Author: Mr Spitznagel is the founder and Chief Investment Officer of Universa Investments. His hedge fund is specialized in tail risk hedging, that is, profiting from negative extreme events in the market. He uses complex financial engineering to get convex exposure from those events – insurance like payoff profile – i.e., buying out of the money put options / Credit Default SwapsBook: In this book, Spitznagel explains how modern finance is based on completely erroneous premises and methods to explain how safe heaven investing the best way is to preserve and compound capital over time. He challenges the idea of risk-reward claiming that only by lowering risk, one can increase returns in the long term. By using a dice (and without falling into the ludic fallacy), he explains the differences between arithmetical and geometrical returns both mathematically and philosophically to shows that adding insurance like safe heavens can increase the CAGR of a portfolio even if the arithmetic return of the asset / payoff is zero or even negative.Opinion: I have enjoyed this book almost as much as his previous “The Dao of Capital”. Compared to the latter, this one has less digressions, goes straighter to the point, but still maintains his style and references to authors like Nietzsche, Popper or Bernoulli. Even if there are some mathematics, simulations of portfolios, etc. this is a philosophical book about safe heavens, not a practitioner’s manual. I strongly recommend reading his 6 papers about tail-risk available at UniversaInvestments.com before reading this book as those papers summarize his strategy in a clearer way. The book then goes further to the philosophy behind it. Pd: I decided to buy this book after reading some negative reviews on amazon claiming that this wasn´t a practical/useful book – great decision.
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