I haven’t learned as much as I could have from my lifelong fascination with games.
If I’d been paying attention to how I win at Monopoly
Alas, I have just confirmed another 12 months with my landlord, and I stubbornly refuse to deploy money into what I still see as a precariously priced London housing market.
Another example: I’m awful at chess
I know the rules of chess, obviously. And I’ve been beaten enough times to get the tactical general gist.
But I struggle to sacrifice pieces to win a checkmate. Instead, I guard everything defensively, until being ripped apart by a couple of knights or a rampaging queen. I don’t think far ahead enough, either.
Here I see echoes of mistakes I’ve made when stock-picking – both in being too cautious about the sort of companies I’ll consider (particularly with growth opportunities) and also jumping to assume a speedy reversion to the mean, instead of foreseeing protracted multi-year downturns.
I’m alert to these tendencies now, but I’m sure I’m not cured of them.
Mirror, mirror, on the board
For good or ill, I tend to play Settlers of Catan
Most of my friends are one-trick ponies when approaching this game of trading and land grabbing, but I’m pleasingly flexible with my tactics.
Unlike in real-life investing, there are no turnover costs to worry about in Settlers of Catan, so I churn my resources continually to try to give myself options. Doing so tends to beat waiting around for the right cards to show up.
Similarly, I try to be alert to the changing landscape in my real-life investing, and to take advantage of being a private – and hence nimble – investor.
I was even selling physical possessions in March 2009 to buy all the equities I could, for instance. And in the last few years I’ve attempted to turn the illiquidity of current markets to my advantage by trading overlooked or reviled small cap shares, to mixed but overall profitable ends.
I think most people are best passively investing, but the reason my co-blogger writes about it now is because I’ve been ever more active over the past 3-4 years.
I’ve even been experimenting with stagging retail bonds, despite my lack of enthusiasm for fixed income versus equities on current valuations.
New system – maybe new opportunities.
Enter Dominion
We shouldn’t take these colourful metaphors entirely seriously.
Indeed, I suspect one of the reasons why people fail when they actively invest1 is because they clutch to metaphors and narrative fallacies, most of which are contradictory.
Should you “be greedy when others are fearful” or ought you “never catch a falling knife”? Either way, if you do make a profit should you “run your winners and cut your losers” – despite the warning that “nobody ever went broke banking a profit”?
Pick your homily and make your choice.
That caveat aside, I believe I’ve genuinely learned something about myself in the past few months through playing a card game called Dominion
It’s another one I keep losing at, and after some introspection I think I know why.
And it’s a little scary what I think it could be teaching me about my attitude to money – and my life.
Dominion: A bluffer’s guide
I’m guessing that you probably haven’t played Dominion. So before revealing what I’ve learned about investing and money from repeatedly losing at it, I’d best explain how it works.2
Dominion is a card-based game, but they’re not the cards you’ll be familiar with from your late night strip poker sessions.
Rather these are the sort of theme-based cards that you might have seen hairy teenagers touting at each other when playing the cult classic game Magic the Gathering and the like.
In the most basic version of Dominion3, cards come in three kinds: Treasure, Action, and Victory cards.
These cards all relate to the medieval back story of the game – so Thief cards enable you to steal from other players, for example, while the Mine card enables you to add to your Treasure pile.
Here’s a few examples: Two Action cards, a Treasure card, and a Victory card:
The only way to win is by having the most Victory points when the game ends. Players take turns to use their cards to achieve this goal.
A turn consists of:
- Drawing a new hand of cards from the top of your deck.
- An action phase, where you can use the action cards drawn to do things such as manipulate your card deck, gain new cards, or attack other players.
- A buying phase, where you can use any Treasure cards in your deck to buy more cards – Action cards, Treasure cards, or Victory cards.
- Finally, discarding all the cards from your turn to a cast-off pile, where they sit until you’ve worked through your deck, at which point you shuffle them all and redraw.
On the face of it this might not sound like it relates much to investing – let alone your financial life-cycle.
But it does!
Card-carrying realist
Leaving aside the colourful specifics of the Dominion cards – Woodcutters, Feasts, Coins, Estates, and all that malarkey – what we have here is a crude model of the choices we face as investors.
Saving your money – You can spend your Treasure cards to buy more treasure. Over time you’ll amass quite a pile of loot.
Investing in productive assets – You can also use your Treasure cards to buy Action cards. This is key because you can only maximize your productivity by deploying Action cards in your Action phase, typically to gain more cards by doing so. It’s quite a bit like investing.
Spending your winnings – The kicker is that neither Treasure nor Action cards count towards winning when the game ends. All that matters are Victory cards, yet they aren’t good for anything else (you can’t spend them or deploy them in the Action phase, and they tend to clog up your deck). The Victory cards are a good metaphor for consumer spending and consumption.
Skilful Dominion players invest in a few complementary Action cards and high value Treasure cards, and they are good at judging when to go from the accumulation phase (investing in Action and Treasure cards) into the endgame (buying Victory cards).
Along the way they manage their decks carefully, trashing lower-value Treasure cards and Action cards to keep their decks punchy and to increase the frequency with which their higher value cards come up.
I don’t.
Why I lose at Dominion, and what it means for real-life
Here’s what I do in Dominion, and why it’s bad:
I hoard all my Treasure cards – Good players trash cheap Treasure cards, in order to focus their hands on higher value ones. I find it almost impossible to throw away money, even when I understand why I should.
I buy lots of different Action cards – Instead of having a clear strategy, I tend to buy lots of different kinds of assets (i.e. Action cards). This is partly a consequence of the previous point – that I hate wasting money. If I find myself with five coins worth of Treasure to spend at the end of my turn, I want to spend all five coins, not spend four and forgo one. I’ve rarely seen this magpie approach pay-off with a win.
I buy Victory cards too late – At the conclusion of games of Dominion I’m left with huge decks stuffed with Treasure and Action cards, none of which are worth anything. My rivals end the game with lean decks and a lot of Victory cards. I delay buying Victory cards because in my gut I see them as dead money. I always think “Just one more turn”.
The flaw in my strategy recalls the famous maxim of the economist John Maynard Keynes:
“In the long run, we’re all dead.”
I keep accumulating Treasure and Assets in Dominion as if there was no Victory point aspect to it. I tell myself I’ll play differently next time, but the same thing happens again. I always want to grow my assets, not consume.
And here I can see parallels with my life.
For example, I have wondered before if I run a tight ship or am just a tightwad? I have saved 20-30% of my net salary, more or less, for most of my working life, and sometimes saved more. I’m not particularly proud of it, because I find it easy the way most people find it hard.
He who dies with the most toys still dies – that’s one difference between real-life and Dominion. If there are winners in the game of life, they are surely not simply the ones that spend the most.
Yet by the same token, life is not a rehearsal and you can’t take it with you.
Am I spending too little in my life today – having less fun or less comfort or less satisfaction – in order to invest for an ever-shorter-lived future self?
I can even see echoes of my Dominion mistakes in the big property blunder I mentioned at the start of this article.
Despite the historical evidence that house prices tend to increase over most periods of time, I’ve always been quicker to see a liability – repair bills, refurbishing costs, and a mortgage racking up interest.
So I’ve saved and invested instead, to the point where I’ve now got enough Action and Treasure card equivalents to buy the first flat I shied away from in the 1990s several times over outright… if only the price hadn’t gone up four-fold since then!
Clearly houses are assets, as well as liabilities – and I’d like to own one and paint it how I please, as Kirsty’n’Phil say on TV. So when will I cash in some chips?
As things stand I risk running a mortgage into my pension years. The parallels with the Victory cards in Dominion are clear.
Back to the game of life
It may seem strange that I’ve noticed these tendencies from a game rather than from, say, various ex-girlfriends shouting at me until they’re blue in the face that I’m not Peter Pan.
But most of literature’s great novels wouldn’t exist if we found it easy to see ourselves, would they?
I’ve not found it easy to change tack in Dominion, and I am not about to rush out and buy a two-bed flat in London that’s priced at seven or eight times average earnings, either.
But this cult card game has given me pause for thought (as well as making me want to recuperate with a few triumphant games of Monopoly!)
What lessons have you learned about money or investing from a game? I’d love to hear from you in the comments below.
- Apart from the formally accepted academic truth that it is impossible to beat the market, with any outperformance down to luck. [↩]
- Note to Dominion fans. The explanation I am about to give is of course overly simplified. This is not the place to explain how Reaction cards work, or to go into the minutia of deck management. [↩]
- There are innumerable expansion packs
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I learnt from every resources type game I ever played from Monopoly onwards that I am hoarder and you won’t find many habituees of the comments section in obscure English personal finance blogs who aren’t.
I worry about this too….should I just start spending money and having fun?
Probably not! Life is fun without wasting money. I don’t mind leaving too many assets when I die. Better to do that then to be financially strapped and miserable due to being over-leveraged……
Reading your post, I realise that we are alike in many ways. Except I’ve never paid Dominion, or the other games. I can’t say I’ve learnt anything about investing from games, either. I do know that in Monopoly it’s advantageous to spend time in jail at the end-game. I’m not sure that’s so applicable in real life. In the end-game, don’t use your get-out-of-jail free card. Stay in there as long as possible. The point is, that in the end game, it’s not possible to accumulate anymore. Everything you land on costs, so jail is the best place to be.
I don’t earn very much, but I do save a high proportion of what I earn. It’s always been my way. It’s also very gratifying to see that the dividends I receive is worth a high proportion (let’s not get into how high a proportion that might be. We are, after all, British) of my wages. It’s like getting a pay rise without having to do anything.
Although I am a big saver, I am far from beng a hoarder. I give a lot of my stuff away, and tend to attract negative criticism for doing so.
This is dead cool. Know thyself. It’s the only game in town.
I failed desperately to know myself in recent years, chasing chimeras and fool’s gold. I had to fall back, and yield, ever falling back and falling back, until the turning point came. In the turning point, wisdom is to be had, but you can’t call where or when it will come. You build the foundations one small piece at a time.
It’s one of the gifts of getting older 😉 It’s why there is no need to fear death
I’m possibly the only Monevator reader who has been playing Dominion for longer than he’s been investing – ignoring standard job pension contributions.
I’ve got to say that Dominion has never struck me as a particularly good model for any style of investing for the simple reason that you never spend cash in Dominion – you use it to buy things, but it magically stays with you so you can use it again later.
I also wouldn’t view Victory cards as a metaphor for consumer spending & consumption. To me, they would represent funds in ISAs & SIPPs: accumulating lots of them is the entire purpose of the game, but every time you decide to invest in one, you’re facing a later opportunity cost (Dominion: useless Victory cards in hand; RealLife: you can’t (or shouldn’t) spend what you’ve saved).
“St Petersburg” was the first modern game I encountered that starts with investing for income, and switches to investing for Victory Points. There are two kinds of VP: recurring and end-game, and it took me many plays before getting some sense of balance about these three elements.Even now, I’ll lose more games than I win.
@Neverland — Indeed. Maybe I should syndicate the article to one of those web blogs about handbags and shopping. 😉
@Patrick — I’m not really changing, but I do think one can go the other way. I think it’s a matter of evaluating what one has given up and was it worth it? A few more fancy pairs of jeans in my 20s — I can live with it. A couple of holidays I didn’t take or (expensive) skills I didn’t acquire, or not having that housing albatross around my neck? Possibly I should have spent a bit more there.
@Mark — Yes, I wouldn’t say I’m a miser though I’m certainly careful with money, even in company. (I have friends who read this blog, they might think differently!) If anyone suffers from my lack of spending, it’s me.
@ermine — Nice to hear from you! You’ve gone awfully quiet since you retired. Are you suffering from “not enough time” retiree syndrome?
@Steve — Interesting to hear from a Dominion vet. Yes, I see what you’re saying about Treasure, of course, but I didn’t want to complicate the article. I think my ‘saving’ metaphor does stand… I have seen games where an opponent has just bought a couple of action cards and then relentlessly reinvested until he’s almost got a hand of gold and platinum, which turns into a Province buying machine! I disagree about the Victory cards though, I still think they’re a useful model — especially if you think of ‘consumption’ as opposed to ‘acquisition of material stuff’. If I ‘consume’ a Duchy/holiday in the Maldives, that’s certainly an opportunity cost. Also, the foregone money in real life will slow down my saving progress, and in Dominion having that Duchy in hand will slightly slow down my hand. (Islands and the like in expansion packs notwithstanding. 🙂 )
But yes, it’s a metaphor! 🙂
St Petersburg
sounds well worth investigating, and I see it’s a Rio Grande game, too. Thanks for the pointer.An Irish friend of mine use to define winning as “dying in debt”.
@Investor: it does depend on the value of the Victory card, but simply seeing Victory cards as “dead money” is probably what costs you the game. They’re investments you *need* to make – gifts from your present self to your future self that cost your present self a bit (you could have bought something else), and curb your future options (by being dead cards in your hand), but your future self will end up appreciating your foresight.
Put simply – in Dominion’s model of life, Victory points are the only assets that count; everything else is just a tool to have most VP at the end of the game.
@Paul S — Hah, legions of aged Irish look like snatching defeat from the jaws of victory, then, due to their admirable knuckling down in the past couple of years. Glory to Athens! 😉
@Steve — Agreed.
@Steve, Investor
I have no idea about this card game Dominion..
..but the more you talk about it seem to me that Victory Cards = Flat in London 🙂
Great article! I’d love to see this expanded to other cult games. Perhaps we could see a “How Pokemon Helped Me Get A Better Insurance Deal” in the future?
It’s a great idea taking a cult movement and using it to explain finance to the masses. I do it all the time on the Which4u.co.uk Finance Blog, dropping references to cult movies and metal bands.
Keep up the good work!
I loved playing monopoly as a kid, but unfortunately it didn’t translate into real life.
I enjoying reading these musings but I can’t help but wonder if you should keep putting off buying property, at least one to live in.
Having upsized from a tiny box to a slightly bigger box very close to the “top of the market” (2006) I did worry that my earnings wouldn’t cover it, but 5 years of rock bottom interest rates and hefty overpayments have turned things around. Mortgage interest is a fraction of what a comparable house would cost to rent.
To achieve enough passive income to pay the rent on an equivalent
house would require a huge amount invested in risk assets with capital loss ever a threat. I think any stress event that really hits property prices by a significant margin will also hammer equities, probably by a greater degree (as in 2008).
Does it have to be a flat in central London? Its a distorted market, a house in commuter belt is a more realistic and better value option for most.
@SemiPassive — Yes, I am reaching a similar conclusion. Property looks a lot less stretched now once you get 60 minutes out of London. (I’d say 5 years ago it was just as stretched there, too, but I concede that has come down from red alert levels, to mildly orange).
That said, I’m not really bothered about holding a lot of risk assets. I saw my net worth fall 35% or so to the trough in 2009, and now I’m well over twice off that low point. I did feel guilty, strangely enough, but not overly stressed. Of course, my time horizon has shrunk by 3-4 years since then.
I think I’d be more stressed buying a property, if anything! While shares can of course halve any time they want to, I do see them as fundamentally reasonably priced, with cheap opportunities in some areas, whereas property, especially London, is definitely expensive. Buying expensive stresses me out, so it’d have to be a nice enough lifestyle choice, too, to counteract that — and that’s more likely to be in the country, I suppose.
Thanks for your thoughts.
Go buy a Home,now is the right time!
gk
I love that games can teach us about (or at least raise awareness of) investing. I started investing when I was 25 and I think it’s a shame that a lot of young people are never introduced to it. I was thrilled then to see that there is an element of investing in the Assassin’s Creed series of PS3/Xbox games. You need money to purchase weapons and equipment etc. but you can also decide to invest in and renovate properties and business. I think this can help to prepare people with the right mind set. Teaching people that “investing is owning quality assets that will pay income or appreciate in value over time” as opposed to “investing is watching a chaotic, random chart and if you get it wrong you lose everything, like in the movies!” is immensely important. Should you be taken over by the investment bug in the games, you will start to notice some subtleties such as the fact that those super expensive but fancy looking landmarks really don’t provide a good return on investment. Hmm, maybe if I’d have bought a bank instead, I’d be able to cut people’s limbs of way more efficiently. That’s how to get through to the youth 😀
> I have seen games where an opponent has just bought a couple of
> action cards and then relentlessly reinvested until he’s almost got a
> hand of gold and platinum, which turns into a Province buying
> machine!”
Depending on the board, a pure money-machine strategy can be very hard to beat (buy the most expensive money you can afford until you can afford provinces then buy them). This strategy is basically compound interest.
Once you add in the efficiency of a good trash card (cutting lifestyle expenses) you have a very tough to beat strategy (pretty much early retirement extreme).
BTW – you can play Dominion online – isotropic.org
Completely unrelated to money, but any recommendations for games for a beginner to start with (other than chess, drafts, standard playing cards)
Ideally simple (i.e. not too many / too complex rules), straightforward /quick to get into, for a minimum of 2 players, with typical game lengths of up to 1hour?
Doh, I realised as I pressed submit that I’ve misspelt draughts!
Not a good start!
@Jonny: standard recommendations for newcomers to “modern” boardgames are games like “Settlers of Catan”, “Carcassonne”, “Blokus”, “Ticket to Ride”. Even “Dominion” (mentioned above) isn’t really very complex. All should be available from amazon.co.uk. Make a point of checking the number of players, though – Settlers is 3-4 players, for example.
Another suggestion would be to check out the website http://www.boardgamegeek.com – a world of information about boardgames, from the simplest to the most compicated – but you will have to bring along your own money-saving self-control.
This comment is all about games and not about investment.
I bought Dominion about 2 weeks ago, and am also enjoying getting mullered on isotropic.org as well.
The sad thing is a lot (most) people play Monopoly when they’re young and then get into that crushingly awful endgame where you’re trying to dodge other people’s high value properties and just endlessly throwing dice. Then they decide they’re too old for boardgames and never play another one again. Little do they realise there’s loads of amazing games out there.
Other awesome games to check out would be Puerto Rico (3-5 though there are 2 player variants, 90m), Race for the Galaxy (2-4, 30m) Amun Re (4-5, 90m) Agricola (2-5, 120m), Brass (2-4, 90m) Year of the Dragon (2-5, 90m).
With all this talk of games … is there any game for Linux like Dominion, or anything else, that can be played by one player against a machine? It sounds like I’m missing out.
“But I struggle to sacrifice pieces to win a checkmate. Instead, I guard everything defensively, until being ripped apart by a couple of knights or a rampaging queen. I don’t think far ahead enough, either.”
I haven’t played chess in YEARS. I think that, generally, you SHOULD guard your pieces. Against a good player, taking risks and overextending yourself is likely to be a bad idea. I think that sacrificing pieces is also likely to be a bad idea generally, unless you know you can force a mate with it. I’ve sometimes considered sacrificing pieces, but I’ve always calculated whether the other guy loses more as a result of exchange of pieces.
I don’t think the idea of sacrifice works in investing. In chess, it can be logical to sacrifice a piece if you gain something more valuable from it. In investing, it never makes sense to “sacrifice” money.
I’ve played both Catan and Dominion. You relate the games to investing very well. In life, the timing and amount of distribution is largely based on personal preference. Some people might prefer to leave money to charity or relatives rather than consuming it. So your failing Dominion hands might be great hands to end life with.
What an excellent piece.
As a child, was there a game you *always* won? For me it was Cleudo, the country house murder detective board game. And while Cleudo was my game, my little sister always won at Monopoly.
Twenty five years on, we have achieved success in different ways. My sister is undoubtedly the wealthier, with several properties, investment and business interests. Since her first pay-day she has followed an aggressive leveraged buy and hold strategy, taking risks to acquire productive assets at keen prices and reinvesting the income. Monopoly brain.
My path to more modest financial success (I do OK) has involved entering an established profession, earning money through hard work, analysing every decision in detail, minimising all downside risks and losing the fewest chips. Cleudo brain.
The key in Cleudo is to diligently harness and tabulate every snippet of information, hard and soft. So if Colonel Mustard asks about Professor Plum in the Drawing Room with the Lead Piping, and is shown just one card, an observer can confidently discern that:
1. all of the above are implicated
2. exactly one of the above is involved in the crime
3. the other two are excluded from the crime
Additionally, the observer can theorise about why Colonel Mustard elected to examine Professor Plum, the Lead Piping , and the Drawing room. What does that suggest he knows already that I don’t? What doI already know that he probably doesn’t? Is there a way can I steer him away from gaining my information, and into divulging his information?
The other thing about Cleudo is that you only get one shot to call the final cards. Get it wrong, you lose. So it rewards intense conservatism.
@Blue — Thanks for your interesting comment! I think your Cleudo brain is also bringing some new insights to this topic.
I think you’re right about the conservatism of Cleudo, versus the great rewards for risk taking in Monopoly. Your sister has the same Monopoly tactics as me — you have to leverage up early and go for it. Some times you’ll blow up fast, but more often you’ll quickly become uncatchable if you’re playing with more careful opponents.
One game I always won was Risk. Ironically, given the name, I played very cautiously, and would almost never attack unless I had overwhelming odds. It’s a strategy that works well provided other players leave you alone for a couple of turns and don’t see you amassing your initial forces.
When I think about my investing in this light, I do see parallels. I like the odds in my favour. I suspect it’s why I’ve never been able to buy a house in London, to my detriment. For as long as it’s been feasible for me (from 2001 or so, after first becoming interested after graduating in the mid-1990s) it’s has also looked expensive. Perhaps priced at times to rise, but never a pushover! Hence I’ve never deployed my resources, a la Risk.
I recall that winning at the game of Risk is all about negotiating alliances and truces, and knowing when to keep your word and when to break it. The winner is often the player who persuades others to team up & delays the inevitable back-stabbing until the most opportune moment! I’m not suggesting that anyone who is good at Risk, is by nature duplicitous and predatory- just that they are probably very effective networkers, cut out for self-advancement in the world of business…
LOVE the concept of *victory points* as applied to personal finance