Know Which Game You’re Playing

“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent. There must be some wisdom in the folk saying, `It’s the strong swimmers who drown.”

Charlie Munger

There are two fundamental strategies for how to play a game. The first one is to beat the other player by actively scoring points. The second is to avoid losing points and waiting for the other to make mistakes.

The investment consultant Charles Ellis discovered that in professional tennis tournaments, the best players are those who follow the first strategy. They outperform the competition by landing difficult shots and just playing in a superior way. In amateur tennis competitions, however, the best players were going for the second strategy. The winners were most often those who made the fewest mistakes and didn’t go for the risky and difficult shots. Instead, they played a solid game and let the other side make the mistakes which give them the winning points. Ellis termed these two strategies fittingly “Winner’s game” and “Loser’s game”.

In a Winner’s Game, players try to get points and make those winning shots. Such a game is about calculated risk and should only be played by the top 5% of players. Only with players that rarely make any mistakes does such a strategy pay off. Here you have to rely on risky plays to win. Everyone else who is not playing a top game should stick to the Loser’s Game instead, where instead of trying to win you’re focusing on not losing. You’re not going for the winning shots but focus on not making mistakes and giving your opponent points.

Most people are trying to win games by going for the proverbial aces and winning shots. However, if your game is not on a professional top 5% level this is a suboptimal strategy. Most games are decided by who made the least mistakes. Know which type game you should be playing.