to match the
actual risk. So insurance companies were stuck using outdated data while
wildfires were getting worse every year. Eventually, they just said "we're
out."
The result? People couldn't get coverage at any price. Turns out cheap
insurance isn't worth much if you literally can't buy it when your house is
about to burn down.
The Tariff Tango
Remember all the talk about tariffs bringing manufacturing back to
America? The logic seemed solid:
ü Protect U.S. jobs
ü Fix trade imbalances
ü Boost national
security
But here's what actually happened:
- Prices went up
for everyday stuff we all buy
- Without foreign
competition, some companies got lazy about improving
- We ended up
helping a few industries while making life more expensive for everyone
else
It's that classic "robbing Peter to pay Paul" situation.
The Debt Bomb Nobody Wants to Talk
About
But here's what really got my attention – and honestly, it's the scariest
part of Marks' memo. He points out that:
ü The U.S. is running
nearly $1.8 trillion deficits every year
ü Social Security
could run out of money by 2035
His analogy? "It's like someone falling from the 20th floor saying
'So far, so good' as they pass the 10th floor."
Ouch. That one stings because it's probably true.
So What's the Answer?
Look, Marks isn't saying the free market is perfect – far from it. But he
makes a solid point: it's still the best system we've got for figuring out
prices and getting resources where they need to go.
His approach?
- Let markets do
their thing most of the time
- Step in to help
people who genuinely need it
- Stop unfair
behavior, but don't try to eliminate natural economic outcomes
My Take on All This
Here's what I think after reading all this: You can't boss around
economics like it's your annoying little brother. The more you try to force it
to behave, the more creative it gets at finding ways around your rules.
That doesn't mean we should just let people suffer when things go wrong.
But maybe – just maybe – we need to work WITH economic forces instead of
constantly fighting against them.
What do you think? Have you seen examples of this stuff in your own life?
Hit me up in the comments – I'd love to hear your stories.
What's your take on economic intervention? Have you experienced any of
these effects firsthand? Let's chat about it below.
You can read the full original memo by Howard Marks at the link below:
https://www.oaktreecapital.com/insights/memo/more-on-repealing-the-laws-of-economics
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