Managing Money

The Zurich Axioms - how to risk and win

On Risk

Worry is not a sickness but a sign of health - if you are not worried, you are not risking enough.

• Always play for meaningful stakes - if an amount is so small that its loss won't make any significant difference, then it isn't likely to bring any significant gains either.
• 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 sinking, don't pray. Jump.

• Accept small losses cheerfully as a fact of life. Expect to experience several while awaiting a large gain.

On Forecasts

Human behavior cannot be predicted. Distrust anyone who claims to know the future, however dimly.

On Patterns

Chaos is not dangerous until it starts to look orderly.

• Beware the historian's trap - it is based on the age-old but entirely unwarranted belief that the orderly repetition of history allows for accurate forecasting in certain situations.
• Beware the chartist's illusion - it is characteristic of human minds to perceive links of cause and effect where none exist.
• Beware the Gambler's fallacy - there's no such thing as "Today's my lucky day" or "I'm hot tonight".

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 Intuition

A hunch can be trusted if it can be explained.

• Never confuse a hunch with a hope.

On the Occult

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 & Pessimism

Optimism means expecting the best, but confidence mean knowing how you will handle the worst.

• Never make a move if you are merely optimistic.

On Consensus

Disregard the majority opinion. It is probably wrong.

• 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 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 long-range plans or other people's seriously.

• Shunlong-term investments.

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