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The Dao of Capital

Austrian Investing in a Distorted World

By Mark Spitznagel
15-minute read
Audio available
The Dao of Capital: Austrian Investing in a Distorted World by Mark Spitznagel

The Dao of Capital takes the reader on a journey from ancient China to nineteenth and twentieth century Vienna, to modern, globalized markets. Using a multitude of examples, it outlines the approach of “roundabout investing” or “Austrian investing,” which is based on ancient Daoist wisdom of “gaining by losing.” See how strategic investing, rather than rapid and rushed investing, can lead you to great financial success.

  • Anyone interested in economics
  • Anyone interested in wise investing
  • Anyone who wants to see how Daoist wisdom can be applied to markets

Mark Spitznagel is the founder and President of Universa Investments, an investment advisor that specializes in profiting from extreme stock market losses as a means of enhancing investment returns. In addition to hedge fund investing, Spitznagel’s roles in his twenty-year investment career have ranged from independent pit trader at the Chicago Board of Trade to the proprietary trading head of Morgan Stanley.

 

Mark Spitznagel: The Dao of Capital copyright 2013, John Wiley & Sons Inc. Used by permission of John Wiley & Sons Inc. and shall not be made available to any unauthorized third parties.

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The Dao of Capital

Austrian Investing in a Distorted World

By Mark Spitznagel
  • Read in 15 minutes
  • Audio & text available
  • Contains 9 key ideas
The Dao of Capital: Austrian Investing in a Distorted World by Mark Spitznagel
Synopsis

The Dao of Capital takes the reader on a journey from ancient China to nineteenth and twentieth century Vienna, to modern, globalized markets. Using a multitude of examples, it outlines the approach of “roundabout investing” or “Austrian investing,” which is based on ancient Daoist wisdom of “gaining by losing.” See how strategic investing, rather than rapid and rushed investing, can lead you to great financial success.

Key idea 1 of 9

"Austrian investing" means applying the Chinese philosophy of Daoism to markets.

The concept of Austrian investing starts with a paradox: you've got to love to lose money, and hate to make it. The wisdom of this paradox reaches back more than two and a half millennia to the Chinese philosophy of Daoism.

In Daoism, the best path to anything is through its opposite. So you gain by losing and lose by gaining.

Daoism emerged in ancient China during a time of heavy conflict. One of its central concepts is wei wuwei, which literally means “doing by not doing.” In warfare, that meant not attacking until you could secure a position of advantage, and turn the opponent's own force against him.

You can see this concept at play in the Daoist martial art tuishou, or “push hands.” In tuishou, two opponents try to throw each other to the ground by going through a sequence of very subtle alternating feints and attacks.

The tuishou exercise is a physical manifestation of the idea of waiting and exploiting your opponent's urgency. The real force in tuishou isn't in pushing; it's in yielding.

Austrian investing follows the Daoist model of pursuing a roundabout route to market success. Instead of following a direct route towards immediate gain, Austrian investing takes the more roundabout path towards immediate loss. This pursuit of loss is similar to the yielding in tuishou: you pull back and experience short-term loss, so you can gain a more advantageous position in the future.

Like the Daoist concept of wei wuwei, the idea is to profit from other investor's impatience and intolerance of small losses, as well as their urgency to get immediate profits. Patience is key.

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