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
- 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.
- Always take your profit too soon.
- Decide in advance what gain you want from a venture, and when you get it, get out.
- 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.
- Human behaviour cannot be predicted. Distrust anyone who claims to know the future, however dimly. (take predictions with a grain of salt)
- 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”)
- 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.
- 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.
- 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.
- If it doesn't pay off the first time, forget it. (never chase)
- Never try to save a bad investment by “averaging down”
- 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.