Want to know the secret to consistently beating “the market?”
Stop trying to “beat it” and start focusing on playing a game you can win!
And before you think this article is going to devolve into some strange zen riddle with no clear guidance…
Today, we’re going to be talking about how the game of investing is played…
Why “beating the market” is a wildly unproductive goal to focus on…
And the weird lesson we can learn from pop culture on how to win an unwinnable game.
How to win an unwinnable game
For fans of the hit series Star Trek, you might recall the rather famous Kobayashi Maru Simulation.
It’s an unwinnable game designed by Starfleet to test ethical decision-making and leadership skills in a high stakes environment.
The situation is as follows…
The person playing the game (or Player) is tasked with a mission: rescue a civilian transport ship – the Kobayashi Maru – that’s currently disabled inside a Neutral Zone.
If the Player enters the Neutral Zone, it will cause a border incident with the warrior race of Klingons.
With this in mind, they are left with two choices…
- Attempt a rescue mission that will violate their treaty, endanger their own lives, and possibly start a full scale war between the Starfleet and the Klingons…
- Do nothing and everyone onboard the Kobayashi Maru dies.
If the Player chooses Option 1, the simulation is “rigged against them” so they always lose.
If the Player chooses Option 2, well, that hardly seems like much of a choice.
But James T. Kirk doesn’t like “no-win” scenarios… so he choses Option 3 – reprogram the game so it’s possible to win!
And when it comes to playing the game of investing, this “out of the box” thinking is the key to victory.
Could you beat Wall Street at their own game by actively trading stocks and options? Maybe. But eventually, “the house” (i.e. the insiders and fat cats) always wins.
Why? Because that’s how those games are designed to work!
And unless you plan on pursuing a career path in investment banking and becoming a true insider capable of competing, the more logical answer is to change the rules of the game so you – the “little guy” – can win.
Which brings us to the next question we need to answer:
How do we change the rules so we can win?
For some context, I – Jake Hoffberg – have been in the business of selling investment opportunities to retail investors for more than five years…
And if I had to define the “bright yellow line” that separates successful investors from unsuccessful investors, it’s this…
- Most unsuccessful investors live in a constant state of fear. They are afraid of money, they are afraid of taking risks, and they are afraid of losing.
Because of the perpetual anxiety they feel about money, they’re not motivated to actually learn how the game is played.
And because they’re not willing to put in the work to learn how to play…
They typically look for “Get Rich Quick” opportunities – like playing the lottery – as a way to fix their financial problems with little to no effort…
Or, they’re looking for ways to get someone else to make the decisions for them and simply “tell them what to do to make money.”
Which, ironically, is probably the reason why they’re currently in an undesirable financial situation.
- Successful investors, however, live in a constant state of confidence. They see investing as a winnable game and they have fun playing it.
And just like any other game, the “hard work” and “effort” required to win is what makes it fun.
With that in mind, let’s talk about how to turn something you might find to be anxiety inducing and scary into a winnable game you enjoy playing.
For this, we need to turn to…
The 6 Elements of Game Design
One of my favorite quotes is, “Play stupid games, win stupid prizes.”
But most people don’t realize what a game is, what prizes they’re playing for, or that they’re even playing a game in the first place.
So, let’s get some definitions and terms out of the way.
- A game is a form of art in which Players gather (1) Information and make (2) Decisions in order to (3) Manage Resources… through the use of (4) Game Tokens… in the pursuit of a (5) Goal… in the face of (6) Opposition.
All six of these elements must be present in order for the game to function properly.
With this in mind, the most important element of the game is the Goal.
If the Player doesn’t have a Goal, any Decisions they make are meaningless.
Take the Kobayashi Maru Simulation as an example. If there is no goal then it doesn’t matter what choice you pick.
For it to matter, for the game to be meaningful, you need something to strive toward. You need a Goal.
And this lack of clearly defined Goals is the reason why people struggle with money and investing!
I’ve asked several Equifund members why they want to invest in private market deals, and by far the most common response is some version of…
“I want to make good returns and not lose money”
This is the definition of an unwinnable game.
First… the fear of losing goes back to the main reason why so many investors are unsuccessful. They’re not confident in what they’re doing!
Second… the Goal is not clearly defined. How much is “good returns?”
And third… it doesn’t describe why that Goal is worth pursuing.
To succeed in the game of investing, you need to have confidence and that comes from thoroughly defining what your ultimate Goal is.
So what is your goal?
Is it paying off a $300,000 mortgage to relieve stress and help you sleep better at night? Or to make $40,000 so you can buy a new car debt-free?
Or is it to earn enough so that you have the freedom to do whatever you want with your time?
Wealthy people tend to value their time – and by extension, their energy which allows them to do things with their time – above all else. That’s because time is a nonrenewable resource that can never be recovered (without breaking the known laws of our universe, of course).
Defining what you really want to do with your time is the Goal you should be relentlessly focused on achieving!
Jake Hoffberg – Publisher