The Dao of Capital Austrian Investing in a Distorted World
by Spitznagel, Mark; Paul, RonEdition: 1st
Format: Hardcover
Pub. Date: 2013-09-03
Publisher(s): Wiley
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Summary
Ancient Chinese philosophy meets venerable Austrian economics in a hedge fund managers modern-day approach to investing. Hedge fund investor and tail-hedging pioneer Mark Spitznagel describes his unique investment methodology, weaving two-thousand-year-old Daoist philosophy into century-old Austrian economics to form a rigorous, entrepreneurial- cum -value approach that is both timeless and particularly applicable today. Considered todays principal doomsday investor, Spitznagel's focus on what he calls the markets natural homeostatic processes actually runs very contrary to doomsayers and free market critics. From an old pit-trading sage to the conifers of the vast boreal forests, Spitznagel reveals his central shi strategy, where gaining future advantage trumps the decisive victory, and where time takes on a whole new dimension-not "long term versus short term", but rather an appreciation for the intertemporal future. Spitznagel presents three central tenets of The Dao of Capital , drawn from the Three Treasures of Daoist philosophy: Patience and tolerance-to prepare for and fully exploit intertemporal opportunities through time Nonaggression and humility-to go where others shun Economy-of means, thought and action, to thus limit vulnerabilities and exposures With a sharp Austrian focus on the entrepreneurial functioning of the market, deference for its natural process, and contrarian bias toward government intervention-driven imbalances and distortions, The Dao of Capital and its Austrian investing methodology provide a profound harmony with the market process-a harmony that is so essential today.
Author Biography
MARK SPITZNAGEL is the founder and president of Universa Investments, an investment advisor that specializes in equity tail-hedging—or profiting from extreme stock market losses as a means to enhancing investment returns. In addition to hedge fund investing, Spitznagel’s 20-year investment career has ranged from independent pit trader at the Chicago Board of Trade to proprietary trading head at Morgan Stanley. Spitznagel also owns and operates Idyll Farms in northern Michigan.
Spitznagel pledges all personal profits from the sale of this book to charity.
Table of Contents
Foreword
Introduction
Chapter One: The Daoist Sage
Klipp’s Paradox
The Old Master
The Soft and Weak Vanquish the Hard and Strong
Into the Pit
The Privileges of a Trader
Robinson Crusoe in the Bond Pit
Fishing in ‘McElligot’s Pool’
Enter the Austrians: A von Karajan Moment
A State of Rest
Guiding into emptiness...
Moving On
The Wisdom of the Sages
Chapter Two: The Forest in the Pinecone
The Roundabout and the Logic of Growth
The Forest and the Tree
The Slow Seedling
Wildfire and Resource Reallocation
The Conifer Effect
A Logic of Growth
Chapter Three: Shi
The Intertemporal Strategy
The Dao of Sun Wu
Shi and the Crossbow
Li - The Direct Path
Shi and Li at the Weiqi Board
A Common Thread, from East to West
An Attack of Misunderstanding
On War - An Indirect Strategy
Shi, Ziel, Mittel, und Zweck
Chapter Four: The Seen and the Foreseen
The Roots of the Austrian Tradition
That Which Must Be Foreseen
At the Viennese Crossroads between East and West
The Teleology of Baer’s Butterfly
Menger Establishes the Austrian School
Tutor to the Prince
Methodenstreit
Österreichische Schule
Chapter Five: Umweg
The Roundabout Path of the Unternehmer
Postulating the “Positive”
Produktionsumweg
Böhm-Bawerk, the Bourgeois Marx
Faustmann’s Forest Economy
Rings of Capital
Henry Ford: The Roundabout Unternehmer
The Roundabout of Life
Chapter Six: Time Preference
Overcoming That Humanness about Us
“Radical” Böhm-Bawerk and the Psychology of Time Preference
The Curious Case of Phineas Gage
The Shi and Li Brain
The Subjectivity of Time
The Tradeoff of an Addict
No Zeal for Ziel on Wall Street
Adapting to the Intertemporal
Chapter Seven: “The Market Is a Process”
The Man Who Predicted the Great Depression
Fleeing the Nazis
Human Action
Unternehmer in the Land of the Nibelungen
Genuine Change Is Afoot in Nibelungenland—A Market-Induced Drop in Interest Rates
Distortion Comes to Nibelungenland—The Central Bank Lowers Rates
Time Inconsistency and the Term Structure
The Day of Reckoning Comes to Nibelungenland
The Austrian View
The Market Process Prevails
Chapter Eight: Homeostasis
Seeking Balance in the Midst of Distortion
The Teleology of the Market
The Yellowstone Effect
Lessons from the Distorted Forest
Market Cybernetics
How Things ‘Go Right’
Spontaneous Order
Distortion
The Sand Pile Effect
Distortion’s Message: ‘Do Nothing’
The Shi of Capital
Chapter Nine: Austrian Investing I: The Eagle and the Swan
Exploiting Distortion By Way of the Roundabout
Homeostasis en force
Enter the Distortion
An Initial Misesian Investment Strategy
The Eagle and the Swan
The Ziel and the Zweck: “Tail” Hedging
Case Study: Prototypical Tail Hedging
The Roundabout Investor
Chapter Ten: Austrian Investing II: Siegfried
Exploiting False Prices By Way of the Roundabout
Case Study: Buying the Siegfrieds
Value Investing, Austrian Investing’s Estranged Offspring
A Zweck Attained
Epilogue
Notes
Acknowledgments
About the Author
Index
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