Book review of The Zurich Axioms, by Max Gunther
The Zurich Axioms” is a slim book that should be on the library of every investor and, perhaps, entrepreneur and manager. It is a book about risk management. The book delivers a collection of principles about how to deal with risk (12 major and 16 minor axioms). The axioms are a sort of rule of thumb for dealing with risk. Curiously, in a way, the axioms are more about dealing with the limitations of the human psyche than with investments.
Max Gunther (1927-1998) was a journalist and writer born in England. He lived most of his life in the United States. He worked and wrote for magazines like Business Week, Time Magazine, Playboy and Reader’s Digest.
Risk is part of our life either we want it or not. Even if we try not to assume any risk, it will “bite” us sooner or later. Perhaps the biggest risk in the long run is not to assume ever any risks. Perhaps the most foolish thing to think is that we are always in control. Things are never in control, at least completely.
“The Zurich Axioms” says that we should embrace risk. Without some risk we can´t reap the rewards of this life. On the other side, we shouldn’t be fools when taking risks. The Zurich axioms is way to deal with risk in a smarter way.
Briefly, the Zurich axioms are the following:
Some of the readers are thinking that they don´t work all the time. I completely agree. One reason is luck (or the lack of it). It is possible to play a very smart poker (poker is a kind of investment) and still loose. The contrary is also possible: play a very dumb poker and still win. However, neither of the situations is a reason to play a bad poker. Good decisions over time make money flow to the better player.
Another possible reason is to have solid information that contradicts the axioms. For example, Max Gunther recommends “decide in advance what you want from a venture, and when you get it, get out”. If the reader knows something important in advance contrary to the axioms don´t follow them.
However, I don’t believe that to disrespect the axioms is the most smart thing we can do most of the time. The Zurich axioms are more times right then wrong. Personally, I think if I had followed the Zurich axioms in the last decade I would be, at least, independent financially. Many of my bad investment decisions would had been avoided.
Even without reading the book, I think most readers would agree immediately with the majority of the axioms.
I don´t think it is easy to apply immediately the Zurich axioms. One thing is to understand the rationality of the axioms and agree with them. Other thing, is to apply them to real situations. We are human and we tend to think we know better than the common sense the Zurich axioms represent.
Perhaps a good idea is to choose two or three axioms that we think can make a real difference in our lives in a short term. And then applying them to our lives. That is what I´m doing in relation to the axioms. Personally, I chose the axioms on risk and stubbornness. Those are the axioms that make more sense to me and I will not explain why 🙂
Ivo Dias de Sousa is a Portuguese writer born in Mozambique. Ivo is also a Professor at Universidade Aberta, Portugal, giving courses on information management. Currently, Ivo is interested in using his experience on information management to construct applications (see http://windit-app.com/ ) for smartphones, in collaboration with others. Ivo holds a Master in Statistics and Information Management (Universidade Nova de Lisboa) and a Ph.D. in Information Management (Universidade Aberta). Amongst his main interests are information management, psychology of luck and literature.