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The Dao of Capital: Austrian Investing in a Distorted World [Hardcover]

Ron Paul , Mark Spitznagel
4.0 out of 5 stars  See all reviews (3 customer reviews)
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Book Description

11 Oct 2013
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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Product details

  • Hardcover: 368 pages
  • Publisher: John Wiley & Sons; 1 edition (11 Oct 2013)
  • Language: English
  • ISBN-10: 111834703X
  • ISBN-13: 978-1118347034
  • Product Dimensions: 23.4 x 16.2 x 3.1 cm
  • Average Customer Review: 4.0 out of 5 stars  See all reviews (3 customer reviews)
  • Amazon Bestsellers Rank: 133,981 in Books (See Top 100 in Books)
  • See Complete Table of Contents

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Review

"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."

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 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 “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 “Investors of all kinds will find immeasurable value in this convincing and thoroughly researched book where Mark champions the roundabout .” — Paul Tudor Jones II , Founder, Tudor Investment Corporation “A timely, original, right–economic principles and history–based approach to investing. Drawing on impressive philosophical building blocks, The Dao of Capital illuminates the wellsprings of capital creation, innovation and economic progress. Dazzling!” — Steve Forbes , Chairman and Editor–in–Chief, Forbes Media “This is a magnificent, scintillating book that I will read over and over again. Every page is eye–opening, with numerous areas for testing and profits in every chapter. Here’s an unqualified, total, heartfelt recommendation, which coming from me is a rarity, and possibly unique.” — Victor Niederhoffer , Author of The Education of a Speculator “ The Dao of Capital is an impressive work. Spitznagel’s approach is refreshing—scholarly without being tedious. What a broad look at economic history it provides!” — Byron Wien , Vice Chairman, Blackstone Advisory Partners LP “Wall Street gamblers who believe the Fed has their back need to read this book. Mark Spitznagel provides a brilliant demonstration that the gang of money printers currently resident in the Eccles Building have not repealed the laws of sound money nor have they rescinded the historical lessons on which they are based.” — David Stockman , Former U.S. Congressman, Budget Director under Ronald Reagan, and Author of The Great Deformation “Mark Spitznagel assembles the best insights in human nature and economics to bring order out of the chaos of our world. Economists, investors and lay persons alike will find abundant treasures in The Dao of Capital , one remarkably useful and exciting book!” — Lawrence Reed , President, Foundation for Economic Education and President Emeritus, Mackinac Center for Public Policy “Spitznagel’s excellent book is a powerful presentation of how monetary policy deceives entrepreneurs and investors into making poor investing decisions. I highly recommend The Dao of Capital as a guide to avoiding these deceptions and thus to better investment results.” — Marc Faber , Publisher of The Gloom, Boom & Doom Report “Spitznagel’s sound analytical foundations combined with shrewd strategic thinking provide the reader with a broad philosophy for long run success in wealth creation—where understanding the process that puts you in a position to win is more important than simply stating the goal of winning. I greatly recommend this book.” — Peter Boettke , Professor of Economics and Philosophy, George Mason University “Mark Spitznagel has done a remarkable job summarizing, synthesizing, and extending the great Austrian tradition, and weaving it into a wonderful set of practical lessons. What’s more, he is a great writer and storyteller in the tradition of Bastiat, Hazlitt, and Rothbard, bringing subtle and sometimes complex ideas to life with memorable examples and sparkling prose. Highly recommended!” — Peter Klein , Professor of Applied Economics, University of Missouri and Carl Menger Fellow, Ludwig von Mises Institute “A highly successful investor, Mark brings Austrian economics from the ivory tower to the investment portfolio.” — Ron Paul , Former U.S. Congressman (from the Foreword)

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Most Helpful Customer Reviews
3 of 3 people found the following review helpful
5.0 out of 5 stars A different view of investing and economics 13 Dec 2013
Format:Hardcover|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.
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3 of 3 people found the following review helpful
5.0 out of 5 stars More people should.... 3 Oct 2013
Format:Kindle Edition|Verified Purchase
... read this book.

Take a look at Investing (and life) in a different way.
How often does a really successful hedge fund manager share his view of the investment process for the cost of a book. Many people write about economics yet few (if any) risk their own real money in the markets.

I enjoyed following the thought process from Ancient China through Austria to Wall street. I really enjoyed Mark's book.
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1 of 4 people found the following review helpful
2.0 out of 5 stars not a good read 2 Jan 2014
By maria
Format:Hardcover|Verified Purchase
This book is not intended for an easy understandable book but have to say reading Code Red and would give that one 5 stars
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Amazon.com: 3.7 out of 5 stars  57 reviews
26 of 28 people found the following review helpful
5.0 out of 5 stars Great book for four reasons 7 Oct 2013
By P .Stanley - Published on Amazon.com
Format:Hardcover|Verified Purchase
Let me explain why I think this is a great book.

First, this book makes a major contribution to the field of economics. Economics is in desperate need of a different paradigm, as the existing theories (heavily based on John Maynard Keynes and Milton Friedman) are not working; there is a need for an "agonizing reappraisal". It may seem odd, but I did not read this book primarily to learn more about investing, nor to learn more about the BLACK SWAN. Rather, I wanted to learn about the "Austrian" approach to economics, which was sorely neglected in economics professional education (as it was - and still is - neglected in virtually all colleges and universities in the U.S.). Spitznagel has thoroughly studied the writings of the Austrians (over the past 150 years), and he has presented their views in a fresh way, making it clear that these "old" ideas are not only relevant today, but when properly interpreted, and when combined with certain recent contributions of others (e.g., behavioral economics), they constitute a formidable new approach to economics and economic policy.

Second, the examples Spitznagel uses as illustrations of Austrian "round-aboutness" are superb; they are unusual and outstanding, and are presented in depth: The "Pit" on The Chicago Board of Trade, ancient Chinese philosophy and martial arts, the conifers and pine cones, Clausewitz and military strategy, the caterpillar and the butterfly, Henry Ford and the assembly line, Robinson Crusoe, and many others.

Third, he not only analyses the views of many well-known economists, he also makes meaningful references to the ideas and contributions of Beethoven, Bismarck, Goethe, Napoleon, Churchill, Edison, Einstein, Defoe, Thomas Jefferson, Hegel, Marx, Mahler, Sibelius, Tolstoy, Norbert Weiner, and others. He draws on history, literature, and the arts in order to make his case more understandable, interesting, and compelling.

The final reason I liked this book is that many sections are eloquent, and almost poetic. This is very rare in economics, and it sets this book apart from most of the others in this field.

However, this is a complex book, dealing with a complicated subject, so there are a few sections which will be difficult to understand on the first reading.
18 of 18 people found the following review helpful
4.0 out of 5 stars thought provoking and ultimately worthwhile 5 Sep 2013
By graham - Published on Amazon.com
Format:Kindle Edition|Verified Purchase
Great summary of Austrian economics and its main developers. At times a little turgid and forgot the authors own maxim by being roundabout for its own sake in places. i have come away with a much better appreciation of Austrian economics and a reinforcement of the value investing approach that I try to follow, but starting from an even more rigorous thoughtful position and this book is a major influence on my future investment process. Can there be higher praise than that this book will alter my behavior?
22 of 24 people found the following review helpful
3.0 out of 5 stars Roundabout Investing 24 Oct 2013
By David Shulman - Published on Amazon.com
Format:Kindle Edition|Verified Purchase
Money manager Mark Spitznagel has written a very wordy paean to Austrian Economics. If ever a book needed a tight fisted editor this one is it. However, once you get beyond reading every thing Spitznagel knows about Austrian Economics the reader will get a better understanding of economics and the investment process. The key takeaways from the book are the core notions of Austrian Economics which value roundabout(indirect) production over direct production and the role of monetary policy to distort investment decisions. For example, in the case of the former, the direct route to catching a fish would be to try to grab one in a pond while the roundabout and far more profitable route would be to make a net first and then use it to catch fish.In case of the latter, the low interest policy of the Federal Reserve induces investment that will be proved unprofitable once interest rates normalize leading to a bust. This knowledge leads investors to hedge tail risks when stock market trade at high price/replacement cost ratios and to buy individual stocks that with high returns on capital that won't be affected by increases in interest rates. Nothing really new here, but puts some real foundation underneath it. That is the value of the book.

Spitznagel uses the biographies of the three great Austrian economists, Carl Menger Eugen von Bohm-Bawerk and Ludvig von Mises to explain Austrian economic theory. All of that is to the good, but he leaves out perhaps the greatest Austrian economists of all time, Joseph Schumpeter and Friedrich von Hayek. I guess Schumpeter's and Hayek's work don't quite fit into his theories. He also ignores the work of three American economists who built on the work of the Austrians: Irving Fisher, Frank Knight and Jack Hirshleifer, a former professor of mine. For example Hirshleifer, in his "Investment, Interest and Capital" outlines a general equilibrium approach to interest rate determination with a society's rate of time preference and an intertemporal production possibilities function, pure Austrian economics.
28 of 32 people found the following review helpful
5.0 out of 5 stars Fantastic! A book to reread over and over! 3 Sep 2013
By gja91 - Published on Amazon.com
Format:Hardcover|Verified Purchase
I've been studying investments and the market for about a decade. It took me time to really form a conceptual framework. After two extreme market crashes, and now the "distortion" happening today -- what is an average person to do? How do we think about and relate to what is happening today? I think most people are realizing that what is on TV, print, and the internet is mostly just marketing and propaganda.

The Dao of Capital gives you that framework. It gives you the reasons on why to have patience and how to conceptually not only think about the markets, but also life in general. The chapters are very thorough and the author repeats the same theme over and over but from different vantage points. I think this book is very important because it develops Austrian themes and gives the reader/individual another vantage point. You be the judge if this works for you or if you get something from it. But that is the whole point -- learning new ideas, testing them, and working it out.

Believe me when I say this -- this is a rare one of a kind book! I am grateful that the author put this out. After sorting and skimming through books and ideas that are no more but fads and marketing I am happy to finally find this diamond in the rough.

Do yourself a favor and read this!
10 of 10 people found the following review helpful
5.0 out of 5 stars Austrian economics brought to investing 1 Sep 2013
By Hunter Hastings - Published on Amazon.com
Format:Kindle Edition|Verified Purchase
Brilliantly analytical about what drives economies, companies and markets, The Dao of Capital translates Austrian economics, from Menger to Rothbard, into investing perspectives and techniques.
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