What is a "competitive situation"? A competitive situation arises from the struggle for interests, and the contention for benefits forms the basis of such a scenario. The parties involved in the competitive situation form mutually competitive and adversarial relationships, where success or failure is determined by the amount of benefit gained. Specific external conditions determine the exact form of competition and confrontation, thereby forming a competitive situation. For example, in a game of Go, both players compete to occupy empty spaces on the board; wars are often fought over territory; duels among martial artists are frequently for honor; and in the stock market, people strive for money. When a resource is needed by people but its total quantity is limited, competition occurs. This competition requires a specific format to bring everyone together, and this format creates a competitive situation. Various competitive situations involve the parties vying for some type of resource, with success judged by how much is obtained. The nature of the competitive situation is closely related to the nature of the contested resource, and based on the characteristics of the resource being contested, competitive situations can be categorized into several types.
The first extreme case is when the contested resource is infinite, allowing anyone to take as much as they need without any competition occurring. For example, knowledge—anyone willing can learn it, and there won't be competition for knowledge itself, but there might be competition for rankings, as rank is a limited resource.
The second case is zero-sum competition, where the total gains of all competitors add up to zero—one person's win is exactly another person's loss, which easily triggers intense competition.
The third case is positive-sum constant competition, where each party’s gain is a fixed positive value. As this value increases, the intensity of competition gradually decreases. When resources are abundant enough to meet the needs of all competitors, it approaches an infinite resource scenario, avoiding competition. However, when the total amount of resources is far less than the total demand of all parties, it approaches a zero-sum competitive situation, causing fierce competition. Land and water resources are examples of constant resources; in regions where water is scarce, people may fight over water sources, whereas in water-rich areas, no such conflict occurs.
The fourth case is negative-sum constant competition, where the total sum of all parties' gains will be less than at the start of the competition. For instance, gladiator duels begin with two living individuals and end with only one survivor. The greater the negative value, the less likely the competition will occur unless forced (like gladiators) or if competing for something of special significance (like knights fighting for honor). This is because all parties understand that participating in such a competition already results in overall damage.
The fifth case is variable-sum competition, where the overall outcome depends on the actions taken by all participants. In this type of competition, cooperative behavior can emerge as the competitors work together to secure a larger total benefit, sacrificing temporary interests for long-term gains when necessary.
In the context of the stock market competitive situation, there are two ways to calculate profits. The first method views stocks as having no intrinsic value, calculating gains solely in terms of money, equating the stock market to gambling.
The second method considers the intrinsic value of stocks, calculating profits 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, optimizing economic structures through rational allocation of social resources, promoting economic development, and benefiting the country and society.
Using the first method, people tend to hold cash primarily, as holding stocks themselves has no value and feels unsafe.
Using the second method, people prefer to hold stocks primarily, as stocks can appreciate in value, while currency often depreciates slowly.
The second calculation method is scientific because stocks are securities with value, not valueless tokens. In reality, people who adopt either mindset exist. Factually, junk stocks behave more like the first method, while blue-chip stocks behave closer to the second method.
Since the first method makes the market more brutal, those holding this view tend to operate more aggressively. If most market participants adopt this perspective, the market becomes more volatile.
Regardless of the calculation method used, the stock market competitive situation is essentially 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 by listed companies through dividends, resulting in injected funds minus taxes. Currently, taxes and commissions far exceed dividends, making it a negative-sum competition. For the second method, the positive factor is the profit of listed companies, leading to company profits minus taxes. 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 positive-sum competition with a small total sum, roughly equivalent to a zero-sum competition.
The theory of stock market competitive situations suggests that to survive and grow in this near-zero-sum market in the long term, adopting a gambling mindset is destined to fail because it represents a negative-sum competition. The only method is to follow Warren Buffett's investment philosophy, diligently studying the fundamentals of companies and relying on the growth of listed company profits to achieve long-term stable returns.