Howard Marks Has Been Saying the Same Thing for Decades. Nobody Applies It to Their Products.

A few months ago, I reread one of Howard Marks’ most famous memos: “There They Go Again… Again.”

I read it differently this time. Not as an investor. As a builder.

And I realized something I’d been missing: Marks’ cycle framework isn’t a financial markets theory. It’s a theory of human behavior. And human behavior doesn’t change depending on whether you’re looking at stocks, real estate, or… the 2026 SaaS ecosystem.

The pattern always repeats. That’s exactly what Marks has been telling us for decades.

The Core Insight Marks Keeps Repeating (and Almost Nobody Listens To)

Howard Marks’ fundamental idea about cycles is brutally simple:

Cycles cannot be avoided. What you can control is knowing where you are within one.

It’s not about predicting the peak or the bottom with surgical precision. It’s about recognizing the current position: are we in the euphoria phase, disillusionment, or silent recovery?

This distinction matters more than it appears. Nicolai Tangen, the manager of the Norwegian sovereign wealth fund—one of the largest in the world—summarized it perfectly in a recent conversation [3]:

“You call it gut feel, nobody believes in it. You call it pattern recognition and suddenly everyone nods.”

That’s exactly what Marks does with cycles: he converts intuition into a pattern recognition system that anyone can learn.

The Three States of Any Cycle (and How to Find Yourself in Them)

Marks describes cycles with a logic that repeats without exception:

1. Euphoria Phase

Everyone is convinced that “this time is different.” Fundamentals stop mattering. The narrative is everything. Capital flows without discrimination.

In tech: the proliferation of AI tools throughout 2024 and early 2025 had many of these ingredients. Hundreds of GPT wrappers raising rounds without real product-market fit.

2. Disillusionment Phase

Reality adjusts expectations. Many projects die. Those that survive do so because they solved a real problem, not because they rode the wave.

Marks doesn’t see this as a catastrophe. He sees it as the cleaning mechanism that prepares the next cycle.

3. Silent Recovery Phase

This is the most valuable and most ignored phase. The best deals—in investing and in product—happen here. When the noise has died down, when the press is no longer covering the topic urgently, when the opportunists have left.

This is where builders with cycle perspective have a real advantage.

Why This Matters in 2026

Look, I’m not going to tell you exactly where the AI market is right now. Marks wouldn’t either, with that precision.

But I can tell you what he would say: ask yourself the cycle questions.

• Are many undifferentiated players entering this space?
• Is narrative substituting revenue in conversations?
• Or conversely: has the noise died down and only those with real traction remain?

The answers to these questions locate you in the cycle. And locating yourself in the cycle tells you what move makes most sense now.

The Trap Marks Identifies: The Sentiment Pendulum

Another fundamental concept from Marks is the pendulum.

Market sentiment—and entrepreneurial ecosystem sentiment—doesn’t oscillate between the midpoint and the extremes. It oscillates between one extreme and the other, rarely resting in the center.

Practical implication for builders:

When everyone says “niche X is dead,” it probably isn’t. It’s at the pessimistic extreme of the pendulum. When everyone says “niche X is the future,” be careful: you’re probably buying at the peak.

The most common mistake I see builders making in 2026: making strategic decisions based on the moment’s sentiment without contextualizing it within the cycle.

How to Apply the Cycle Framework to Your Product Decisions

Let’s get concrete. This isn’t just investor philosophy.

Step 1: Audit Your Niche’s Cycle Before Building

Before starting any new project, ask yourself:

• How many similar tools have appeared in the last 12 months?
• Are they dying or consolidating?
• Is the ideal customer saturated with solutions or still actively searching?

If there’s high saturation and active consolidation, it’s not a bad moment: it’s the moment where survivors gain market share more efficiently.

Step 2: Use Others’ Pessimism as a Signal, Not a Guide

Marks is explicit on this: second-level thinking requires going beyond consensus. If everyone says something is dead, the right question isn’t “are they right?” but “what would happen if they were wrong?”

This doesn’t mean being contrarian on principle. It means not letting the pendulum carry you without thinking.

Step 3: Be More Aggressive When Sentiment Is Low, More Cautious When It’s High

Sounds obvious. It’s not in practice.

When you’re in a hype environment (lots of noise, many competitors entering, lots of positive press), Marks would reduce exposure. Applied to products: that’s not the moment to launch without validation. It’s the moment to validate harder, not less.

When the environment is depressed (the topic is no longer trending, competition has dropped), that’s when you have more time to build well before the noise returns.

The Error of Wanting to Predict vs. Position Yourself

And here’s the most important lesson from Marks, the one that’s taken me the longest to internalize:

You don’t need to predict the future. You need to position yourself well in the present.

I remember thinking about product ideas in 2025: “if I knew when the AI market would consolidate, I’d know exactly what to build.” That thinking was the problem.

Marks would solve it like this: you can’t know when. But you can know where you are now and act accordingly. If you’re in the euphoria phase, build more defensively. If you’re in the disillusionment phase, build with more conviction in the fundamentals.

The cycle always comes back. That’s the only thing Marks guarantees.

Takeaway

Howard Marks won’t tell you what product to build or what market to choose. But he gives you something more valuable: a system for knowing when and with what attitude to act.

Two concrete things you can do this week:

1. Pick a niche where you’re building or want to build and map it in the cycle. Euphoria, disillusionment, recovery? The signals are there if you look for them.
2. Before your next product decision, ask yourself: am I acting from the moment’s sentiment or from cycle analysis? The difference between those two answers is usually the difference between a good and a bad move.

The pattern always repeats. The advantage is in recognizing it before everyone else.