Wealth management (or the combination of comprehensive financial planning and investment management) is like a game. It comes with rules to follow. There are various players and strategies to the play itself. There are objectives and goals to achieve.
But most people misunderstand the kind of game they play with wealth management. Failing to acknowledge the type of game you play when it comes to financial success can lead to costly mistakes, missed opportunities, and failures to fix blind spots.
Wealth Management Is a Game. It’s Just Not the One You Think It Is.
A finite game is played for the purpose of winning; an infinite game for the purpose of continuing the play.
When you first read this, it’s easy to jump to the conclusion that activities like financial planning and wealth management are finite games. Of course you want to win when it comes to your financial life. After all, isn’t “winning” the same as achieving goals, earning returns, making money, and growing wealth? Maybe. But consider this:
When it comes to creating a financial plan and investment strategy for your life, rules can change based on your circumstances. Your specific wealth management strategy depends largely on your needs, what you want to accomplish, how you feel about risk, and the details of the assets you have versus the assets you want.
There are also known and unknown variables in the game that will influence outcomes—of which there are no universally agreed-upon result or objectives, because everyone’s goals and preferences are different. And as far as the end of the game? When it comes to using your money to support a great life, the “end” is not exactly something most of us want to get to; instead, most of us play with the aim to keep playing.
No one will ever be crowned the winner of money, and to strive for that impossibility is to forever feel like you’re failing or coming up short. What we can do, however, is to continue to play the game as long possible. And, along the way, we can achieve what’s important to us rather than chasing non-existent goalposts to score points in a game where there is no real score.
To Master Investing, Think of It As an Infinite Game
The point of an infinite game is not to “win,” but to stay in the game as long as possible.
This is a critical factor that far too many people fail to understand or acknowledge with their investment strategy. When it comes to investing, you must participate in the market with your number-one priority set to continued to participate in the market for as long as possible. That’s the only way compound returns can work for you. That’s the only way you grow wealth in an exponential way.
Failing to do this means failing to appreciate the real impact of risks you can’t afford to realize. It’s shooting for the fences, throwing everything into a concentrated position in hopes that you hit a home run…. and risking your ability to stay in the game if things don’t go your way.
It’s fun to think about the upside of a massive bet. But what about the potential for loss?
No upside is worth taking a risk you actually didn’t need to take in the first place. (This is why it’s also critical to understand your “enough.” If you know what enough is, you can better understand what risks you may need to take and which ones are unnecessary.)
There’s no sense in taking a risk that opens you up to the possibility losing money you otherwise could have grown over the long term, had you invested not with the goal of “beating” anything, but with the aim of simply staying invested. Stay in the game as long as possible. Give yourself every opportunity to continue to play.
Most People Struggle as Players in the Infinite Game of Financial Planning
People often find infinite games difficult to play. Or, at the very least, they find them uncomfortable, because they require you to sit with a lot of uncertainty and unknowns. If financial planning was a finite game—let’s say it was like football—it would be really easy.
No one argues over the right way to do football because there is a right way. The rules are clear and everyone must abide by them. There is an objective outcome everyone agrees upon. There are static goalposts that never change. While many different specific things can happen on any one play, there are generally no real surprises. The ball is advanced or it isn’t. The catch is made or it’s not. There’s a fumble you recover or you don’t. You score or you miss.
Football is easy to understand and to learn. It is simple to begin playing because it is a finite game. Financial planning can look like a finite game, which can make it seem deceptively easy. It should be simple, but it’s not. Financial planning is not a finite game.
In financial planning, the goalposts tend to skitter around the field, evolving as your life does. As soon as you hit one milestone, you can see another in the distance. Once you cross one major transition off the list, another one looms. The field itself has no clear boundaries. There are no yard lines or down markers for how much money you must save, invest, earn, and use. These metrics are subjective, depending on your ever-evolving goals, your personal priorities, and what it is you want to do with your time and energy.
Financial planning has no preset context to work within or result that we all agree signals “the end.” (And again, typically in life, the finish line is a place most of us aren’t in a hurry to reach.) Wealth management is an infinite game in which there is hardly ever one right answer, no specific objectively correct path. To even begin to deal with all this, you must have a continuously evolving, consistently maintained strategy (which you must do in what I’m sure is your abundant free time, while your live your life, move up in your career, enjoy your family).
If all you want is information, you don’t need to pay anyone for that. You can Google it… and hope you can figure out how to apply it to the context of your financial planning game, which might look radically different than someone else’s.
All the information and knowledge in the world is nothing compared to your own behavior and choices.
When It Comes to Money Management, Play the Infinite Game
People want to play wealth management like it’s a finite game. Unfortunately for those folks, that’s not what kind of game they need to play to find real success. If you want to do well with your money, consider changing your mindset and consider your endeavors in finance as part of an infinite game instead. The point is to keep playing the game.