Is stock investing a zero-sum game?

This question has puzzled me for a long period of time since I started my journey on learning about investing. Different people hold different views to this question. Some say stock investing is a zero-sum game while others say that it is not. Is stock investing a zero-sum game?

The idea of zero-sum game implies that in every stock investment transaction, one party must benefit at the expense of another party who is making a loss. It seems that during every transaction of a stock in the stock exchange, the proponents in support of investing as a zero-sum game hold the view that one party must always benefit from the transaction from another party who is making a loss. 

For example, buyer buys a stock at a particular price from a seller who sells at a loss to him. This seems true during a bear market when a seller might be selling a stock at a loss due to a down-trending market to a buyer who buys the stock at a cheaper price which later rises in price resulting in a profit for the buyer. This also seems true when a seller sells a stock at profit at a particular price to a buyer after which the stock price goes down resulting in a loss for the buyer. 

However, do stock prices always behave in a zero-sum game fashion? Is it always necessarily true that one party must make a profit from a transaction at the expense of another party who is making a loss? 

Through my own experience with investing so far, I noticed that any stock investment transaction on the stock exchange may not necessarily follow a zero-sum game fashion. For instance, when I sold off a stock at a particular stock price making a profit, the buyer of my stock did not make a loss thereafter as the stock price continued its climb further. In this case, both parties made profits on their transactions. In another case, when I sold off a stock at a loss, the buyer of my stock did not make a profit as the stock price continued to decline further. In this case, both me the seller and the buyer made losses together on our transactions.

Thus, it is not always in a stock transaction that one party will make a profit at the expense of another party making a loss. This is the randomness of the stock market as described by Benjamin Graham, the father of value investing that in the short-term, the stock market is a voting machine, but in the long term, it is a weighing machine.

In the long term, stocks belonging to businesses with good fundamentals may grow their value over time rewarding their investors with appreciating stock price. For example, one cannot imagine a small company that has grown over time to become a large enterprise generating larger amount of revenue, income and cash flow to be still trading at the same share price when it was once in its infancy stage of growth. Unless this company keeps issuing more outstanding shares enlarging its equity at a faster rate than the growth of its earnings to dilute its earnings per share. Then, we might see a stock price that has not grown over a long period of time as the earnings per share remains the same due to dilution effects of more shares issued over time.

Thus, the company that can steadily grow its earnings per share over time, while growing and managing well its other tangible and intangible fundamentals such as revenue, income, cash flow, margins, branding, market share, corporate governance, debt loads, debt servicing, working capital need, etc. will generate appreciating stock value over time. This is why the stock market is a weighing machine over time as time will tell the difference between a good company and a lousy one. 

An investor can invest in a company at its early stage of growth and exit from the company by selling off his shares at a profit to another investor after the company has grown into a medium size enterprise. The latter investor can also benefit by staying invested with the same company which grows into a large enterprise similarly seeing the share price of the company continue its appreciation over time and making also a profit on his investments. Both investors, the earlier and latter one derive benefits by staying invested with the company that grows in value. No one benefits at the expense of the other as both made their profits on their investments. 

If one is a good value investor, there is no concern over whether stock investing is a zero-sum game or not. This is because no matter which period of time he has bought his shares (assuming he always tries his best to buy at lower than his estimated intrinsic value per share of a good company securing a margin of safety), he will be rewarded with an appreciating share price over a period of time. Thus, stock investing will never be a zero-sum game for any investor as no matter at which stage of growth in the company, as long as an investor rides on the growth, he will be seeing the share price of his invested company appreciate over time as the company grows. This is on the assumption that he has invested in a good company at a reasonable share price that grows its fundamentals steadily over a long period of time. 

Is stock investing a zero-sum game? By the looks of it, it is not. A company can grow over time and an investor who has invested in a good company that grows in value over time will see his shares in the company appreciate over time. Thus, stock investing is not a zero-sum game as it will reward any patient and astute investor who rides along the growth of a good company, seeing his invested shares grow in their share price over time. This is only so true of a company that grows in value instead of destroying value for its shareholders over time.

Stock investing is not a zero-sum game. 

Any investor can derive value from a good company by participating at different points of its growth.

If you get the customer experience, you have the business.

I am sharing a basic fundamental truth about running businesses but it is so basic that people may take it for granted. Every business exists to fulfil a need or want from the customer. If the business can understand the need or want of the customer really well and also execute their service or sale of products to meet the relevant need or want and even exceed the expectation of the customer, they have got the customer hooked. A satisfied customer means potential repeat sale and even word-of-mouth referrals by the satisfied customer for introducing more customers to the business. On the contrary, if a business provides lousy experience for a customer and keeps doing so long enough, the result is potential permanent loss of customer. This results in permanent loss in repeat sale from the same customer and also potential word-of-mouth referrals for introducing more customers to the business.

I personally have experienced this fundamental truth in business. I was once patronising a particular car servicing company. However, after some years I switched to my now current car servicing company. Ever since the switch, I have so far been satisfied with the service provided by my current car servicing company for the past few years. Why did I make the switch? 

Originally, I was satisfied with my previous car servicing company. It was a car dealer company as well and my first and second used car were bought from this previous car company. When I was buying my first used car, the car company got me a medium size used car from their list of used cars. I was satisfied with my first used car and had it serviced at this same car company over a few years. After a few years, I decided to change to a smaller used car. However, when I was making my purchase decision at the same car company, I was persuaded by the car salesperson to go for a medium size Japanese brand used car because the reason given was that it will carry a high resale value should I sell the car after a few years usage.

The advice given by the salesperson was not wrong and sounded logical. I went ahead with the purchase and got a medium size used Japanese car. I continued to service this second used car with the same car company. I decided to change my second used car again after another few years. This time round, I again wanted to purchase a smaller used car. Unfortunately, the car company happened not to carry a small used car in their list of used cars at that time. The salesperson tried to persuade me to buy one of their medium size Japanese used car using the same argument again that this type of car has a better resale value.

All seemed well. However, little did the salesperson knew that I had already set my mind this time to get a smaller used car and was thinking of holding on to this third used car for a long time and will not be changing car any time soon. I did not get a chance to voice my needs to the salesperson as what I got from the conversation was just the salesperson keep talking and explaining to me the logical sense to get a medium size used car. This could be because he was eager to make a sale since they did not have a smaller used car at that point of time to sell me and was hoping I would change my mind to get a medium size used car instead.

Guess what? I told the salesperson I would go back and reconsider my decision and return to the car company to make my purchase. The result is that I never did get back to the car company again. I eventually visited another car company and made my purchase of a smaller size used car as I intended to. Days later the previous car company called me up to ask for my decision and I was sorry to disappoint them that I had made my purchase with another car company. As for my car servicing with this previous car company, you would have guess it correctly that I did not return to the car company again for my car servicing needs but changed to my now current car servicing company.  

My current car servicing company has served me well. I could feel their sincerity in wanting to do their best to fulfil my car servicing needs with reasonable car servicing response time. There is also a personal touch as they actually remembered me as their client every time my car is due for servicing. Sometimes, when I asked for a discount on their car servicing, they will provide a small discount for me. Even if I am a loyal customer to them deserving a small discount, they have also done their best to keep me as their loyal customer and supporter of their service.

From my experience as a customer, the business that can understand my needs or wants better and can fulfil them better will get my sale. Sometimes, it is not just the price of the products or service that matters, but more so the quality of experience provided to the customer. I am glad to say that I have remained a loyal customer of my current car servicing company even though I received many advertisements on cheaper car servicing by other car servicing companies. Why do I stick with my current car servicing company? This is because they have provided quality customer experience so far and people tend to stay with familiar comfortable experience. Familiar quality customer experience is such a strong positive reinforcement and feedback that keeps the customer returning for more. This is a virtuous cycle that ensures repeat sale from the same customer and may even through word-of-mouth referrals from existing customers to help the business expands its customer base.

As such, the revenue of the business will grow steadily over time. The business will thus expand in size to service more customers. Then, it will be time to look at how the business can find ways to accommodate the increased customer base to maintain or even improve their level of quality customer experience. As long as the business continues to provide better quality customer experience, it will keep growing and have to constantly seek to accommodate the increased customer base and keep up their quality customer experience. 

Do not underestimate the power of quality customer experience as it is a fundamental truth which obviously will make or break a business.  

12 lessons Steve Jobs taught Guy Kawasaki.

Twelve lessons Guy Kawasaki learnt from Apple's Steve Jobs. These lessons I feel are not only applicable to entreprenuers but are also useful for any employee who constantly want to improve at how they think and function at work. Anyone can think and feel like an entreprenuer no matter an employer or employee. Any work that one do is likely to be involved in dealing with providing goods and services to people. Even an employee working in an organisation is providing service to his employer, his fellow colleagues across various departments and also their customers (even back end support staff who think that dealing with customers is not their job is in fact providing indispensable support to their front end colleagues who deal directly with customers).

Twelve inspiring lessons from one of the World's greatest entreprenuer Steve Jobs that can be applied for everyone who wants to improve at how they think and feel in their work, enjoy!

Summary of the 12 lessons:
1. Experts are clueless. 
2. Customers can't tell you what they need. 
3. Biggest challenges beget the best work. 
4. Design Counts. 
5. Big graphics, big fonts. 
6. Jump curves, not better sameness. 
7. If it works or doesn't work, that's all that matters. 
8. Value is different from price. 
9. A Players hire A Players. 
10. Real CEOs can demo. 
11. Real entrepreneurs ship. 
12. Some things need to be believed to be seen.