The Zurich Axioms By Max Gunther
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Disregard the majority opinion. It is probably wrong.
Rene Descartes was the world’s champion doubter. He stubbornly refused to believe anything until he had verified it for himself. This was one of the traits that mad him a successful gambler-speculator. He died more than 300 years ago ,but any modern speculator can profit greatly – as well as spend a lot of enjoyable evenings – by reading the works of this engagingly ugly man with the staring black eyes, the nose like a crescent moon, and the giant intellect.
Descartes began his philosophy by doubting literally everything, including the existence of God, man, and himself. This enraged the religious authorities of his native France, so he fled to the Netherlands. Continuing to reject what others told him was true, he searched for ways of discovering truth through his own senses and experience. He finally hit upon what he considered a basic and unarguable truth: Cogito, ergo sum – “I think, therefore I am.” Having thus satisfied himself that he wasn’t just a phantom of his own dream, he went on to verify or reject other postulated truths. In the process he made major contributions to mathematics and built a philosophy which, for sheer lucidity of thought, hasn’t been surpassed in three centuries. (For my money, there haven’t even been any close competitors). And also in the process, partly as a hobby and partly because he had a taste for costly wines and other luxuries, Descartes made a scientific study of gambling.
There were only a few loosely organized stock and commodity exchanges in existence in the first half of the seventeenth century. Descartes was fascinated by the big, lively market at Amsterdam, but whether he took any fliers there, and how big those fliers were, is not known. What is known is that he often traveled to Paris, sometimes under an assumed identity to avoid arrest for heresy, and gambled.
Various card, board, and spinning-wheel games were available, ready to take suckers’ money. Descartes enjoyed games whose outcomes, like those of modern bridge or poker, depended not only on luck but also on mathematical computation and psychology. He studies his games with customary care and skepticism, rejecting all the gambling cliches and folk wisdom of the time, insisting on establishing truth or fallacy for himself. He seems always to have gone home from Parish richer than he arrived, sometimes a lot richer. Though his only visible means of support through most of his adult life was a small inheritance from his father, he died comfortably well off.
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.”
It was with this perhaps arrogant and certainly lonesome view of the world that Rene Descartes went to the gaming tables of Paris and walked away rich. If you would succeed as a speculator, you could do a lot worse than to listen to the words of this hard, cleared-eyed man.
In our democratic age, on our democratic side of the world, we tend often to accept majority opinions too uncritically. If a lot of people say something is so, why, all right, it’s so. Thus does our thinking run. If you aren’t sure about something, take a poll. The rightness of majorities is pounded in our heads in grade school. It is very nearly a religion in America and other western nations, particularly those such as France and Britain, with a long history of declining public issues by popular vote. If 75 percent of the people believe something, it seems almost sacrilegious to ask, even in a whisper, “Hey, wait a minute, could they be wrong?”
Listen to Descartes. They could.
In America we decide who will govern us by voting. That is the only sane way to do it. At least it is the only way any of us would sit still for. We are strained from school years on to accept the will of the majority. We often grumble about this will – we can always be heard fussing and fuming when our candidate loses – but in the background, behind all the sound and fury, you can always hear the democratic leitmotif: “The people have spoken. You can’t fool them. If this is what they want, it must be right.”
This humble acceptance of the majority opinion spills into our financial lives. We listen not only to economist, bankers, brokers, advisers, and other experts, but also to majorities. This can cost us money, for as Descartes said, it is more likely that the truth has been found by few than by many.
The many may be right, but the odds are they aren’t. Get out of the habit of assuming that any often heard assertion is the truth. “High budget deficits will be the ruination of America”, says nearly everybody. Is it true? Maybe, maybe not. Figure it out for yourself. Come to your own conclusion. “Interest rates and inflation will rise as the decade grows older.” Oh yeah? Don’t just swallow it. Examine it. Don’t let the majority push you around.
In our studies of other Axioms we’ve looked at many things that are asserted by the majority. A bird in the hand is worth two in the bush. Build up a diversified portfolio. Only bet what you can afford to lose. And so on. All these pieces of supposedly wise advice are embedded in the popular consciousness. You need only bring up the subject of investment at any cocktail party or coffee circle to hear the ancient bromides repeated. And as each moss-grown old preachment is uttered, everybody within hearing will nod sagely: “Yes. Quite right! Excellent advice!”
The majority of people believe the ancient cliches to be unarguable truths. In the light of this, it may be instructive to note that the majority of people aren’t rich.