"Enormous self-belief, intuition, the ability to take a risk at a critical moment and go in for a very dangerous play with counter-chances for the opponent - it is precisely these qualities that distinguish great players."
Bobby Fischer & the Stock Market
July 14, 2022
Whether or not you follow the game of chess, there’s a good chance you recognize the name Bobby Fischer. The child prodigy chess phenom was one of the game’s all-time greats – and his life story is an interesting one. But what does he have to do with the stock market?
For one, we’re always intrigued by those who make it to the top of their profession. They often turn out to be fascinating and illuminating case studies. In addition, more often than not, they tend to be outside-the-box thinkers. Many of the most successful investors display similar aptitudes and characteristics. There’s a lot to be learned by analyzing the journey such individuals take in their pursuit of excellence.
With Netflix’s recent hit The Queen’s Gambit still fresh in the minds of many, and COVID lockdowns ending, chess has experienced a bit of a revival. New clubs are popping up all over, and ESPN has even broadcast a match of current World Champion, Magnus Carlsen. While no one here at Q3 is any-where near being a chess master, we can appreciate the sheer dedication and passion it takes to compete at the highest level. Further, we also recognize certain similarities between chess and the stock market.
On the surface there might not seem to be any obvious connections between the two, other than perhaps that they both involve “analysis” and “forward-thinking.” In our minds, it is more about playing both offense and defense. Granted, these terms tend to lend themselves more to sports such as football or basketball, but they certainly come into play in the game of chess. As an example, the aforementioned Magnus Carlsen along with 1960’s top-player Boris Spassky are both considered defensive masters of the game. Bobby Fischer and Garry Kasparov, on the other hand, both excelled at being on the offensive.
50 years ago, this summer, the 1972 World Chess Champion-ship match between the Soviet, Spassky, and the American, Fischer, was billed as “The Match of the Century.” During the height of the Cold War, this matchup was widely anticipated and hotly contested as the Soviets had a 24-year monopoly on the world championship title. Media from all over the world descended on Reykjavik, Iceland to witness the clash of titans.
Predictably, Fischer came out swinging with a series of aggressive moves that Soviet players were generally not accustomed to. As Spassky’s playing style tended to be more reactionary and defensive, he was immediately out of his comfort zone. It should be noted that in chess many games do not end with a winner, but rather as an agreed upon “draw” - in other words - a tie. Earlier in the 1960’s Fischer had accused the Soviets of collusion asserting they had a prearranged agreement to quickly play their games to a draw in order to conserve energy for their matches against Fischer.
Spassky offered Fischer many draws throughout the 21 -game match, with many denied by Fischer. In some cases, detailed analysis after the fact showed that a draw was in Fischer’s best interest, but he was playing as much of a psychological game as a chess game. It was all about getting in Spassky’s head, pushing him to become emotional and in turn make a mistake.
In a surprise twist, Fischer forfeited game 2 as he demanded that the television cameras be removed. Many commentators believed he did this just to upset Spassky. At this point Fischer trailed 2-0 and threatened to fly back to the United States should his demands not be met. It took the intervention of Henry Kissinger, and other dignitaries, to persuade Fischer to continue with the match. Finally, after 21 games and six weeks, Fischer emerged as the winner, besting Spassky 12 ½ - 8 ½.
Fischer’s victory made him an instant celebrity. Upon his re-turn to New York, a Bobby Fischer Day was held, and he was offered numerous endorsement offers worth millions of dollars, all of which he declined. He appeared on the cover of Sports Illustrated and made television appearances on a Bob Hope special and The Tonight Show starring Johnny Carson. The match against Spassky proved to be his last public competitive game for two decades, as he became somewhat of a recluse.
Numerous documentaries, books, and articles have been released covering every aspect of this contest, as it is considered one of the most fascinating chess matches of all time. Fischer’s victory has been attributed to a variety of factors, but nearly every expert agrees on two things: Fischer’s ability to pivot and react quickly to Spassky’s change in play, along with his ability to cause his opponent to second-guess himself, increasing the likelihood that he would deviate from his strategy.
While the game of chess and successfully navigating the stock market may not seem to have a great deal in common, we view the relationship a bit differently. Successful investing can be achieved in a variety of ways. We believe, however, those who make it to the top of the profession tend to be highly analytical and systematic in nature. Removing emotion is an integral part of the process. And while we cannot intimidate or control our opponent – the markets – like Fischer did Spassky, we can put ourselves in a position not to become intimidated, while sticking to our systematic approach toward managing risk.
The article above is an excerpt from the Q3 Quarterly Market Commentary. Here is a link to the most recent issue. Complete the form below if you would like to get this emailed to you each quarter.