The Zurich Axioms are based on the axioms that Swiss bankers have used to increase and preserve wealth over generations. I decided to look at the axioms through the lens of antifragility and with coaching principles in mind in order to better understand how to apply them.
It’s all very well reading the axioms and thinking – yes, they make sense – but what about putting them into practice? Of course, axioms are like rules of thumbs to be used to guide decision making in complex and unpredictable environments where the outcome is unclear. However, in my opinion, to actually apply this wisdom, we also need to confront our own fears, emotions and biases before being able to properly apply the axioms (since our basic fears will overrule the axioms)
I decided re-organising the insights to make them more readily applicable (at least for myself) and I hope that they chime with others on a similar journey.
Key questions
From the outset we need to consider some key questions that we need to ask ourselves before wishing to speculate or invest.
- Why you are speculating or investing?
- What does success look like for you?
- Clarity about what it means to be acquisitive and improving one’s situation.
It’s really trying to understand the motivations beyond just ‘I want to get rich’ which is a very superficial intention.
Accepting reality
According to the author there are certain truths or realities that we need accept.
- Understanding that luck is the biggest factor in any success.
- Understanding that forecasts are wrong, plans are useless, unexpected things will happen and the future cannot be predicted.
- Understanding that there is downside involved in any risk and that this will hurt you.
We need to go into this with our eyes open!
Overcoming emotions
At this point, it is worth noting that in the face of these realities, the decisions we make will be heavily influenced by our emotions and fears.
A lot of this appears to be overcoming the emotions. The aim is trying, as much as possible, to make any investing strategy as unemotional as possible, since it is emotions that often trip us up.
- Overcoming the fear of being hurt (it is inevitable)
- Overcoming constant worry about investment / decisions (‘better to worry, than do nothing at all’)
- Overcoming greed (or the fear of not having enough)
- Overcoming the fear of regret of not having made a decision
- Overcoming the attachment to ideas / investments
- Overcoming the need for control and predictability
- Overcoming the need for consensus when making a decision (or fear of of being different)
The corollary of this, I presume, is that you are emotional or attached to something (e.g. a piece of art, an apartment by a lake, a share in a friend’s business) – which is perfectly human and understandable – then don’t see it as an investment.
Delusions
Humans are prone to biases and delusions, and again, many of these delusions will prompt us to make decisions which are completely counter to preserving or increasing wealth or assets. What’s more, looking back at previous ‘successful’ decisions can give us the false impression that we knew what we were doing – when in reality, as we saw above, it was more about chance or luck than clever decision making.
- “Luck is on your side” (the universe is not smiling just on you)
- “There are experts who know what they are talking about” (if anything, they’re more wrong than they are right)
- “You can be certain about this decision” (almost nothing is certain, and often these decisions are based on superstition as well)
- “There is information that you can trust”
- “You have spotted trends and patterns” (particularly dangerous thinking!)
Zurich Axioms
I’ve boiled them down and modified them a little bit since some of the axioms were covered by the questions or delusions above. My hope is that after clarifying the key questions, overcoming the emotions and being aware of our own delusions that we can use the following axioms in order to help us make decisions about when to buy or sell a particular asset and continue towards our aim.
- Do take risks!
- Make any hits quick, positive, and then move on.
- Sell too soon and make it a ‘win’.
- Keep looking for opportunities.
- Have an exit strategy (or know how to get out of anything you get into).
- Use intuition if you know why / can explain it.
- Increase your confidence by taking care of the downside. (knowing how to react if things go pear shaped).
- Stay flexible and don’t outmanoeuvre yourself.
- Be a contrarian going in, be consensus when you get out.
Seen from the lens of antifragility, these principles tally quite nicely, essentially that unexpected things will happen that no-one can predict. That you will get hits if you want to take risks, and that if you want to succeed you should take risks – and the best way to do so is to reduce the downside, make the hits positive, stay flexible and keep looking for upside.