What Games Can Teach Us About the Markets
Posted May 03, 2022
“I went to a fight the other night,” Rodney Dangerfield once quipped, “and a hockey game broke out.”
It’s one of my favorite jokes because I can relate.
Where I grew up, games would break out on the street just as spontaneously as fights.
Humans love games. Even more than they love fights.
Video games. Card games. Board games. Sports games.
But, why? Why do we love to play games?
It seems like a stupid question, but maybe not. And it can lead us to some profound insights:
Perhaps it can even help explain why the markets suck so bad right now.
Before we go there, however, let’s start from the beginning.
What Are Games?
In his book The Grasshopper Bernard Suits defined a game as a “voluntary attempt to overcome unnecessary obstacles.”
This definition makes games seem even weirder.
But social scientists suggest that humans love games because they are practice for life -- a low-risk way of learning how to overcome necessary obstacles.
Not to be outdone, the great social scientist Jean Piaget took it even further.
He said that humans, especially children, love to play games because games are societal microcosms. We’re attracted to games because they mimic optimal life.
He observed that we, especially kids, intuitively gravitate toward games that:
A.] Are voluntary
B.] Have a clear set of rules
And, here’s a big idea…
Piaget believed that the act of voluntary play in childhood was the precursor to the establishment of ethical societies.
Sounds weird, but here’s the point:
Optimal games, like optimal societies, are voluntary and have a clear set of rules. Therefore, games, like societies, should have as little uncertainty as possible.
That’s because humans thrive under certainty and shrink during times of uncertainty.
That’s Why the Markets Suck
This simple idea explains why the markets suck right now.
It’s a point that James has been hammering in our recent calls for subscribers: the markets hate uncertainty more than anything.
Bad news is fine as long as it gives us a sense of certainty — a clear path forward. Uncertainty is worse than bad news. Uncertainty can also compound over time.
That’s what makes it so tricky.
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