Mark Spitznagel On Ron Paul's Grand Shi Strategy

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by Mark Spitznagel of Universa Investments LP; first published in Forbes,

As the Republican National Convention approaches, the shouts of victory resounding in the tents will easily conceal the broader political forces at work in the party beyond this fall’s hopeful decisive victory.

The strategy of these forces are visible in the past Republican presidential campaign of Congressman Ron Paul. To some, Paul’s stubborn persistence in the campaign has been just that: a stubborn unwillingness to lie down and die despite evidence of sure defeat. But what they have missed is a common misperception of a subtle yet powerful age-old strategy at play.

The strategy of the Paul campaign, explicit or not, is the archetypal shi (pronounced “sure”) strategy expounded and employed by Chinese philosophers and military strategists for thousands of years.

Shi has no single, obvious translation, though the best seem to be strategic- or positional-advantage, or potential energy. We might call it cultivating the influence of the present on the future. Shi has been traced back as far as Laozi and the Daodejing, the fourth century BC political treatise attributed to him, with its counterintuitive processual and indirect approach to conflict. Over the centuries that followed, it gained more military-specific development starting with Sunzi.

The quintessential metaphor for shi is water, flowing ever downward in the most naturally powerful and effective way, ultimately overcoming everything in its path. Paradoxically, it is one of the softest and yet strongest forces in nature.

Shi’s antithesis, li, is the strategy of decisive victory in each present battle, typically a more natural, comfortable, and coherent approach than the greater subtleties of the shi approach. While li is seen as a very western world view, it is that forward-looking strategic-advantage orientation of shi that has been the basis of the advancement of western civilization itself—from capital investment and production to the ceaseless pursuit of innovation and, as in Paul’s case, freedom. Rarely have these advantages been realized immediately, while their costs typically have.

Throughout history, perhaps the clearest and most pedagogical example of shi at work has been in the Chinese board game weiqi (pronounced “way-chee”). In this simple yet most complex and calculated of games, opponents (one with black stones and the other with white) each try to surround the most territory on a square grid. The obvious initial strategy is to dive for the corners (the easiest territory to surround) in pursuit of immediate points. The extreme example in this picture shows that li strategy’s allure yet great disadvantage.

White is far ahead in terms of tangible territory right now. But black has established a strategic advantage and intangible edge by moving into the center to command the rest of the board. Black, employing the indirect and circuitous shi strategy, seeks future opportunistic potential, rather than applying direct force like the chess player bent on annihilation. Although white has scored at least 13 points out of the gate, and black has scored nothing, black is well-positioned for an eventual, but patient victory.

Thus, the future-oriented shi meets the present-oriented li—and wins. It requires a profound understanding of the Daoist concept of how current loss leads to eventual gain—or, as Laozi said, the soft overcoming the hard.

We see the shi strategy of Ron Paul in the great patience and nonaggression that favors the slow buildup of influence and strategic advantage over the decisive all-or-nothing clash. First, in the evolving GOP economic platform, Paul’s promotion and teaching of the Austrian school of economics and its business cycle theory has made the destructiveness of Federal Reserve interventionism a constant point of discussion in the primary race, which perhaps has been far more significant than the number of delegates won. Consider, for instance, Mitt Romney’s support of Paul’s current “Audit The Fed” bill, as well as his recent position on the inefficacy of further (as well as past) Fed quantitative easing; it remains only a question of degree with Romney, but a position that nonetheless would have been unlikely without the pressure from the Paul campaign—especially given Romney’s otherwise very simplistic Keynesian-leaning views.

Second, we see the shi strategy in Paul’s ever-expanding influence at the local and state level. Rather than winning at the GOP convention, the Ron Paul shi strategy has been to accumulate delegates in more and more caucus states, and thus control the states’ party apparatuses; from that base it will influence and back future like-minded libertarian-constitutionalist candidates for many years to come.

More than anything else, we can see Paul’s greatest shi advantage in his outsized support among the young. What better representation of the weiqi image than the potential in these well-positioned “stones” on the areas of the board of so little current consequence? Although undesired by political opponents today, their development will provide tremendous influence and advantage to Paul’s cause later.

In this society of immediate gratification and winning right now at all cost we need to ask ourselves: why should future elections and platforms matter so much less than the current ones? There are powerful cognitive biases at work—among them the temporal myopia of hyperbolic discounting, or excessively undervaluing the future, while focusing on the nearer term—which make fuzzy in our minds the importance of victories in the years ahead (a view that is promulgated by the media).

Romney wins the current decisive battle for delegates, and his fight with Obama will be critical, but a protracted campaign will continue to be waged. The ultimate war is against intrusive, burgeoning government, in the ongoing insurgencies of the battles yet to come—Ron Paul’s grand shi strategy.

Mark Spitznagel is the founder and Chief Investment Officer of California-based Universa Investments LP.

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Mon, 07/30/2012 - 09:41 | 2662007 dwdollar
dwdollar's picture

Is that why Rand endorsed Mittens? Part of some "Shi Strategy" that we're too dumb too understand? Sounds like any politician could make that argument.

Mon, 07/30/2012 - 09:45 | 2662014 bigdumbnugly
bigdumbnugly's picture

yeah at the time i thought that was some sort of Shit Strategy.

Mon, 07/30/2012 - 09:47 | 2662021 Joe Sixpack
Joe Sixpack's picture

I hope his delegates, bith official and in other camps do more than shi all over the place.

Mon, 07/30/2012 - 10:29 | 2662132 Precious
Precious's picture

shi ...   li ...

Unfortunately Chinese philosophy never answers the deepest question.

why ...

Mon, 07/30/2012 - 11:12 | 2662276 strannick
strannick's picture

Paul's politics of principle shows these sham little conventions for the grand poobah rah rahs that they are.

Paul is a statesman contending with a clown -Romney- and a punk -Obama.

Mon, 07/30/2012 - 15:00 | 2663069 LowProfile
LowProfile's picture

 

Unfortunately Chinese philosophy never answers the deepest question.

why ...

Why not?

Mon, 07/30/2012 - 22:43 | 2664050 StychoKiller
StychoKiller's picture

The Chinese are very pragmatic; why waste time on a question that only God can answer?

Even so, read the book of Judges for God's response to Gideon's question of why...

Mon, 07/30/2012 - 15:46 | 2663236 Anusocracy
Anusocracy's picture

I see why this was published in Forbes.

The next article will claim Ron Paul is a shi-ite.

Mon, 07/30/2012 - 09:51 | 2662032 battle axe
battle axe's picture

He is setting it up for his son in 2016.....

Mon, 07/30/2012 - 10:30 | 2662140 dracos_ghost
dracos_ghost's picture

Or put Ron Paul as head of the Fed and agree to the audit.

Mon, 07/30/2012 - 10:45 | 2662187 Redneck Hippy
Redneck Hippy's picture

If only his son wasn't a nitwit.

 

Mon, 07/30/2012 - 10:46 | 2662191 Redneck Hippy
Redneck Hippy's picture

If only his son wasn't a nitwit.

 

Mon, 07/30/2012 - 11:05 | 2662243 Daily Bail
Daily Bail's picture

It looks like the mutual back-scratching has begun.

I agree with the author's point about the more subtle gains by Dr. Paul for the overall cause of liberty.  Yes, Ron has lost the 2012 battle and Rand capitulated and endorsed Romney.  But here's some good news:

  1. Audit the Fed might be put into the GOP platform.
  2. During the debates, millions heard Ron Paul's views on the U.S. war machine.
  3. Ron Paul's supporters might still raise hell at the GOP convention.

The big battle was lost (2012 election), but small-to-medium victories for the side of truth, justice and freedom.  All in all, not a horrible result from a campaign that was never given a chance by the mainstream media.

The real test comes in the next few years as we see whether a new voice for freedom will emerge to replace that of Dr. Paul who is gone from Congress come January.  I think Rand might have already hurt his chances to be the replacement voice given the reaction to his endorsement of Romney.

 

HELL FREEZES OVER - Romney Tweets His Support For Ron Paul And 'Audit The Fed'; But Youtube Clips Demonstrate His True Love For Bernanke

 

Mon, 07/30/2012 - 13:39 | 2662758 graneros
graneros's picture

Mitt and the GOPe are not stupid people.  You don't have to like them them but to think they are going to let the Libertarian Party/Paulistas  usurp they're candidate or convention is just wrong.  The GOPe will have such tight security at the convention that the first outburst of the Paulistas will be brought up short very quickly.  But methinks they have a far better and easier way of silencing the RP crowd.  One the RP folks will like.  They will let it be known prior to the convention that RP will be Romney's choice to replace Ben when his appoiontment is up in 2014. 

Of course this begs the question would Romney follow through with said nomination and would the Senate confirm RP if he did?

Mon, 07/30/2012 - 11:18 | 2662303 JR
JR's picture

Rand Paul is not presidential material.

Mon, 07/30/2012 - 15:43 | 2663225 Anusocracy
Anusocracy's picture

Compared to what we have, he's the second coming of Christ.

Mon, 07/30/2012 - 10:24 | 2662120 Sudden Debt
Sudden Debt's picture

Van Rompuy writes one Haiku a day and look where he's right now. He didn't even needed to be elected!

 

Mon, 07/30/2012 - 11:21 | 2662308 williambanzai7
williambanzai7's picture

WISDOM OF HU FLUNG DUNG

Mon, 07/30/2012 - 11:32 | 2662328 dogbreath
dogbreath's picture

the bernanke's great grand pappy visited the orient?

Mon, 07/30/2012 - 11:33 | 2662330 Daily Bail
Daily Bail's picture

Nice work, WB.  That one is going into the picture files for future use in a story.

Mon, 07/30/2012 - 12:02 | 2662399 tu-ne-cede-malis
tu-ne-cede-malis's picture

What's even more hilarious about this, WB, is that the Chinese were the first to create and use paper money.

Mon, 07/30/2012 - 12:20 | 2662475 ATM
ATM's picture

And the first ones to dump it for hard money.

In the West the first paper money was issued by a bank in Sweden who became over-extended and needed a government bailout......

Mon, 07/30/2012 - 13:46 | 2662788 graneros
graneros's picture

Lost me. So what does Chinese paper money have to do with WB pasting Ben's face over a Japanese martial arts master?

Mon, 07/30/2012 - 12:02 | 2662400 OneTinSoldier66
OneTinSoldier66's picture

Awesome work! Got a great chuckle from this one.

 

Thanks!

 

I would think it must have took a great deal of time getting the facial hair melded just perfect(!), or maybe that part was easier than it looks at first glance.

Mon, 07/30/2012 - 14:38 | 2663006 JR
JR's picture

Bansai: If it were a just world, you would be the billionaire and Lloyd Blankfein et al. would be in prison.  Your work is beyond measure, priceless…Chinese proverbs and all. Thanks for being here... in the fight club.

Mon, 07/30/2012 - 20:34 | 2663840 Clever Name
Clever Name's picture

The cruel tutelage of Bai Bei?

Mon, 07/30/2012 - 10:42 | 2662182 Lionhead
Lionhead's picture

Reading the comments here, it doesn't look like there are many Libertarians around. Did you all forget about the Libertarian Party, Gary Johnson? Some complain of no choice, when a choice for Constitutional conservatives is available. That tells me most have not really studied Libertaranism or Austrian Economics. Sad.

Here's a link to some remarks on Ron Paul by Lew Rockwell a real libertarian. These are supportive of the post above. Go Here:

http://www.lewrockwell.com/lewrockwell-show/wp-content/uploads/296_Block_Ad.mp3

To all that are serious about ending the duopoly red pill / blue pill parties, there are no silver bullet solutions. Your first & best step is to educate yourselves to help others understand & bring them to the educational resources. Ron Paul supporters have a viable choice in November; if he's not selected or denied any convention privileges, continue his fight by joining us Libertarians. Live Free!

Mon, 07/30/2012 - 11:07 | 2662265 Lost Wages
Lost Wages's picture

That's why I refer to Ron Paul as a "messiah," because for his followers, it has to be Ron Paul or no one. There can only be one. And make sure none of you change anything about your lives or stand-up for anything in your day-to-day life, because all we need to do is get some politician elected and that will solve all our problems.

Mon, 07/30/2012 - 11:44 | 2662350 Lionhead
Lionhead's picture

The problem is not to rely on one man, but rather build the Libertarian Party of many men & women, many of whom can carry the torch for successive generations. We can't have a zero sum solution to defeat the duopoly. It will take folks that support the Constitution & Austrian Economics to support any candidate that believes the same things. I urge all Dr. Paul supporters to consider Gary Johnson if Paul is not nominated in Tampa. If Johnson can poll 15%, you will see him in the Presidential Debates. To waste that opportunity would be tragic.

Mon, 07/30/2012 - 11:56 | 2662374 UGrev
UGrev's picture

Considering the choices between pure, fucking, evil and a lesser demon (Mittens).. FUCK YEAH.. you bet your ass RP is the "only one".. 

Stop being delusional in your struggle to understand those of us who would rather support RP than constantly letting lesser evil's into the oval office. 

Why is that so difficult for you people to understand? 

Mon, 07/30/2012 - 12:00 | 2662388 tu-ne-cede-malis
tu-ne-cede-malis's picture

I pretty much stopped considering Gary Johnson after listening to Bob Wenzel's interview with him here: http://www.economicpolicyjournal.com/2012/06/how-libertarian-is-gary-joh...

Mon, 07/30/2012 - 10:52 | 2662220 hoos bin pharteen
hoos bin pharteen's picture

I didn't like that he did it, but Rand's move was definitely calculated as a gesture of peace to the GOP.  The trouble is, the price of their support at the Presidential level is not subject to change.

Mon, 07/30/2012 - 12:21 | 2662480 Joe Sixpack
Joe Sixpack's picture

You are right, the repubican party is a real piece (of shi*)

Mon, 07/30/2012 - 09:41 | 2662008 Pladizow
Pladizow's picture

Are you shi?

Mon, 07/30/2012 - 09:44 | 2662013 Mercury
Mercury's picture

The Republican convention could actually get ugly this year.

Mon, 07/30/2012 - 09:59 | 2662051 Roandavid
Roandavid's picture

That would be my fondest hope.

Mon, 07/30/2012 - 10:14 | 2662093 kridkrid
kridkrid's picture

Wishful thinking.

Mon, 07/30/2012 - 11:03 | 2662254 Bicycle Repairman
Bicycle Repairman's picture

I wouldn't say 'ugly'.  I'd say 'real', as opposed to the scripted infomercial it has been since 1992.

Mon, 07/30/2012 - 12:22 | 2662486 Joe Sixpack
Joe Sixpack's picture

That it goes chaotic is our best chance at this point.

Mon, 07/30/2012 - 09:45 | 2662017 malikai
malikai's picture

+1000 for references to Lao Tzu, Sun Tzu, and an implicit reference to Chuang Tzu.

Paul has certainly become familiar with the great works and employed the strategems.

Mon, 07/30/2012 - 09:49 | 2662027 Biosci
Biosci's picture

Or, perhaps he simply believes in an idea, and is unwilling to compromise his beliefs.

Mon, 07/30/2012 - 09:57 | 2662048 malikai
malikai's picture

The man is in politics, which I think we can agree is the most dirty business on earth.

Plenty of people are as you describe but have not had the success Paul has had influencing as wide a range of people by employing their idealism alone.

What I am saying is that you cannot acheive those results unless you know how to operate in the environment by knowing and outmaneuvering your opponents, for the long game.

Mon, 07/30/2012 - 10:41 | 2662177 Biosci
Biosci's picture

Yes, politics is a dirty business.  But Paul comes from one of the most stable districts in Congress, and hasn't had a serious primary challenger since the 90s.

What is Paul's widespread success?  He has preached more or less the same philosophy for the last 40 years.  Only recently has he attracted a national following of any significance, and that following skews young.  Now which is the most likely explanation for that:  a grand political strategy, or a massive economic dislocation that has prompted American youth to begin to recognize how their standard of living isn't going to be what they were promised, and to question the status quo?  And who's had a more consistent, ideologically pure message than Paul?

What I am saying is that you cannot acheive those results unless you know how to operate in the environment by knowing and outmaneuvering your opponents, for the long game.

What I'm saying is that Paul has achieved nothing.  He is who he is, and that has made him more attractive as the Washington/Wall Street farce has become more openly visible.  Sometimes the simplest explanations are best.

Mon, 07/30/2012 - 11:10 | 2662273 Bicycle Repairman
Bicycle Repairman's picture

In times like these disaffected youth turn towards a new voice promising radical change.  We are fortunate that the voice is Ron Paul and not some neo-Hitler.

Mon, 07/30/2012 - 11:18 | 2662302 Biosci
Biosci's picture

I wholeheartedly agree, but the night is young.

Mon, 07/30/2012 - 12:01 | 2662392 UGrev
UGrev's picture

Would you call the peacemaker that picks up a sword to fight for what he believes in a soldier of war? of a soldier of belief? It's not like he went into politics because he WANTED to be a politician. Remember, he was/is a medical doctor (OBGYN) first and a politician second. 

Mon, 07/30/2012 - 10:27 | 2662125 azzhatter
azzhatter's picture

Paul can look back at 60 years of failed policy where the nation has become more and more dependent and less and less independent. Why would you compromise your beliefs when the opposite has been proven to be a failure?

Mon, 07/30/2012 - 10:04 | 2662060 PiratePawpaw
PiratePawpaw's picture

Sun Tzu said "fight no battle unless you can win, and have no choice but to win"

 

Im not sure this battle can be won anymore.

Mon, 07/30/2012 - 11:17 | 2662295 Bicycle Repairman
Bicycle Repairman's picture

We cannot escape the field of battle.

Mon, 07/30/2012 - 11:40 | 2662339 MrPalladium
MrPalladium's picture

Only the dead have seen the end of war.   Plato

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