What This Crazy Monopoly Game Showed Me About the Real Estate Market
It’s always a good time when you can get together with friends and family, far and wide, to play the classic game of Monopoly.
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This past weekend, I was able to get my wife and two daughters all together for an epic game. It is amazing how this game can be so fun and satisfying to so many different kinds of minds. You’ve got me: the typical REI guy who thinks naturally about how real estate works. Then you’ve got my wife who has zero interest in the actual real estate business, but has a natural competitive edge, and can drive a hard bargain. And then you’ve got the two girls who want to buy as many properties as possible, and will do ANYTHING to acquire them (foreshadowing of the pre-2008 buyers market?)
The game starts off as usual. We roll the dice, do a couple laps around the board, and see how the cards fall by pure luck of the draw. I’m thinking that this is going to start getting boring after much longer, but what comes next was actually quite interesting.
I’m observing how everyone is reacting to how things are developing. I actually developed the first monopoly and built houses on the yellow properties. A couple of people landed on them right away, and they began cash flowing quite well. This ended up turning into a buyer craze for everybody else. Everyone had to have monopolies and start building houses, no matter what.
When I saw this, I immediately thought “housing bubble, 2008 financial crisis, SELL, SELL, SELL”.
The girls seriously would have given me their real bank accounts for the 2 monopolies that I had accumulated. So I sold them two totally developed monopolies for some serious cash and payment plans. I had essentially turned into the bank! I put a ridiculous amount of cash in my pocket, and had money continuously working for me.
What really made this strategy effective is that I had essentially depleted my opponent’s pockets. Every time they landed on each other’s houses, they’d have to mortgage their properties. On top of that, they were still paying off their debt with me each turn.
We ended up running out of time, so we ended the game by counting up our assets. As suspected, I had accumulated the most assets by this time, with only one railroad in my portfolio. I didn’t quite realize it yet, but I had just witnessed the coolest way to win in monopoly, contraire to conventional wisdom.
So What Can We Learn From This Game?
First of all, there are obvious differences between the monopoly game, and the real world market. Cash flow models are different, inflation of cash is not representative in the game, limited populations, and the limited time frames are just a few.
What the real take-away is that you’re not going to be maximizing your impact if you’re doing what everyone else is doing. When you’re doing what everyone else is doing the competition is too high, the reward is sparse, and the effort required to make an impact is unsustainable.
What this little game has proven to me is that you want to be zagging when everyone else is zigging. We do this by either approaching the market from a different angle, or by tapping into virgin ground. For example, everyone in our game was property crazed. The competition was furious and loud. By recognizing that cash in that game was an equally legitimate commodity, and that nobody was interested in keeping it, I was able to sell off my properties at prices way above the amount of cash that I had spent. I was able to set my own price, without the pressure of other competition. While everyone was busy spending, I was busy cashing out.
It was so fun seeing this economic phenomenon play out right in front of me at such a small scale. Usually seeing stuff like this play out in the real world takes years of data, lot’s of lost dollars, and our involvement is weighted at a micro scale. It was enlightening for me, but also a terrific example to teach my entrepreneurial kids.
The question is, what will be zigging next time, and will you be zigging or zagging?
By the way, my reference to zigging and zagging comes from the book by Marty Neurmier, “Zag: The Number One Strategy of High-Performance Brands“. In it, Marty makes the suggestions that “When everybody zigs, zag,” Good stuff, thanks Marty.
Related: How to Never Lose Monopoly Again
Photo Credit: DavidDMuir