Checkers... and Chess

The process of writing my last two posts (the one on choicemaking and the other one on the popularity of terrible blogs) got me thinking about the nature of the various games being played around us. Writing those posts helped me grasp an insight: We want to know which games are being played, and we want to make sure we're playing the right game, the game that really matters.

Or, to put it another way: we don't want to be fooled into playing some game somebody else chose for us.

To help explain what I'm getting at, I'll use the metaphor of playing checkers vs playing chess. Playing checkers is playing a game someone else sets out for us, where the rules and the entire framework of the game are pre-set, limited, and played on their terms, not yours.

Chess, on the other hand, is the upper-level game going on around and above the people stuck playing checkers. Chess is where the real strategy happens, and it's where you have far more control--both over the framing of your choices and over the choices themselves. Thus chess is the real game, the game you want to make sure to play.

Let's consider a few scenarios that many of us might face in everyday life, each of which offer us a set of basic checkers moves... and a parallel set of nuanced chess moves.


Scenario 1: "Would you like to lease your new car or would you like to finance it?"

You're in a car dealership, you've decided to buy a new car... and suddenly a game begins around you, a game involving a set of choices about how to pay for this car you've just decided to buy.

For a checkers player, the choice is obvious: "Ooooh! The lease payments are a *lot* lower... uuhhh, I think I'll lease it." The person in this situation is given two choices (to borrow a concept from two posts ago, you might call it "choice by limitation"). And because we're playing checkers, the choices offered are the only choices, and, obediently, we choose one of them. Before we know it, we're in the financing manager's office debating whether to get window etching.

But once you understand that there might be a greater game of chess going on around you, you start asking real questions, questions that take you right out of the box they're trying to keep you in:

"What will be the total cost of leasing a car, particularly if after three years I have to give it back? What's my effective interest rate, and can I do better? Should I finance at all? Heck, should I really even be buying a car? And what the heck am I thinking paying another $128 for stupid window etching???"

Think about the people who have set up the checkers game in front of you. They don't want you asking these questions. They don't want you playing chess. They want you playing checkers!

You, on the other hand, want to play the game on more equal footing, particularly when dealing with institutions structured to rudely separate you from your money. And in order to play chess in this particular situation, you'll need advanced preparation. You might need to have a far greater degree of independence to the outcome of a car-buying situation. Perhaps you'll need to have the financial resources to pay for the car in a variety of ways--not just the "checkers" ways they offer you. Perhaps you have to not need a car in the first place, allowing you to defer the entire car-buying process until circumstances heavily favor you. This might mean waiting until the end of the sales year, or waiting until a time when the dealer is liquidating inventory and thus is offering cars for sale at prices and terms suitable to you, not them.

Now you're starting to play the greater game of chess. Let's move on to another scenario.

Scenario 2: "If you transfer your balance to our credit card, you can have 0% interest for the first three months!"

Okay, what's the checkers move here? Easy: transfer your balance. And then do it again to some other card three months from now. You can even go full checkers and fluff yourself on how you're avoiding obscenely high interest expenses on debt you shouldn't even have in the first place.

The chess move? Well, this part CK readers can fill in for themselves. Readers here already know not to needlessly buy stuff, certainly not stuff they can't afford, so they wouldn't put themselves in a situation where they'd even have a credit card balance, much less need to transfer one.

A sidenote. At some point, you might find yourself in an occasional situation where the only available move is a checkers move. Let's say you really need to buy a car, right now. Or, after a big vacation (one you lamentably didn't save up for in advance) and a surprise car repair, you get hit with an unexpectedly large credit card bill, and as a result you can't fully pay it off. In these cases, you're playing checkers, and because you're playing checkers, you are unable to control the framing of the situation. Your moves are limited.

The primary insight here is get yourself out of the checkers game you're in right now, and try to create circumstances where you play checkers as infrequently as possible. A big part of winning the game around you involves avoiding situations where your options are limited to crappy checkers moves... situations like paying credit card interest to The Man, or shopping for a car without advanced preparation.

It helps even more to be vaguely ashamed that you're not playing chess. You should be at the chess tables. You deserve to be there. And therefore the next time a situation like this comes up you'll be prepared. You are not going to let yourself get elbowed down to the checkers game.

Let's look at one final scenario.

Scenario 3: "This mutual fund was the best performing fund over the past 5 and 10 years."

The retail investor, upon hearing this statement, nods her head, makes a suitably admiring comment, and plunks her money into a high-fee fund. What can possibly go wrong? it's the best of the best!

Readers: is she playing checkers or chess?

Unfortunately, over the next five- and ten-year periods, this fund's performance mean-reverts. The fund stumbles down to the bottom quartile of its peer group, and while she doesn't yet know it, this investor will be paying extra fees for years for the exclusive right to underperform the overall market.

Yep, you were right: checkers.

Let's play chess instead. The chess player knows to be suspicious of any investment that's being sold to him, in fact he likely uses "don't buy or invest in anything sold to you" as a general heuristic in all life domains, not just investing.

Also, the chess player wants to better understand the nature of this fund's outperformance: after all, there's a good chance it might be due to sheer luck. And of course part of the backdrop of his investing knowledge includes insights like knowing that high-fee investment products are almost always doomed to underperform low-fee index funds.

Thus the chess player will smile and politely turn down this investment. And if she hasn't already, she'll question why she's doing any business at all with an individual selling her crap financial products like this.

Conclusion
Chess players arrive to a chess game with the ability to leave the table, and with a great degree of independence, even antifragility, to the outcome of the situation. They skillfully avoid being in situations where they're forced to buy, spend or pay. They don't let themselves get boxed in where the only moves are checkers moves.

Checkers is the sucker's game, the game they want you to play. Don't play it. Play chess.


Appendix: Alternate scenarios
How about few other scenarios where we might consider chess versus checkers moves?

1) At a doctor's office: "Your cholesterol is a little high, I recommend we put you on a statin to get those numbers lower."
2) At the real estate agent's office: "Well, according to your mortgage preclearance form we should really be looking at homes in the low- to mid-$400s. Also, you're going to want to lock in a mortgage as soon as possible. Rates are going up!"
3) At the gym, one woman talking to another: "I don't want to lift weights. I don't want to get big and bulky."
4) At home, a person about to pay the cable bill: "I can't believe Comcast raised rates again. We're paying $205 a month now for cable!"
5) At the insurance agent's office: "This policy has a low deductible, so if you have an accident, you'll only be responsible for paying the first $100."


Finally! For further reading
Readers, it takes me a long time, an embarrassingly long time, to arrive at relatively basic insights. I had to read, over the past few years, the entire list of books below to be able to crystallize and articulate the ideas in today's post. Imagine the insights you'd get (and probably far more quickly) from reading them too. Plus! You can support my work here at Casual Kitchen by following the Amazon links anywhere on this site: you'll pay nothing extra, but a portion of your total purchase is paid to me in the form of a small commission. As always, I thank you for your support and attention.

Games People Play by Eric Berne
Antifragile by Nassim Nicholas Taleb
Fooled by Randomness by Nassim Nicholas Taleb
Risk Savvy by Gerd Giggerenzer
Capital by Karl Marx
Early Retirement Extreme by Jacob Lund Fisker
The Path of Least Resistance by Robert Fritz
The Art of Learning by Josh Waitzkin