The new economics of chess

I just finished watching one of Chess24.com’s Magnus Carlsen-affiliated rapid on-line chess tournaments, when today (a day later?) I see that another tournament has started.  And with Magnus himself playing, as well as other world-class players.  Note that Magnus both plays in these tournaments as the #1 attraction, and he owns an equity share in them, albeit with other investors.

So I’ve been trying to model the production of chess services in my mind.

I start with the point that viewers care much more about live, fresh games than games from a week ago.  Many sports of course operate on this same basis.

The second point is that most chess players have a relatively low opportunity cost of time, Rogoff and Kasparov excepted, plus some chess players can substitute into poker for profit (and may have quit chess already).  In fact what they do in their spare time is to…play chess!  Often with each other, and often on-line.  So if you offer to pay them some amount for doing basically the same, they will sign up.  Especially during a pandemic when many of them are trapped under relatively severe quarantines.

It is also the case that a chess player can play many days in the year, perhaps not every day, but you really can play a lot without tearing your rotator cuff.

It then seems the equilibrium is a much higher supply of chess tournaments, especially since on-line play removes some of the previous barriers to entry, such as needing a venue and some physical infrastructure.

You might even end up with a kind of Malthusian equilibrium, where the supply keeps on expanding to meet a fairly low marginal cost.

But this is a “superstars” kind of competition, and so the returns will go to the scarce factor.  That scarce factor is Carlsen himself, who garners far more attention than any other player.  And as noted he is an equity holder in this venture and as a player he has been winning the #1 prize money.  Over time, you might expect the returns of some of the other players — maybe in the top ten but not so famous or glamorous — to approach the Malthusian level.  Perhaps much of the public doesn’t care if Magnus plays #9 or #16, who in any case are only a small number of rating points apart.

Notice how well Magnus Carlsen understands reputation and internet production.  He keeps on posting “Banter Blitz” videos on YouTube, which show him playing speed chess on-line and commenting on the games as they proceed.  He dramatically expanded the supply of chess tournaments, which he earns income from.  He already was “the scarce factor,” and he has dramatically expanded the supply of attention aimed his way.  He understands that successful internet production is frequent production.

On-line chess viewing is way up (NYT) with the pandemic, and also because of these efforts.

Do not underestimate Magnus Carlsen.  He has been #1 in classical chess, rapid, and blitz, all at the same time.  He is a huge YouTube star in chess.  He has won a tournament about chess trivia, and he has been #1 in fantasy football for the whole world (not an easy feat).

And now he is bringing an economic revolution to chess, with himself as the #1 labor and equity earner at the same time.

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They just need a system to ensure no-cheating beyond the honour code and whatever probabilistic criteria used today.

They do pretty well: Any tournament with real money has multiple cameras on every player at all times. On top of that, top tournaments are invitation only, and aren't going to bring in anyone outside of the top 50 players in the world: Really, even top 20, tops. A top 20 player has a lot more to lose in lifetime reputation loss by getting caught than they have to win in prize money.

It's especially tough to cheat in rapid and blitz, as the difference between perfect computer play and what a super GM can do in such time pressures is so high: Everyone has major inaccuracies, or downright blunders. The best computer moves require technical calculation might take a human a 10 minute think, so good luck selling the fact that they saw it in 15 seconds. It's not a matter of probabilistic criteria: Even a club level player with an engine can tell when a move is very good or inhuman, and computers today aren't all that great at giving human level advice. Leela might look more human than Stockfish, but anyone with some skill can tell when a move is too rash for anyone that doesn't have an engine behind them telling them that entire trees of tactical complications are always going to come up right.

That doesn't mean there's no cheating: There's a lot of cheating in online chess. But doing that in those premier tournaments would be silly.

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The South Asians figured out an appealing way to speed up cricket matches and made cricket a huge spectator sport in India in this century, so presumably there is an optimal speed at which chess should be played to maximize spectator interest. Thirty minutes between moves is probably not it.

the first T20 tournament was in England in about 2003, the goal was for each match to be no longer than a football game. The IPL in India (where cricket was already insanely popular) threw money at players from all around the world and hit the jackpot.

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Magnus always amazes me, not just his extraordinary chess brilliance but his personality. As an ambassador for the sport , I’d say he is the best world champion that ever was.
He is both otherworldly and approachable.
It’s great that there are so many top online tourneys and most of them are in the rapid format. It’s perfect for online because blitz is a little tough for the commentators, they don’t always keep up well. For spectators, Blitz works well when he is playing in the banter format and doing his own commenting.
It’s weird but I don’t even like playing a real game with a real board. Online is a lot more convenient. I like a flat screen and mouse and mostly 2 mins games. Sometimes I paste my position into another window with an engine right after the game to see where I went wrong.
There has never been a better time to be a chess player.

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What Magnus is doing is amazing but e-sports is where the action, the money, and attention is.

Is what Magnus Carlsen is doing not an esport?

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It's clear that chess players have been influenced by the megabucks being earned by Fortnight players.

World top 20, Nakamura, is posting a huge amount of streaming content at the moment. And you've noted Carlsen's 'Banter Blitz'.

https://www.youtube.com/channel/UCweCc7bSMX5J4jEH7HFImng

I think the equilibrium is that the players that have the largest intersection of charisma and talent end up streaming a lot of blitz and bullet games, as you say Carlsen is the number 1 here by quite some way at the moment. I'd happily subscribe on Twitch if he streamed a few times a week, and a couple of hundred thousand people watch his Banter Blitz and other youtube posts so I think there is substantial revenue he can unlock here with the Twitch grind.

Of course Nakamura is much better at blitz than classical so these changes favor him.

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Except that Magnus Carlsen is the monopoly supplier of Magnus Carlsen, and therefore has an incentive to restrict the supply of Magnus Carlsen to the monopoly level. (Particularly since these kinds of tournaments lose their glamour if you have too many of them. Customer willingness to pay is not fixed per unit, but declining.)

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Tyler, I do not understand how you wrote this post without mentioning Nakamura! Far more fascinating economically from my perspective. Naka is ~20th in the world in classical chess, but top 2 in blitz/bullet. He seems to have decided that streaming live chess entertainment is better for him than training to remain a top classical chess player. You can estimate his Twitch income fairly easily. He has a differentiated product, having a more internet-friendly personality than most chess players (Magnus excepted). It is a far more economically interesting story because Magus, great as he is, just dominates at everything in chess. He can be the best online player, the best classical player, the best chess investor, all at the same time. But Naka's story involves scarcity and a unique spot on the efficient frontier between super-elite chess skill and pure entertainment.

Hikaru also talks a lot about investing, and apparently is starting to act a bit. Not sure what that says about his comparative advantage.

There are also a lot of non-top players who seem good at leveraging their web presence in chess -- particularly those who are charming or articulate or both.

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How big is the market here? How many chess players can actually make this their day job?

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Yeah I came here to make a similar point about Naka but you've done a great job with this one. So interesting what he's doing, as well as some of the reactions (see Ben Finegold's really butthurt comments a couple days ago).

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Don't forget his popular videos from Lichess.com's online blitz tournaments! (He competed under the alias DrDrunkenstein among others)

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