Business people, may I have your attention, please? Bob Rice has something to say to you that could well transform the way you work: “1.e4.”

Rice is a member of the New York Angels investment consortium, and is a managing partner of Tangent Capital, which structures high-yield hedge fund investments.

He also founded the Wall Street Chess Club in 1990, and along with Garry Kasparov and Nigel Short established the Professional Chess Association (1993-1996), serving as its first commissioner. He ran PCA chess events, created a “speed chess” television series for ESPN, and produced the chess software program “Maurice Ashley Teaches Chess.”

Hedge funds and speed chess? Three Moves Ahead is the intersection of Rice’s business savvy and chess enthusiasm.

As he told me in an email interview,

I really believe that only a limited knowledge of the way players think, and a few basic chess stratagems, will improve the average executive’s “game” at the office.

Having recently heard American economist (and retired International Grandmaster) Kenneth Rogoff on the radio, I had to wonder: wouldn’t one have to be at the top of the chess to be a biz whiz?

Reaching “Club player” level is fine in that sense.  I think traditional “recipe for success” business book sell a false promise: in the real world of business change, randomness, and clever opponents don’t permit things like “the seven secrets for …” or “the three keys to….” to work.  Instead, executives must appreciate that they cannot, in fact, see “three moves ahead” with certainty.

Indeed, Fisher’s quote – “I don’t believe in psychology, I believe in good moves” – is even more relevant to business than it is chess.

The chapters in Three Moves Ahead are rather “chessy” – “The Wall Street Chess Club,” “Three Moves Ahead?”, “First Mover”, “On the Clock”, “Bad Bishops”, “Lucky or Good?”, “Strong Squares”, “Sac the Exchange!”, “Classic Tactics”, “Decisions, Decisions” and “A Postgame Recap”.

The notion of “three moves ahead” is crucial to understanding Rice’s point of view. There are all sorts of stories about how many moves ahead a good chess player can see – big talkers will climb up through the double digits, modest ones will say two or three. (Of course, there is the chess master who claimed to see only one move ahead – the best one.)

Three Moves Ahead points out:

Well, in an average chess position, there are about 40 possible moves, so seeing one full move ahead (yours and your opponent’s response) would involve 1,600 positions (40x40). If we take that to the breathtaking number of two moves out, your friend is claiming that he’s seeing over 2.5 million positions. Three moves? Four billion.

In chess, as in business, decisions are constantly being made on imperfect information about what lies ahead. As Rice explained to me, this has its impact on business professionals.

So, they must “play chess”.  This involves playing “positionally” (getting your pieces on the right squares, developing your infrastructure in accordance with your goals — as any opening does); developing and following  a plan that exploits your “imbalances”; constantly adjusting it to the market’s feedback loop (the opponent’s moves); playing for rhythmic, constant improvement; and the like.  It also turns out that some specific strategies, like “strong squares” and “exchange sacrifices”, are highly instructive for executives.

I pushed the author for some more insights, reminding him that my hometown-grown-national restaurant, Wendy’s, seems to have floundered in its identity since the passing of its founder, Dave Thomas, who used to be their well-known and well-regarded spokesperson.  They seemed like an 1.e4 player who had taken up 1.d4.

I would say that Wendy’s is a great example of many things, but one  of them is that you have to protect your “imbalance” and, if forced  to give it up, at least make an exchange sac to get something back for it.  That is, Wendy’s zoom to prominence was based on a fundamental quality argument vs McDonalds and BK [Burger King].

Their burgers were fresh, made in response to a customer’s order, not sitting around in the back getting reheated. The founder’s homespun persona reinforced the argument nicely.

That distinction, the company’s “imbalance”, has now been lost through a combination of blunders.  Can they get it back? I don’t know, but it’s very interesting to see how BK has tried to regain its footing: through a much more narrow appeal to a specific group (young males). They are trying to gain control over one segment of the market (a file, if you will, or maybe even a square) first, and then build from there.

Probably Wendy’s should do the same: jettison their idiotic current approach with the guys wearing the red wigs and shoot for their own narrow segment, and one that resonates with their traditional imbalance: quality.  For example, they would have been in an ideal position to do in the burger industry what “Subway” has done for sandwiches; and they could still possibly pull that off.

You don’t have to follow the Wall Street Journal the way many follow Chess Informant to know that’s exactly what Wendy’s has done of late, with a noticeable rebound.

The more I read in Three Moves Ahead, the more chess-based questions I had.  What about the chess stylistic between Karpov and Kasparov?  Is there “slow, positional” business and “sharp, tactical” business, too?

Your question about style is interesting.  The point is not that you can’t play “slow” chess, like Karpov, et al.; but rather that you have to play it quickly!  That is to say, in today’s business world, the time controls are shorter.

In fact, one could say that many companies that have played “slowly”, like Adobe, have totally outperformed those that have played too “tactically,” like DoubleClick.

Positional, slow chess can work in the business world very well, but you still can’t let too much time run off the clock between moves.  Karpov and Kramnik do just fine at speedchess, I’ve noticed!

I enjoyed reading Rice’s book, and came away a bit wiser, but a bit uneasy – comparable to how I feel after reading about top-level chess.  Certainly I can learn from the masters, but I’m not likely to ever be a master.  When it comes to business, should we turn over Wall Street to the Association of Chess Professionals (the modern equivalent of the Professional Chess Association)?  Are the GMs the likeliest CEO candidates?

Do I really think strong chess players have an advantage in the business world? Not really, because most have trouble translating their over-the-board thoughts into real world activities.

One reason is that business is far more complex than chess, and has many more factors involved (example: in chess, you don’t have to cajole a bishop to move a few squares, or praise him for doing so afterwards; but many employees will fail to do their jobs if they aren’t handled the right way).

But the reverse IS true: executives can become better in the office if they understand how chess players go about leading their hierarchical organizations through battles with infinite possibilities and constant change.

I guess we can be reassured that there may not be a business “Deep Blue” computer to replace all of us on the horizon yet.

As a final note, if you need one more reason to pick up Three Moves Ahead, all of Bob Rice’s profits from the book go to the Imus Cattle Ranch for Kids with Cancer (http://www.imusranchfoods.com/).
 

From the Author's website:

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