The path to success often comes through avoiding major mistakes rather than pursuing brilliant moves. This isn’t about being passive – it’s about being thoughtful and disciplined about where and how you compete.
Success comes from playing where you have an edge, ensuring you’re properly compensated for risks, and maintaining both financial and psychological staying power. Patience is crucial – many fail simply because they can’t wait long enough for their strategy to work.
The foundation of this approach is understanding which type of game you’re playing. There are two fundamental types.
It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.
Charlie Munger
Winning or Losing?
Simon Ramo’s book Extraordinary Tennis Ordinary Players illustrates a crucial distinction between professional and amateur games.
In professional tennis, players win points through skill – placing shots just beyond their opponent’s reach through precise control, spin, and positioning. The outcome largely depends on their own performance.
Amateur tennis is fundamentally different. Amateurs don’t win points so much as lose them through errors – hitting balls into the net, serving double faults, or sending shots far beyond the lines. This distinction between winning and losing games extends far beyond tennis.
In expert tennis, about 80 per cent of the points are won; in amateur tennis, about 80 per cent of the points are lost. In other words, professional tennis is a Winner’s Game – the final outcome is determined by the activities of the winner – and amateur tennis is a Loser’s Game – the final outcome is determined by the activities of the loser. The two games are, in their fundamental characteristic, not at all the same. They are opposites.
Amateur games are different. Amateur tennis — likely the level you and I play at — is a loser’s game. The winner is the person who makes the fewest mistakes and lets the other person beat themselves. If you keep the ball in play long enough, your opponent will make a mistake. In effect, amateurs win because their opponent makes more mistakes than they do.
Ordinary people win at games they are not skilled in by letting their opponents beat themselves.
… if you choose to win at tennis – as opposed to having a good time – the strategy for winning is to avoid mistakes. The way to avoid mistakes is to be conservative and keep the ball in play, letting the other fellow have plenty of room in which to blunder his way to defeat, because he, being an amateur will play a losing game and not know it.
While the amateur can’t consistently hit winners, they want to because they think that’s the path toward victory. However, playing this way increases the odds they lose.
When amateurs play a Winner’s game, they force shots with a low probability of success and a high probability of error. While they might hit the occasional winner, the ratio between winning and losing shots is heavily skewed toward losers.
In a sense, amateurs convince themselves they are professionals, but professionals never persuade themselves they are amateurs.
Professionals know they are not playing the same game as amateurs.
The takeaway is obvious: If you are within your circle of competence, go for the win. If you are not, avoid stupidity.
Investors Bet on Someone Else’s Game
This reminds me of a story. Warren Buffett used to convene a group of people called the Buffett Group.
At one such meeting, Benjamin Graham, Buffett’s mentor, gave them all a quiz.
I spent hours searching for this reference from Benjamin Graham on Value Investing: Lessons from the Dean of Wall Street.
“He gave us a quiz,” Buffett said, “A true-false quiz. And there were all these guys who were very smart. He told us ahead of time that half were true and half were false. There were 20 questions. Most of us got less than 10 right. If we’d marked every one true or every one false, we would have gotten 10 right.”
Graham made up the deceptively simple historical puzzler himself, Buffett explained. “It was to illustrate a point, that the smart fellow kind of rigs the game. It was 1968, when all this phoney accounting was going on. You’d think you could profit from it by riding along on the coattails, but (the quiz) was to illustrate that if you tried to play the other guy’s game, it was not easy to do.
“Roy Tolles got the highest score, I remember that,” Buffett chuckled. “We had a great time. We decided to keep doing it.”
Avoiding Stupidity is Easier Than Seeking Brilliance
Most of us are amateurs, but we refuse to use the winning strategy for amateurs: Avoid Errors. Instead, we try to be brilliant.
Think of the know-nothing investor. The amateur strategy is to buy an index fund every month for 30-40 years. This strategy of average performance for an above-average period is very likely to result in an extraordinary outcome, putting the ‘know-nothing’ investor in the top 1% of returns. However, if the amateur tries to win by picking the individual companies that will outperform, they will almost certainly perform below average.
In short, amateurs should invert the problem. Rather than trying to win, they should simply maximize the odds of not losing.
This was a point Charlie Munger, the billionaire business partner of Warren Buffett, made a long time ago.
In a letter to Wesco Shareholders, where he was at the time Chairman (Found in Damn Right!: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger), Munger writes:
It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.
It might be the single most powerful sentence I’ve ever read.