I’ve played some pretty high stakes games of Rock, Paper, Scissors in my day. Throughout history, Rock, Paper, Scissors has been a staple of decision-making psychology, valued for its perceived randomness. A good friend of mine (whom I’ll refer to as Garret from now on for the sake of brevity) has a unique approach to playing the game: right before you’re about to start, he always says, “Just so you know, I’m going to throw Rock”.
He says that if he’s accurately assessed your level of intellect, this approach greatly increases his likelihood of victory.
Many will believe it’s simple reverse psychology and that Garret plans to throw something else. The shrewd player will then throw Scissors, because their worst outcome is a tie (believing Garret will only be deciding between Paper and Scissors). Now all Garret has to do is throw Rock, just like he said he would, and the game is his.
A second-order level of thinking puts this strategy in jeopardy. Say Garret’s opponent anticipates the reverse psychology and accounts for it, believing that he actually will throw Rock. If Garret deduces his opponent’s capacity for multi-step decision making, then he will throw Scissors to beat Paper.
The goal is to transform Rock, Paper, Scissors from a game of random chance into a strategic exercise in anticipating your opponent’s decisions.
Garret is trying to turn Rock, Paper, Scissors into Chess.
He’s convincing you that you can do better than random by exploiting the weakness in his strategy. But the weakness is only feigned. It’s a bit like Muhammad Ali’s rope-a-dope strategy, where he would encourage opponents to tire themselves out with relatively ineffective punches.
But who cares about Rock, Paper, Scissors?
By revealing ultimately immaterial information, Garret attempts to tire his opponent out through the mental gymnastics of trying to process its relevance. Of course, the way to win at this game is not to play: tune out what he’s said entirely. Your moves should be based on true randomness, something that human beings inherently struggle with.
While it may seem like a stretch, the psychology of Rock, Paper, Scissors offers valuable insights for understanding investor behaviour and market strategy.
The information that we are inundated with and often influences decision-making is the equivalent of Garret saying he’s going to throw Rock. It’s the scary headlines that dominate the news cycle and Twitter (X?) feeds. It’s the main driver of a sense of collective nihilism that may prove to be humanity’s greatest threat.
But wait – how can those things be immaterial, Max? We’re talking about the events that literally shape the world!
That may be true, but it still has very little impact on my investment thesis. World events, fiscal policy, and election results exert influence in the short-term, but they do little to impact the health and longevity of mature companies. Consult the overwhelming volume of historical evidence if you need further convincing:
When Garret plays Rock, Paper, Scissors, he wants to win. He thinks that telling you he’s throwing Rock increases his odds of winning. His ulterior motive is readily apparent. Ulterior motives usually aren’t this obvious and sinister, but that doesn’t mean they aren’t present. There are countless forms of media vying for your attention at any given time, and they discovered long ago that making you scared or angry is a great way to lure you in.
Whether in Rock, Paper, Scissors or elsewhere in life, whenever you take in new information, ask yourself: Is this important, or is it designed to take my attention away from what actually matters?
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Opinions are those of the author and may not reflect those of BMO Private Investment Counsel Inc., and are not intended to provide investment, tax, accounting or legal advice. The information and opinions contained herein have been compiled from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the author nor BMO Private Investment Counsel Inc. shall be liable for any errors, omissions or delays in content, or for any actions taken in reliance. BMO Private Investment Counsel Inc. is a wholly-owned subsidiary of Bank of Montreal.
