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1-Page Summary of The Dao of Capital

Overview

Some things are better when they’re in an environment that is constantly changing. This quality has been essential for the progress of human civilization since ancient times. Nassim Nicholas Taleb takes a critical look at modern society and its aim to make life easier by interfering with systems like the economy. By doing this, we are making these systems less volatile and therefore destroying their antifragility.

In the late 19th century, a new school of economics was established that saw capital as an indirect means to more productive ends. However, this theory didn’t originate in Austria—it can be traced back thousands of years to ancient China and the Daoist philosophy.

In ancient China, the Daoists believed that everything came from its opposite. For example, hardness came from softness and strength came from withdrawal. This wisdom can also be applied to markets: profiting by not investing in them at all times. You’ll learn how you can approach the market like a Daoist and gain more money in the long run by withholding your investments until they are ready for a big move up.

The book will also cover why Robinson Crusoe was a good investor, how the market functions like a natural forest, and why central banks should allow small market crashes from time to time. It will explain Daoism’s relevance to China’s military strength and its relevance today.

Big Idea #1: Daoism is a Chinese philosophy that can be applied to markets for better investing.

Austrian investing is very different from other types of investment. The investor needs to accept losses and not seek profits. This concept was derived from the Chinese philosophy of Daoism, which has been around for more than 2,500 years.

Daoism teaches us that the best way to get something is by giving it up.

Daoism originated in ancient China. It is also known as Taoism, and it was a time of heavy conflict. One concept that arose from this period is wei wuwei, which means “doing by not doing.” This idea manifested itself in the military when one side would wait for its opponent to attack first before securing an advantageous position and turning the tables on them.

In the martial art of tuishou, people try to throw each other by making subtle feints.

Tuishou is a form of martial arts that embodies the idea of exploiting your opponent’s urgency. The real force in tuishou isn’t pushing; it’s yielding. Austrian investing takes a roundabout path to market success by pursuing immediate loss during the investment process so you can gain more advantageously in the future.

Similarly, the author is drawing from an ancient Chinese concept that advocates doing something without trying to do it. In this case, the author advises people to profit from other investors’ impatience and intolerance of small losses by using a long-term investment strategy.

Big Idea #2: Robinson Crusoe and Henry Ford used the principles of Austrian Economics to succeed.

To succeed with the strategy of Austrian Investing, you must be able to tolerate initial setbacks. To explain this principle, let’s look at a parable from Robinson Crusoe. In it, he struggles to catch fish using his bare hands. This is clumsy and rarely works well for him.

Robinson Crusoe reduces the time he spends fishing by making more efficient tools. He does this at the risk of starving, but it’s worth it because his time is limited.

When he first started fishing, he caught fewer fish because he was spending more time building tools. After finishing his tools, though, it took him less time to catch the same number of fish. Sometimes losing something now can lead to gaining a better advantage later on that makes the loss worth it. In Crusoe’s case, his short-term losses may have saved his life in the future by giving him access to food and shelter.