Wednesday, March 28, 2012

The Zurich Axioms by Max Gunther

I recently finished reading the Zurich Axioms by Max Gunther. Ever wondered how a landlocked, resource-poor country like Switzerland became wealthy? Max Gunther explores Swiss investment philosophy to determine how the Swiss succeed. The book is excellent brain-food, although there are a few parts that I don't agree with. I've summarised the axioms below. The mentality between the rich and the poor is very large.


ZURICH AXIOMS by Max Gunther

ON RISK
  • Worry is not a sickness of but a sign of health. If you are not worried, you are not risking enough.
  • Always play for meaningful stakes.
  • Resist the allure of diversification.

ON GREED
  • Always take your profit too soon.
  • Decide in advance what gain you want from a venture, and when you get it, get out.

ON HOPE
  • When the ship starts to sink, don't pray. Jump.
  • Accept small losses cheerfully as a fact of life. Expect to experience several while awaiting a large gain.

ON FORECAST
  • Human behaviour cannot be predicted. Distrust anyone who claims to know the future, however dimly. (take predictions with a grain of salt)

ON PATTERNS
  • Chaos is not dangerous until it begins to look orderly. (avoid illusions of order)
  • Beware the Historian's Trap (avoid believing that history repeats itself)
  • Beware the Chartist's Illusion (accept that trends can break)
  • Beware the Correlation and Causality Delusions
  • Beware the Gambler's Fallacy (no such thing as a “lucky day”)

ON MOBILITY
  • Avoid putting down roots. They impede motion.
  • Do not become trapped in a souring venture because of sentiments like loyalty and nostalgia.
  • Never hesitate to abandon a venture if something more attractive comes into view.

ON INTUTION
  • A hunch can be trusted if it can be explained.
  • Never confuse a hunch with a hope.

ON RELIGION AND THE OCCULT
  • It is unlikely that God's plan for the universe includes making you rich.
  • If astrology worked, all astrologers would be rich.
  • A superstition need not be exorcised. It can be enjoyed, provided it is kept in its place.

ON OPTIMISM AND PESSIMISM
  • Optimism means expecting the best, but confidence means knowing how to handle the worst. Never make a move if you are merely optimistic.

ON CONSENSUS
  • Disregard the majority opinion as it is probably wrong. (think for yourself)
  • Never follow speculative fads. Often, the best time to buy something is when nobody else wants it.

ON STUBBORNNESS
  • If it doesn't pay off the first time, forget it. (never chase)
  • Never try to save a bad investment by “averaging down”

ON PLANNING
  • Long-range plans engender the dangerous belief that the future is under control. It is important never to take your own or other people's long-range plans seriously.
  • Shun long-term investments.

1 comment:

  1. reading this at the moment too - for the umpteenth time

    ReplyDelete

Note: Only a member of this blog may post a comment.