Here is an excerpt from Capital Ideas Online on “roundabout investing” followed by a book review on The Dao of Capital: Austrian Investing in a Distorted World by Mark Spitznagel.
Here are some parts that I have marked in my copy of the book “The Dao of Capital: Austrian Investing in a Distorted World” by Mark Spitznagel.
1.“Murray Rothbard stated in his work “An Austrian Perspective on the History of Economic Thought” that the ancient Daoists “were the world’s first libertarians”.”
2.“No one should expect that any logical argument or any experience could shake the almost religious fervor of those who believe in salvation through spending and credit expansion.”
3.“As money can never be neutral and stable in purchasing power, a government’s plan concerning the determination of the quantity can never be impartial and fair to all members of society. Whatever a government does in the pursuit of aims to influence the height of purchasing power depends necessarily upon the ruler’s personal value judgement. It always furthers the interest of some groups of peoples at the expense of other groups. It never serves what is called the common wheel or the public welfare.”
4.“At the outset, we must think of capital in a new way, as a verb, not a noun.”
5.“The whole point of my approach to investing is that we must be willing to adopt the indirect route to achieve our goals.”
6.“The distortion of interventionism short-circuits the natural governors within systems, whether forests or markets; and yet, the forces that return the system to homeostasis persist and will eventually prevail, although reversions will be, almost by definition, extremely messy.”
7.“Rather than pursue the direct route of immediate gain, we will seek the difficult and roundabout route of immediate loss, an intermediate step which begets an advantage for greater potential gain.”
8.“This is what is called the subtle within what is evident. The soft and weak vanquish the hard and strong.”
– Laozi
9.“There is a saying among soldiers:
I dare not make the first move but would rather play the guest;
I dare not advance an inch but would rather withdraw a foot.
This is called marching without appearing to move,
Rolling up your sleeves without showing your arm,
Capturing the enemy without attacking,
Being armed without weapons.”
– Laozi
10.“There is a definite brand of epistemology at the root of the Laozi. To the Laozi, much of the exterior world is but exterior diversion, much perception is a distraction from a hidden reality – though one which requires diligent attention.”
11.“This is of course a ubiquitous tradeoff in nature – and, when involving complex phenomenon, is often described in terms of a “power law” of frequency along the size continuum (or “really small things are really common, really big things less so”).”
12.“In Klipp’s basic asymmetric strategy, the bigger the gain I waited for, the less frequently it would occur, and the more asymmetric (or “positively skewed”) my payoff would be.”
13.“The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy.”
14.“A succession of failed balancing acts, with the locals as fulcrum.”
15.“My inheritance how lordly, wide and fair! Time is my fair seed-field, to Time I’m heir.”
– Johann Wolfgang von Goethe
See full article here by Capital Ideas Online.
The Dao Of Capital – Description
The Dao of Capital: Austrian Investing in a Distorted World by Mark Spitznagel
As today’s preeminent doomsday investor Mark Spitznagel describes his Daoist and roundabout investment approach, “one gains by losing and loses by gaining.” This is Austrian Investing, an archetypal, counterintuitive, and proven approach, gleaned from the 150-year-old Austrian School of economics, that is both timeless and exceedingly timely.
In The Dao of Capital: Austrian Investing in a Distorted World, hedge fund manager and tail-hedging pioneer Mark Spitznagel – with one of the top returns on capital of the financial crisis, as well as over a career-takes us on a gripping, circuitous journey from the Chicago trading pits, over the coniferous boreal forests and canonical strategists from Warring States China to Napoleonic Europe to burgeoning industrial America, to the great economic thinkers of late 19th century Austria. We arrive at his central investment methodology of Austrian Investing, where victory comes not from waging the immediate decisive battle, but rather from the roundabout approach of seeking the intermediate positional advantage (what he calls shi), of aiming at the indirect means rather than directly at the ends. The monumental challenge is in seeing time differently, in a whole new intertemporal dimension, one that is so contrary to our wiring.
Spitznagel is the first to condense the theories of Ludwig von Mises and his Austrian School of economics into a cohesive and—as Spitznagel has shown—highly effective investment methodology. From identifying the monetary distortions and non-randomness of stock market routs (Spitznagel’s bread and butter) to scorned highly-productive assets, in Ron Paul’s words from the foreword, Spitznagel “brings Austrian economics from the ivory tower to the investment portfolio.”
The Dao of Capital: Austrian Investing in a Distorted World provides a rare and accessible look through the lens of one of today’s great investors to discover a profound harmony with the market process—a harmony that is so essential today.
The Dao Of Capital – Review
“Spitznagel has written an essential new book. Indeed, The Dao of Capital: Austrian Investing in a Distorted World might be one of the most important books of the year, or any year for that matter.” – Forbes
“The Dao of Capital: Austrian Investing in a Distorted World by Mark Spitznagel (Wiley, 2013) is a beautifully crafted book, one I can recommend to readers of all political/economic persuasions… it is impossible not to be shaped by its carefully presented history and logic.” – Seeking Alpha
“There is no shortage of market bears who take a grim view of the stock market. But Mr. Spitznagel has gained credibility in the investment world by predicting two market routs in the past decade, first in 2000 and then in 2008. Still, Mr. Spitznagel’s approach is unusual for a money manager.” – The New York Times
“A fascinating and radical break from the investment dogma of the past several decades” – Fortune
“While The Dao of Capital: Austrian Investing in a Distorted World makes for demanding reading, it repays the effort as a heady historical and intellectual feast.” – Barron’s
“Spitznagel could simply have written that investors need patience and must avoid the temptation of the quick profit; that building a successful strategy, and life, involves a longer-term approach foregoing instant gratification; that establishing a solid foundation while appearing not to create progress puts you in position for much greater success later on. He did not do that. Instead, he takes you on a tour of history and nature that illuminates these long held truths. In the end his message is simple, but by providing the historical underpinnings he brings them to life in a much more vibrant way.” – Futures Magazine
Among the “12 Books That Every Investor Should Read… deeply informative and will leave an impact on you.” – Business Insider
“A memoir and free market manifesto… that bring(s) theoretical concepts down to the practical level.” – Institutional Investor
“I applaud the book as a look into the thinking process of a great investor, especially one that has a clear and consistent understanding of the market process, the dangers of government intervention, and the benefits of Austrian economics.” – Ludwig von Mises Institute
“At last, a real book by a real risk-taking practitioner. You cannot afford not to read this!” – Nassim Nicholas Taleb, Author of The Black Swan
From the Inside Flap
As today’s preeminent doomsday investor Mark Spitznagel describes his Daoist and roundabout investment approach, “one gains by losing and loses by gaining.” This is Austrian Investing, an archetypal, counterintuitive, and proven approach, gleaned from the 150-year-old Austrian School of Economics, that is both timeless and exceedingly timely.
In The Dao of Capital: Austrian Investing in a Distorted World, hedge fund manager and tail-hedging pioneer Spitznagel takes the reader on a gripping, circuitous journey from the Chicago trading pits, over the coniferous boreal forests and canonical strategists from Warring States China to Napoleonic Europe to burgeoning industrial America, to the great economic thinkers of late 19th-century Austria, ultimately arriving at his central investment methodology of Austrian Investing. Victory comes not from waging the immediate decisive battle, but rather from the roundabout approach of seeking the intermediate positional advantage (what he calls shi), of aiming at the indirect means rather than directly at the ends. The monumental challenge is in seeing time differently, in a whole new intertemporal dimension, one that is so contrary to our wiring.
With one of the top returns on capital of the financial crisis, as well as over a career, Spitznagel is the first to condense the theories of Ludwig von Mises and his Austrian School of Economics into a cohesive and highly effective investment methodology. From identifying the monetary distortions and non-randomness of stock market routs (or black swans, Spitznagel’s bread and butter) to scorned highly-productive assets, The Dao of Capital: Austrian Investing in a Distorted World, in Ron Paul’s words from the Foreword, “brings Austrian economics from the ivory tower to the investment portfolio.”
The Dao of Capital: Austrian Investing in a Distorted World provides a rare and accessible look through the lens of one of today’s great investors to discover a profound harmony with the market process—a harmony that is so essential today.
The Dao of Capital: Austrian Investing in a Distorted World by Mark Spitznagel
