The Zurich Axioms
Posted March 27, 2015on:
by Max Gunther
The best money book I have ever read!! So good. Felt that I have learned a lot – it is like asking the questions I have while working the stock market to a family elder who has had made his fortunes from the market thirty years ago – lucid descriptions of problems and convincing argument for the axioms.
It encourages you to take risks because that is the only way you can move up from the not-rich-not-poor. However it then immediately tells you to be light on foot and cut loss immediately. When a ship starts to sink, don’t pray. Jump! That is so useful to me – as I have proven to be unable to cut loss, basically. So much to practice. A few things that I have figured out myself: don’t diversity. If my capital is limited and I want growth, diversification is not the strategy. The strategy is actually bet all on the most promising venture you think you have access to. Other things like discard the opinion of the majority because they are probably wrong. This is not to say always bet on the opposite of the majority. The herd might be right. Every time make a decision based on my own reasoning, not because other people have all said so.
Note all these axioms apply in general to risk taking, not limited to financial affairs. A lot of people, especially the more Chinese ones, exhibit quite some unreasonable behavior when it comes to risk taking. First they value stableness above all else, at first. Along the way they may even tell you that you are so wrong that you work for money. What good does it do you? Look at my upper-middle class life – my neighbors and my kid’s friends are all white! White do you see it? Second when they actually realize quite some people made a lot in the previous bubble and the current bubble, they got really anxious – because of what I am not sure. And with all the Chinese media talking about startups, they are suddenly willing to join a startup no matter what. As a friend I told them what was wrong with these decision making process but they don’t seem to be able to listen. I can only wish them luck.
As the author claims, and I have actually observed over the years, especially those people who are only a few years older than me, but with significantly more vision (and therefore significantly more wealth), despite the fact that they came to America a few years earlier than me, the Europeans do have a way of risk management. It is not hard for them to make those persevere or give up, where to go decisions. And they often were right. I think risk management was missing from my Chinese education at all. From what i read online, it is still missing now.
So time to read The Zurich Axioms!