Monopoly

No, I’m not talking about Standard Oil or the AT&T of old, or even your cable TV provider. It’s the board game that got me thinking about behavioral finance after my family played a protracted three-night marathon game.

I won’t claim Monopoly is the perfect personal finance teaching tool. Nor do I think it mirrors reality in a meaningful way. After all, how many of us would ever buy a railroad—or four for that matter?

Over the years, though, I’ve admired the way Monopoly promotes executive functioning. Among other things, players must make timely decisions, solve problems, think strategically and proactively, and adapt to change while managing a diverse portfolio of properties.

It was also fun, back in the day, to watch a four-year-old stretch his math skills while serving as the banker.

But the boys are older now and our most recent game gave me some insights into their personalities—and my own—and how we see risk and reward. Here’s a summary of our varying styles.

The index investors. Mom and dad sought diversified portfolios, buying up individual properties when we could to ensure we had pieces of the action across the board. We wouldn’t get rich quick with this approach, but our fortunes just might compound over time.

The property developer. Our eldest son played aggressively and showed a high tolerance for risk. I got nervous watching him snatch up like-colored properties. He’d then adorn them with house after house followed by hotel after hotel until the amount of his cash on hand dwindled to a few fives and singles.

The dividend investor. His brother played things more conservatively, taking maybe a tad more risk than his mom or old man would. Not as interested in keeping track of houses and hotels, he was keen on the railroads and utilities, valuing the simplicity and straightforward income they offered. He also appreciated having a good cash cushion set aside.

Who won? Our eldest son, the risk-taking property developer. Over the second and third nights, he started bringing in oodles of cash flow from his multiple hotels. Those hotels were hard for the rest of us to avoid on any trip around the board. Soon our cash positions dwindled due to the high rent we had to pay. Meanwhile, the lack of strong cash flow from our more conservative portfolios left us struggling to cover those expensive rent outflows.

Had the game ended after one session, the result might have been very different. It’s unclear who the exact winner would have been, but our hard-charging property developer was definitely in a pickle at that point.

Where would the game have gone beyond the three nights? My money would be on the risk-taking property developer. His gains would have continued to pile up because we other players would have been forced to pay rent every time we landed on his properties.

Given that my get rich slowly approach failed miserably when compared to the property developer’s riskier approach, do I have second thoughts about my lifetime of diversified index investing and modest spending? Absolutely not. After all, Monopoly is only a game—and it’s one where the rules often thwart things like budgeting. What you spend in Monopoly is driven less by planning for and controlling costs than by chance.

In addition, high risk and aggression just aren’t my style. That’s why I’m right at home here on HumbleDollar.

Any Monopoly players out there? What observations have you made while watching or playing the game?