What is a competitive situation (竞局)? A competitive situation originates from the struggle for interests, and this struggle forms the basis of a competitive situation. The parties involved in the competition form relationships that are both competitive and adversarial, with the amount of benefit gained determining victory or defeat. Specific external conditions dictate the specific forms of competition and confrontation, thus forming a competitive situation. For example, in a game of Go, the two players compete for empty spaces on the board; wars are often fought to seize territory; duels among martial artists are frequently over reputation; and in the stock market, what people fight over is very tangible—money.
A resource becomes necessary for people, but if the total amount of the resource is limited, competition will occur. Competition requires a concrete form to bring everyone together, and this form creates the competitive situation. In all types of competitive situations, the parties involved are vying for a certain resource, and the amount obtained determines success or failure. The nature of the competitive situation is closely related to the nature of the contested resource, and based on the characteristics of the contested resource, competitive situations can be divided into several categories.
The first extreme case is when the contested resource is infinite, allowing anyone to take what they need without competition occurring. For instance, knowledge—anyone willing can learn it, and there won’t be competition over knowledge itself. However, competition may arise over rankings, as rankings are finite resources.
The second case is zero-sum competition, where the sum of what each competitor gains is zero—one person's win is another person's loss, which easily triggers fierce competition.
The third case is positive-sum constant competition, where the gains of all parties are fixed positive values. As this value increases, the intensity of competition gradually decreases. When resources are abundant enough to meet the needs of all competitors, it approaches infinite resources and does not trigger competition. When the total amount of resources is far less than the total demand of all parties, it approaches a zero-sum competition, leading to intense competition. Land and water resources are constant resources. In areas where water is scarce, people may go to war over water sources, while in water-rich areas, such conflicts do not occur.
The fourth case is negative-sum constant competition, where the total sum of what all parties have after the competition is less than at the start. For example, gladiator duels—two live people begin the duel, and only one survives at the end. The larger the negative value, the less likely the competition will occur unless forced (like gladiators) or for something of special significance (like knights competing for honor). This is because all parties understand that participating in such a competition results in overall damage beforehand.
The fifth case is variable-sum competition, where the overall effect depends on the actions taken by all participants. In this type of competition, cooperative behavior can emerge, with all parties working together to gain greater total benefits. When necessary, temporary interests can be sacrificed for long-term gains.
For calculating the benefits of stock market competition, there are two methods. The first method views stocks as having no intrinsic value, considering only monetary gains, equating the stock market to gambling.
The second method considers the intrinsic value of stocks, calculating gains as the sum of money and the intrinsic value of stocks. According to this perspective, the stock market is a place for allocating social resources. Through reasonable allocation of social resources, economic structures can be optimized, promoting economic development and benefiting the country and society.
According to the first method, people tend to hold cash primarily, as the chips themselves have no value, making holding them insecure.
According to the second method, people tend to hold stocks mainly, as stocks can appreciate, while currency often depreciates slowly.
The second calculation method is scientific, as stocks are securities with value, not valueless chips. In reality, people exist with both mindsets. In fact, junk stocks behave more like the first method, while quality stocks behave more like the second method.
Since the first method makes the market more brutal, those with this mindset operate more aggressively. If most market participants adopt this view, the market will become more volatile.
Regardless of which method is used, the stock market competition is a variable-sum competition. Transaction taxes and commissions are negative factors. For the first method, the positive factor is the injection of funds into the market through dividends, resulting in injected funds minus tax. Currently, taxation and commissions far exceed dividends, making it a negative-sum competition. For the second method, the positive factor is the profit of listed companies, resulting in company profits minus tax. Calculated this way, the stock market isn't necessarily a negative-sum competition, at least reducing the degree of negativity significantly.
Whether calculated using either method, the stock market is basically a negative-sum competition or a slightly positive-sum competition, approximating a zero-sum competition.
The theory of stock market competition teaches us that to survive and grow long-term in this near-zero-sum market, adopting a gambling mentality is destined to fail, as it is a negative-sum competition. The only method is to follow Warren Buffett’s investment philosophy, diligently studying company fundamentals, relying on the growth of listed company profits to achieve long-term stable returns.