Want to Make Better Investment Decisions? Hard-Won Lessons from a Chess and Poker Champion

Jennifer Shahade knows a few things about making big decisions in the face of uncertainty. Learn her secrets for navigating life's biggest choices.

As shared on www.backstopsolutions.com

High-stakes decisions are a way of life for asset allocators and asset managers. You try to act on the best information available. You analyze it from every angle. You want to make the right move at the right time. So how can you have more confidence in your decisions? And what does it mean when the outcome isn’t what you had hoped for? 

Jennifer Shahade knows a few things about making big decisions in the face of uncertainty. She’s a two-time US Women’s Chess Champion and a Grandmaster. She also happens to be a professional poker player. Speaking at our 2022 Backstop Beyond conference, she explained how her passion for chess and poker helped her not only to make better decisions in life, but also to enjoy life more. She then shared a few of secrets of her success. Here are a few that struck us as especially relevant to making investment and strategic decisions.

So Many Possible Moves, So Little Time

The question Jennifer hears most often is, “How many moves do you think ahead?” It’s virtually impossible to answer, because it depends so much on the situation. Besides, she says, “It’s not just about thinking ahead. It’s also about thinking sideways.” If you look too far ahead, you might miss the best possible move that’s sitting right in front of you.

More important than trying to plan out multiple moves is to examine all your options, identify your choices – what chess players call their “candidate moves” – and the possible outcomes of each one.  “That first step of examining all your options is in many ways the most important one,” Jennifer says.

Those of us in the investment world can relate. Whether it’s choosing investment managers or specific investments, the ability to examine all your candidates comes down to two things: data and time. Do you have all the information you need to understand your options, and do you have the time to explore and analyze them in detail? That’s how technology can really help drive better decisions – first, by making all the data you need readily accessible, and second, by freeing you from the labor of searching for data so you can spend more time analyzing it.

Can You Accomplish Two Goals at Once?

Jennifer calls this the “soul of chess.” A typical example would be making a move that not only removes one of her opponent’s pieces from the board, but also blocks her opponent from gaining an advantage. We see this kind of thinking in investing all the time – “downside protection with upside potential,” for example. It also explains much of the impetus behind the ESG trend – deploying capital with the dual goals of earning a competitive return while also making a positive impact (or at least avoiding doing harm.) Technology, too, can help us achieve two goals at once – making us not only more efficient but also more effective in our decision making.

Tune Out the Noise

When Jennifer introduces young people to chess, the beauty they experience is “the opportunity to be engrossed in your thoughts and block everything else out,” to be “completely absorbed in the game.”

How often do we really get to do that in everyday business? The typical work routine is rife with distractions, from text or email interruptions to redundant meetings to operational minutiae. Finding ways to tune those out is essential to effective decision making. Technology helps by taking a lot of mundane tasks off people’s hands, answering questions without the need for calls or meetings, or by intelligently prioritizing work so that you can focus on what matters most.

Focus on Making Good Decisions – Not on Achieving Good Outcomes at Any Cost

Chess and poker have a lot of similarities, Jennifer says, but one crucial difference. In chess, “there’s a very direct corollary between your decisions and your results.” Poker is the exact opposite. “You can play really badly and win. You can play really well and lose.” In a similar vein, investors try to make the best possible decisions based upon the best possible information. But risk is inherent in the process – that’s the definition of a “gambit” – and negative outcomes can occur despite making the best decisions. “That is extremely difficult to get used to,” Jennifer says, “but it’s also really great preparation for life.”

And that is the key takeaway: trust in your decisions. Outcomes are always uncertain, as in chess or poker, but the essence of good decision making is having confidence in the data and the process that leads to your move.

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