The DAO of Capital: Austrian Investing in a Distorted World by Mark Spitznagel

Chapter One
 The Daoist Sage
 Klipp’s Paradox
 “You’ve got to love to lose money, hate to make money, love to lose money,
 hate to make money. . . . But we are human beings, we love to make money,
 hate to lose money. So we must overcome that humanness about us.”
 This is “Klipp’s Paradox”—repeated countless times by a sage old
 Chicago grain trader named Everett Klipp, and through which I first
 happened upon an archetypal investment approach, one that I would quickly
 make my own. This is the roundabout approach (what we will later call shi
 and Umweg, and ultimately Austrian Investing), indeed central to the very
 message of this book: 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.
 This is the age-old strategy of the military general and of the
 entrepreneur—of the destroyer and of the very creator of civilizations. It is,
 in fact, the logic of organic efficacious growth in our world. But when it is
 hastened or forced, it is ruined.
 Because of its difficulty it will remain the circuitous road least traveled,
 so contrary to our wiring, to our perception of time (and virtually
 impossible on Wall Street). And this is why it is ultimately so effective. Yet,
 it is well within the capability of investors who are willing to change their
 thinking, to overcome that humanness about them, and follow The Dao of
 Capital.
 How do we resolve this paradox? How is it that the detour could be
 somehow more effective than the direct route, that going right could be
 somehow the most effective way to go left? Is this merely meant to confuse;
 empty words meant to sound wise? Or does it conceal some universal truth?
 The answers demand a deep reconsideration of time and how we perceive
 it. We must change dimensions, from the immediate to the intermediate,
 from the atemporal to the intertemporal. It requires a resolute, forward-
looking orientation away from what is happening now, what can be seen, to
 what is to come, what cannot yet be seen. I will call this new perspective

our depth of field (using the optics term in the temporal rather than the
 spatial), our ability to sharply perceive a long span of forward moments.
 This is not about a shift in thinking from the short term to the long term,
 as some might suppose. Long term is something of a cliché, and often even
 internally inconsistent: Acting for the long term generally entails an
 immediate commitment, based on an immediate view of the available
 opportunity set, and waiting an extended period of time for the result—
 often without due consideration to or differentiation between intertemporal
 opportunities that may emerge during that extended period of time.
 (Moreover, saying that one is acting long term is very often a rationalization
 used to justify something that is currently not working out as planned.)
 Long term is telescopic, short term is myopic; depth of field retains focus
 between the two. So let’s not think long term or short term. As Klipp’s
 Paradox requires, let’s think of time entirely differently, as intertemporal,
 comprised of a series of coordinated “now” moments, each providing for
 the next, one after the other, like a great piece of music, or beads on a
 string.
 We can further peel away Klipp’s Paradox to reveal a deeper paradox, at
 the very core of much of humanity’s most seminal thought. Although Klipp
 did not know it, his paradox reached back in time more than two and a half
 millennia to a far distant age and culture, as the essential theme of the Laozi
 (known later as the Daodejing, but I will refer to it by its original title, after
 its purported author), an ancient political and military treatise, and the
 original text and summa of the Chinese philosophy of Daoism.
 To the Laozi, the best path to anything lay through its opposite: One
 gains by losing and loses by gaining; victory comes not from waging the
 one decisive battle, but from the roundabout approach of waiting and
 preparing now in order to gain a greater advantage later. The Laozi
 professes a fundamental and universal process of succession and alternation
 between poles, between imbalance and balance; within every condition lies
 its opposite. “This is what is called the subtle within what is evident. The
 soft and weak vanquish the hard and strong.”
 To both Klipp and the Laozi, time is not exogenous, but is an
 endogenous, primary factor of things—and patience the most precious
 treasure. Indeed, Klipp was the Daoist sage, with a simple archetypal
 message that encapsulated how he survived and thrived for more than five
 decades in the perilous futures markets of the Chicago Board of Trade.

The DAO of Capital: Austrian Investing in a Distorted World by Mark Spitznagel