The Dao of Capital: Austrian Investing in a Distorted World

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The Dao of Capital: Austrian Investing in a Distorted World Audible Audiobook – Unabridged

Mark Spitznagel (Author), Ron Paul (Author), Jeremy Arthur (Narrator),

4.3 633 ratings

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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, 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 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.

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Listening Length

11 hrs 29 mins
Author

Mark Spitznagel
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Narrator

Jeremy Arthur
Release date

2020
July 27
Language

EN
English
Publisher

Gildan Media, LLC
ASIN

B08DH78T9N
Version

Unabridged
Program Type

Audiobook
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Product details

Listening Length	11 hours and 29 minutes
Author	Mark Spitznagel, Ron Paul
Narrator	Jeremy Arthur
Audible.com Release Date	July 27, 2020
Publisher	Gildan Media, LLC
Program Type	Audiobook
Version	Unabridged
Language	English
ASIN	B08DH78T9N
Best Sellers Rank	#130,994 in Audible Books & Originals (See Top 100 in Audible Books & Originals) #153 in Investing Analysis & Strategy #417 in Money & Monetary Policy (Books) #890 in Investment Analysis & Strategy

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4.3 out of 5

633 global ratings

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Gravity's Gone

A Billionaire’s Treatise on the Philosophy of Strategy Itself…but you should read it anyway

Reviewed in the United States on June 21, 2014

Verified Purchase

First and foremost, I highly recommend reading this book. The journey is admittedly round about, but the unique perspective is worth the time investment.

What to Expect
The Dao of Capital is not an investment manual, or a tactical handbook. Instead this is more of a treatise – see “The Art of War”, a paradigm from which to view strategy itself. The focus is strategy, and underlying philosophy, not tactics. Spitznagel’s perspective on life as a whole is unique and enlightening. Yes, he is (extremely) repetitive at times, and could have benefitted from an editor with a bit tighter fist, but please do not let that discourage what will most assuredly be a valuable investment of your time. The author has a gift for conceptual perspective, but at times his brilliance unnecessarily complicates his choice of metaphors - making the book a bit more difficult to continually comprehend than it necessarily needs to be. At times I found myself having to retreat in the book to go back and review a previous metaphor, so that I could keep up with the current concept being stressed. Now, while the retreating to advance strategy may fit well with the overall positional advantage theme of the book, there is still something to be said for concise simplicity when conveying your message.

Specific Tactics for Investing
My personal desire upon purchase of this book was to garner some insight on specific investments, in what I already knew was a distorted market. I already shared much of the author’s theoretical economic view (Austrian) and his political philosophies (liberty), and therefore already shared his belief of a Fed created distortion in the market. I wanted him to tell me how to simultaneously protect myself from inflationary policies (and the dangers of holding cash or T notes), while avoiding the impending artificially stimulated boom and bust cycle of the market. Although he touches on some methods for this, don’t expect any magic potion here. I can summarize the tactical portions of the book fairly quickly. His message to the average investor can be boiled down to the initial half of the concept he terms Austrian Investing I, which is staying out of the equities (stock) market when Central Bank induced artificial distortion is high, and patiently waiting on the inevitable bust to reenter the market to purchase equities at either highly discounted rates or at least at prices that have been adjusted by the bust to a level actually reflecting the natural levels. The latter half of his Austrian Investing I philosophy is a concept which is not feasibly accessible to the average investor (in my opinion). This second half of Austrian Investing I is tail-hedging, the investing tactic for which he is famous, and boils down to purchasing well “out of the money” puts on S&P 500 index options. Regardless of the complexity of tail hedging, dealing in the options market is simply out of reach for folks with full time jobs (assuming that job is not broker, banker, or fund manager). Austrian Investing II summarizes his concepts for valuation to utilize first in times of high distortion (i.e. building the bubble) to find equities to hold that have been less affected by interest rate manipulation, and more so once bubbles have burst and brought market prices closer to natural equilibrium. Austrian Investing II is a nuanced version of value investing with his own spin on how to evaluate companies’ susceptibility to Fed induced volatility; with a focus on companies with round about production processes and healthy (Henry Ford style) reinvestment of profits into continually greater efficiencies through further levels of round about production.
As I mentioned, this is not a tactical book, so he is a bit short on specifics, and what few are included reside at the very end of the book. I do not disparage the author for this, though, as he thoroughly explains throughout the book that tactics were not his intention and does a fairly thorough job of explaining why he did not write a “how-to” invest manual. I will caution, though, that for non-financiers (like myself) he was a bit short on explanations surrounding the financial concepts and terminology once he gets into the actual weeds of Austrian Investing. In a book that requires two weeks of reading just to get through the metaphor regarding conifers and the boreal forest, one would think that at least a brief description of financial concepts in layman’s terms would be included (instead of referring the uneducated reader to seek explanation of these terms and concepts in other materials).

Austrian Economics
Although I didn’t read this book for any reinforcement of Austrian Economic theory, and instead was looking for a heavier dose of finance and investment from someone with an Austrian mindset; I truly did enjoy Spitznagel’s perspectives on the Austrian tradition. I suspect that even professional economists in the Austrian tradition would enjoy his perspectives on the classic Austrian texts. For someone totally unfamiliar, or especially someone who has only been informed by the mainstream’s biased slander concerning Austrian Economics, this book would be a tremendous primer on the subject. Dao of Capital covers theories from Bastiat, Menger, Bohm-Bawerk, Hayek, Rothbard, and (of course) “the Master” Ludwig Von Mises. This book does not cover the full philosophical realm of liberty in the way that “Road to Serfdom” or Rothbard’s “Libertarian Manifesto” do, but this book covers a tremendous array of central themes in the more strict markets based theories of classical liberalism.

Summary
Reviewing this book is a bit difficult, because as much as I enjoyed Spitznagel’s brilliance and unique perspective on strategy itself; the book is extremely tedious at times. Overall, I cannot help but give this brilliant composition 5 stars. The engineer in me, though, would prefer a bit less repetition and a bit higher regard for brevity (although this review obviously suffers from the same infirmity), as well as a more robust coverage of the technical financial concepts.

105 people found this helpful

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Rob Kirk

More economics than investing, this book is spot on

Reviewed in the United States on September 14, 2023

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I am student economics and investing so this book spoke to me. I also have been a big fan of the Austrian look at how the world should work, and the author did a great job of explaining this concept. It's not an easy read, it's a challenging read that is very rewarding. If you want an idea on how Austrian economics should fit in the world, I would highly recommend this read.

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Adem T

Tough read but very informative yet drawn out

Reviewed in the United States on January 11, 2014

Verified Purchase

I really appreciated this book, but more then the first half was information I had already known about Austrian Economics from reading Mises Human Action, Hayek, Road to Serfdom, Much of Rothbards great work, J.B. Say and Bastiats work, etc. Most people when they even read the title of Austrian Investing means that they are already well versed with the theory and applications of Austrian economics, but wanted a better view of investing for the theory. He could have just completely focused on investing and gave recommended pre-readings to beginners to save the serious investors the time and focused on investing information.

Other than that, it was a good side read. I recommend anyone though who truly wishes to maximize investment results to read the works of Benjamin Graham, specifically Security Analysis: Second edition and his book, The Intelligent Investor. Throw in Interpretations of Income Statements, The classic edition by Graham to if you enjoy his first great treatises.

I personally am on macroeconomics a Austrian, I approach market sectors/industries with a contrarian view, and then i use the form of value investing (benjamin Grahams school of thought) for individual companies.

4/5 for this book.

7 people found this helpful

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Roundabout

Reviewed in the United States on June 29, 2023

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Mark Spitznagel provides the full context for his highly successful tail-hedging strategy. The key insight is the importance of his roundabout method (the li vs the shi)- going left to later go right. He supports this by pointing to several instances in nature that successfully utilize this strategy. He also describes the significant influences that informed his philosophy, primarily the famous Austrian economists. He ties this all together to explain why the market is distorted and how to take advantage from the inevitable consequences.

His strategy has only gained in prominence since the book was written 10 years ago. I thoroughly enjoyed reading it and highly recommend it. It is a gift to everyone that someone as private as him would divulge the framework for his strategy for anyone to read, although he repeatedly stresses that this book is not a how-to guide.

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Top reviews from other countries

Patrick Sullivan

A Good Introduction To Austrian Economics

Reviewed in Canada on October 23, 2013

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I will start off, by saying this book is about changing perspectives. It is not, a one two three investment cookbook. Spitznagel attempts to explain his approach to investing. The author has immersed himself, in the school of Austrian economics. Spitznagel`s investment strategies, are all based on the lessons of Austrian economics.

The reader will be introduced, to all the leading proponents of Austrian economics. The list includes; Mises, Hazlitt, Carl Menger, Bohm-Bawerk, Bastiat, and Hayek. Austrian economics is based on human behavior. This is in complete contrast, to most modern economic models. The current models are based on mathematical principles. Spitznagel wants to be clear, that human behavior can not be graphed into a math equation. Spitznagel then compares and contrasts the two methods of economic thinking.

Spitznagel`s conclusion, is to invest in a round about fashion. Here is a straight forward example; avoid investing during euphoric periods.This sounds very simple. However, the human tendency is to get caught up in the euphoria. The round about approach, fights against our natural human instincts. The investor must understand the entire business cycle, in order to profit from human folly.

Spitznagel also dwells into other examples, to help understand the cyclical nature of the world. He lays out various military strategies. He sights lessons from Clausewitz and Sun Tzu. There is also a dendrology lesson, involving the life cycle of conifers. Spitznagel also explains how, forest fires play a role in the boreal forest ecosystem. The effect of forest fires, is also an analogy to the downturns in the business cycle.

Over all, this was a rather interesting read. There were times, when things got a little on the slow side. This is a great book, for anyone interested in understanding Austrian economics/investing.

2 people found this helpful

Benjamin Snow

A different view of investing and economics

Reviewed in the United Kingdom on December 13, 2013

Verified Purchase

Should you buy more equities or sell your existing equity holdings? What should you buy or sell? Is an S&P 500 Index fund worth buying or a selling? In a roundabout way this book can help you think about these questions. This is part investment book, part Chinese philosophy, part autobiography and part biology text book. At its heart is a very good introduction to the Austrian School of economics. Morevoer, it provides a really interesting insight into how a very successful investor thinks - the author has done exceedingly well in the world of investing. All the profits from the sale of the book go to charity so it appears he wrote this book as a labour of love.

A terrific book if you want to think about your investment strategy. Best thing was it made me think about when to sell equities. After reading it, one can quite straight forwardly tell when the market or a company are potentially overvalued. I enjoyed the biology, philosophy and economics that are described in the book. The author successfully uses the Austrian School method of keeping the use of equations to an absolute minimum. It is the ideas that matter rather than the maths or quantitative analysis.

What I don't know is how applicable his investment strategy could be used by small investors like myself. But don't let this put you off reading the book as even if you cannot implement his investment ideas to the letter the general ideas may well be beneficial to your portfolio.

17 people found this helpful

Elvis

New world view

Reviewed in Germany on November 21, 2021

Verified Purchase

This book is very well written. The author mixes history with philosophy and at the end gives practical application of the theory.

The book has a potential to change the worldview and it gave me a different vision of certain processes that happen in our world.

It would be nice to have a softcover version of the book and the practical chapters at the end were over my head (which is my fault and not the books).

One person found this helpful

Achraf T.

History of Austrian investing

Reviewed in France on October 7, 2019

Verified Purchase

A long book that explains the genesis of Austrian investing and maybe too long. However, really fit the distortion we live in today with negative interest rates and so on. Looking forward to Mark's next book.

Raphael Spannocchi

Empowering book even for non-investors

Reviewed in Germany on June 6, 2020

Verified Purchase

This is the first book about markets and investing, that left me feeling empowered to actually do so.
No astrological chart analysis, no irrational Mr. Market to contend with, just first principles of human action in the context of the capital markets.
A sweeping intellectual journey from warring states China, to Prussia and finally to the trading pits of the Chicago.
This book leaves no stone unturned to hammer home it's timeless message.
I feel like I finally understand why the markets behave the way they do, and how I can use that for gain.
Thank you Mr. Spitznagel.

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The Dao of Capital: Austrian Investing in a Distorted World Audible Audiobook – Unabridged

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