======Axioms of Zurich======
The Axioms of Zurich are a set of twelve major and sixteen minor unorthodox and provocative rules for financial speculation and risk management. Popularized by Max Gunther in his 1985 book, "The Zurich Axioms," these principles were purportedly developed by a club of Swiss bankers and investors who grew rich by playing markets after World War II. They stand in stark contrast to conventional investment wisdom, particularly the patient, long-term philosophy of [[value investing]]. Instead of focusing on [[intrinsic value]] and buying with a [[margin of safety]], the Axioms embrace [[risk]] as a necessary ingredient for wealth creation. They are not a guide to finding great companies but rather a psychological toolkit for navigating the turbulent waters of [[speculation]], dealing with fear, greed, and the chaotic nature of markets. Think of them as the gunslinger's code for the Wild West of Wall Street, prioritizing nimble decision-making and emotional discipline over deep analysis.
===== The Major Axioms: A Speculator's Guide =====
While there are twelve major axioms, several stand out for their counter-intuitive and pragmatic advice. They are designed to keep a speculator grounded and profitable.
==== On Risk and Greed ====
The Zurich speculators believed that wealth requires bold risk-taking, but they also preached the importance of taming greed.
  * **The First Major Axiom (On Risk):** "Worry is not a sickness but a sign of health. If you are not worried, you are not risking enough." This axiom encourages investors to step outside their comfort zone. Meaningful rewards don't come from playing it safe; they come from taking calculated risks that naturally cause some anxiety.
  * **The Second Major Axiom (On Greed):** "Always take your profit too soon." Forget the mantra "let your winners run." The Axioms argue that hope for a stock to climb ever higher is a form of greed. The goal is to consistently secure profits, not to perfectly time the top of the market. As the old saying goes, bulls make money, bears make money, but pigs get slaughtered.
==== On Hope and Sinking Ships ====
Emotion is the enemy of the speculator. The Axioms provide firm rules for cutting emotional ties to an investment.
  * **The Third Major Axiom (On Hope):** "When the ship starts to sink, don't pray. Jump." This is a ruthless rule for cutting losses. If an investment turns against you, sell immediately. Don't wait and hope for a recovery that may never come. This is the speculator's version of a [[stop-loss]], executed with discipline and without hesitation.
  * **The Tenth Major Axiom (On Disregarding the Majority Opinion):** "Never follow the crowd." Contrarian thinking is at the heart of the Zurich philosophy. By the time an investment is popular with the masses, the big profit has likely already been made. The best opportunities are often found in places others are ignoring or fleeing from.
==== On Forecasting and Patterns ====
The Axioms are deeply skeptical of anyone claiming to know the future, a sentiment that many value investors share.
  * **The Fourth Major Axiom (On Forecasts):** "Human behavior cannot be predicted. Distrust anyone who claims to know the future." This axiom dismisses market gurus, elaborate economic forecasts, and complex predictive models. A speculator should react to what the market is doing, not bet on what they think it’s //going// to do.
  * **The Fifth Major Axiom (On Patterns):** "Chaos is not dangerous until it begins to look orderly." This is a direct shot at over-relying on [[technical analysis]]. The market is inherently chaotic, and seeing a "pattern" is often just an illusion. Believing you've found an infallible system in a random environment is the surest path to ruin.
===== A Value Investor's Perspective on Zurich =====
At first glance, the Axioms of Zurich seem like the antithesis of the teachings of [[Benjamin Graham]] and [[Warren Buffett]]. Value investors build wealth by buying wonderful businesses at fair prices and holding them for the long term, benefiting from their durable [[competitive advantage]]. Speculators using the Axioms jump in and out of ventures based on risk and momentum.
However, even a dedicated value investor can draw wisdom from Zurich:
  * **Emotional Discipline:** The core message of mastering fear and greed is universal. The axiom to "jump from a sinking ship" can be a powerful reminder for a value investor to re-evaluate their thesis. If the underlying facts of a business deteriorate, selling—even at a loss—is the rational move to avoid a [[value trap]].
  * **Skepticism:** The deep distrust of forecasts and market noise aligns perfectly with value investing. A value investor focuses on [[fundamental analysis]]—the health and prospects of the business—not on the chatter of pundits or the squiggles on a chart.
  * **Defining Your Game:** Perhaps the most important lesson is acknowledging the difference between investing and speculating. The Axioms provide a framework for the speculative part of a portfolio, which even Benjamin Graham acknowledged could exist (he suggested capping it at 10%). By understanding the rules of a different game, value investors can better stick to their own proven strategy.
In short, while you shouldn't trade your value investing playbook for the Axioms of Zurich, reading them can make you a sharper, more self-aware investor, better equipped to manage the one variable you can control: yourself.