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.