Wall Street loves chess

Chess Champ? Hedge Funds May Want You

Boaz Weinstein and Peter Thiel were top chess players that had analytical skills that aided in investing decisions

By Marlene Y. Satter
September 30, 2011

Wall Street loves chess, and chess champions and other gaming experts may very well have developed skills that assist them to excel in the kind of analytical decisions required by high-level investing of the type that hedge funds make.

So says a New York Times article that looks at the chess connection—the link between skilled players and skilled investors, many of whom got their start at hedge funds through their abilities in moving from square to square. Citing such luminaries as Boaz Weinstein, Peter Thiel, and Douglas Hirsch, all of whom manage hedge funds and who are either chess luminaries or enthusiasts, the article points to a correlation that they say exists between the kind of advance-move thinking required by someone with the talent to become a grand master and the kind of thinking required to shuffle millions—or billions—of dollars on the market.

Weinstein said that the means of making decisions is a useful focus in both arenas. Chess playing, he said, teaches one to deal with the uncertainty inherent in any decision. In investing, he was quoted saying, “you can have an 80% chance of being right. And then the 20% comes up. But really it is the process that you used to make the decision.”

Other financial institutions that value skills at games include Bankers Trust, which recruited World Chess Federation grand master David Norwood (who later moved to Duncan Lawrie and ended up retiring at 40 as a multimillionaire) and D. E. Shaw Group, which boasts a bridge life master, a Jeopardy! champion, and a U.S. women’s chess champion.

While the strategy of games can be important—the report points to Warren Buffett’s bridge skills, and David Einhorn’s poker abilities as further examples of how game skills permeate investing—it is by no means a guarantee. James E. Cayne, formerly chief executive of the now-defunct Bear Stearns, is a world-class bridge player. Yet Bear Stearns collapsed in March of 2008.

Norwood said of his chess wisdom that it definitely helped him in business, citing the constant setbacks of the chessboard and the fact that those who learn to overcome them are the true greats. Game mavens might want to remember that, lest they end up like the pieces on the losing side in Wizard’s Chess of Harry Potter fame: broken to pieces on the chessboard by a better player.

Source: http://www.advisorone.com