The Dao of Capital: Austrian Investing in a Distorted World

by Mark Spitznagel

The ultimate end for the Austrian investor is the same as for any other investor: profit. Yet the means are entirely different; here, they are the central focus. The Austrian investor doesn’t lunge in li fashion immediately for the goal; he doesn’t set out directly to find firms with immediately rising profitability, or firms to hold while others also pile in immediately, or firms with immediate dividend yields, or even underpriced firms per se. Rather, his first task is to find highly roundabout, productive firms—ones with high ROIC—that possess the circuitous means of economic profit. Then, to these Siegfrieds he applies a second filter, or screen, and looks for firms with a low Faustmann ratio. This two-pronged approach would strike most investors as quixotic, simplistic, and even contradictory. By this point in the book, though, the reader should understand that such a commonplace attitude is precisely what will deliver remarkable rewards to the roundabout Austrian investor.