Chapter Nine

It’s Called Volatility

What Goes Up Comes Down, and What Goes Down Comes Back Up

The essence of Hong Kong is the refinement of risk taking. In the socialist lexicon, assuming even a reasonable level of risk taking is called speculation, and is regarded as the root of all evil. But to the committed free marketeer, speculation is a more morally neutral matter of setting your sights on a target in the near future and running a real risk of being wrong but being more confident of being right.

The most lasting lesson I learned during nearly 30 years of living in Hong Kong is the ultimate value of risk taking. The Hong Kong stock market makes an ideal case in point. It’s famously volatile, and requires nerves of steel to ride out its hair-raising roller coasters. But from those dark days of 30 years ago, when a good number of Hong Kong fortunes were made by those willing to see a bright future even before seeing the light at the end of the tunnel, I learned that it usually pays to take the long view. In Hong Kong I also learned that all markets are inherently elastic, and that while what goes up always goes down, the converse is equally true.

A Research Challenge

One day in 1973, I got a call from the grandson of the famous Chinese comprador who made millions by being the middleman between Chinese businessmen and the British colonial business establishment. At the time the British Colonial office ruled Hong Kong, Chinese people were not permitted to live high on Hong Kong ...

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