Board Games And Investing

I currently reread Victor Niederhoffer’s The Eduction of A Speculator. I regard this book as one of the best I have ever read. It’s not an easy read, but it completely changed my mindset for the better 20 years ago.

What makes this a good book? Because it explains the foundation and principles for successful speculation.

Chapter 7 is called Essential Board Games. What is the relevance between board games and investing? Pretty much, if you ask me. The basic principles are very much the same; both involve some form of speculation in future uncertainties.

Much of the chapter is about Tom Wiswell, a former world champion in the game of checkers. He spent much of his free time writing proverbs that related the game of life to the board game (or opposite). According to Niederhoffer he drafted more than 10 000 (!) proverbs and brought new ones to every training session. When Wiswell died Niederhoffer realized he was sitting on a goldmine of proverbs. Niederhoffer divided the proverbs into the usual stages of the game of checkers, which in my opinion also happen to be the stages of investing.

Below is an extract of what I consider the best of Wiswell’s proverbs, all taken from chapter 7 in The Education of A Speculator:

Rules of the game:

The winner of a match is not always determined by who is right….but in the end….who is left.

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The easiest thing in the world is to learn the checkers moves; the hardest thing is to learn to play them correctly.

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Moves that disturb your position the least disturb your opponent the most.

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A bridge is often the road to victory, or it may save you from defeat. I live near a great bridge, and I always try to have one in my games.

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It isn’t only what you know that counts, it’s also what you don’t know; and don’t know that you don’t know. (This was written before Nassim Nicholas Taleb was born.)

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The good player doesn’t memorize by heart, he memorizes by his brain. That way the plays stay with him or her.

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You may not have as much knowledge as your opponent, but you do have as much imagination – use it!

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In chess a lowly pawn may checkmate the king, and in checkers a common man may defeat a powerful monarch.

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Don’t play on a hungry meal; a hungry player is a good player.

Before the game:

Before every game say the following: I can defend myself from my opponent, but who will defend me from myself?

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The clock is your natural enemy, but there is no reason why it cannot become your friend: that only takes discipline, mental agility, developed visualization, and nerves of steel!

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Some players have no problem with the game’s precepts, but they get in trouble when they have to think.

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Don’t try to look too far ahead in the opening. Save that for the endgame, when it is much easier to see far ahead.

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The opening is the “planning” stage. You should already have a pretty good idea of this part of the game before you even sit down to work, especially if you are playing with a clock. When you have studied the opening you are playing as if you have a safety net under you.

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The student should concentrate on the weak opening, the strong ones will take care of themselves.

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Not all games a re lost in the mid- and endgames; many players go astray in the first ten moves.

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If you wish to play with the masters; become acquainted with their games, their strengths, and their weaknesses, if any. Watch them when they play, and listen when they talk, and read their books before you play them.

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Some masters seem to lead charmed lives – escaping certain defeat or winning hopeless games; but behind their charmed lives are years of work and study.

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The search for the right move – while you are playing – is helped by the research you have done before playing.

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When you discover good moves on your own, you are apt to remember them longer than the ones you learn by rote. Look in old books. They helped me win several title matches.

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When it comes to playing top games, the champions are workaholics, but it is work they enjoy.

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In order to play a game today, you should have studied yesterday.

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Before you ever push a piece, 90 percent of the work has already been done. The winner is the player who has done his homework.

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Don’t try to remember more plays than you can digest. It’s better to know less and understand more.

During the game:

Exercise judgement, exercise caution, exercise patience, and, finally, exercise.

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Indecision is fatal. It’s better to make a wrong decision than build up a habit of indecision.

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The slower you move, the faster you’ll “arrive”.

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The difference between victory and defeat is nearly always a single move.

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Never let the fear of striking out get in your way.

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The true art of playing is not only to make the right move at the right time, but to leave unmade the wrong move at the moment of truth.

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I seldom use the word “impossible”; you will see just about everything happen on the board if you play long enough.

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Don’t give up what looks like a hopeless game; instead, give up a piece. It may draw – or win. You should not overlook the chance to go a piece down and get a game up.

Deception:

No matter how bad your position is, never let your opponent see you sweat.

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When your opponent allows you to make a very inviting move, remember the story of the spider and the fly.

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You are in the greatest danger when your game appears the safest.

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Smart gamblers never gamble, and when a master sacrifices a piece, you can usually prepare to resign.

After the game:

The student playing much, suffering much, and studying much; these are the three pillars of learning.

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We can play today’s draws and anticipate tomorrow’s wins, but we shouldn’t forget yesterday’s losses.

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The losing player who says: “I’ll look it up tomorrow”, very seldom does look it up. Don’t put it off; look it up that day and you’ll be sure to remember it.

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It’s never too late to be the champion you always wanted to be; but the days turn into weeks, and the weeks turn into months, and the months turn into years, and before you know it…..your dreams are gone with the wind.

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After a losing session, begin to prepare for your next game, your next match, your next tournament. Every master loses…and then comes back to win it all.

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When is a loss not a loss? When you have learned something new and important.

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After you lose a tough game there is only one thing to do; set them up and start all over again.

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I know players who would rather lose than think; many often do.

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I suggest you study your great victories a long time, and then study your great defeats twice as long. You may well learn a great deal more from the latter.

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Whenever we win or draw a game, we feel there is no need to study; and after we lose a game we feel it is too late….and it is.

Character of a winner:

Only those with passion can become masters.

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Success does not come all at once; even for masters it comes in stages, separated by years.

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You are the architect of your own victories and defeats.

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The good player is the one who knows he will always have a lot to learn.

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Those who do not learn from experience, will not learn at any other school.

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In order to win, you should analyze the play, you need to analyze the player, and you must, above all, analyze yourself.

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You can’t expect to be an expert in a short time. You have to play, and learn, as you go along.

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Now and then a patient player will win, mainly on strength of a single virtue. Don’t underrate patience.

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It is often the richly talented but lazy player who fails to reach his full potential, while the less gifted, but plodding player, like the tortoise, slowly makes his way up the ladder of success.

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Many games are won by players who are smart; many games are lost by players who are too smart.

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There is such a thing as “dumb luck” – pure chance – and what I call “intelligent luck” – hard work. I don’t begrudge any player the former, but I’d rely on the latter if I were you.

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Great improvements in play are usually found by a player in solitude, and only rarely discovered in crossboards, tournament or match play.

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The master knows exactly the right moment to do nothing.

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On the long road to victory, the player who can go that extra mile will probably come up with that extra move that wins the game.

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There are players who keep an “open mind” and are ready, when necessary, to change course and improvise, in order to win or draw; then there are others who have a rigid mindset, and plow ahead, regardless of the consequences. The latter philosophy, or lack of philosophy, often leads to defeat.