YouSaid · the spoken record

Mark Spitznagel

lines on the record: 51
first: 2019-05-06
most recent: 2019-05-06
sittings or episodes: 1
sources: podcast

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“Most productive businesses are the most roundabout businesses. And I'm going to close here, and this is going to give you a summary. The entrepreneur who foresees a profit opportunity in the distant future and who patiently reinvests earnings into his business year after year in anticipation has a much greater opportunity for eventually posting an enormous return than entrepreneurs who are engaged in short-term projects. I'm going to read that to you one more time and then I'm going to tell you who did this. And we just lived through this happening. Actually, let me tell you who I'm talking about. I'm talking about Jeff Bezos. Jeff Bezos did this, literally did this. So let me, now that you know that's the entrepreneur that I'm referencing, even though the one he's referencing, let me read that to you again with Jeff Bezos in mind in Amazon. The entrepreneur who foresees a profit opportunity in the distant future and who patiently reinvests earnings into his business year after year.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Therefore, it's all about the straightforward plan of attack compromised in this book, which here's a summary. Being patient now in order to be strategically impatient later. So he uses the example. Like, Henry Ford was willing to forego profits for a few years to build his plant to get his production up. But once the production up was up, they would have people in his factory going around with stopwatches trying to measure how fast cars were being produced and then to optimize to keep decreasing that. I think they got it down to like producing a car every like two and a half minutes or something like that. Something crazy like that. It says we and then this is a really good summary about why is this so important? Like why are you spending hundreds of pages talking about this? Because we know that the most productive capital is also the most roundabout capital. And again, he's talking about investing, entrepreneurship. Same thing. We know that.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Building the indirect means, which is also known as the positional advantage, toward the end of profits that will not materialize in the near term. In fact, as we will see, it is all the better for us that such evidence is hidden from the rest of the investing public who focuses on the scene, also known as the immediate, right? Their impatience makes them blind to the future potential, which are tomorrow's profits that are yet unseen, but this is really important, but can, if we know where to look before seen.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Actually, true, and that you should actually be expecting them. It's C, and then he's going to wrap here about his own thing. He says, it seems that tail hedging, as I've been explicitly practicing for about 15 years now, should be called central bank hedging because he's saying the distortions that allow him to make these profits are caused by people that are trying to interrupt the natural market process. And then he's going to summarize what roundabout investing is, which is what he's engaged in, a version of it rather. Roundabout investing is all about temporal structure of productive capital, meaning the changes in value of money over time. As we recall from the slow growing, at first conifers and Henry Ford's capital structure extending from raw materials to automobiles, production by its very nature takes time, much time. Roundabout production therefore cannot focus myopically on the immediate profit. Rather, it invests”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Each month, and then he talks about some way in which he organizes some of his funds. He says each month the portfolio spends one half of 1% on puts and the remaining 99.5% stays invested in the S&P index. No leverage is employed. And in fact, typically when the market is down by not even 20%, the entire portfolio is actually net profitable. He says investors have indeed encountered surprising and pernicious events. So he's talking more about black swans. But the fact is those who were surprised have been those in the extreme majority with either a blind or brazen disregard for the crucial concepts of Austrian capital theory and monetary credit expansions. And the corollary understanding of capital goods and the time structure of production. So he's saying like, yeah, just because a lot of people don't think it's a remote and it's unforeseen doesn't mean that that”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Bears repeating, I am not telling anyone to run out and do this as described. Even the very generic version of tail hedging is very hard and involves options that are very illiquid, which makes pricing and taking profits very difficult. It is meant to serve as a case study, to demonstrate Austrian tools and the application of the roundabout approach through the conditional historical outperformance generated by adding extremely out of the money options to the SMP composite index. Let me just read this part to you in case, you know, options, not everybody knows what they are. So it says to begin with a little basic knowledge for readers who are not familiar with options. To take a short position in the underlying security at the strike price example, an equity index such as the S&P composite with tail head The puts involved are necessary.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“That's partially what he built his business on. If the market perceives our prices a large loss in the stock market as very unlikely even when such perception and pricing are unwarranted, obviously tremendous opportunity exists. That's how you get these headlines where he makes a billion dollars in a day. It's not necessarily made a billion dollars in a day. He may have waited three years for that, but he reaps all the benefits in one day. Even if only to protect a portfolio against such deleterious losses. So he also, I think a lot of people invest with him because they look at it as like a form of insurance. So he says, I move from the commentator I was in the previous chapters to the practitioner. Tail hedging is at the center of what I practice in my investment partnerships. However, while this is something of a glimpse into what I do in my funds, my actual approach is far more nuanced, as it is far beyond the scope and intention of this book.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“We always want to do something a bit onerous that will shower us with long-term benefits, but we never want to do it today So, the last two chapters of the book are about the first, I don't know, ten chapters are all about this idea. And the last two is how he applies it in his own practice. So that's what I'm going to focus on now. So like I said before, he uses options. That's his tool. So he says, the real black swan problem of stock market busts is not about a remote event that is considered unforeseeable. Remember, he repeats himself a lot, but that's not a bad thing. I actually think it's really smart because you have to constantly remind yourself if you look at, think about your memory not so much as like a video recorder, but as a process that takes photographs. A lot of stuff is left out. Therefore, the need to reread or re-listen to or rethink about things that are important to you. Rather, it is about a foreseeable event that is considered remote. So I've already read that to you. The vast majority of market participants fail to expect what should be in reality perfectly expected events.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Why do you not? Why are they so rare? And this reminds me of, I always talk about when the founder of Atari, Nolan Bushnell, he hired like a 19-year-old Steve Jobs. He said, you know, Steve Jobs had one speed go. And I think having that one speed is how you overcome short-term self-diluting procrastination. So it says, now we're skipping ahead in the book, talking about why are people so focused on the immediate? This pattern present in all of us and distorted to extreme and even dangerous levels in the case of addictions is to be impatient now all the while holding fast to the self-delusion of being able to be patient later. And of course, when later becomes now, we are just as impatient. We're just playing a mind game on ourselves. We expect to act very differently through time than we actually do, predictably throwing a wrench in our best laid plans.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“So the rate of growth is accelerating. He now has an advantage that his competitors could never match. Now eventually, we obviously see, this is at the beginning of an industry, right? Now I think almost all carrier manufacturers use relatively similar means of production. So it's not like these advantages last forever. And he talks about this. So he says, my notice, if it were easy, everyone would do it. Something I remind myself constantly. It says if roundabout were easy, then everyone would do it. And no doubt the strategic advantage derived from it would be eliminated altogether. So at once was rare and a novelty has kind of been 100 years later kind of par for the course in the automobile industry. But again, it could be applied to any craft that you're doing. Oh, so this is more about the psychology. The reason why once you explain these ideas, they make sense.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“When I got to this part on Ford, Mark's ideas really started sinking in for me. Okay, after showing extraordinary patients during the building of the roundabout production processes, once it was in place, Ford switched gears temporarily and became obsessed with timing the car making production process to see how he could make it faster. So now we're going to see. Remember he talked Mark uses the example. He's like, listen, it's not about detertis to hair. It's about the tortoise turning into the hair Going faster. So we're going to see that annual output of model T rose from 500,000 vehicles in 1916 to 1 million in 1921, right? So double amount five years later to 2 million a year later.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“The roundabout paradox is that the process of becoming more circuitous takes a tremendous amount of time during which there is little to show for the sacrifice. But at the end results in significant time savings. Like the conifer, it is slow at the start so that it can accelerate at the end. So he's building cars, basically, let's call it handmade for lack of a better term before this. And his competitors are building cars handmade. Where's your advantage? Ford realizes that takes a step back, looks like he's making going backwards or making no progress and for going immediate profits that other car makers are getting to build the system because he knows that this system is going to give him advantage that the other people that are taking direct routes and not just the roundabout route cannot match in the future.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“That winds up producing cars in mere minutes. And we're going to get into that, which because that's an illustration of the roundabout process and the benefits that you derive from that process in the future. It says the decision was driven by economics. With mass production, Ford could make parts at a lower cost and more quickly than buying them from suppliers. The flagship for his roundabout production was the River Rouge plant, which included a port, a shipyard, steelmaking, a foundry, a bodymaking plant, a sawmill, rubber processing, a cement plant, a power plant, and an assembly plant. It was the epitome of roundabout production, which at the outset literally consumes time and requires great capital expenditures to be, in Ford's words, turned back into the business so that it may be still better fitted to serve and in part passed on to the purchasers, the customers.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“but to produce modest, reliable, high-quality cars for working people of more modest means, such as the iconic model T. The Model T was introduced in 1908 to an enthusiastic public that just a few years before did not even know they craved cars. As Ford once said, if I'd asked people what they wanted, they would have said faster horses. Led by Ford's vision, the company made the roundabout transition from assembler to manufacturer in every process along the way in order to reduce costs, gain more control over supplies, and eliminate unnecessary inventory, thus making huge gains in efficiency in innovation. So what are you talking about? They used to just like kind of like handmake cars in this big warehouse. So supplies would come in one end and out the other end. Come a car. This obviously took way more time.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“By the time Ford built a second car he had already faced a competitive market. In nineteen eighty six Ford sold his car and like the roundabout entrepreneur he was at heart invested the proceeds in research and development. Indeed, over the course of his lifetime, Ford Motor Company would not have prospered had the founder not committed to continuous long term investment in improvements and roundabout production. Although his name is synonymous with automotive manufacturing and entrepreneurial success, Ford failed in his first two ventures. Some of the greatest entrepreneurs have suffered such setbacks. Often these experiences pave the roundabout routes to crazy and obsessive goals.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“The Austrians described what the undertaker knows in his gut. That was not a quote from him. That Bark writing, obviously. Ford held similar Austrian views on such things as profits as a source of productive capital that must be reinvested to the ultimate benefit of consumers. And a loathing for the actual operation of the banking and monetary system, which he famously said, if people understood, would be a revolution before tomorrow morning. All right, Ford had a natural fascination for all things mechanical. As a boy he fashioned for himself a set of tools with which to repair watches, perhaps foreshadowing the entrepreneur who would invest in a tremendous amount of time and effort to assemble the tools of production in order to approve speed, efficiency, and output in his manufacturing processes later. His obsession with the horseless carriage intensified in eighteen ninety two he had built his first motor car.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“He is the quintessential roundabout entrepreneur in the Austrian tradition. So says he wrote this book, which I just ordered. I missed this. I don't know how I missed this. But he wrote a book in 1926 called Today and Tomorrow. And this is a quote from Ford. The time element in manufacturing stretches from the moment the raw material is separated from the earth to the moment the finished product is delivered to the ultimate consumer.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so now we understand how it looks with a one person economy. Let's jump up to Henry Ford and see how Henry Ford applied roundabout production to yield greater returns in the future. And in doing so, one of the only car manufacturers at the time to be able to actually reap those benefits, if not probably the only one, actually. Okay, so this is Henry Ford as a quintessential roundabout entrepreneur. Here we recognize him, meaning Ford as the embodiment of the roundabout entrepreneur who created a new paradigm of production, the assembly line, as the culmination of vertical integration that depicts the improved efficiency and productivity gained by spanning factories and power plants to turn coal, iron ore, and steel into automobiles.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“such as, in addition to repairing his boat net, a rack for drying fish, an evaporating seawater to collect salt to preserve them, etc. Soon Crusot has an exceedingly efficient fishing operation, catching far more fish than he can consume and accumulating a stockpile of protein for his diet and equivalently a stockpile of time for replacing and creating even more capital goods. As Crusot shows us, entrepreneur is engaging in roundabout production must contemplate the basic considerations of how long it takes, what it costs, how many resources must be invested to get increased output, and how long one has to wait for a payback.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“So, Crusot hopes that this more than justifies the setback in waiting to be paid for the fruits of one's labor and investment. If indeed there ever is a payoff, entrepreneur ventures naturally do not come with any guarantees of feasibility or profitability. It's an important statement. Now, so we have Crusot, he's hungry, he's catching five fish a day, but at the end of the day, he's got to do the exact same thing tomorrow. He's not making any progress. He's only able to focus on his immediate needs. He takes, what, two months off, whatever the timeframe was, builds this, builds a boat, gets the tools, gets a net, and his idea is like, hey, I'm going to starve a little bit now, but this is going to make me yield greater results in the future. That is the literal definition of the roundabout process, okay? And here's the result. At last, the boat and net are ready. The Hungry Crusoe takes to the water, and in less than two hours cast.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Process takes weeks, all the while Crusot foregoes full satisfaction of his current wants, which is a stomach full of fish, so that he can position himself for future advantage with the intermediate goods of a boat and net. Hungry, he labors upstream for more fish downstream. Putting it in economic terms, he makes use of his meager surplus time now in order to create a more productive means for later. This is on Weg, that word I was telling you about. Crusot ultimately catches more fish by first catching fewer fish, by focusing his efforts in the immediate toward indirect means, not ends. It is highly strategic yielding or losing now to realize an advantage in the future.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“At an intermediate good, a branch that he shapes into a spear. But when the last bone is picked clean, he must rest up for another day of labor. Thus Crusot's quandary is how to catch the same amount of fish in less time and with less labor, or a greater number of fish in the same amount of time. The answer to both is to become more roundabout. The problem, however, is that even with his spear, Crusot spends so much time trying to catch five fish for the day that the only way he can invest in better tools, think of these as improved intermediate goods, is to cut back on current production. In other words, he has to save some of his effort instead of expending it all on catching fish. This requires him to decrease his fishing time and catch perhaps only three fish a day, which means he's going to be hungry, so he can spend the remainder of his day making a simple boat and a fishing net.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“And in business, you can only arrive at by taking the roundabout way. To illustrate, he's going to give an example of the parable of the shipwrecked Robinson Crusoe. And so this is like the most simplest way to outline his idea because literally a one-man economy. Okay, so Crusot's very survival, in case you don't know, it's a fictional character. He's stranded on a desert island, so he needs to survive. Crusoe's very survival depends on him moving beyond the hand to mouth, direct satisfaction of his needs to become ever more roundabout. Crusot's first priorities are the basics of life. To obtain food, he begins with the most primitive of approaches. He goes after what he needs with his hands. Standing in water, Crusot tries to snatch fish as they swim by, but these slippery and fast moving creatures are hard to catch, and so he upgrades his approach with a primitive tool, his first attempt.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Is realized in the future. That roundabout methods lead to greater results than direct methods is one of the most important and fundamental propositions in the whole theory of production. That's kind of what I was just mentioning, how even though most people take the direct route, the greatest opportunities in life”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“It stops when you're actually consuming it, when you're using the device. You've given them the money already, but then after you open it, after you start using it, and the end result is that for any successful business, is the consumer should be satisfied. I like that idea. Okay, so now this is, I'm going to read a good amount here. This is the story that finally made roundabout production click for me. Okay, this is roundabout production. It is important to understand that that roundabout production is not simply about having production take longer. It's not just indirectness for the sake of it. Taking the roundabout route is not the same as merely taking more time. There is no advantage or virtue in delays, procrastination, meandering, or going out of one's way for no reason. One amasses the tools of one's trade, the intermediate goods that will add proficiency and efficiency to the pursuit. The result of which”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Assembles the necessary inputs, the factors of production into a temporal capital structure. So that means over time. Capital accumulation is a sequential production process accomplished through stages to produce final consumer goods more efficiently and time for when they will be demanded. The constantly stalked strategic advantage toward the ultimate end of satisfying the consumer. I love that he's not even talking about the end being the final factor form of the product because that's in his own thinking like that's more of a means than an end. The end is the final satisfying consumer. So think about how much you might love your smartphone like iPhones are great, right? That could be thinking, okay, think about all the different materials and all the different supply chains and all the different processes Apple has to get, including the software and the operating system and everything else to get it into its final form. But that's not where it stops.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Of the entrepreneur. So it says Umweg is a lowly and mundane term which disguises its philosophical and practical significance. It translates literally as detour indirect or roundabout route. So now let's go into how this applies to entrepreneurship. So too is the path of this book spanning miles and millennia militarist and economist conifers and entrepreneurs circuitous yet calculated in our attended direction. That's why I mean you kind of have to read the whole book because he's taking the roundabout path as he to explain his idea in his writing too. But this is one important part. By exploring universal strategic thinking, we build a structure of understanding from many sources and thus mimic how capitalists layer their tools in intermediate stages of production. The protagonists of the Austrian narrative is the entrepreneur.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“That is, and intentionally and counterintuitively going right in order to go left rather than taking the direct route, what he also calls the false shortcut, saying like most of the greatest opportunities in the world, they are unavailable to people that just go the straight path. You have to go to the roundabout path. So I'll give you an example of a modern day entrepreneur at the very end of the podcast who utilizes this. And I think it'll enhance your understanding of what he's saying here. Like the idea that, oh no, no, you don't understand to get to the very best opportunities, you have to do this, even though most people will never do it. It's very counterintuitive. It says UNWEG, so he uses a ton of non-English words. I think he speaks like German. He may speak Finnish or just a lot of them. So one of these is Unweg. But this one is important because UNWEG is a staying for the roundabout path of the...”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“He says, some have compared the roundabout strategy of the conifer. That's exactly how they spread their seeds and continue to grow and survive. Some have compared this roundabout strategy of the conifers to the old fable, the race between the tortoise and the hare. But it is really, and he's saying that's a misunderstanding of what the conifers are doing. He's saying, but is really a refined version, call it the tortoise that morphs into a hair. In our fable, the tortoise doesn't remain slow, but rather builds his strength and gradually accelerates that is the strategy of the conifer. And now he explicitly states, like this is the main point in how it applies to entrepreneurship. So it says the gospel of this book is the strategic positional advantage gained in the roundabout way, in the relation of indirect means and conditions to ultimate ends and consequences.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“To its eventual position of advantage. So it's much better to just be different than to compete with everybody else. Okay, so this whole idea, this is something this paragraph is important. The point is not to go slow to stay slow. It's to go slow now so you can go faster later.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Switch the order, which I've spent the bulk. And mainly the fact that because nature's existed for a much longer time period than humans, that's why you learn from them. And one of the reasons you learn from them, I should say. And so although my favorite, I mean, my favorite, one of my favorite chapters of the book, I'm not going to talk too much about it because you have to read the whole chapter in whole, but this is like a one paragraph, I would say, summary to give you a good idea. It says, We look to the conifer tree and its logic of growth, and we learn from one of the truly great success stories of natural history. Through its adaptive strategy that has allowed it to survive over hundreds of millions of years, estimated about 300 million years, the patient and persistent conifer teaches us that it is far better to avoid direct head on competition for scarce resources. And instead to pursue the roundabout path toward an intermediate step.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“See, that's also the importance of just not copying what everybody else is doing, of thinking for yourself and finding your own niche. Okay, so it says, which we duly snagged in the 2000 equity collapse. We parted ways in 2005, and I went on to form my own investment firm, Universe Investments, moving beyond the basic mandate at Empirica. After I started, Naseem joined me again but in a strictly hands-off passive capacity. So he's just an advisor to the fund. The real So it says, and then most people call him say he's like a black swan hunter, but he has a different view on black swans. He says the real black swan problem of stock market busts is not about a remote event that is considered unforeseeable. That's how most people see them, right? It is rather about a foreseeable event that is considered remote. Interesting how the definition, the understanding of the definition changes when you just”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so after a while as a trader, he starts his own company and instead of, now he's going to focus on option trading, which is what he does to this day. He says, I joined Nassim Taleb in 1999 as he was launching Empirica Capital, a mutually obvious relationship from our shared pitch trading background and shared view on the certainty of an eventual collapse in the then bubbly US stock market. And to this day, there is no one with whom I enjoy I more enjoy in benefit from sparring about tales. We called ourselves crisis hunters. We were indeed the first formalized tale protection firm ever.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“So that's what Clip meant by saying the market is always right and it's always wrong. This the note I left myself, this phenomenon is also why it is always possible to start new, successful companies because of this imbalance. The opportunity is always there. You just have to find it.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Consuming more time and thus the significant role played by taking account of waiting time. This was Clip's paradox writ large on the grandest scale. So again, impatience and the pains caused by waiting. Think about Mark's day to day. Most of his day he loses a small amount of money as his options expire. And he might be waiting for two years, for three years, for five years, whatever it is, and then boom, huge payoff. That is not, again, it's the pain. I like how they use that word. Impatience and the pain caused by waiting. And you can see this in human nature on a smaller scale. Just go anywhere, like where there's a line, whether you're at a theme park, grocery store, anywhere there's a line, and you immediately see that how humans react to the pain of waiting, they'll pick up and they'll immediately try to distract themselves, usually with a cell phone, a smartphone. I see this sometimes I walk to go pick up my daughter from school.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“The pressing need for consistent and immediate profits is hardwired into our brains. We humans have a shallow depth of field. Other traders that use this method are doing the opposite. They're taking a bunch of tiny losses. They may make no money for five years, 10 years, whatever case. But when they have the large gain, it's usually enough money to last a lifetime. So it's the opposite of how most of us think about making money. And we're going to see how this applies to building businesses soon. Don't give up on me yet. Okay. I always find this very interesting and I ordered this book because now this is like the 10th person that's recommended it. But I like this idea. I told you before about when you have conversations with people, design your conversation within constraints. So instead of saying, hey, tell me some of your favorite books, say if you only read one book, what is that?”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“So that's how to think about it. Impatience and intolerance for many such small losses, as well as urgency for immediate profits. Clip believed, dealt a death blow to traders. And this is such an important sentence, an easy and common one, meaning that people grabbed onto it because it was easy and then their demise happened all the time. It was so common. So again, it's human nature does not change. It's the same people coming and going, making the same dumb mistakes, not learning. Okay, so people naturally fall victim to these tendencies and thus do the opposite of CLIPS approach. We sweat through large losses and take small profits quickly. Going for the immediate gain.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“With his gravelly voice, ever speaking and fortune cookie prose How could he have done so well as a speculator without knowing or even caring where the market was heading? How could it be that the guy who knows where the market is heading? This is a quote from Everett here. Guys who know where the market is heading are no longer at the board of trade. They are either retired or broke and I can't think of any that are retired. This was classic clip. This is also Cookie Fortune Pros, right? If trading wasn't about predicting price movements, then what was it all about? The answer which took this teenager some time to understand was the edge to pitch training was in the order flow and in the discipline it was in a patient response to someone else's impatience someone else's urgency so this is another”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Something unseen starts to ripple through like a pulse of energy causing a sudden jolt turn and a burst of speed. In an instant, I wanted nothing more than to be a pit trader. After that fateful trip, I became obsessed with the grain futures markets. Price charts soon lined my bedroom walls. From then on, whenever I would see Clip, I always peppered him with questions on price trans world grain supplies, Soviet demand, Midwest weather patterns, basically on where the markets were headed. Now this was his response is very like, it's going to be surprising. His response was always a variation on the market is a completely subjective thing. It can do anything. And it is always right, yet always wrong. His abject disdain for data and information left me bemused, even skeptical of this stubborn old Chicago grain man.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Wisely across slices of time so you don't jeopardize our bankrupt opportunities, often better ones that arise later. So this is not, like I said, this is not really a biography of his life, but it does. He is going to tell us a little bit about his early working career. And it's more accurately categorized as a synthesis of the lessons that he's learned throughout his life that he applies to his work. So I think that's equally as valuable. So this is how he finds his life work, his life's work. My exposure to investing came quite by accident. As a 16-year-old, I tagged along with my father when he paid a visit to his good friend. The guy was a corn futures trader, and we've already met him. His name is Everett Clip at the Chicago Board of Trade. And he talks about what he saw there. He says, I was memorized, sorry. It reminded me of watching a flock of birds, a cloud of countless individual parts appearing as a single fuzzy organism, seemingly resting, hovering in midair until”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“A counterintuitive path of acquiring later stage advantage through an earlier stage disadvantage, and this is nearly impossible to follow. The reason it's possible to follow because we like what he's just saying, we focus on the immediate reward. So you have to overcome part of Clip's paradox, which is a mentor, and we'll go more into Clip earlier later, is the fact that you have to overcome your humanness. Okay, so now he says, I invite you into my process, not with a plug and play strategy, but more importantly, with a way of thinking that can be applied to investing and indeed many other important activities in life in which one must choose wisely across slices of time so as not to jeopardize our bankrupt opportunities, often better ones.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Crystallize what he's saying here, but I can't just jump right there. I think you have to understand some of his ideas first, and then we're going to see how other people in history, one fictional, one not, applied that. And it'll sink in, I promise. Okay, the reason I'm reading this part to you, the part I just read, it's really important to understand that these are not new ideas. They may not be common ideas, but they're certainly not new. And then here is just a one sentence, his main point. The whole point of my approach to investing is that we must be willing to adopt the indirect route to achieve our goals. So he talks about on the next page I left to know to myself it says, our nature fails us, and this applies to many domains. 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.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“From these roots, both eastern and western, so he spends a good amount of time talking about what he learned from the east, so he's already mentioned China and Daos a few times, and then the west, which comes from mainly Vienna. We learned to inter-temporalize across slices of time, never focusing solely on the objective of our desire in pursuit of securitous means, we assume a whole depth of field. The great strategists of the world did not need to be taught to train their attention on the means of their later advantages. The quintessential roundabout entrepreneur, Henry Ford, knew it in his gut. So I just want to say, if we're a few minutes into the podcast, if you're a little confused, just hold on because I was extremely confused too as I'm reading the book because there's going to be two stories I'm going to tell you. One about Robinson Crousot and one about Henry Ford.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Word investing for entrepreneurship regardless of the different political structures and governments, entrepreneurship is an innate human action. Okay, let's keep going. Even Wall Street, that great sideshow with its temporal constraints shackling it to its urgent present is blind to these mechanisms of the economy and can only chase the shadows of what is actually happening. The good news, however, is that these mechanisms are very simple at their core. So then he's going to reference some people that have heavily influenced him. I'm going to skip over their names, even though we might talk about some of them later. But these people that he's influenced by establish a new way of thinking about capital as a roundabout means to a more productive end. That's why he calls what he does Austrian investing. It comes from Austrian or the Vietnam Viennese school of economics. Some of those people are like Carl Menger.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Of human beings, which is he seems to echo if you're familiar with Danny Kahneman's work. A lot of people have read that book, Thinking Fast and Slow. A lot of entrepreneurs have read that book, Thinking Fast and Slow. He definitely talks about what is it about our humanness that causes us to make these repeatable mistakes. They're repeatable so much that they're predictable that we're going to make them. Okay, so we fail to perceive it. We tend to see the destination, but somehow often miss the path. So we end up playing the wrong game. This is a lesson that runs deep throughout many areas of life's strategic thinking and decision making. But this book is about investing, and as such, this is my focus. Though I hope to make the point clearly in these pages that investing is an innate human action, not distinct from others. That's a really important point. And again, you could substitute.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“The path is notable in its exceedingly purposefully circuitous. The key word throughout this book is roundabout. In fact, he calls Henry Ford the quintessential roundabout entrepreneur. And I'm going to talk a lot about that. The going right in order to then go left, that leads us first to the means, which are the strategic intermediate waypoints, from which it becomes all the more possible and effective to arrive at the ultimate ends. As evident and ubiquitous as this process is all around us from the natural world of the boreal forest, which he talks a lot about, in fact, my favorite chapter in this book is all about, it's chapter two, one of my favorite chapters in the book. It's chapter two. It's an entire chapter on conifer trees, and it's fascinating. Okay, so that's what he means by boreal forest. To the business world of the entrepreneur, all too often we fail to perceive it. And a good part of this book is also about the psychology.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Business just happens to be money, but he does talk about the entrepreneur taking different resources in different stages, putting them together in a way to serve the end consumer. So you can think of when he says capital, you could also think of business. As we think of capital in a new way, we also must think of time in a new way. And as we engage in this process, our path will be the Tao of Capital. This path is notable in that it is exceedingly and purposefully circuitous, that word, in other words circuitous, the word roundabout. He's going to mention that again probably a hundred times in the book. That is his central message. And what I like about Mark, because I feel like he was talking directly with me when I was reading the book, because sometimes I'm lost. I'm like, wait, I think I kind of get it.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Helps it and hinder it hinders it. So he's talking about capital. I would also say there, think about the time defining, shaping, helping, and hindering the different stages of a business because that he's going to talk a lot about entrepreneurship in the book. He talks a great deal about Henry Ford. In fact, before I decided to do the podcast the way I'm doing it today, I almost thought I could make this like another series, because I think I've done two or three books on Henry Ford for the podcast. I think this I could take out the highlights because he mentions Ford in the book probably 50 times, if not more. So I was thinking, oh, maybe I'll just do a podcast on Henry Ford based on how Mark sees him. And then the more I try to digest the ideas and what Mark is trying to teach us, I'm like, oh, you know what? No, these ideas need to stand on their own. But we are going to talk a lot about Ford today. Okay, so again, just think of capital. His tool for building a...”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Approach the market, and it was by watching that video, I started researching Spitzengel that led me to this book. So, anyways, let me jump into it because I think his ideas are interesting, and I just want to share as many of them with you as possible. All right, it says at the outset, we must think of capital in a new way as a verb, not a noun. Rather than an inanimate asset or piece of property, it constitutes an action, a means to an end. To build, to advance, to deploy the tools and instruments of a progressing economy. Indeed, capital is a process or a method or path what the ancient Chinese called the Tao. Capital has an interpral dimension. Its positioning and advantage at different points in the future is central. Time is such an important part of the book. Time defines it, shapes it.”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Remain the circuitous road least travelled, so contrary to our wiring and to our perception of time, and this is why it is ultimately so effective. To clip, time is not exogenous, but is an endogenous primary factor of things, and patience the most precious treasure. Indeed, Clip, with a simple message that encapsulated how he survived and thrived for more than five decades in the perilous future markets of the Chicago Board of Trade. Okay, so that's an excerpt from the book that I want to talk to you about today, which is The Tao of Capital Austrian Investing in a Distorted World by Mark Spitzenagel. Okay, so today's gonna be a little different. Normally I try to focus just on a biography, like the life story of somebody that”
2019-05-06 · Founders · #70 Mark Spitznagel: The Dao of Capital · IDENTIFIED FROM THE TRANSCRIPT · source