The Dao of Capital explores the principles of Austrian economics, and how they can be applied to the world of finance and investing. Spitznagel draws on the teachings of the Austrian school of economics to argue that markets are inherently unpredictable and that investors should adopt a flexible, long-term perspective in order to be successful. He also emphasizes the importance of understanding the business cycle and the role of government intervention in the economy. Overall, the book promotes the idea that investors should focus on the "big picture" and avoid making short-term, reactive decisions in order to achieve long-term success. Austrian investors typically place a strong emphasis on economic and financial fundamentals, such as productivity, savings, and interest rates, when making investment decisions.
Austrian economics is a school of economic thought that emphasizes the role of individuals and their subjective value judgments in the economy. It argues that the economy is a complex, ever-changing system that cannot be fully understood or predicted by government or experts. Key principles of Austrian economics include the idea that markets are naturally efficient, that government intervention in the economy is often harmful, and that economic booms and busts are caused by monetary policy mistakes by central banks. The Austrian school also places a strong emphasis on the importance of property rights and the role of entrepreneurs in driving economic growth. They often advocate for laissez-faire policies and minimal government intervention in the economy.
Many of the Austrian investing principles discussed were a bit esoteric. One key principle is the Mises Stationarity Index, or MSI for short. It is a test to see if a graph or chart is consistent over time. Imagine you have a graph that shows how many apples are sold at a store every day. If the graph shows the same amount of apples sold every day, then the graph is steady or constant. But if the graph shows that sometimes more apples are sold and sometimes less apples are sold, then the graph is not steady or constant. The MSI is a way to check if a graph is steady or not. It's based on the idea that sometimes the economy changes a lot and sometimes it doesn't change as much.
I did thoroughly enjoy the historical discussion of Austrian economics, particularly the early founders of that school of thought. It originated in Austria in the late 19th century. Some of the most famous Austrian economists include:
Eugen von Böhm-Bawerk: He is considered one of the founders of the Austrian school of economics and is known for his contributions to the field of capital theory. He wrote several influential books and articles, including 'Capital and Interest' and 'The Positive Theory of Capital.'
Ludwig von Mises: He is considered one of the founders of the Austrian school of economics. He wrote many influential books and articles, including 'Human Action' and 'The Theory of Money and Credit'. He is known for his emphasis on the importance of individual choice, the role of entrepreneurs, and the economic calculation problem.
Friedrich Hayek: He is another prominent member of the Austrian school. He won the 1974 Nobel Memorial Prize in Economic Sciences. He wrote many influential books, including 'The Road to Serfdom' and 'The Constitution of Liberty'. He is known for his emphasis on the importance of markets, the role of prices in transmitting information, and the dangers of central planning.
Carl Menger: He is considered the founder of the Austrian school of economics. He wrote 'Principles of Economics' which was one of the first works in the field of marginal utility. He is known for his emphasis on the subjective nature of value and the role of individual choice in shaping the economy.
These economists and their works have had a significant influence on economic thought and policy, and their ideas are still studied and debated today.
I did enjoy parts of this book, but I did struggle through parts of it, particularly the technical 'Austrian investing parts'. Listening to the audiobook version probably had much to do with it. If I really wanted to understand the more esoteric concepts, I'd buy the print version and do lots of highlighting and side-research.
Ref: https://en.wikipedia.org/wiki/Austrian_School
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