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John Goodell

AMONG THE AREAS of law that have made me miserable over 16 years of practice, it’s the adversarial roles that have made me most miserable. My experience in labor and employment law has been particularly difficult because the interaction with opposing counsel is usually contentious, each side compelled to zealously advocate for their position.

Almost any type of litigation is a zero-sum game. One side wins, the other loses. Because the outcome is never guaranteed, those involved often engage in cut-throat, zero-sum behavior.

I’ve slowly come to realize that the financial world has a similar dynamic. Short-term trading usually delivers zero-sum outcomes, while longer-term investing offers positive-sum results. The game that investors choose to play determines the outcome they receive.

In a zero-sum game, rational actors seeking the greatest gain for themselves will necessarily do so at the expense of other actors. Trading amounts to a zero-sum game. Buyers hope to get a better deal at the expense of sellers, and vice versa.

By contrast, in positive-sum games, the overall pie is growing, so there are more spoils for everyone to share. Positive-sum games can be win-win situations. Investing for the long term in a broad market index fund, and thereby avoiding the risks inherent in individual stocks, is a positive-sum game because markets move up over time—and all investors can potentially win.

Moreover, the longer investors hold a diverse basket of stocks, the greater the likelihood that the engine of capitalism will produce a happy outcome. An added bonus: Investors can avoid the nasty “winner takes all” mentality that many short-term traders consciously or subconsciously have. For my own mental health, I prefer to play positive-sum games—whether it’s in my professional life or when investing.

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