David Ricardo (19 April 1772 – 11 September 1823) was an English political economist, often credited with systematizing economics, and was one of the most influential of the classical economists, along with Thomas Malthus, Adam Smith, and John Stuart Mill. According to an 1838 book, The Great Metropolis, Volume 2, Ricardo had certain golden rules:
“As I have mentioned the name of Mr. Ricardo, I may observe that he amassed his immense fortune by a scrupulous attention to what he called his own three golden rules, the observance of which he used to press on his private friends. These were: 1. Never refuse an option* when you can get it, 2. Cut short your losses, and 3. Let your profits run on. By cutting short one’s losses, Mr. Ricardo meant that when a member had made a purchase of stock, and prices were falling, he ought to resell immediately. And by letting one’s profits run on he meant, that when a member possessed stock, and prices were raising, he ought not to sell until prices had reached their highest, and were beginning again to fall. These are, indeed, golden rules, and may be applied with advantage to innumerable other transactions than those connected with the Stock Exchange.”
Building off that consider a story sent in from a listener:
Michael,
I live in Guernsey, which is a small island with several single track lanes in the rural parishes. I was driving yesterday when I came across two cars which were almost bumper to bumper. (I knew the lady driving the car going in the direction we were traveling in, she is a robust lady who is the wife of a close friend.)
Anyway the man driving the other car refuses to back up a few yards to a passing point, and is already getting out of the car, to argue with her, when I drive up behind her, she gave him short shrift and by the time he had acquiesced and decided to reverse a car had come up behind me and he had a lorry approach behind him.
He eventually reversed making a meal of this – and the whole process took a lot longer than it would have if he had just swallowed his pride and reversed immediately.
The moral of the story is – cut your losses short, before they have the opportunity to get your ego involved and the whole situation escalates beyond sensible proportions.
Kind regards,
[Name]
True that!
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Wish you and Taleb did a podcast together. Thank you again for not wasting my time talking about damn beer, the now cool thing to fill time on podcast.
[Name]
Beer is the cool talking point, eh? I am so far out of the loop!
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Hi Michael,
Firstly a quick thank you for all your books, most of which I own and have reread multiple times. I can’t overstate how invaluable they have been in helping develop my views and approach to trading. And thank you for all the other open source sharing of knowledge that you provide in your podcasts and trend following update emails, again I really appreciated them both for the information provided and for the motivation and new trading ideas they have inspired.
I know your views on tertiary education, however I was given an opportunity to study a Masters in Finance and am now mid way through the degree. I’m exploring ideas to focus my research on for my final project and want to use the project as an opportunity to deepen my understanding of the CTA industry. Ultimately I’m aiming for my project to have real value to someone within the industry by sharing new knowledge and insights or ideally providing a solution to an issue they face.
You have a deep understanding of the CTA industry and an amazing network of contacts so I wanted to ask you whether there were any areas you felt required further research. Otherwise whether there were any problems the industry faced that you or your contacts had identified that I could research and challenge myself to solve. I want my research to be relevant and offer practical application and value to the industry, rather than being exclusively an academic exercise so I would appreciate any feedback you could share.
Kind Regards
[Name]
Cape Town, South Africa
Thanks for your nice words.
I don’t have a research idea for you. But going through my world of books and podcast will push serious ideas I suspect.
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BTW, I like how you say PhDs are not necessary…I have a PhD in Microbiology and Immunology and a law degree, bought into the whole education thing. It’s fine as far as making a living but definitely not what it’s cracked up to be.
Indeed.
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