Deep Dive
How Howard Changed His Mind on AI
Howard begins by admitting he'd written a skeptical memo on AI bubbles back in December, but his son Andrew—a VC working in AI daily—pushed back hard in February saying everything had changed. So Howard rewrote the entire memo. He upgraded his view after seeing AI discuss its own strengths and weaknesses, use humor, contextualize information about him personally. What shifted his thinking wasn't just speed but something more fundamental: unprecedented qualities no prior technology possessed. He's careful to note he's not an expert and remains genuinely uncertain, but the autonomy factor alone—giving a system a job and having it figure out how without instructions—feels genuinely different from computers to railroads to the internet, all of which were just tools to boost human productivity.
What Humans Can Still Do That AI Can't (Yet)
Howard identifies two potential limits to AI displacement. First, there will always be situations with no historical precedent to train on—pure novel territory where pattern recognition fails. Second and more intangible: some people have better intuition about probability distributions of future events, what he calls judgment or insight. He references a Steve Cohen anecdote about feeling the ticker, a sixth sense that can't be replicated. On client relationships, Howard notes they've helped investors by simply saying 'this person doesn't feel right' based on pure gut—the hair on your neck stands up. If AI has no neck hair, maybe experienced human judgment survives. But he's genuinely uncertain whether AI can develop insight or whether it's bounded by what's trainable on existing data. The question of whether AI's capabilities are limited or unlimited remains the big unresolved question.
Second-Level Thinking and Why Most Investors Fail
Howard pivots to investment fundamentals, explaining that second-level thinking is the bedrock of superior returns. You can't outperform if you see the same thing everyone else sees; you need a variant perception—a different view on quality, growth rate, earnings power, or valuation that's both contrarian and correct. He's explicit: he can teach the importance of second-level thinking, but he cannot teach you how to have the right contrarian view. It's like basketball—you can't coach height. Some people have insight, some don't, and he doesn't know if AI ever will. The implication stings: if indexation proved most active managers underperform, AI will similarly expose everyone whose talents don't match their claims. But the hardest part isn't the methodology, it's the originality.
Lehman 2008: Conviction Without Certainty
Howard recounts the pivotal moment when Lehman collapsed in September 2008. He and Bruce had raised $11 billion for a distressed debt fund before the crisis, sitting on the shelf specifically for this kind of moment. When institutions started melting down, they faced a brutal question: deploy or hold? Howard notes they had no historical data for apocalypse, no prior experience, only supposition. A Harvard epidemiologist had taught him that decisions rest on data, analogies, or supposition—they only had supposition. So they reasoned: if the world melts down, deploying doesn't matter. If the world doesn't melt down and we don't deploy, we failed our mandate. Bruce invested an average of $450 million a week for 15 weeks—$7 billion in a quarter. Critically, Howard admits they were absolutely not confident. They were terrified. But they did it anyway because the asymmetry demanded it. He makes a profound point: if you wait until you have nothing to be afraid about, the opportunity has passed.
Building Credibility Through Countercyclical Behavior
Howard explains how he and Bruce raised that $11 billion before crisis struck. Three factors: 20 years of prior relationships and strong results, a track record of doing exceptionally well through past crises like 1991 and 2001-02, and something most investors ignore—they made their next fund smaller after big wins. Most managers do the opposite: great results, raise a bigger fund. But Howard and Bruce sized down, signaling they believed opportunities had diminished. This pattern over 20 years built credibility. People began to trust that when Howard and Bruce said there's a great opportunity, they meant it—not that they were just hungry to raise capital. He emphasizes you have to speak against your own interest sometimes, admit limitations and uncertainties openly. That honesty compounds trust. A young portfolio manager approached him during the 1998 crisis (LTCM, Russian default, Asian panic) convinced it was the end. Howard listened, validated the concerns, then said: go back to your desk and do your job. A battle hero isn't unafraid; he's afraid but acts anyway.
What Makes a 39-Year Partnership Work
Howard reflects on his nearly four-decade partnership with Bruce Krovitz as perhaps the greatest thing in his life besides family. The foundation: mutual respect and shared values. He and Bruce share ethical frameworks and appetite for risk, so they've never fought about fundamentals—only had intellectual disagreements. Neither is a financial maximizer, which prevents the ego battles that destroy partnerships. The second pillar: complementary skills. From day one, Bruce brought the distressed debt expertise and Howard went on the road to talk to investors. Bruce manages money, Howard does podcasts. Each does what the other doesn't want to. The third element, often overlooked: appreciation. You have to thank your lucky stars your partner does the stuff you can't or won't. He reflects that Warren Buffett and Charlie Munger had the same dynamic—different kinds of intelligence, synergistic, respectful, loving, suffused with humor. Warren used Charlie as a logic checker and sounding board. Charlie's great contribution was talking Warren out of cigar butt investing into great companies at good prices. Highest combined IQ of any partnership in history, different types of minds.
How to Choose a Life Path at 21
When asked what he'd do differently at 21, Howard admits he did a terrible job—unconscious, haphazard, letting others decide, making decisions without intention. He's embarrassed by his early lack of rigor. But his advice to young people is clean: find something that plays to your strengths, avoids your weaknesses, and makes you happy. That sounds obvious until you realize it means you can't let friends decide, can't follow the crowd, can't let society or parents dictate. You have to think it out yourself. The hard part: you don't fully know yourself at 21, and you'll be different in 20 years. How can you choose today for a person you'll become? Very difficult. But you have to try. Howard admits he didn't try—he got lucky instead. He wandered into City Bank's investment research because he'd had a good summer there. Got pushed into bonds because equity research failed. Moved to California for sunshine and palm trees. At 31, a guy in Cali called asking if some fellow named Milken dealt in 'high-yield bonds'—pure chance. He entered distressed debt accidentally, got lucky with timing and context, not design.
How to Raise a Kid You Actually Like
Howard shares that a 1970s Forbes article about a Wall Street psychiatrist revealed his patients' problems were inversely proportional to paternal support. Too many successful men feel compelled to assert superiority over their sons, which is terrible. Howard let Andrew be smarter than him in some things and gave full support to his interests. When his daughter was choosing upper school, Howard and his wife had a preference but let her decide. One choice might be better than the other, but neither was bad, so the kid learns decision-making and sometimes learns from mistakes—very important. He emphasizes the phrase he repeats to himself: we could be wrong. If that's true and both options are acceptable, let the kid choose. His openness to being wrong, to uncertainty, shaped how he parented—not dominating but supporting exploration.