Go and Economics

Dieter: A few years ago, our club gave a demonstration of the game to a service club. Although they seemed to be happy with the demonstration, I could not help but feeling we bored them at several stages of the lecture.

Members of a service club are, in my experience, mostly businessmen, or at least they take strong interest in economics. I remembered the outlines of the book Go, An Asian paradigm for business strategy and started to rethink completely the approach for demonstrating Go to people who have such a business-like background.

Soon enough, I discovered - well, this may be old news for you - that Go is not only a way to understand business, but that our understanding of business can also help us understand Go.

Go has always been related to warfare. The goban is the war zone, and the different areas on the goban are the battlefields. This picture leads to serious trouble for sentimental people or people with high ethical standards when forced to sacrifice some "soldiers" in order to win the "war".

The business analogy is obviously far more peaceful while keeping the competition aspect and therefore may appeal to more people.

The goban is the economy. You as a player have a business to run. The different areas on the board are called markets. In the beginning, all markets are to be conquered - there is not yet any economic activity. When playing a stone in an area, you invest in that market. The return on the investment can come under different shapes: making territory, building thickness or capturing some enemy stones.

When your opponent judges that you are developing in more markets or in larger markets than he, he will start competing with you in some market. Obviously, he's at a disadvantage in a market where you were the first to invest. If both keep investing in an area, competition gets tougher. At some point, one of the players decides to stop investing in that market (tenuki). There are several possible reasons for that.

• The market is stable with both competitors making profit. Any additional investment will increase the profit only by a small margin.
• The market is stable: your competitor has a clear advantage . Any additional investment will only increase the loss.
• The market is stable: you have a clear advantage. Any additional investment will only decrease the profit.
• The market is unstable, but other markets are begging for investment, and leaving this market won't make your business collapse.
• The market is unstable, but other markets are begging for investment, and continuing in this market won't make your competitor's business collapse

Accordingly, you continue to play in an area for the opposite reasons.

Making business has two aspects. Tactics and strategy. Tactics serve to conquer a market. Strategy includes deciding which markets are interesting to invest in, and how to combine the investments in the different markets to a sound business plan.

Territory is a market that you control/monopolize.

A moyo is a large market which is still open for competition, but which is heavily influenced by your investments. Either you take complete control of that market (turn the moyo into territory) or your competitor starts investing in that market, but he can't expect much profit coming of his investments, whereas your investments will pay off.

Thickness are solid investments in an open market. Those investments will soon turn into profit, or, if your opponent prevents that, his attention will be fully drawn towards this market, enabling you to make profit elsewhere.

TakeNGive: I had read somewhere that if chess is a war, then go is the economy. This looks like a good translation of go concepts into economic ideas -- I like it. I'll try to use it, the next time I teach the game to adults.

What should "influence" be?

Nodrog: Couldn't influence be positive feedback? If you have influence in one 'market' you have a stream of steady income that makes it easier to invest in other ones.

Twobitsprite: Another way to look at it would be capital overlap. You've invested a certain amount of capital in one market, but that capital can serve a dual purpose in a related market.

JanDeWit: Has anybody else here ever played the computer game 'Entrepreneur' (or 'The Corporate Machine' as it is called now)? I recently dug up my copy again and immediately I had to think of Dieter's article here.

In the game, you have to establish a monopoly in a specific type of products. You have to juggle prices, do research, keep up morale etcetera but the most important part is that have to get market penetration, which you do by sending salespeople to new regions (which you have to investigate first). Each of these salespeople radiate influence up to two spaces away, and being market leader in a region also strengthens your position in neighbouring countries.

So it's not exactly Go, but there are some similarities. It's also a fun game! In fact, I think I'm going to play it right now...

You can download 'Entrepreneur' (the older version of the game) at http://www.squakenet.com/download/entrepreneur/1615/. It is 8 megabytes in size, but well worth the download IMHO.

A demo of 'The Corporate Machine' (which you can only play online) is at http://www.stardock.com/products/machine/.

Vincent : As an MBA graduate in Banking, Finance, and Investment and a struggling Go player I found Dieter's article and the ideas within to be very interesting and helpful. Thanks Dieter!

Brad: As an Economics Major, I have always been amazed by the parallels. The go game is a cooperative entity built by competitors, just like the economy. The winner tends to be the most efficient player in terms of cost (stones played) vs. profit. Firms, in conquering the market, make decisions between profit and market share (influence). Marginal Analysis is used (usually subconsciously) in determining how many stones to use and how large of a territory to create. Increasing market share, past the initial startup (opening game), must be done at the expense of your competitors. The list goes on...

Hyppy: Jan, thanks for nothing for introducing me to The Corporate Machine. It ruined my entire afternoon! Seriously though, it's a great little game, and it gives a lot of insight into global business politics and strategies

Hu: Deep inside this article (broken link?) from the popular media, briefly, chess is compared to war and Go to "market share".

iLoveSai: Interesting ideas and interpretations here. However, unlike a goban (361 mokus), economies can and do grow over time. One side's gain is not the other's loss. There can be win/win situations. A random thought from a random person.
-- May23, 2004

Phelan: Great page, Dieter! I had never thought of Go this way, but it makes a lot of sense.

xela: Minue, in his lessons, sometimes uses "percentage return rate on investment" as a metaphor for efficiency or work.