Greatest Chess Players Trading Financial Markets Today
Chess is the game of brain and skill. Some would describe trading financial markets as the game of skill, where the brain of the trader dictates the rate of success. I have followed enough researches to see that skill playing chess doesn’t necessarily translate to general other skills.
Yet as somebody who plays chess all his life, I decided to analyze some of the greatest chess players and describe what I think would be their imaginary trading and investing styles. I also compare them to some of today’s traders, investors and trading approaches of financial markets. I hope it would entertain some of my fellow chess players and also traders out there.
Positive returns
Comparison: Warren Buffet
As much as I don’t like Anatoly Karpov’s boring style of play, he was a world champion for a long time, where pretty much everybody was complaining that he shouldn’t be. I always watched his games thinking, “that’s just too boring.”
However, if you review Karpov games and style more in-depth, you would see a tremendous amount of patience, calculation, balance, and efficiency. Not a risk-taker indeed. He doesn’t win instantly, but continuously, over a more extended time period.
Also: Mikhail Botvinnik
Another great chess champion quoted saying, “Karpov? He is pathologically cheap”. I am quite sure he wasn’t buying $3 breakfast at McDonald’s on his way to the tournament, but indeed I compare him to Warren Buffet. Macro view and common sense prevail, and the draw is a good compromise that can be taken since it’s not a loss. As they say, “defence wins championships”!
2. Bobby Fisher
Comparison: John Arnold
This is a very unusual comparison, yet I am sure Bobby Fisher would be one of the best traders of one of the toughest commodities in the world of trading. Fisher’s style of game is pure as it gets and is just brilliant. Unorthodox, contradictive, and so confident.
If Fisher would be trading markets, there is only one trader I can compare him to — the legendary John Arnold. A living legend, trading natural gas, or what traders call “a widow maker” (toughest commodity if not a financial instrument in general to trade) starting with $5 million AUM hedge fund, making out of it $4 billion in less than a decade and retiring. It is said that John Arnold had his office filled with a lot of math whizzes that he would still rarely talk to, making just about ten genius trades a year based on his own proprietary system, where each trade would have huge leverage as well. Today we can only speculate that what he was using was most likely a quant strategy. This sounds like Bobby Fisher to me.
Comparison: Marc Rich
Botvinnik was a great chess champion, yet we really know him for his “Botvinnik” school operating in Moscow for decades and growing world chess champions such as Michail Tal and Garry Kasparov, who attended it.
Marc Rich is one of the greatest traders of the physical commodities in the world. Yet we only really know him for his “students” who founded Vitol, Glencore, and Trafigura — the three world’s largest commodity trading companies in the world.
Comparison: Ray Dalio
Emanuel Lasker was the world chess champion for 27 years. He is regarded as the strongest player ever played the game of chess. He controlled all aspects of the game. He would even use various psychological aspects of the game against the opponents. Lasker also had an unbelievable depth to his playing style. You really have a tough time learning his method or style since there it simple almost perfect covers of all game aspects. There is no silver bullet. Every move is such!
Ray Dalio, similar to Lasker in chess, can manage any type of trading and investing, be it traditional and non-traditional approaches, macro or algo driven strategies. He remains dominant in each of the fields, staying in the game as longest as possible and still being on top. Recently, I have learned that Bridgewater Associates is trying to develop an AI that will capture its CEO’s — Ray Dalio — decision making. So, if you can’t learn to understand fully, then you should have it available for you to use.
Ray practices and supports transcendent meditation as a tool to make better “mindless” investing and trading decisions, which also reminds me of Lasker highlighting the importance of the psychological approach to the game of chess.
Comparison: Richard Craib
If anybody is to copy a computer approach to play chess is Anand. He memorized every game out there and various playing styles played by all notable chess players. It gave Anand a solid foundation to be a stable performer. You need to create and have an edge when you play against Anand, but at least you know that Anand will never do that against you. Still positive return, but without the edge, you can’t become great. I can see Anand be a solid quant trader who employs sound ML-driven strategies that are based, however, on readily available market information and without the edge needed to beat the market, and not just be in line with its performance.
Negative Returns
Comparison: Bill Ackman
This is a very shocking outcome for me. I have the utmost respect to the youngest chess world champion and who dethroned the “Soviet machine” backed Karpov. I think that Kasparov is too smart for himself and can convince himself of whatever he wants to do. His playing style often can’t survive without a conflict; winning easily is not an option. If mistakes are made, they are critical ones.
I clearly can see Kasparov convincing himself and driving the entire capital into dangerous ego-driven trading choices. For example, shorting Herbalife stock, disregarding capital drawdowns and forgetting that trend is your friend.
Comparison: John Meriwether
There is no question in my mind that Alekhine had a chance to be the greatest chess player ever. Genius in playing a simple and aggressive style of game, I am sure “Alekhine” defence is one of the most popular played defences by chess players. A defence that would turn into lethal offence. Alekhine’s super aggressive style kept everybody on the edge of their seats, including, in my opinion, Alekhine himself. An argument can be made that Alekhine’s brain was a chess supercomputer. It was Alekhine genius who was known for blindfold chess (In 1924, Alekhine played 26 simultaneous blindfold games against very strong opponents with the score of +16 -5 =5.) That level of intensity couldn’t survive for a long time, and Alekhine was also known to be no stranger to many controversies. A great rise and hope that couldn’t follow through and fulfill his great potential.
To make full disclosure on both of the subjects of this entertaining (I hope) article, I started playing chess at the age of seven and got the ELO rated level of 2000 a few years later. Then I couldn’t progress further staying in 1900–2000 range, and at age 12 found my true love playing basketball. The interesting thing is that my ELO rating didn’t change much since then. I am still in those 60 or 70 thousand best chess players on this planet, but those who know chess understand that it’s nothing compared to the top 1000. I play chess every day, mostly blitz, 5–10 times a day. I look at the games as brain gymnastics, meditation and really just plain fun. I do believe that chess develops dimensional thinking, something that nowadays hedge funds test you on when you inquire about working for them. On the trading side, I started with macro trading making my first forex trade in 1994, moving through macro, technical analysis, algo, and finally — ML backed trading.
