Author: Mark 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 – the same payoff profile as buying out of the money put options
Book: The first part is devoted to his investment philosophy: He recommends looking for the roundabout way, being patient and having discipline. You must love to lose money and hate to make money to be successful in the market. Planning several steps ahead and sacrificing short term gains gives you a huge advantage in the long term. He makes the analogy with nature (conifers) and with war strategies from Ancient China’s Sun Tzu to XIX. century’s Von Clausewitz. In the second part, he explains the main ideas of the Austrian School of Economics. He makes analogies with central planners’ manipulation of the economy and the creation of forest fires. Finally, he explains the two Austrian oriented styles; Austrian investing I. is about understanding when the market is under/overvalued using the “Misesian Index” (similar to Tobin’s Q), whereas Austrian Investing II. focuses on companies with roundabout productive processes (high and sustainable ROICs)
Opinion: This is probably one of the top books I have ever read, however, it could be somewhat difficult for those not familiarized with the Austrian School of Economics. It has been a life-changing book for me as I have improved both my thinking process and the overall approach to life and investing. One final warning: It is not a book one should read to learn immediate concepts or investment skills. It should be read slowly just to enjoy.
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