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The Fischer Random Chess Stock Market

Jun. 11, 2020 11:18 AM ET9 Comments


  • Enter Fischer random chess, which was popularized by the eccentric American world chess champion Bobby Fischer in 1996.
  • There is a parallel between today's stock market and Fischer random chess.
  • Over the last few decades the airlines, trying to lower their costs, increased the number of seats on planes and thus shrank the distance between passengers.

I grew up in Russia, where chess was a spectator sport. Chess is almost as old as the New Testament and has only gone through minor changes over its long history. Chess has the longest recorded history of any sport - you can study the first recorded game, played in Valencia, Spain in 1475. The game, which was called "Scachs d'Amor" ("The Chess Game of Love") by those who played and recorded it, comes to us in the form of a poem comprising 64 stanzas of 9 lines each.

Any player who takes chess seriously will carefully study every move in the tens of thousands of games played by grandmasters over the last six hundred years of recorded chess history. Chess players study opening systems - the series of first moves (five to fifteen in number) early in the game that led to the middle-game formation of pieces. They study opening systems to the point that the early part of the game requires very little thinking; it is quite mechanical - you execute openings that you've studied day and night and thoroughly memorized. As the game leaves its opening phase and goes into middle - and then end-game stages, raw thinking becomes more and more important.

Enter Fischer random chess, which was popularized by the eccentric American world chess champion Bobby Fischer in 1996. It is the same as the traditional game, except that the first rank, the standard opening arrangement of kings, queens, bishops, knights, and rooks, is randomly reshuffled (symmetrically for white and black) every game. The second rank, where the pawns open the game, is untouched. The rules, objectives, and strategies are the same - you want to control the center; your pieces need to protect each other; your king has to be protected at all times; and the goal is the same: kill the other king.

This article was written by

Vitaliy N. Katsenelson, CFA, is Chief Investment Officer at Investment Management Associates in Denver, Colo. He is the author of Active Value Investing (Wiley) and The Little Book of Sideways Markets (Wiley).    His books were translated into eight languages. Forbes Magazine called him "The new Benjamin Graham". To receive Vitaliy’s future articles by email or read his articles click here.

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Comments (9)

Great Read!
Chris Valley profile picture
This American Distance is why I knew we would have no serious problems like Italy. We don't have crowded cities except for 2.

In random chess, the game is not changed. Openings are not random. The placement of pieces only changes the initial construction.

You must push pawns. And control the center with one touch moves. Don't overdevelop-it is not efficient or dynamic. Endgame is the same.
T'pee profile picture
Super insightful as always. Vitaliy is without a doubt one of the best second level thinkers to publish here on SA. Not the easy 'doom and gloom' after the fact, nor the 'well be back to normal soon', but 'what could this mean as we proceed and what are the range of possible outcome and how can we invest and live accordingly'. Nuance and deep thinking, great stuff.
Ted Waller profile picture
I really appreciate your creative and inventive articles. We certainly will need to make changes in how we view the world. Even if we don't know what those changes are, we must begin the process now.
Mitch Zeitz profile picture
wonderful article, wish you would have explored other industry changes more.
Francis_Mcgillicuddy profile picture
I think this is the best SA article I've ever read.
Vitaliy Katsenelson, CFA profile picture
Thank you very much. My articles are published on http://contrarianedge.com you can also subscribe there to get them by email
powerful-crow-juju profile picture
Companies that involve "the real world" are getting difficult to value- divergent futures can lead to either hellfire or business-as-usual.

Bit-shufflers seem safer. For me, that has been Facebook.
WAM002 profile picture
Great article. I played chess a lot when I was 8 to 25 years old (40+ years ago). I was told there are more difficult games (GO?) but I didn’t care. The comparison between the market and chess is apt. Thank you for this great article.
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