I’ve been playing games my entire life. I love playing games. I like to play games more than pretty much anything. I’ll play anything with rules and where even the slightest bit of strategy or tactics apply. I’ll play them with anyone.
I don’t care if you think I’m a geek. Games have taught me valuable lessons. And when I say “valuable,” I mean the kind of stuff that can make you money if you know how to translate it to other fields.
Here are some things I’ve learned.
1. Practice is essential.
Our parents told us to practice. We’ve been told to practice everything from our sums to our golf swing to our pleases and thank yous. We all know this, right?
But the problem with simply being told to practice or reciting stupid cliches like “practice makes perfect” is that the learning isn’t very visceral. It doesn’t really stick. We know what it means in the abstract, but the lesson doesn’t click at the gut level. This is ten times more important than you’d think.
When you play games, the act of practice is inseparable from the act of play. Every game you play is practice, and since it’s fun to play, you don’t even think about the work of practice. The thing that really drives this lesson home is the continual feedback a player gets through a series of games. Every game you play you will notice how much stronger a player you’re becoming. And you’ll understand — very deeply and very intuitively — that what’s making you better is your practice.
Folks, investing takes practice too. Don’t expect to be good at it right out of the gate. Also don’t think that you can just sit back and read and learn and listen and turn into a pro. You can read all the books you want about great chess openings and endgame theory, but you’re never going to be any good unless you sit down and actually play somebody. You won’t ever be a good investor until you start making investments.
If you play games, this all becomes second nature.
2. Play people who are better than you.
Look, if you want to get better you have to challenge yourself.
Back in the day I was a mediocre Scrabble player. Then in high school I became friends with some guys that were way out of my league. At first, I got steamrolled every game. But in time I learned how to work all the two-letter words, how to maximize the value of the bonus tiles, and most importantly, how to build several words with one play and shut the board off to the next player. My game improved dramatically and quickly. I never quite got better than them, but we had some pretty legendary Scrabble sessions and I got a few wonderful, lifelong friendships out of the deal too.
If you want to get good at anything in life, whether it’s running your business or being an investor, you’ve got to hang out with people that are better than you at it. Get over your insecurities as a player. It’s OK to be the weak hand at the table if you’re playing with people who are very good.
Find a really intelligent financial advisor who challenges your thinking, not a piker who just pushes the hot trend. Learn to speak the language of the industry. Jargon gets a bad rep, but jargon exists because it’s efficient. It’s how you communicate complicated concepts without having to slow down and explain it all. Hang out with people who know the language. Read publications from places that are having a higher-level discussion and playing a higher-level game.
If you want to get better, make peace with the fact that you aren’t very good and seek out those that are. Every game player understands this innately.
3. Don’t take it personally.
Look, the goal of the game is ultimately to beat the other guy. Sometimes you win. Sometimes he does. It’s not personal. It’s not because you hate him or he hates you or he’s bad person and you’re a good person. When he moves all his tanks into West Russia and starts attacking your German Eastern front, it has nothing to do with you. It’s because that’s how you’re supposed play when you’re the Allies.
The more games you play, the less you’ll take stuff like this personally. This is an insanely valuable skill in the business world. Sometimes, business is just business. It’s not personal.
One of the things you have to understand as an investor is that, invariably, the market will screw you. You’ll get crappy fills, other traders will take you to the cleaners, and the noise will knock you down. It has nothing to do with who you are as a person. The market doesn’t hate you. The market doesn’t care.
We all understand the “business isn’t personal” concept in abstract. This is not a new lesson. But the problem is that we don’t really accept it deep down inside.
Playing games desensitizes you to this stuff. You learn it at the gut level. When your competitor outfoxes you, good game players don’t feel angry and irrational about it. Instead of taking it personally and getting upset, they develop some counter-strategies. They naturally just move on to their next move. That’s much more useful than personal self-pity.
4. Games teach you emotional control.
When I was a kid, I always wanted things to go my way. I wanted to win. And when I didn’t win or things wouldn’t go my way, I’d get mad.
When you’re a kid, that’s OK. But at some point you turn into an adult. And if there’s one thing that we adults all hate, it’s playing (or doing business) with people who get all bent out of shape when things don’t go their way. Don’t be that guy.
Emotional control is one of the most important traits that an investor can have. In fact, if I had to pick a single characteristic that correlates the most strongly with long-term investing success, it’d be emotional control. Warren Buffet and John Henry are about as different as two investors can be. But these guys have been making great investments for decades because they never let their emotions get the best of them. Look at all the incredibly successful people you know in your own lives. How many of them are really good at keeping their emotions in check? My guess is almost all of them.
Emotion is the enemy of investing. Emotion is what causes you to load up on real estate in 2005 or tech stocks in 1999 and emotion is what makes you sell into the panic and fear of a month like March 2009. It is the key to your portfolio’s undoing.
There’s a corollary, too: don’t get too excited when you win. Emotional control cuts both ways. Excitement can lead to overconfidence and that’s the kind of thing that can wipe an investor all the way out.
Games teach you emotional control. These lessons will help you slice through the fear and greed of the marketplace.
5. Sometimes the right play works out in the wrong way.
In most of the games that I play like Puerto Rico or Agricola, it’s often difficult to know what the right move is. Those types of games are heavily dependent on strategy and player interaction and aren’t really driven by luck and chance.
But there are a lot of games where probabilities play a gigantic role. Fantasy baseball is one of those games. Poker is another. In these games, when you study the positional odds, the dominant moves become very clear. If you’re dealt a 7H & 2C in the hole, the right move is to fold. Sure, the flop could contain another 7 and a pair of 2′s. But that doesn’t mean you should play the hand. The probabilities suggest that you should fold and even though it might work out better if you don’t, it doesn’t change the fact that folding is still the right move.
Playing games this way is part of who I am. I’ve played a thousand games where I made what I knew was the right move, only to have it blow up in my face. One time I was playing Mrs. Draco in Monopoly. I spent my last $200 on New York Avenue to own all the orange ones. The orange ones are the best, you know, and I thought I had the game in the bag. I probably grinned a smug little grin and offered her the chance to resign with her dignity still intact.
But immediately after that I landed on her Marvin Gardens, the only property on the entire freakin’ board that had any houses. I would have been OK if I’d had that little bit of cash on hand, but I had to mortgage half my properties to pay her. I never recovered. Oh well. Buying New York Avenue was still the right move. It just didn’t work out.
I can’t tell you how important a lesson this is in the world of investing. When it comes to investing, one right move is to not have all of your money in stocks. But it’s amazing how heavily people load up on stocks in the late stages of a rally. Amidst all of that enthusiasm, something snaps in investors’ brains that makes them think, “well, shoot, if the market is going to go up another 25%, I’ll make more money if I have all of my money invested in it!”
Experienced game players understand the difference between the right plays and the wrong ones.
They know that the right play doesn’t always turn out favorably but that shouldn’t keep you from making it.
6. It’s OK to lose.
I follow professional sports. I’m actually a pretty big fan. Honestly, I’ve never understood the “winning is everything” mantra. You always hear champions and elite athletes talk about this, how nothing is more important than winning. Just win, baby!
Well, in my book, nothing is more important than learning. Maybe that makes me a new age pinko. Whatever. I don’t care. It’s more important to me that I play better the next time I take the match than winning the current one. And learning is what makes us better players. There is every bit as much to be learned — usually more – from losing a match than winning.
Now, if my entire sense of self-worth was derived from whether I succeeded or failed, I suppose I might have to change my mantra. If I’m a rookie quarterback thrust into the starting job, I might not have the luxury of carefully, thoughtfully learning how to get better.
It isn’t about encouraging and cheering your son after he hits a home run. Nor is it about coddling him after he strikes out. It’s about helping him to understand outcomes and the linkage between cause and effect. A home run is just a home run if you hit it and move on. Same with a strikeout. But if you can learn more about why you hit the home run or about why you struck out, it can translate into something tangible in the future. Something of real value.
If you’re not interested in hitting more home runs and striking out less in the future, then feel free to disregard this advice. But if you want to be a better investor, then understand that it’s OK to make some bad trades so long as you identify why it was you lost money and take steps to rectify it for next time.
Focus on the process, not the outcome. That’s what will help you be a better investor.
7. Don’t buy into your own success.
Sometimes you’ll win. Even if you’re not very good. Sometimes you’ll win a few in a row. The worst thing you can do is start to think you’re hot stuff.
I saw a lot of people buy a lot of houses in the boom years. Most of them thought they had real talent. They thought they had “the touch.” Every property they bought and flipped was a winner. They were awesome like Donald Trump! So they kept buying more and kept buying bigger because they were mini moguls and success was their destiny.
But it turned out that they had nothing to do with their success. Just about all of their success was actually attributable to the magical happenstance of simply being alive during an environment when a bunch of different variables all lined up to create a generational bubble in real estate.
It turned out that they weren’t very good real estate investors after all. It turned out that they couldn’t identify shifts in the market and it turned out that they couldn’t navigate a market moving the other direction. They blew up. Sure, a lot of legitimately skillful real estate investors lost money too. But they lost a whole lot less on a relative basis.
Do not — I repeat — DO NOT mistake luck for skill. Never buy too much into your own success because your success may have a lot less to do with you than you may be comfortable admitting.
Nowhere is this more true than the world of investing. And nowhere is it easier to buy into your own success than in trading the capital markets. But don’t do it. Don’t buy into your own hype.
Games provide an efficient, safe, and high-feedback environment to learn this lesson and learn it for good.
8. You’ll never know it all.
I think these are all pretty good lessons. They’ve served me reasonably well over the course of my young life. I’ve found them useful and broadly applicable. I think you might feel the same way.
Are these lessons you learn elsewhere in life? Yeah, some of them. But these are lessons that are explicit and obvious if you play games. When you play games these things are beaten into your head. And you have fun while it’s happening.
The other neat thing about playing games is that they always show you how much left you have to learn. Every time I bring out the chess board or hit the golf course, I’m reminded of the fact that I could dedicate the rest of my life to mastering the game and never know it all. It’s a humbling realization, but it’s also kind of comforting.
As an investor, I have a lot left to learn. Games taught me that that was OK.
Games taught me that I’ll never be a master, but that what really mattered was to keep working towards it.