A Case of Luck

I recently had the opportunity to participate in a seminar on investing and financial planning. In the seminar, we played a game quite similar to the cashflow game of the Rich Dad, Poor Dad fame.

Although it was just a game, it provided an insight of how one would manage one's money in real life. However, I must comment that some rules of the game makes it quite unrealistic. For example, the winner is the one who is the most cash-rich, not the one with the highest net worth.

I observed at my table at how other participants played the game. Initially, everyone was quite cautious. They were some chances to make big money, but we tend to ignore them, until someone else makes the money. Soon, all of us were taking those chances. See how great the lure of money (whether real or imaginary) is?

As the game proceeded, we were becoming reckless in a sort of a way. There were some chances where the returns weren't that good. Worse, they actually had a greater downside risk then upside potential. But participants chose to take it anyway.

In addition, people tend to forget the prices at which they made the purchase. I became a middleman at some point and made some commission off other participants. These participants then sold off the houses/ stocks later when they thought they had made a profit. They would have, if not for the cut I took from them.

And so it goes. The winners from each table were asked to share how they win the game. Since the game involves dices, luck was one of the component which some winners believed were essential to their positive outcome. While I believe many people had fun with the game, they might have taken home the wrong message, especially when the trainer implied that luck was important as well.

If I were to assume that the observation at my table applies to other tables as well, that is hardly the case. We might be unable to control the externalities (eg. the dice rolls), but we are able to control ourselves (the decision we make or don't). We might not be able to win the game because we happen not to land on those big chances (lack of opportunity as some say), but it not should be used as an excuse for some lousy decision made (your bad...admit it).

Bringing these learning points back to real life, here's how we could apply them.

1. Be clear on your financial objectives.
2. Monitor your finances carefully.
3. Determine your potential gains to losses when making any financial decisions.
4. After the middlemen take a cut of your profits, you're on your own.
5. Life could be cruel and deal you a bad hand, but you must learn to play the game good.
6. If opportunity doesn't knock on your door, it's probably because you haven't built one yet.