A LOSER’S GAME

Thursday, January 21, 2010

Investing in the stock markets is not a winner’s game, but a loser’s game. There is a big conceptual difference between these two types of games. In a winner’s game, the game is won by the winning actions of the winner. In a loser’s game, the game is lost by the losing actions of the loser. In the latter, the game is won by the player who makes the fewest mistakes, whereas in the former, it is won by the player who makes the maximum number of right decisions. In a loser’s game, the final outcome is determined by the number of wrong decisions, and not by the number of right decisions, that each player makes. Losers’ games have another important characteristic. The winner does not win, but the loser defeats himself by making mistake after mistake.


How and why is stock market investing a loser’s game? In the stock markets, your chances of success depend upon the errors of others. All buying and selling opportunities arise out of the over-reactions of the majority of the other players who constitute the market. If they do not consistently and systematically make errors of judgement, you would not get an opportunities become available only when other players make mistakes- the bigger and more common the mistakes, the greater the opportunity to make big profits.