The Dao of Capital: Austrian Investing in a Distorted World

by Mark Spitznagel

In its natural state, a system—from a forest to a market—achieves balance through internal governance and guidance, which depend upon the system’s own ability to internally communicate and react to changing conditions due to the interactions of a variety of players, whether buyers and sellers in a marketplace, trees and herbivorous predators (especially fire) in the forest, or entrepreneurs deciding when and how to become ever more roundabout to meet the ultimate demands of consumers. Within the system, errors will occur and resources will need to be reshuffled; as such, there will be isolated, individual failures, whether we are dealing with forests or factories, banks or bakeries. The process will take care of itself as long as there is integrity within the feedback loop and accurate (nonmanipulated) information is allowed to flow, resulting in a suitable mix and magnitude of growth, given the available resources—whether savings for investment, or sunlight and soil for trees. However, attempts to intervene and manage such systems typically end in a paradox whereby the very opposite of an intended result is achieved; instead of order and balance there is distortion that leads, ultimately, to destruction.