Cod Fish Wars: lessons for traders & investors

A trawler ship was fleeing away.

A patrolling boat was behind it.

The ship’s name: CS Forester.

It was British.

The boat was named Thor – and belonged to Iceland.

CS Forester had come to the seas 12 miles near Iceland to catch fish.

For 100 miles, CS Forester tried to flee with the Thor close behind it.

Eventually, Thor fired shells. Two shells hit their target, damaging the CS Forester.

The crew of the CS Forester stopped fleeing.

Men from the patrolling boat got onto CS Forester.

They arrested the crew. The captain of the ship was arrested and sent to prison. The ship was towed to Iceland and impounded.

Nobody was killed in the exchange but it was violent nonetheless.

Eventually, the ship owners paid heavy fines to release the captain and to take the ship back.

This was only one of the several major conflicts that occurred between British ships and Icelandic ships.

All for one fish: the cod.

Cod Wars

For nearly 500 years, British fishing boats had been going to the seas near Iceland.

The people of Iceland had been fishing using boats too.

Iceland is a tiny country. It has little land. Of that, even less is suitable for farming. They heavily depend on fishing cod from their seas.

For hundreds of years, the British and the Icelandic people fished these seas without much conflict.

But things changed in the 1950s.

Big steam and diesel-powered trawler ships started coming from Britain.

Trawler ships have a large net behind them. These nets can catch tons of fish in a matter of hours.

Not just British trawlers, but trawlers from Germany and other European countries came too. But the British were the largest in numbers.

Seeing this, the Icelandic people realized they were missing out on potential money.

They bought second-hand trawlers from other countries and started fishing.

Instead of catching cod only to eat, they started fishing and exporting vast quantities of cod.

This developed the country’s fishing industry.

This was something British ships had started doing before Iceland.

Iceland went from being a poor country living in the medieval ages to a modern country. The cod fish exports changed an entire nation’s fortunes.

With such vast quantities of fish being taken out of the sea, the inevitable happened. The number of cod fish in the sea started dropping alarmingly.

In response, Iceland tried to expand its nautical zones.

At first, it increased its jurisdiction from 5 miles from its shore to 12 miles.

Then, from 12 miles to 50 miles. And eventually, from 50 miles to 200 miles.

Of course, the British did not like this.

The result: the ‘Cod Wars’.

Each time Iceland expanded its shores, conflict arose. Britain protested and refused to follow the new shore limits.

Iceland’s patrolling boats would cut off the trawlers’ nets. The whiplash from this injured many sailors.

In defense, the British would send their navy ships to guard against Iceland’s patrolling boats.

Many boats and ships rammed into each other and suffered damage.

The CS Forester trawler was impounded during the Second Cod War.

There were a total of 3 Cod Wars. They took place from around 1958 to 1976.

After negotiations between countries and international bodies like NATO and the UN, Iceland was successful in each of the Cod Wars.

Iceland was so critically dependent on this fish that they carefully measured the fish they were taking out of the sea.

Today, the fishing rate is said to be ‘sustainable’. This means the cod fish is not in danger of going extinct.

All things were not well on the other side of the sea though.

In Britain, an entire cod fishing industry was wiped out.

Jobs were lost. Industries were undone.

Not just the fishermen, but even the cod fish-processing plant workers in Britain were heavily affected.

The British government compensated those who lost their jobs.

Zero-sum Game

This is a classic example of a zero-sum game.

For some people to win, some others have to lose.

The number of cod fish in the sea was limited.

Both Britain’s and Iceland’s fishermen would not get what they wanted.

Some people would get it. The others would not.

There are countless examples of zero-sum games in real life.

Cricket matches – there can be only one winner.

Competitive exams – a few of the hardest workers get the seats. The others will not, even if they studied hard (but not hard enough).

Contract bidding – the lowest bidder gets the contract. All others lose.

The essence of it is, you need to be better than your competitors.

Otherwise, you are not going to win.

Investing vs Trading

Is investing a zero-sum game?

No.

But trading is a zero-sum game.

In investing, the overall pie keeps increasing. So everyone benefits.

Think of it like this: imagine both British and Icelandic ships continue fishing more and more. But, the number of fish magically keeps increasing.

In such a hypothetical case, both fishermen continue to gain.

Even if British fishermen have better equipment and catch more fish, it won’t matter. There will still be enough fish for Icelandic fishermen.

There will be no conflicts.

That is roughly what investing is like.

In reality, fish are not endless in supply. They will finish after a certain point.

This is much like trading.

In trading, traders are competing against other traders. There is a limited supply of money.

Whoever is more skilled will get more money. The others will lose money.

This is why you read reports like ‘70% traders lose money’.

Why is investing not a zero-sum game?

Trading happens at an extremely high speed.

When you invest, you are buying companies’ shares.

These companies are earning revenues and making profits.

As their revenues and profits increase, their share price also increases.

If you own shares of companies whose revenues and profits go up – your share value goes up too.

The increase in share price is due to solid reasons.

The revenues and profits of good companies increase over months and years. They do not increase in a matter of minutes or hours.

Thus, stock prices go up (mostly backed by solid reasons) over months and years.

This is why investing in stocks is called ‘long-term investing’ – it takes years.

Of course, we are assuming that the country’s economy is doing well. Otherwise, it is difficult for most companies to increase their revenues and profits.

But stock prices change every second.

How?

This change is simply driven by the continuous buying and selling of shares. It is the changing supply and demand that affects the share prices.

So predicting which stocks will go up in the next few seconds or minutes is extremely hard. Many times, it is just luck.

There is no solid, fundamentals-backed reason for the stock price to go up or down.

Traders have to use advanced math, high-speed computers, technical indicators, and a developed sense of instinct.

Hence, only a few very skilled traders get the profits.

And others lose money.

This concept is quite technical.

You might have to research more as to why trading is zero-sum and long-term investing is not.

We’ve just tried to highlight the concept using a simple analogy.

The images above were generated using AI tools.