Second Level Thinking — Howard Marks Framework

The market is a discounting machine. Outperformance comes from being right about something the market is wrong about. Second-level thinking asks: What does the current price imply? Is that belief justified? And what is everyone missing?

Research First

Do the work before the framework. Assertions without data are opinions.

Search for: SEC filings (10-K, 10-Q), earnings transcripts, capex disclosures, ROIC trends, interconnection queue data (FERC/EIA), fab lead times, labor market stats (BLS), and comparable historical cycles (telecom 1990s, shale, cloud infrastructure). Cite sources. When data is unavailable, say so — that's more valuable than a fabricated number.

The Seven Stages