Years before the notion of starting a software company ever entered my mind, I briefly toyed with the idea of becoming a professional chess player. At the age of 19 as a sophomore in college, I tied with grandmaster Pal Benko for first place in the World Open chess tournament. I went into the tournament ranked 115th, and I don’t think anyone was more surprised than I was to make it to that last game and tie with Benko.
It was thrilling. I was young, had a master rating, and a big win under my belt. But I very quickly realized a long-term chess career was not in my future. It would have required constant travel, complete devotion, and little ability to build something that could have a lasting, significant impact on the world. Not to mention that my grand winning from the World Open was a check for a little over two thousand dollars. In 1975, that wasn’t bad. But once I subtracted my registration fee plus costs for travel to New York City, I realized I would likely struggle to make a decent living.
Though I resigned from the idea of becoming a grandmaster, I found my chess experience helped me master the tasks required of a CEO of a growing company. As it turns out, many of the same principles involved in choosing a chess move can be applied to making decisions in business.
In chess, the advantage may shift and change with each player’s move. One moment you are the underdog; the next, you recognize an opportunity to take the lead. The ability to identify and decide which opportunities to take—in chess and in business—are learned skills. Over the years, I’ve relied on the following three-phase approach to help me make the best decisions.
Recognize the patterns
In chess, patterns are important. If you’re going to turn the game to your advantage, you’ve got to see something in an open position that your opponent doesn’t. To understand and recognize patterns, chess players study their competitors’ history and experience. For example, in the Netflix series The Queen’s Gambit, the lead character reads book after familiar book analyzing the games of great grandmasters. The goal is to recognize micropatterns on the board within the positions of the pieces and the control of the different squares. Recognizing those patterns will clue you in on the strategic approach you should take.
Run candidate moves
Is the strategy you want to apply a winner? Analyzing the situation will help you find out. Take an “if-then” decision-tree approach to ascertain what will happen if you address a pattern with specific moves, and map out a sequence of alternatives to help refine your next move.
Evaluate your overconfidence
Right before you make your move, step back and ask yourself, “Am I missing anything obvious that could totally derail my decision or wipe me out?” It’s really dangerous in chess—and in business—to get so wrapped up in the analytics of your decision that you completely skip over something simple that may trip you up at the end. And while chess is a very transparent game, business—and specifically markets—are opaque. You not only need to analyze what your competition is doing—you need to understand what is happening holistically in the ecosystems that may affect you.
I’ve used this framework for decision-making for decades now and took some learnings from it to heart early on in our company’s existence.
In 1996, after operating as a private business for 13 years, I decided to take the company public. Honestly, I wasn’t sure if we were fully ready and wasn’t experienced in all of the ups and downs of an IPO, but people who were expert in these transactions assured me that it was a good strategy. We listed on NASDAQ and watched the company’s value rise . . . then fall—sharply. I felt I had failed. I was overconfident; carried away by Wall Street hype, I missed the signs that should have told me we weren’t ready.
To remedy the situation, I took myself out of the daily CEO responsibilities, brought in someone more experienced to help stabilize the business, and dove back into product development, which I had gotten too far away from. I also took the opportunity to ultimately become a better leader for the company. I was able to really study and understand the structural and managerial patterns of successful companies, look holistically at situations, and fully analyze our operations and go-to-market strategies. Then, in 2005, when I was confident in my ability to lead the day-to-day decisions of the company again, I retook operational control. The business has grown every year since and recently passed a milestone of $1 billion in revenue for the first time.
Over this past year and for some time to come, leaders in almost every industry are being challenged with more change than they ever expected. The pandemic exerted forces on markets that were unforeseen, and some aftereffects are still unknown. Disruption will continue to be the norm for the near future, and markets are evolving quickly, making the business of doing business increasingly more complex. The operational decisions you make now will be more important than ever. Look for the patterns. Consider all the angles. Have a Plan B (and C and D). Take one last, long look. Then make your move.
Alan Trefler is the founder and CEO of Pegasystems, a multinational software company he founded in 1983. Years earlier, at age 19, he tied for first place in the World Open Chess Championship.
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