The DAO of Capital Quotes

“The key is to free oneself from a tyranny of first consequences, overvaluing what comes first at the expense of what inevitably comes later. As Bastiat warned, “The sweeter the fruit of habit is, the more bitter are the consequences.”16”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“All that wisdom—indeed, the summation of every word on these pages—is contained in a deceptively mundane object that weighs but a few ounces and through which, in the words of William Blake, you “hold infinity in the palm of your hand”: a humble pinecone. Worth nothing, neither rare nor unusual, it is like the Dao itself, failing to catch the eye or interest; to most, its meaning remains unseen. Yet to those who know what they are beholding, it is nothing less than a marvel. In the pinecone is a visible reminder of a practical discipline, the tenacious, unyielding pursuit of intermediate means as strategic advantage for achieving the ultimate ends—a quest only possible for those who dare to take the roundabout route.”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“The shi of Sun Wu was to “make the most of the strategic advantage” and “if there is no advantage, do not move into action.”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“Thus, the stock market tends to be about immediate bets (or expectations) on distant outcomes—yet all that matters to the bettors tends to be the immediate outcomes.”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“The real black swan problem of stock market busts is not about a remote event that is considered unforeseeable; it is rather about a foreseeable event that is considered remote—”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“Although the future remains uncertain, the entrepreneur relies on “specific anticipative understanding,” which “can be neither taught nor learned”; he does not focus on what was or is, but acts upon what he expects the future to be.”
― Spitznagel, Mark, The Dao of Capital: Austrian Investing in a Distorted World

“To model procrastination—where someone really does intend to do something, just not right now—involves not merely a discount on future enjoyments, but a more subtle problem of time inconsistency, of thinking that what is too onerous in the present will somehow be easier to endure in the future.”
― Spitznagel, Mark, The Dao of Capital: Austrian Investing in a Distorted World

“it was Böhm-Bawerk who defeated them so effectively with economic theories and critiques such that Marxism did not take root in economics to the degree that it has in other professions, such as sociology and history.10 Using impeccable logic, Böhm-Bawerk showed that the workers who are employed by the entrepreneur are paid immediately for the “full value” of their labor, so long as that value is correctly calculated by including the time element. After all, in most production processes the input of labor hours doesn’t immediately yield a finished good.”
― Spitznagel, Mark, The Dao of Capital: Austrian Investing in a Distorted World

“Because of the quirks of our human eagerness for the immediate reward, we are forewarned that what seems easy and straightforward is deceptively so; the roundabout is in practice a counterintuitive path—of acquiring later stage advantage through an earlier stage disadvantage—nearly impossible to follow.”
― Spitznagel, Mark, The Dao of Capital: Austrian Investing in a Distorted World

“It is not the globe trotter who knows mankind, but the thinker.”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“In addition to casting our net for firms with a high ROIC, we are also looking for firms with a low Faustmann ratio, meaning a low market capitalization (of common equity) over net worth (or invested capital plus cash minus debt and preferred equity) ratio.”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“We ask ourselves: How are we exposed to malinvestment? Are we, for instance, investing in what is most manipulated by, whose profitability is most dependent upon, artificially low interest rates? Beyond avoiding it, can we perhaps even benefit from it?”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“to be shi until strategic advantage coalesces into the opportunistic action of li within shi”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“Within the economy, as Hayek stated, the “mutual adjustments” of individual participants occur through negative feedback.11 Government and central bank interventions can at best postpone the negative feedback mechanisms; they can’t repeal them.”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“Feedback is crucial, and must be continuously given by and within the system in order to make the necessary, typically small corrections to keep on course.”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“We have thus succumbed to a blind faith in bureaucratic authority over natural processes.”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“Interestingly, this increased temporal myopia under artificially lowered rates is the very opposite effect of naturally (savings-driven) lower rates. Genuine, savings-driven declines in the interest rate lead to capital accumulation, more roundabout production, and a progressing economy; artificially lower rates, driven by credit inflation, ultimately lead to naught but capital consumption and a regressing economy.”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“They do not become more roundabout, because they refrain from investing in capital that will not show returns for a period of time (or a period when the interest rate has not been lowered as much as shorter-term rates). Thus there is a hyperfocus on—and even addiction to—the yields of stocks and other risky and high-duration securities (a “maturity-mismatch”); there is an irrepressible allure to the steep yield curve.”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“To be clear, it is the abnegation of interest rates as an information and control parameter in the economy that creates the distortion, not just inflation per se.”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“The Land of the Nibelungen, just like the real world under such intervention, is a frightfully distorted place. It is physically impossible to devote more land to timber production because all the pastureland currently in use appears to be quite profitable and, indeed, deserving of expansion, as well.”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“Mechanical equations can be used to solve practical problems through the introduction of empirically acquired constants and data; but equations of mathematical catallactics cannot in the same way be of service to practical problems in the area of human action where constant relations do not exist.”22”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“Those who studied human action would start from the premise that there is a purpose behind our behavior, which in this instance was to commute from home to work via the train in the morning and then the return trip in the evening. However, the opposite approach by the “truly scientific” behaviorist, who uses only empiricism, would merely see people rushing around randomly, without any particular aim, at certain times of the day. By this example, Mises showed which of the two approaches to human behavior would be most meaningful—clearly the deductive.20”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“Mises, perhaps the greatest economist of all time, broadened the thinking among his students; the market could not be viewed as or contained by a mere static thing or physical location, but rather as the actions of countless people”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“Consumers and producers, with their subjective expectations and preferences, do not conform well to mathematical models.”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“What we have here is a clear, systematic source of investment mispricing, ripe for intertemporal arbitrage (a term synonymous with Austrian Investing itself).”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“we are decidedly inconsistent in our time preferences—that is, our preference for delay reverses as the delay period changes; and we are certainly not well-described by a single (or perhaps by any) static parameter.”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“Mark Spitznagel, “Christmas Trees and the Logic of Growth,” Wall Street Journal, December 22, 2012.”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“Our live-for-today culture has been invaded, like a deadly virus, by an insidious attitude that teaches this moment is all that matters just because it is all we see and experience—right now. The symptoms of this affliction can be found in the chronically low savings rate in our culture (ranging from financial to even fresh water, soil, and, of course, forests) and, analogously and most incredibly, governmental fiscal deficits that deviously and increasingly rob future generations—our helpless intergenerational forward selves.”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“Impatience now with the belief that we can and will be patient later is the way of all flesh.”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World

“The key is to free oneself from a tyranny of first consequences, overvaluing what comes first at the expense of what inevitably comes later. As Bastiat warned, “The sweeter the fruit of habit is, the more bitter are the consequences.”
― Mark Spitznagel, The Dao of Capital: Austrian Investing in a Distorted World