Why we choose to invest as an infinite game, not a finite one
Why we choose to invest as an infinite game, not a finite one
Play the long game, not the short one.
In James Carse’s brilliant book Finite and Infinite Games, he discusses two types of games: (1) finite games that are played to win that end, and infinite games that are played to continue the play that does not end.
We seek to summarise the key differences between these two types of games and return to why we choose the infinite game of investing rather than a finite game.
Purpose: The purpose of finite games is to win, to end the game with one winner. The purpose of infinite games is to continue/sustain the game with all players continuing to play.
Outcome: In finite games, there has to be a definite ending with one winner (person/team), and all others are losers and are ranked, and finite games can be repeated. In infinite games, there is an indefinite ending with no winners (and losers), which cannot be repeated.
Beginning: In finite games, there is a precise beginning with clear externally defined temporal boundaries. In infinite games, there is no beginning; the game for the players is internally defined, and they want to keep playing.
Rules: In finite games, there are explicit, upfront, agreed-upon rules to play by, which remain fixed/unchanged during gameplay. In infinite games, rules change to prevent winners, allow continuity for the game to keep playing, and be inclusive, allowing more players to join.
Constraint: In finite games, time is the constraint. Finite players put play into time. In infinite games, each player’s limits of exhaustion, loss of resources, and death are the constraints. Infinite players put time into play.
Resources: In finite games, players compete over scarce resources (time); whoever hoards the most wins and ends the game. In an infinite game, players share and pool resources, so everyone has enough resources to continue to play.
Time: Finite games are bounded by a limited time horizon/finite game time limit. Time is viewed. Infinite games, conversely, have no finite time/game limit, which allows for a longer/unlimited time horizon. Time is lived.
Boundaries: Finite games mandate play within specified boundaries, and finite players move within those boundaries. Infinite games instead play with boundaries, and infinite players move towards the horizon.
Dependency: In finite games, each is on their own and for themselves. In infinite games, players collaborate and cooperate with as many other players as possible.
Measurement: One can measure how many finite games one wins. However, in infinite games, the duration can only be measured externally, to which it endures.
Defined: Finite games are externally defined; they have a definite meaning and finite players play to be serious. Infinite games are internally defined; they have a timeless meaning to infinite players and play to be joyful.
Choice: This is the only commonality across both finite and infinite games. Players are free to play it of their own choice, and no one is forced.
Players: In finite games, there must be other players; one cannot play alone. Infinite games can be either single or multiplayer, and one can play alone if one chooses.
Eligibility: There are eligibility criteria for finite games; anyone who wishes to play typically has qualifying criteria. There are no eligibility or qualifying criteria for infinite games; anyone who wishes to play may play.
Discrete: Finite games are discrete. There are no infinite games within finite games. Infinite games are non-discrete. There can be finite games within infinite games.
Frequency: Finite games can be played many times, and each game or occurrence is unique. Players in infinite games continuously play.
Format: Finite games are theatrical. The roles are scripted and performed and are timebound. Infinite games are dramatic, they avoid outcomes, they keep the future open, rendering any scripting useless, as players ascribe a timeless meaning.
Titles: Finite games focus on giving titles to winners at the end of each play. This is theatrical with awards, backward based on past achievements, and temporary until they lose. In infinite games, there are only names, no titles. Titles are abstractions. Names are open, and infinite game players focus on leaving a legacy.
Surprises: Surprises cause finite play to end. Finite game players are trained to anticipate every future possibility. Surprise, on the other hand, is the reason infinite play continues. Infinite game players constantly expect and are prepared for surprises.
Strategy: Players in finite games hide future moves, conceal, deceive, distract, falsify, misdirect, and mystify to strengthen their advantage to win. Players in infinite games play in complete openness.
Improving: In finite games, training leads towards final self-definition, repeating a completed past into the future. In infinite games, education discovers the richness in the past and continues an unfinished past into the future.
Living: Players in finite games play to live, and they do not live their playing. Life is the outcome of the play. Players in infinite games live to play and live their playing.
Playing: Play for life for finite game players is serious, and they focus on what is impossible for others. Conversely, for players in infinite games, the play for life is joyous; they focus on what is possible with others.
Focus: Play for themselves to bring an end, concerned with what has happened. Do not play for themselves to continue the play; focus on what's yet to happen.
Power: In finite games, players play to be powerful, with power limited to the selected top few. In an infinite game, players play with strength, seek not to be powerful, and do not attempt to become powerful.
Speaking: In finite games, players use trained and rehearsed voices to inform; they must know before they speak. In infinite games, players do not give their voices to one another but receive them from another, presenting themselves as an audience.
Theme: In finite games, it is about survival, winning, and titles; they constantly look out for themselves. Infinite games focus on sustainability, continuation, growth, innovation, transformation, unity, trust, and cooperation.
Goal: Finite game players are focused on what's best for me; they seek to improve their benefits at others' expense. Infinite game players focus on what's best for others; they continuously strive to improve everyone's lives.
The table below summarises the key differentiating characteristics between Finite and Infinite Games:
Linking the Infinite Game back to Investing for us
At my core and with Vision Capital Fund, we see investing as an infinite game rather than a finite one. We do not want the highest returns possible, but the best returns that can be sustained for the longest possible period of time.
We do not seek to be the best-performing investment manager in any given quarter or year. Instead, we want to do well enough to be very good for a very long time and to allow us to keep investing and playing this game for as long as well as we can.
We invest because we love investing, and it is intellectually stimulating, and we want to keep doing so, creating value and positively impacting our investors and others.
As size is the enemy of returns, we even intentionally introduced a fund cap (influenced by Richard Lawrence of Overlook Investments) to limit annual net investor inflows to prevent us from growing too fast. If we start too big or grow too fast, we will likely have a much shorter runway to compound our returns.
We would rather grow our fund size largely from generating returns than new investor inflows. We are incentivized appropriately and fairly not to be AUM gatherers, and we want to stay that way; we will lower fees as the fund size grows over time and share the scaled economics with our partners.
We are in no rush to maximize returns and will not take unnecessary risks like leverage, short-selling, derivatives, or hedging or employ highly speculative positions. We do not want to play a game of Russian roulette and eventually be wiped out.
We want to keep playing the game for a long time, preferably for the next 20-40 years, for as long as I can. Surprises do not cause us to stop playing, so we expect them and are prepared for them.
While time is limited, it is not because of the game's limit. Instead, the finite amount of time we can keep playing is limited by our own physical limits of exhaustion, loss of resources, and death. We see this new investing journey as a marathon for the rest of our lives, not a sprint in any given month or year.
We believe in playing with complete openness. That is why we write to share our thoughts, we speak to give insights, and most importantly, we seek to show and prove through our actions.
Our portfolio should reflect the consistency of our investment approach. That is why we do all these to educate, continue, and sustain the game, and why we teach once a year, invest all the net proceeds in the Vision Give Back Fund, and donate 20% of annual gains to philanthropic causes.
Wealth and titles mean little to us, for we bring nothing with us to the grave when we pass away, and we will give away the majority of our wealth at the end of our lives anyway. What matters is who we helped during our lives, the value we created, and the legacy and positive impact we leave behind when we leave this world.
While traditional finance keeps indoctrinating us that it is difficult to beat the market and that it is better to index cheaply, We think it possibly applies to most people who don’t have the time to do the research. Being able to invest well is one of the greatest life skills one can learn, the power of compounding and duration can leading to outcomes that one cannot fathom.
For those who are willing to learn and master the art and science of investing, my most profound belief is that individuals (and professionals) too can beat the market. We did it for over seven years with my own capital via Vision Capital (+257% vs. +133% and 20% vs. 12% CAGR, respectively, for the S&P 500) as an individual investor.
We seek to do so as a professional investor with Vision Capital Fund, growing wealth for families and institutions for generations together by delivering outstanding long-term investment returns from investing in exceptional companies that best reflect our vision for our future. We want to be living proof that one can do both in this infinite game and have more join us in our journey ahead.
9 September 2024 | Eugene Ng | Vision Capital Fund | eugene.ng@visioncapitalfund.co
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