By: Edward J. Leach, CFP®, MBA
During my sabbatical, I read a book by Simon Sinek, “The Infinite Game,” which was published in 2019 and inspired by James Carse’s 1986 book on game theory titled “Finite and Infinite Games.”
In the books, finite and infinite games are described in this way.
A finite game is played to win, like baseball or golf. The players are known, the rules are set, and the endpoint is defined. For example, in baseball, you have two teams with a minimum of nine players, and the team with the most runs at the end of nine innings is the winner. In finite games, the winners and losers are easily identifiable.
In an infinite game, the objective is not winning but ensuring the continuation of play. In an infinite game, the participants come and go over time, and the rules and boundaries change. The infinite game never ends. Winners and losers are not easily identifiable as there is only ahead or behind.
After reading these definitions, you probably would assume financial planning and investment management are finite games. Have I accumulated enough money to retire? If the answer is yes – Win! Did I earn a positive return this year in my portfolio? If the answer is no – Loss!
It is not wrong to think this way – it’s very practical. Most of what we do in financial planning and investment management is quantitative and easily measured. We make decisions on a day-to-day basis to help our chances of achieving a specific set of goals, just the way a football team makes in-game adjustments to improve their chances of winning the particular game being played.
In Simon’s book, “The Infinite Game” he describes finite and infinite-minded players in this way:
“Finite-minded players do not like surprises and fear any kind of disruption. Things they cannot predict or cannot control could upset their plans and increase their chances of losing. The infinite-minded player, in contrast, expects surprises, even revels in them, and is prepared to be transformed by them. They embrace the freedom of play and are open to any possibility that keeps them in the game. Instead of looking for ways to react to what has already happened, they look for ways to do something new.”
Based on the previous description, do you think the finite player or the infinite player is better at playing the game of managing wealth? I would put my money on the infinite player.
In finite games like football, the goalposts and endzones don’t move, in soccer, the goals don’t move, and in baseball, the fences don’t move. They are fixed and do not change. In life, things are always changing. Your goals and circumstances are constantly evolving, and so is the world around you. We can all agree that the world is very different than it was five or ten years ago. Which player is better equipped to deal with these changes? It’s the infinite player.
When we talk about financial planning, you will notice that we never use the word winning, which would imply an endpoint. Instead, when it comes to planning, we refer to helping you “increase your odds of success.” We do that by helping you make confident financial decisions to help keep you in the game.
I will use investing as an example. The great investor Warren Buffet said, “Time is your friend, impulse is your enemy. Take advantage of compound interest, and don’t be captivated by the siren song of the market.”
The only way to capture the magic of compounding interest is to stay invested through good and bad markets because if you don’t, you can interrupt the power of compounding interest. We don’t tell you to stay invested in down markets because we enjoy seeing you worry; we tell you this because we know this approach increases your odds of success and keeps you in the game.
Since I have read the book, before every decision I make, I ask myself which game I am playing – the finite game or the infinite game. It has certainly provided a much-needed filter in helping me make better decisions.
My advice to you is to do things to help you stay in the game and give yourself every opportunity to continue to play.
Ed Leach, CFP®, MBA is a Partner and Wealth Advisor at HIGHLAND Financial Advisors, LLC in Wayne, NJ and works directly with clients advising them on their financial planning and investments. Ed’s work focuses on the unique needs of business owners, helping them extract value from their business while creating efficiencies in their business and personal financial plans. He is, also, a member of NAPFA which is dedicated to serving fee only advisors.