It is, therefore, just an assumption. Or a deductive thing. Since, the argument probably goes, trading takes place in a crunched time format and most people are seen to be losing, logically, it is felt, if we increase the time frame of engagement with the market, we should not lose. Note that this isn’t even a statement of winning; instead it is about not losing!
That is why there is no statement about the percentage of winning for investment. If pressed, then they point to Warren Buffet or their equivalent icons in India. But that’s like saying Sachin Tendulkar is the representative of a batsman. If at all you have to play cricket, then you should play like Sachin. The implied message is, otherwise don’t play it at all!
Not everyone can play like Sachin or invest like Buffet. That is why there is just one of them.
Everyone else is the ‘new Sachin ‘or the ‘new Buffet’. And it is not until a very long time after that a person can be recognised for himself, for what he has done.
Why is that? If you look at the so-called winners, you will find that all of them, without exception, play what is called the Infinite Game. Now, the minute I use the word ‘infinite’, everyone is going to jump up and say ‘aha’. Time! But that’s not it.
While there is no doubt that ‘infinite’ does mean endless time, an Infinite Game is quite different. And the difference mainly lies in how it is played.
Let me define that some more. If there is an infinite game, then obviously there also has to be a finite game, right? So, what is a finite game? A single transaction can be deemed to be a finite game.
You walk into a shop, buy something, pay for it and leave. That’s it. You bought it because you needed it for some use. The shopkeeper stored it because there is demand for that item and he expects to sell it soon. Transaction done, game over.
Many things in our lives are finite games. But when it comes to more important things, like leading your life in a certain way, going along a certain path that you would like to tread, setting a goal and achieving it, it is not such a finite item.
Instead we find that the process itself is the game! Life may be a series of transactions at different pitstops, but life itself is a process that is unfolding. Where we want our lives to go, what we wish to achieve, what kind of goal we set and what do we do to reach those and then what do we do once we have achieved it: all of these are continuous processes even as they may be made up of individual transactions of their own.
However, unless we look at them as a continuum, we cannot see the bigger picture and achieve a bigger goal.
In quite the same manner, the market is an infinite game, even though it is made up of several finite games (i.e. transactions of buy and sell between people). The reason people face difficulty in triumphing in the market is mainly owing to the fact that they look upon what they do in the market as a limited game- one of winning, profiting. This intense desire to win or profit from every transaction keeps the focus on the contours of that transaction even as we make a limited effort to look beyond.
As soon as some profits or losses occur, we look at it in a limited way as this profit or this loss. It is never about the profit being one among the series of profits that I need to garner or create in order to achieve my goal for an overall return or to reach my goal of prosperity.
It is also never about this loss being just part of the overall process of the market where profits and losses are natural outcomes of our actions.
If we take profits and losses out of the context of the larger game of investing and trading, then we run the risk of reducing the game to a finite level. Instead, if we start looking upon every aspect of our engagement with the market – the analysis, the investing or trading mechanism, the outcome of profits and losses as a continuous play that keeps occurring on a continuous basis, we will then succeed in raising the game to an infinite level.
If we do not take markets and our participation in it out of the ‘Win-Lose’ context, where winning is everything and losing is simply not on – then we will always live and die by the next trade. Know that the next trade is certainly not going to be your last and it is just one among the many that you are going to make across a lifetime of playing the markets.
When Warren Buffet says, “Buy stocks such that if the market is shut for the next 10 years, you are undisturbed,” what he really means is ‘play the infinite game’. Value investing is a variant of playing the ‘infinite game’. But do realise that trading can also be an infinite game. Just that its time duration is a lot shorter than a value investment.
Just because the time is shorter in a measurable kind of way, it does not change the nature of the game. For, the nature of the game is really defined by how we play it. Even trading can be played in the same manner with the side-lining of wins and losses to being mere temporary outcomes rather than the life-defining aspects that we give them.
In trading, you lose when you engage as a finite game player with someone who is a professional trader and plays an infinite game. The times that you win in the market are often when a finite player goes up against another finite player. Then it becomes a question of who makes lesser mistakes, who blinks first. This is why we keep having random rewards in the market – because every so often, we encounter other finite players and we have these series of hits and misses.
As we win some, we keep getting encouraged to come back and try our hand one more time. When losses pile up, we move away. Now, here is the paradox, and I want you to think about this, because there are many of us who are in this sphere.
When you keep playing this finite game endlessly (because you are stoical enough, you have enough fund flow, you are careful not to get blown out of the water etc.) you create a different kind of an infinite game. This is a version that is played by two infinite game players on either side.
Both of them are playing in a limited fashion, but they are able to keep bouncing back for one reason or the other, and are, therefore, able to continue in the game for a long time. A very large majority of the active traders are in this bracket!
Sadly, in this game of one Infinite player vs another, there is no result! There are no winners! They just take turns at winning and losing. Every now and then, they drop away, quit the game temporarily, only to come back after some time, with their egos healed, their courage restored, their money replenished. But they have not changed from within.
So the game continues with no definite results. Sometimes you have streaks and you believe that you have graduated to a higher level. But truly you have not and very soon, you have this blowout loss that brings you right back to where you were earlier.
You think about it a lot, discuss it with other people a lot but no answers come forth. They do ,not because you are speaking to the same kind of person on the other side – one who is doing no different from you and one who has no different results! For answers you need to ask someone outside your game.
Eventually you may meet one of them, or read about them in some book or an interview or enroll for a course or two. What they say begins to resonate in your minds as it is now ready to receive and slowly, there is a transformation that occurs. You realise that you are playing a limited game even as you thought it was infinite. You realise the errors of your ways and set about mending them. It all takes time. The patient will win this transformational game. Changing oneself is among the hardest things that a human being can ever attempt.
As the nature of infinite begins to dawn on you the process of improvement speeds up. You start thinking differently, you begin to act differently. You now realise that there are millions of finite game players out there with whom you can engage and the chances that you shall profit are very high. Your actions therefore start becoming more pointed. You start to focus less on the outcome and more on the process. The benefits start to show, slowly at first and then increasing in frequency.
The worry lines ease, the confidence grows and a certain ease comes into your actions. Soon you morph from the old you into a Sachin of trading. Now, you are an infinite game player. Now you are relaxed and you just remain in that state!