Which Great Investors Were Also Chess Players?
Douglas Goldstein, CFP®

Want to be a better investor? You might want to get your chessboard out. Start talking about chess and there’s a good chance that you will get the attention of some of the greatest investing gurus anywhere. Boaz Weinstein, now a star hedge fund manager on Wall Street, got his job when he tried to get a summer job at Goldman Sachs in 1991, when he was just 18. After he was rebuffed in his effort, he stopped in the men’s room on the way out, where he met another person he had played chess with in the past, David F. Delucia, the head of corporate bond trading. (Delucia is ranked as an expert by the United States Chess Federation.) After his personal recommendation and a few interviews, Weinstein got a job.

Weinstein and Delucia aren’t alone in their chess connection. There are a lot of top-tier professionals on Wall Street who are chess masters. There’s Peter Thiel, the billionaire co-founder of PayPal, who now runs Clarium Capital, a hedge fund. And there’s Douglas Hirsch, founder of Seneca Capitol, who although is not a chess master, is a serious chess fan. And Patrick Wolff, manager of the hedge fund Grandmaster Capital Management, is a prime example of a chess grandmaster who successfully turned to the world of investing.

The bottom line for these fellows is that they learn more than game strategy at the chess board. They take their chess discipline, strategy, and tactics and apply them to other aspects of their life, namely business and finances.

First, and perhaps most importantly, chess teaches players to evaluate all possible moves, determining the pluses and minuses of each one in order to narrow the options down to the best move possible.

A second lesson that chess-playing investors learn is how to deal with risk and uncertainty. Investors who learn from their chess instruction and experience find that the best way to play the game is to calculate the risks for a variety of different moves, evaluate the risk of making certain moves, and determine the possible rewards. After all, what could be a better lesson from losing a pawn for a knight when you are considering one business deal over another?

The skills learned from a game are no guarantee of success, but the lessons learned are important. A good example of this is the experiment conducted in the 1990s by Banker’s Trust, which hired a group of world-class chess players in an effort to learn whether their chess skills would help on the trading floor. None had any experience with investing. One of those hired was David Norwood, who was studying history at Oxford at the time.

The move was disastrous. Soon, the firm was licking their wounds and Norwood and the others were on the street. Fortunately, Norwood was intrigued. A year later, he was hired by a private British bank, Duncan Lawrie, and began his trading career. By the time he retired in 2008, he was a millionaire. When Norwood is asked to explain his success, he says that most traders do well when the market is doing well, but when the market is stumbling these same traders panic. He, on the other hand, learned from chess that when you face setbacks you shouldn’t run, but think creatively to overcome them. And that is a valuable lesson in investing.

Douglas Goldstein, CFP®, co-author of Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing (by Susan Polgar and Douglas Goldstein, Morgan James Publishing, 2014)

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