The Zurich Axioms

[Triplethought]

For those who don't want to read the whole book here is a detailed summary of the Zurich Axioms.
I feel that TI philosophy is not in complete accordance to Axiom 4 and 5. As well as out of sync with minor axioms 5,6,7. Not to say one is right or wrong - just that you see conflicting advice. For example Axiom 2 flies in the face of just about every money manager ever and everywhere. Minor Axiom 16 is interesting in the face of the AI trend

What are your thoughts?

The Zurich Axioms
“Everybody wants to win, of course. But not everybody wants to bet, and therein lies a difference of the greatest magnitude. Many people, probably most, want to win without betting.”
The idea is to deliberately expose yourself to risk — to bet — in a way that gains are more likely than losses.

• Axiom #1 on Risk: “Worry is not a sickness but a sign of health. If you’re not worried, you are not risking enough.”
• Most people strive for a “sleep well at night” portfolio because it offers security. The Axioms propose the opposite. Worry is part of an adventurous life, one that takes personal risks. Put another way, an adventurous life is a rich life. A life avoiding worry is boring or poor. Managing money is no different. To get rich, you must take risks. The price of risk is a state of worry.
• Frank Henry (author’s father) rule of thumb: only spend half your energy toward job income, spend the other half on investment/speculation.
• “Every occupation has its aches and pains. If you keep bees, you get stung. Me, I get worried. It’s either that or stay poor. If I’ve got a choice between worried and poor, I’ll take worried anytime.” — Jesse Livermore
• Minor Axiom #1: “Always play for meaningful stakes.”
• “Meaningful stakes” does not mean taking a huge risk that a loss would drive you to bankruptcy. It means taking a big enough risk, with favorable odds, that produces a significant difference. If the bet is small enough that a loss won’t matter, any gain won’t matter either. The bet should be one where a loss is enough to worry about while a gain is financially significant.
• J. Paul Getty, after betting his entire fortune ($500 in 1916) on his first oil lease that hit big, remarked: “Of course, I was lucky. I could have lost. But even if I had, that wouldn’t have changed my conviction that I was right to take the chance. By taking the chance — a pretty big chance, I’ll admit — I gave myself the possibility of getting somewhere interesting. The possibility, the hope, you see. If I’d refused to take the chance, I would not have had the hope… So it seemed to me I had a lot more to win than lose. If I won, it would be various kinds of wonderful. If I lost, it would hurt, but not all that much. The right course of action seemed clear. What would you have done?”
• Minor Axiom #2: “Resist the allure of diversification.”
• Diversification: “As used in the investment community, it means spreading your money around. Spreading it thin. Putting it into a lot of little speculations instead of a few big ones.”
• Diversification reduces risk but can be taken to a point that reduces any chance of significant reward.
• 3 Flaws: Being too diversified means violating the “always play for meaningful stakes” axiom, more likely to see any gains and losses offset each other (like running in place), and rather than too many eggs in one basket, you have too many baskets to watch over and not enough time to do so.
• Peter Lynch called it diworsification: “Don’t diversify just for the sake of diversity. You then become like a contestant in a supermarket shopping contest, in which the object is to fill your basket fast. You go home with a lot of expensive junk you don’t really want. In speculation, you should put your money into ventures that genuinely attract you, and only those. Never buy something simply because you think you need it to round out a ‘diversified portfolio.'”

• Axiom #2 on Greed: “Always take your profit too soon.”
• Greed means always wanting more reward than should be expected.
• “If you can conquer greed, that one act of self-control will make you a better speculator than 99 percent of other men and women who are scrambling after wealth.”
• In other words, less greed = better chance at wealth.
• “If they wanted less, they’d go home with more.” — Sherlock Feldman, Dunes casino manager on the power of greed.
• Don’t press your luck: “In the course of gambling or speculative play, you will from time to time enjoy streaks and runs of luck. You will enjoy them so much that you will want to ride them forever and ever. Undoubtedly you will have the good sense to recognize that they cannot last forever, but if greed has you in its grip, you will talk yourself into hoping or believing that they will at least last a long time…and then a bit longer…and then just a little longer. And so you will ride and ride, and in the end, you and your money will go over the falls.”
• Since most lucky streaks are a possible but rare series of events, go in assuming any lucky streak will be short and not very profitable. In other words, when the odds are against you, walking away is the best decision, even in the unlikely event the streak continues.
• “Always bet on the short and modest. Don’t let greed get you. When you have a good profit, cash out and walk away.”
• “That which hurts, teaches.”
• Fear of regret will be the biggest thing working against you in following Axiom #2.
• Minor Axiom #3: ” Decide in advance what gain you want from a venture, and when you get it, get out.”
• Helps give a specific answer to the all-important question “What is enough?” or When to sell?
 

• Axiom #3 on Hope: “When the ship starts to sink, don’t pray. Jump.”
• Expect things to go wrong from time to time, and have a plan for when it does. That means expect mistakes, expect bad luck, expect to be wrong about investments, but don’t let any of it debilitate your ability to invest. When it does happen, learn to cut your losses. To do that, you must be willing to take a loss.
• “You take small losses to protect yourself from big ones.”
• “In the absence of compelling reasons to think things will get better, sell.”
• Three obstacles stop people from cutting their losses early:
1. Fear of regret: taking the loss, only to watch it recover, and miss out on the recovery. Recoveries will happen but not very often or quickly enough to wait. Investments gone bad often have problems that “are slow to develop and slow to go away.”
2. Too painful: Avoiding the pain of taking a loss, by holding, and hoping, to break even. By avoiding the pain, you also avoid other opportunities that could get you back to even sooner. No rule states that you must make your money back the same way you lost it.
3. Admitting you’re wrong: “Refusing to be wrong is the wrongest response of them all.” Protecting your ego is a foolish reason to lose a pile of money. Markets humble everyone. Expect it to happen to you.
• Minor Axiom #4: “Accept small losses… Expect to experience several while awaiting a large gain.”
• Small losses “are part of the cost of speculation. They buy you the right to hope for big gains.”
 
•
• Axiom #4 on Forecasts: “Human behavior cannot be predicted. Distrust anyone who claims to know the future, however dimly.”
• Why do we listen? Because the easiest and quickest way to get rich is to know what the market will do tomorrow. Humans have a long history of wanting to know the future.
• Why are forecasters dangerous? Because sometimes forecasters guess right. Then conveniently, we ignore all the times they were wrong.
• “It’s easy to a prophet. You make 25 predictions and the ones that come true are the ones you talk about.” — Theodore Levitt
• The basic rule of forecasting: “If you can’t forecast right, forecast often.” In other words, beware of revisions and re-revisions.
• Some events can be predicted like physical events (i.e. sunrise, sunset, the next full moon), but markets deal with human events driven by behavior, which is unpredictable.
• “There are simply too many unknowable variables involved to allow for trustworthy forecasts of something like the inflation rate. The rate is caused by millions of people making billions of decisions: workers about wages they want to be paid, bosses about wages they are willing to pay, consumers about prices they will swallow, everybody about diffuse feelings of hardship or prosperity, fear or security, discontent or buoyancy. To claim you can make reliable forecasts about this staggering complexity seems arrogant to the point of being ridiculous.”
• Simply, ignore forecasters!
 
Axiom #5 on Patterns: “Chaos is not dangerous until it begins to look orderly.”
• Everybody wants a formula to get rich, so they look for patterns. Formulas don’t exist.
• The illusion of order: Humans are pattern seekers, who often confuse randomness — amid market chaos — for order. Also, Humans prefer a level of control, something the illusion of order offers.
• Luck plays a bigger role in investment outcomes than most will ever admit.
• “A formula that worked last year isn’t necessarily going to work this year, with a different set of financial circumstances stewing in the pot. And a formula that worked for your neighbor won’t necessarily work for you, with a different set of random events to contend with. The fact is, no formula that ignores luck’s dominant role can ever be trusted.”
• Minor Axiom #5: “Beware the historian’s trap.”
• The historian’s trap is the illusion that history repeats itself exactly. Ex: Long ago, event Y happened, followed by event Z. So when event Y appears to be happening again, everybody assumes event Z will happen next.
• “It is true that history repeats itself sometimes, but most often it doesn’t, and in any case, it never does so in a reliable enough way that you can prudently bet money on it.”
• “Events rarely happen the way they are expected to happen.”
• Minor Axiom #6: “Beware the chartist’s illusion.”
• The chartist’s illusion is the belief that future price movements can be found in the charts of past prices. Charts are a convenient way to use data to exaggerate, deceive, or lie to others and yourself (see How to Lie with Statistics).
• Minor Axiom #7: “Beware the correlation and causality delusions.”
• Our pattern seeking often links cause and effect where none exist. When no link exists, we make it up. The media does this all the time with silly headlines claiming why the market did X yesterday. True or not, the headline provides a sense of order, which we like.
• Don’t assume that just because two events happened around the same time, that there is a link. It could be chance.
• Minor Axiom #8: “Beware the gambler’s fallacy.”
• The gambler’s fallacy is a belief that random events are somehow magically tilted in your favor. Yes, winning streaks may happen when gambling on randomness. You can have a run of luck, but don’t confuse luck with order. And don’t assume a streak will continue (see Axiom #2).
• You can study the market, you might even be able to tilt the odds in your favor, but you’ll never find a formula that produces a sure thing. Despite better odds, the role of chance exists because markets are chaotic.
 
•
• Axiom #6 on Mobility: “Avoiding putting down roots. They impede motion.”
• Avoid latching onto the familiar. Familiar things in investing offer comfort, that can lead to emotional attachments. Emotional attachments get you rooted, which makes it harder to sell.
• Minor Axiom #9: “Do not become trapped in a souring venture because of sentiments like loyalty or nostalgia.”
• Minor Axiom #10: “Never hesitate to abandon a venture if something more attractive comes into view.”
• No investment is too good to ever sell. Every investment has a price where selling makes sense. It may never reach that price, but the price exists.
• Every opportunity must be weighed against existing investments, money going to the more promising one.
 
•
• Axiom #7 on Intuition: “A hunch can be trusted if it can be explained.”
• A hunch or gut feeling is looked on with scorn, indiscriminate trust or discriminating use. Rely on the latter. It may be useful, but it won’t always be useful.
• A hunch is something you know without knowing how or why you know it. The question to ask is have you come across enough relevant information to make it plausible?
• Minor Axiom #11: “Never confuse a hunch with a hope.”
• Be skeptical of hunches that suggest the outcome (you want) will turn out better than you expect. It sounds a lot like overconfidence.
• Axiom #8 on the Occult: “It is unlikely that God’s plan for the universe includes making you rich.”
• Relying on some supernatural power to get you rich will leave you poor.
• Minor Axiom #12: “If astrology worked, all astrologers would be rich.”
• As the 4th Axiom states, you can’t predict the future. Thinking astrology, tarot, psychics, superstitions, or other mystical arts somehow can predict or influence future outcomes is dangerous.
• “Anybody can have a lucky hit or two, but the true test of any touted moneymaking approach is whether it works consistently.”
• Minor Axiom #13: “A superstition need not be exorcized. It can be enjoyed, provided it is kept in its place.”
• In other words, have fun with it, enjoy it, but don’t make important finance bets on it.
• Axiom #9 on Optimism and Pessimism: “Optimism means expecting the best, but confidence means knowing how you will handle the worst. Never make a move if you are merely optimistic.”
• Blind optimism gets you in trouble because it ignores the odds, thinking luck will win out. A healthy sense of pessimism reminds you of the odds, so you can be ready for the worst.
• “You can beat the odds once in a while but not consistently. Usually, if the odds say you’ve got a loser, it’s a loser. The pro, knowing this, and knowing how easily the optimistic sucker can be persuaded to bet when he shouldn’t, gets rich. The pro doesn’t have optimism. What he has is confidence. Confidence springs from the constructive use of pessimism… Seek confidence instead. Confidence comes not from expecting the best, but from knowing how you will handle the worst.”
• Every bet has numerous possible outcomes but we’re drawn to the one that works out best. That’s the point of betting, right? So optimism, hoping for the best, is a normal state of mind and it feels better too. But it’s out of control optimism which dooms investors. Some amount of worry helps keep it under control by thinking about alternate outcomes, allowing you to prepare if things go wrong.
• Axiom #10 on Consensus: “Disregard the majority opinion. It is probably wrong.”
• The lesson from Rene Descartes is to doubt but verify — “The trick, he said over and over again in any number of contexts, is to disregard what everybody tells you until you have thought it through for yourself. He doubted the truths alleged by self-styled experts, and he refused even to accept majority opinions. “Scarcely anything has been pronounced by one [learned person] the contrary of which has not been asserted by another”, he wrote. “And it would avail nothing to count votes . . . for in the matter of a difficult question, it is more likely that the truth should have been discovered by few than by many.””
• The easy way is to accept the words (opinions) — of experts, gurus, brokers, bankers, forecasters, it’s a long list — as absolute truth. The hard way, the Descartes way, is to question, examine, and verify.
• “The majority of people believe the ancient clichés to be unarguable truths. In the light of this, it may be instructive to note that the majority of people aren’t rich.”
• Minor Axiom #14: “Never follow speculative fads. Often, the best time to buy something is when nobody else wants it.”
• Buy low, sell high is a simple, but hard to follow concept, because it goes against popular opinion.
• “As a general rule, the price of a stock – or any other fluid priced speculative entity – falls when substantial numbers of people come to believe it isn’t worth buying. The more unappetizing they find it, the lower the price drops. Hence the great paradox that isn’t taught in seventh grade: the time to buy is precisely when the majority of people are saying, “Don’t!” And the obverse is true when it comes time to sell. The price of a speculative entity rises when large numbers of buyers are clamoring for it. When everybody else is screaming, “Gimme!’ you should be standing quietly on the other side of the counter saying, “Gladly.””
• Being outside the majority can create anxiety and doubt, making it easier to cave to pressure, even when the majority is wrong. Because investing is largely opinion based (lacking hard facts on an unknowable future), it’s harder to verify, making us more susceptible to doubt.
• Of course, always going against the crowd is the wrong lesson. Sometimes the majority is right, but not always.
• “The trouble with contrarianism is that it starts with a good idea and then hardens it into a grandiose illusion of order. It is true that the best time to buy something may be when nobody else wants it. But to buy automatically and unthinkingly for that single reason – to buy solely because the entity is unwanted – seems almost as silly as to bet unthinkingly with the herd.”
• Axiom #11 on Stubbornness: “If it doesn’t pay off the first time, forget it.”
• “If at first you don’t succeed, try, try again” is a nice idiom but pouring good money after bad into a bad investment out of a stubborn refusal to quit is stupid. It’s an emotional response driven by a need to break even or be proven right.
• Minor Axiom #15: “Never try to save a bad investment by averaging down.”
• Averaging down may lower your cost basis, but a lower cost basis in a bad investment is still a loss, likely made worse. If you wouldn’t put new money into an investment — having never owned it — at the fallen price, then don’t average down. Accept the loss. Sell. Make it back in another opportunity.
• Axiom #12 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.”
• Plans have a way of adding order to chaos by ignoring the unexpected. The further you look out, the more unknowable things become.
• “What all these hopeful planners either fail to recognize or choose to ignore is that the money world is only in a limited sense like a tree growing. It is ridiculous to think you can see the world’s future simply by looking at trends in evidence today. Some of those trends will undoubtedly peter out or reverse themselves in the next twenty years. Nobody knows which ones. Whole new trends will spring into existence, factors that nobody today even dreams of. Unknowable events will take us by surprise. Booms and busts, upheavals, wars, crashes and collapses: who knows what we have ahead of us?… The only kind of preparation I can make for the next century, therefore, is to continue studying the market, to go on learning and improving… Resolve to learn all you can learn about the kinds of speculation that attract you, but don’t ever lose sight of the probability – no, let’s say the certainty – that your speculative media and the circumstances affecting them are going to change in ways you cannot now imagine.”
• Minor Axiom #16: “Shun long-term investments.”
• The advantage of long-term investments is it removes tough decisions. There’s one: buy it and wait. Except the future is not guaranteed to reflect the past. It’s unknowable. Expect the unexpected. Expect things to go wrong. Be nimble enough, when things do go wrong, to avoid financial catastrophe.
• “All you can know about the future is that it will get here when it gets here. You cannot see its shape, but at least you can prepare yourself to react to its opportunities and hazards. There is no sense in just standing there and letting it roll over you.”

[chippermon]

For those who don't want to read the whole book here is a detailed summary of the Zurich Axioms.
I feel that TI philosophy is not in complete accordance to Axiom 4 and 5. As well as out of sync with minor axioms 5,6,7. Not to say one is right or wrong - just that you see conflicting advice. For example Axiom 2 flies in the face of just about every money manager ever and everywhere. Minor Axiom 16 is interesting in the face of the AI trend

What are your thoughts?

The Zurich Axioms
“Everybody wants to win, of course. But not everybody wants to bet, and therein lies a difference of the greatest magnitude. Many people, probably most, want to win without betting.”
The idea is to deliberately expose yourself to risk — to bet — in a way that gains are more likely than losses.

• Axiom #1 on Risk: “Worry is not a sickness but a sign of health. If you’re not worried, you are not risking enough.”
• Most people strive for a “sleep well at night” portfolio because it offers security. The Axioms propose the opposite. Worry is part of an adventurous life, one that takes personal risks. Put another way, an adventurous life is a rich life. A life avoiding worry is boring or poor. Managing money is no different. To get rich, you must take risks. The price of risk is a state of worry.
• Frank Henry (author’s father) rule of thumb: only spend half your energy toward job income, spend the other half on investment/speculation.
• “Every occupation has its aches and pains. If you keep bees, you get stung. Me, I get worried. It’s either that or stay poor. If I’ve got a choice between worried and poor, I’ll take worried anytime.” — Jesse Livermore
• Minor Axiom #1: “Always play for meaningful stakes.”
• “Meaningful stakes” does not mean taking a huge risk that a loss would drive you to bankruptcy. It means taking a big enough risk, with favorable odds, that produces a significant difference. If the bet is small enough that a loss won’t matter, any gain won’t matter either. The bet should be one where a loss is enough to worry about while a gain is financially significant.
• J. Paul Getty, after betting his entire fortune ($500 in 1916) on his first oil lease that hit big, remarked: “Of course, I was lucky. I could have lost. But even if I had, that wouldn’t have changed my conviction that I was right to take the chance. By taking the chance — a pretty big chance, I’ll admit — I gave myself the possibility of getting somewhere interesting. The possibility, the hope, you see. If I’d refused to take the chance, I would not have had the hope… So it seemed to me I had a lot more to win than lose. If I won, it would be various kinds of wonderful. If I lost, it would hurt, but not all that much. The right course of action seemed clear. What would you have done?”
• Minor Axiom #2: “Resist the allure of diversification.”
• Diversification: “As used in the investment community, it means spreading your money around. Spreading it thin. Putting it into a lot of little speculations instead of a few big ones.”
• Diversification reduces risk but can be taken to a point that reduces any chance of significant reward.
• 3 Flaws: Being too diversified means violating the “always play for meaningful stakes” axiom, more likely to see any gains and losses offset each other (like running in place), and rather than too many eggs in one basket, you have too many baskets to watch over and not enough time to do so.
• Peter Lynch called it diworsification: “Don’t diversify just for the sake of diversity. You then become like a contestant in a supermarket shopping contest, in which the object is to fill your basket fast. You go home with a lot of expensive junk you don’t really want. In speculation, you should put your money into ventures that genuinely attract you, and only those. Never buy something simply because you think you need it to round out a ‘diversified portfolio.'”

• Axiom #2 on Greed: “Always take your profit too soon.”
• Greed means always wanting more reward than should be expected.
• “If you can conquer greed, that one act of self-control will make you a better speculator than 99 percent of other men and women who are scrambling after wealth.”
• In other words, less greed = better chance at wealth.
• “If they wanted less, they’d go home with more.” — Sherlock Feldman, Dunes casino manager on the power of greed.
• Don’t press your luck: “In the course of gambling or speculative play, you will from time to time enjoy streaks and runs of luck. You will enjoy them so much that you will want to ride them forever and ever. Undoubtedly you will have the good sense to recognize that they cannot last forever, but if greed has you in its grip, you will talk yourself into hoping or believing that they will at least last a long time…and then a bit longer…and then just a little longer. And so you will ride and ride, and in the end, you and your money will go over the falls.”
• Since most lucky streaks are a possible but rare series of events, go in assuming any lucky streak will be short and not very profitable. In other words, when the odds are against you, walking away is the best decision, even in the unlikely event the streak continues.
• “Always bet on the short and modest. Don’t let greed get you. When you have a good profit, cash out and walk away.”
• “That which hurts, teaches.”
• Fear of regret will be the biggest thing working against you in following Axiom #2.
• Minor Axiom #3: ” Decide in advance what gain you want from a venture, and when you get it, get out.”
• Helps give a specific answer to the all-important question “What is enough?” or When to sell?
 

• Axiom #3 on Hope: “When the ship starts to sink, don’t pray. Jump.”
• Expect things to go wrong from time to time, and have a plan for when it does. That means expect mistakes, expect bad luck, expect to be wrong about investments, but don’t let any of it debilitate your ability to invest. When it does happen, learn to cut your losses. To do that, you must be willing to take a loss.
• “You take small losses to protect yourself from big ones.”
• “In the absence of compelling reasons to think things will get better, sell.”
• Three obstacles stop people from cutting their losses early:
1. Fear of regret: taking the loss, only to watch it recover, and miss out on the recovery. Recoveries will happen but not very often or quickly enough to wait. Investments gone bad often have problems that “are slow to develop and slow to go away.”
2. Too painful: Avoiding the pain of taking a loss, by holding, and hoping, to break even. By avoiding the pain, you also avoid other opportunities that could get you back to even sooner. No rule states that you must make your money back the same way you lost it.
3. Admitting you’re wrong: “Refusing to be wrong is the wrongest response of them all.” Protecting your ego is a foolish reason to lose a pile of money. Markets humble everyone. Expect it to happen to you.
• Minor Axiom #4: “Accept small losses… Expect to experience several while awaiting a large gain.”
• Small losses “are part of the cost of speculation. They buy you the right to hope for big gains.”
 
•
• Axiom #4 on Forecasts: “Human behavior cannot be predicted. Distrust anyone who claims to know the future, however dimly.”
• Why do we listen? Because the easiest and quickest way to get rich is to know what the market will do tomorrow. Humans have a long history of wanting to know the future.
• Why are forecasters dangerous? Because sometimes forecasters guess right. Then conveniently, we ignore all the times they were wrong.
• “It’s easy to a prophet. You make 25 predictions and the ones that come true are the ones you talk about.” — Theodore Levitt
• The basic rule of forecasting: “If you can’t forecast right, forecast often.” In other words, beware of revisions and re-revisions.
• Some events can be predicted like physical events (i.e. sunrise, sunset, the next full moon), but markets deal with human events driven by behavior, which is unpredictable.
• “There are simply too many unknowable variables involved to allow for trustworthy forecasts of something like the inflation rate. The rate is caused by millions of people making billions of decisions: workers about wages they want to be paid, bosses about wages they are willing to pay, consumers about prices they will swallow, everybody about diffuse feelings of hardship or prosperity, fear or security, discontent or buoyancy. To claim you can make reliable forecasts about this staggering complexity seems arrogant to the point of being ridiculous.”
• Simply, ignore forecasters!
 
Axiom #5 on Patterns: “Chaos is not dangerous until it begins to look orderly.”
• Everybody wants a formula to get rich, so they look for patterns. Formulas don’t exist.
• The illusion of order: Humans are pattern seekers, who often confuse randomness — amid market chaos — for order. Also, Humans prefer a level of control, something the illusion of order offers.
• Luck plays a bigger role in investment outcomes than most will ever admit.
• “A formula that worked last year isn’t necessarily going to work this year, with a different set of financial circumstances stewing in the pot. And a formula that worked for your neighbor won’t necessarily work for you, with a different set of random events to contend with. The fact is, no formula that ignores luck’s dominant role can ever be trusted.”
• Minor Axiom #5: “Beware the historian’s trap.”
• The historian’s trap is the illusion that history repeats itself exactly. Ex: Long ago, event Y happened, followed by event Z. So when event Y appears to be happening again, everybody assumes event Z will happen next.
• “It is true that history repeats itself sometimes, but most often it doesn’t, and in any case, it never does so in a reliable enough way that you can prudently bet money on it.”
• “Events rarely happen the way they are expected to happen.”
• Minor Axiom #6: “Beware the chartist’s illusion.”
• The chartist’s illusion is the belief that future price movements can be found in the charts of past prices. Charts are a convenient way to use data to exaggerate, deceive, or lie to others and yourself (see How to Lie with Statistics).
• Minor Axiom #7: “Beware the correlation and causality delusions.”
• Our pattern seeking often links cause and effect where none exist. When no link exists, we make it up. The media does this all the time with silly headlines claiming why the market did X yesterday. True or not, the headline provides a sense of order, which we like.
• Don’t assume that just because two events happened around the same time, that there is a link. It could be chance.
• Minor Axiom #8: “Beware the gambler’s fallacy.”
• The gambler’s fallacy is a belief that random events are somehow magically tilted in your favor. Yes, winning streaks may happen when gambling on randomness. You can have a run of luck, but don’t confuse luck with order. And don’t assume a streak will continue (see Axiom #2).
• You can study the market, you might even be able to tilt the odds in your favor, but you’ll never find a formula that produces a sure thing. Despite better odds, the role of chance exists because markets are chaotic.
 
•
• Axiom #6 on Mobility: “Avoiding putting down roots. They impede motion.”
• Avoid latching onto the familiar. Familiar things in investing offer comfort, that can lead to emotional attachments. Emotional attachments get you rooted, which makes it harder to sell.
• Minor Axiom #9: “Do not become trapped in a souring venture because of sentiments like loyalty or nostalgia.”
• Minor Axiom #10: “Never hesitate to abandon a venture if something more attractive comes into view.”
• No investment is too good to ever sell. Every investment has a price where selling makes sense. It may never reach that price, but the price exists.
• Every opportunity must be weighed against existing investments, money going to the more promising one.
 
•
• Axiom #7 on Intuition: “A hunch can be trusted if it can be explained.”
• A hunch or gut feeling is looked on with scorn, indiscriminate trust or discriminating use. Rely on the latter. It may be useful, but it won’t always be useful.
• A hunch is something you know without knowing how or why you know it. The question to ask is have you come across enough relevant information to make it plausible?
• Minor Axiom #11: “Never confuse a hunch with a hope.”
• Be skeptical of hunches that suggest the outcome (you want) will turn out better than you expect. It sounds a lot like overconfidence.
• Axiom #8 on the Occult: “It is unlikely that God’s plan for the universe includes making you rich.”
• Relying on some supernatural power to get you rich will leave you poor.
• Minor Axiom #12: “If astrology worked, all astrologers would be rich.”
• As the 4th Axiom states, you can’t predict the future. Thinking astrology, tarot, psychics, superstitions, or other mystical arts somehow can predict or influence future outcomes is dangerous.
• “Anybody can have a lucky hit or two, but the true test of any touted moneymaking approach is whether it works consistently.”
• Minor Axiom #13: “A superstition need not be exorcized. It can be enjoyed, provided it is kept in its place.”
• In other words, have fun with it, enjoy it, but don’t make important finance bets on it.
• Axiom #9 on Optimism and Pessimism: “Optimism means expecting the best, but confidence means knowing how you will handle the worst. Never make a move if you are merely optimistic.”
• Blind optimism gets you in trouble because it ignores the odds, thinking luck will win out. A healthy sense of pessimism reminds you of the odds, so you can be ready for the worst.
• “You can beat the odds once in a while but not consistently. Usually, if the odds say you’ve got a loser, it’s a loser. The pro, knowing this, and knowing how easily the optimistic sucker can be persuaded to bet when he shouldn’t, gets rich. The pro doesn’t have optimism. What he has is confidence. Confidence springs from the constructive use of pessimism… Seek confidence instead. Confidence comes not from expecting the best, but from knowing how you will handle the worst.”
• Every bet has numerous possible outcomes but we’re drawn to the one that works out best. That’s the point of betting, right? So optimism, hoping for the best, is a normal state of mind and it feels better too. But it’s out of control optimism which dooms investors. Some amount of worry helps keep it under control by thinking about alternate outcomes, allowing you to prepare if things go wrong.
• Axiom #10 on Consensus: “Disregard the majority opinion. It is probably wrong.”
• The lesson from Rene Descartes is to doubt but verify — “The trick, he said over and over again in any number of contexts, is to disregard what everybody tells you until you have thought it through for yourself. He doubted the truths alleged by self-styled experts, and he refused even to accept majority opinions. “Scarcely anything has been pronounced by one [learned person] the contrary of which has not been asserted by another”, he wrote. “And it would avail nothing to count votes . . . for in the matter of a difficult question, it is more likely that the truth should have been discovered by few than by many.””
• The easy way is to accept the words (opinions) — of experts, gurus, brokers, bankers, forecasters, it’s a long list — as absolute truth. The hard way, the Descartes way, is to question, examine, and verify.
• “The majority of people believe the ancient clichés to be unarguable truths. In the light of this, it may be instructive to note that the majority of people aren’t rich.”
• Minor Axiom #14: “Never follow speculative fads. Often, the best time to buy something is when nobody else wants it.”
• Buy low, sell high is a simple, but hard to follow concept, because it goes against popular opinion.
• “As a general rule, the price of a stock – or any other fluid priced speculative entity – falls when substantial numbers of people come to believe it isn’t worth buying. The more unappetizing they find it, the lower the price drops. Hence the great paradox that isn’t taught in seventh grade: the time to buy is precisely when the majority of people are saying, “Don’t!” And the obverse is true when it comes time to sell. The price of a speculative entity rises when large numbers of buyers are clamoring for it. When everybody else is screaming, “Gimme!’ you should be standing quietly on the other side of the counter saying, “Gladly.””
• Being outside the majority can create anxiety and doubt, making it easier to cave to pressure, even when the majority is wrong. Because investing is largely opinion based (lacking hard facts on an unknowable future), it’s harder to verify, making us more susceptible to doubt.
• Of course, always going against the crowd is the wrong lesson. Sometimes the majority is right, but not always.
• “The trouble with contrarianism is that it starts with a good idea and then hardens it into a grandiose illusion of order. It is true that the best time to buy something may be when nobody else wants it. But to buy automatically and unthinkingly for that single reason – to buy solely because the entity is unwanted – seems almost as silly as to bet unthinkingly with the herd.”
• Axiom #11 on Stubbornness: “If it doesn’t pay off the first time, forget it.”
• “If at first you don’t succeed, try, try again” is a nice idiom but pouring good money after bad into a bad investment out of a stubborn refusal to quit is stupid. It’s an emotional response driven by a need to break even or be proven right.
• Minor Axiom #15: “Never try to save a bad investment by averaging down.”
• Averaging down may lower your cost basis, but a lower cost basis in a bad investment is still a loss, likely made worse. If you wouldn’t put new money into an investment — having never owned it — at the fallen price, then don’t average down. Accept the loss. Sell. Make it back in another opportunity.
• Axiom #12 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.”
• Plans have a way of adding order to chaos by ignoring the unexpected. The further you look out, the more unknowable things become.
• “What all these hopeful planners either fail to recognize or choose to ignore is that the money world is only in a limited sense like a tree growing. It is ridiculous to think you can see the world’s future simply by looking at trends in evidence today. Some of those trends will undoubtedly peter out or reverse themselves in the next twenty years. Nobody knows which ones. Whole new trends will spring into existence, factors that nobody today even dreams of. Unknowable events will take us by surprise. Booms and busts, upheavals, wars, crashes and collapses: who knows what we have ahead of us?… The only kind of preparation I can make for the next century, therefore, is to continue studying the market, to go on learning and improving… Resolve to learn all you can learn about the kinds of speculation that attract you, but don’t ever lose sight of the probability – no, let’s say the certainty – that your speculative media and the circumstances affecting them are going to change in ways you cannot now imagine.”
• Minor Axiom #16: “Shun long-term investments.”
• The advantage of long-term investments is it removes tough decisions. There’s one: buy it and wait. Except the future is not guaranteed to reflect the past. It’s unknowable. Expect the unexpected. Expect things to go wrong. Be nimble enough, when things do go wrong, to avoid financial catastrophe.
• “All you can know about the future is that it will get here when it gets here. You cannot see its shape, but at least you can prepare yourself to react to its opportunities and hazards. There is no sense in just standing there and letting it roll over you.”

Nice job with this synopsis. I would still encourage everyone to read the whole book anyway but this is a nice way to keep the axioms handy as a reference.

The thing is, you can interpret them in your own way. So, some of the axioms do seem to contradict TI, perhaps, if you take them too literally. We need to interpret them to fit our own style, which of course is always evolving.

For instance you mention 4 and 5. I think TI has always said they are not Gurus and they are generally giving us some possibilities, probabilities and general guidelines of possible events that would influence markets.

I think TI addresses number two by usually selling half at a certain target and the remaining shares at a higher target or if the investment landscape changes a lower number is presented.

Number 16 is also somewhat ambiguous. Everyone's idea of long term is generally different. For currency trading looking at the daily chart is long term for me. When trading Primary Candidates in the Market Update we are mostly looking at weeklies, sometimes monthlies but probably don't hold on to much for more than a couple years or three and always with an exit plan. The same goes for the AI service as you mentioned(on another forum).

I loved the book and am actually reading it again right now. People should cut and paste this in their journal. Well done TripleThought.

[harryg]

That must have taken some time, thank you.

In case of doubt, I tend to side with the Axioms usually...

Regarding #16 - I would have to re read, but I think the ‘shun long term investments’ was about being careful of getting mentally locked into a position and not bailing if it starts to go wrong ie: not cutting losses.

[Eric]

The examples given for #16 involved buying real estate because a new road or bridge or whatever is going to make it skyrocket in value. "Someday" rarely comes... That road or bridge is going to run into funding trouble or be diverted to protect some allegedly endangered insect or whatever and you're going to be holding an inaccessible land-locked worthless piece of dirt.

Granted my house shot up about 20% in value on the day a new bridge opened 8 months after I bought the house. I didn't buy it as a speculative investment, I bought it because I wanted to live there.

[harryg]

The examples given for #16 involved buying real estate because a new road or bridge or whatever is going to make it skyrocket in value. "Someday" rarely comes... That road or bridge is going to run into funding trouble or be diverted to protect some allegedly endangered insect or whatever and you're going to be holding an inaccessible land-locked worthless piece of dirt.

Granted my house shot up about 20% in value on the day a new bridge opened 8 months after I bought the house. I didn't buy it as a speculative investment, I bought it because I wanted to live there.

Well I certainly hope that the bridge of which you speak was built to enable the lesser Texas Tortoise to cross the road without getting splattered. Those chaps have got enough on their plate already.

Regarding fear of regret [above] -that is probably position-independent - if you sell it might keep going up, if you keep it it might tank – the possibility of regret is identical and unknowable so you should (try to) ignore it.

(?)

[Cinnamon]

. Where my response is I don't sell ANYTHING at a LOSS! I would much rather the stock to go to ZERO than SELL and for ever by jumping from one stock trading near it's lows to another! What is that going to result in? SELLING EVERYTHING NEAR THE LOWS! Yes there is no sure fire bet, and all stock prices oscillate around earnings and fair value between extremes of over valued and under valued, but I would much rather lose it all then SELL a stock for a loss as I wrote several years ago when constructing the High Risk Portfolio, a case of HERO or ZERO, 0 or X10. no in betweens

Harry this is a guy that several of us here are familiar with. I find it interesting, possibly disturbing that he is willing to lose it all rather than sell it at a loss. Hero or Zero, in my experience usually tends to push you closer to Zero. However, maybe, I never had luck putting such a strategy into play. The 9 times over the years that I tried this strategy i lost roughly 80% of the time, albeit small sums otherwise I would not be here. Would the Zurich Axioms support this stance. More importantly, what is your take.

[harryg]

. Where my response is I don't sell ANYTHING at a LOSS! I would much rather the stock to go to ZERO than SELL and for ever by jumping from one stock trading near it's lows to another! What is that going to result in? SELLING EVERYTHING NEAR THE LOWS! Yes there is no sure fire bet, and all stock prices oscillate around earnings and fair value between extremes of over valued and under valued, but I would much rather lose it all then SELL a stock for a loss as I wrote several years ago when constructing the High Risk Portfolio, a case of HERO or ZERO, 0 or X10. no in betweens

Harry this is a guy that several of us here are familiar with. I find it interesting, possibly disturbing that he is willing to lose it all rather than sell it at a loss. Hero or Zero, in my experience usually tends to push you closer to Zero. However, maybe, I never had luck putting such a strategy into play. The 9 times over the years that I tried this strategy i lost roughly 80% of the time, albeit small sums otherwise I would not be here. Would the Zurich Axioms support this stance. More importantly, what is your take.

It's very much a testicle-wielding type of brag isn't it?

Again we run into the question of our overall aim - is it to make money or to be (seen to be) 'right'?

In my experience, the loud aggressive traders always end up taking on too much risk because they can't help themselves. And for every ‘Hero’ (very loud) there are probably 100 ‘Zeros’ (mainly quiet).

Most successful traders are, if not humble, at least willing to question themselves and their ideas.

Technically to never sell anything at a loss is easy - we can all do it by never selling anything! So somewhat meaningless, and still holds true for stocks that go bankrupt. Furthermore the logic of 'selling near the lows' is faulty, because to sell, for example, Coinbase at a 50% stop loss turned out to be nowhere whatsoever near the lows.

That said, to be completely fair, it does appear to refer to High Risk positions. These are somewhat different, since you often have to give them more space to move. In my view, it would be sensible to decide in advance, on a case by case basis, just how much space. This would be a function of your belief in the company and industry.

If the answer is 100% then it would be wise to position-size accordingly (ie : don't bet much!) - after all, there’s no way back from a 100% loss.

The third Zurich Axiom is "When the ship starts to sink, don't pray. Jump".

The idea is that taking small(er) losses stops you from ending up with bigger ones and as a philosophy it speaks to me.

"{...} obstacle to the Third Axiom's implementation is the difficulty of admitting you were wrong. People differ widely in the ways they react to this problem. Some find it only a minor nuisance. Some find it the biggest obstacle of all."

Horses for courses...

[Centeron631]

Maybe one has to be conscious of the years these were written for originally - which was even before the author's time as i believe it is his memory of what his father talked about which would make it really early on. Maybe the horse and buggy age in the markets when one would look up prices in the newspaper if one was able to get them. Someone recently somewhere said that today vs just a few decades ago the markets r changing at warp speed espeically with advent of ai and all history is irrelevant. So some of his axioms may still work for today but certainly some do not apply today. How many of u r into just 2 positions as he suggests. Just some thoughts on the book which ive read most of.

[Cinnamon]

It's very much a testicle-wielding type of brag isn't it?

Again we run into the question of our overall aim - is it to make money or to be (seen to be) 'right'?

In my experience, the loud aggressive traders always end up taking on too much risk because they can't help themselves. And for every ‘Hero’ (very loud) there are probably 100 ‘Zeros’ (mainly quiet).

Most successful traders are, if not humble, at least willing to question themselves and their ideas.

Technically to never sell anything at a loss is easy - we can all do it by never selling anything! So somewhat meaningless, and still holds true for stocks that go bankrupt. Furthermore the logic of 'selling near the lows' is faulty, because to sell, for example, Coinbase at a 50% stop loss turned out to be nowhere whatsoever near the lows.

That said, to be completely fair, it does appear to refer to High Risk positions. These are somewhat different, since you often have to give them more space to move. In my view, it would be sensible to decide in advance, on a case by case basis, just how much space. This would be a function of your belief in the company and industry.

If the answer is 100% then it would be wise to position-size accordingly (ie : don't bet much!) - after all, there’s no way back from a 100% loss.

The third Zurich Axiom is "When the ship starts to sink, don't pray. Jump".

The idea is that taking small(er) losses stops you from ending up with bigger ones and as a philosophy it speaks to me.

"{...} obstacle to the Third Axiom's implementation is the difficulty of admitting you were wrong. People differ widely in the ways they react to this problem. Some find it only a minor nuisance. Some find it the biggest obstacle of all."

Horses for courses...

Thanks for the response and you are right he was referencing higher risk plays. Well I guess I have to work my Hero or zero luck factor. If its 10 bagger then you can afford to lose over 80% and still come out ahead. I prefer to use the Hero or zero option when dealing with options. You can risk smaller amounts when you are feeling ballsy.

[SOL]

. Where my response is I don't sell ANYTHING at a LOSS! I would much rather the stock to go to ZERO than SELL and for ever by jumping from one stock trading near it's lows to another! What is that going to result in? SELLING EVERYTHING NEAR THE LOWS! Yes there is no sure fire bet, and all stock prices oscillate around earnings and fair value between extremes of over valued and under valued, but I would much rather lose it all then SELL a stock for a loss as I wrote several years ago when constructing the High Risk Portfolio, a case of HERO or ZERO, 0 or X10. no in betweens

Harry this is a guy that several of us here are familiar with. I find it interesting, possibly disturbing that he is willing to lose it all rather than sell it at a loss. Hero or Zero, in my experience usually tends to push you closer to Zero. However, maybe, I never had luck putting such a strategy into play. The 9 times over the years that I tried this strategy i lost roughly 80% of the time, albeit small sums otherwise I would not be here. Would the Zurich Axioms support this stance. More importantly, what is your take.

It's very much a testicle-wielding type of brag isn't it?

Again we run into the question of our overall aim - is it to make money or to be (seen to be) 'right'?

In my experience, the loud aggressive traders always end up taking on too much risk because they can't help themselves. And for every ‘Hero’ (very loud) there are probably 100 ‘Zeros’ (mainly quiet).

Most successful traders are, if not humble, at least willing to question themselves and their ideas.

Technically to never sell anything at a loss is easy - we can all do it by never selling anything! So somewhat meaningless, and still holds true for stocks that go bankrupt. Furthermore the logic of 'selling near the lows' is faulty, because to sell, for example, Coinbase at a 50% stop loss turned out to be nowhere whatsoever near the lows.

That said, to be completely fair, it does appear to refer to High Risk positions. These are somewhat different, since you often have to give them more space to move. In my view, it would be sensible to decide in advance, on a case by case basis, just how much space. This would be a function of your belief in the company and industry.

If the answer is 100% then it would be wise to position-size accordingly (ie : don't bet much!) - after all, there’s no way back from a 100% loss.

The third Zurich Axiom is "When the ship starts to sink, don't pray. Jump".

The idea is that taking small(er) losses stops you from ending up with bigger ones and as a philosophy it speaks to me.

"{...} obstacle to the Third Axiom's implementation is the difficulty of admitting you were wrong. People differ widely in the ways they react to this problem. Some find it only a minor nuisance. Some find it the biggest obstacle of all."

Horses for courses...

Well, if one changes the angle of observation one could state the following
Everyone is entitled to their opinion. It might sound like a very bold or provocative statement, but the individual appears to be stating what course of action he would take. He is not stating that others should follow him.
Secondly, maybe it works for him

[Yodean]

How many of u r into just 2 positions as he suggests. Just some thoughts on the book which ive read most of.

Like any book or YT video, it's good to critically consider the ideas presented and decide which ones are high quality (for you) or not.

_The Zurich Axioms_ is no different - in general, it's an excellent book on investing, and great reads tend to trigger different parts of the specific reader.

Btw, the author does not suggest "2 positions" - he simply warns against over-diversification, and states that _he_ tends to prefer 4 positions or so, but goes on to state that it will vary for each investor.

Investing, at the end of the day, is more art than science.

_The Zurich Axioms_ could be considered a gr8 book on painting, but you may prefer pencil sketching instead.

[Centeron631]

and talking about warp speed today's info compared to then, and opinions of experts playing follow the leader now that can so influence the markets, maybe he was better off with no or little expert opp's in those times (time of the father) and that helped shaped his thoughts. I never seek out going to bed in a worried state as something to strive for and if i do go to bed worried or get worried in middle of the night i move that energy over as quickly as possible with mindfulness, by embracing it and allowing it, with the full dignity the emotion or any other downer emotion deserves - ; nor do i hang on it during the day and get myself out of negative emotions by being a presentologist as much and as quickly as i possibly can.
just another thought to add

[Yodean]

and talking about warp speed today's info compared to then, and opinions of experts playing follow the leader now that can so influence the markets, maybe he was better off with no or little expert opp's in those times (time of the father) and that helped shaped his thoughts. I never seek out going to bed in a worried state as something to strive for and if i do go to bed worried or get worried in middle of the night i move that energy over as quickly as possible with mindfulness, by embracing it and allowing it, with the full dignity the emotion or any other downer emotion deserves - ; nor do i hang on it during the day and get myself out of negative emotions by being a presentologist as much and as quickly as i possibly can.
just another thought to add

Well, if you want a good P & L, you have to learn to embrace Fear, rather than fight it or try various ways of repressing it (which are called euphemistically different terms by the New Age folks).

Most importantly, you have to learn to think independently, and critically. Sometimes this means to make the most $$$ in the markets, you have to do the opposite of the so-called experts, or "advanced students." Or whatever.

Sometimes it means to do the same as what they do, for a period of time, until you discover their various weaknesses and biases, which they themselves have blocked off from their awareness.

At the end of the day, one can make all sorts of excuses. Either you have a good long-term CAGR, or you do not. Simple as that, imo.

Health comes first, of course, but this is a financial forum, primarily. I sleep well these days, so am not too interested in what you do in your bed.

The dude below echoes _some_ of my views on the market:

https://youtu.be/NiVngZzh9Tk?t=1

*****

Sheep will never learn - will be vaxxed, and some will be perished, by Mass Menticide.

[outof thebox]

Well, if you want a good P & L, you have to learn to embrace Fear, rather than fight it or try various ways of repressing it (which are called euphemistically different terms by the New Age folks).

Most importantly, you have to learn to think independently, and critically. Sometimes this means to make the most $$$ in the markets, you have to do the opposite of the so-called experts, or "advanced students." Or whatever.

Sometimes it means to do the same as what they do, for a period of time, until you discover their various weaknesses and biases, which they themselves have blocked off from their awareness.

At the end of the day, one can make all sorts of excuses. Either you have a good long-term CAGR, or you do not. Simple as that, imo.

Health comes first, of course, but this is a financial forum, primarily. I sleep well these days, so am not too interested in what you do in your bed.

The dude below echoes _some_ of my views on the market:



*****

Sheep will never learn - will be vaxxed, and some will be perished, by Mass Menticide.

Any service or expert that hints that their strategy falls along the lines of Simon says and then we follow is not worth following. Anyone following anyone blindly is a Putz. And anyone claiming to know it all is an even bigger loser (regarding stock market experts). Thankfully TI does not advocate either. If they did I would be out of here.

I use this service for general guidance and trend analysis. Then I do my own work and I have noticed that when they more or less Mesh I win more often. So if they are looking at LIT and if I happen to think its a good idea too, then I will jump in.

There are other areas that TI might not cover that I follow on my own and the results are not to bad so far. I also used other services (Once upon a time it used to be 10 now its down a lot) for ideas but more in the contrarian dept, some have an incredible knack of jumping in when they should be jumping out and vice versa

All in all my main point is that if you blindly follow someone than you are asking for trouble, more so if that someone acts like they know it all.