Industry News

Financial Philosophy in Monopoly Games

2018-05-30

In our childhood, many people should have played a tabletop game called master chess. The English original is called "monopoly".



A few years later, computer games made out of this should be known to many people and called monopoly.

I can say with great responsibility that this game should be the initiation of my finance education.

If you haven't played this game for readers, I can explain about the general gameplay of this game:

First, each player has a fixed amount of money from the beginning (15,000 or how much? I forgot).

Then, everyone turns the dice in turn and moves the number of steps according to the number of dice.

When moving, if you encounter a blank land, you can buy it. There are public utilities such as airports, railways, and bus stations that can also buy his stock.

If other players step on your land, he will have to pay you.

Each player completes a lap and pays a salary. This is the only opportunity to increase the source of income in the entire game. (except for some chance cards may have)

The game ends with the withdrawal of all other players except yourself.

Of course, there are some tricky games in the game:

For example, you can buy several adjacent lands and then upgrade them to villas.

This forms a monopoly on this area, so that the cost of passing by others is multiplied.

For example, you can buy those public facilities, so that you move much faster, because between the two public facilities, you can not spend money. This can quickly receive salary.

Our advanced gameplay can also be used to directly sell the land cards in our hands to other players. Or swap with other players.

For more sophisticated steps, you can mortgage the ground card on your hand to other players or banks, and negotiate a single interest for each lap.

You see, how similar this game is to our current business model.

We earn value by earning wages, buying assets, profiting from assets, and then buying more assets.

But one thing is that not everyone can understand it.

The core of this game is also the core of the current business logic: in fact, how to obtain (exploit) other people's funds (assets).

Because the total amount of funds in the entire society is constant, even if the annual expansion rate of currency issuance is different, the total amount of funds is still constant.

The speed at which you make money does not depend on how hard you work or what else, but what really depends on whether you are exploiting others or being exploited.

We have real estate, 2 million bought a house. It rose to 4 million three years later.

Then we sell it to the next one, removing the money that is left over through inflation and interest. In fact, you are exploiting the next buyer. Not how high is the value of the house itself. The construction cost of the house is similar, and it is nothing more than the degree of the land price that is exploited by the country to sell land.

The wages we receive each month are actually exploited by the boss for the value you have produced. The remaining part of the salary is given to you.

Otherwise, how did the national tax come and how did the owner’s luxury car yacht come?

We stocks, rose from a block of 10 to 15, and then sell it. In fact, you have exploited the next person to purchase your stock. It is not the value of the stock itself, nor the value of the company you invest in.

We invest in P2P. In fact, it is from the platform to obtain what borrower's borrowing costs and to exploit their interest. Of course, most of them were taken away by the platform or the corresponding asset company, and the rest was only distributed to you.

Therefore, how much money you can earn does not depend on your own ability to earn money, but on your ability to exploit & fight against exploitation.

We look back at the game itself. In fact, every change in wealth between you and your opponent depends on whether you have exploited him or whether he has exploited you.



Then we derive from the game, how can it be easier to exploit others?

The whole game is the easiest to make money, and the easiest way to kill an opponent is to buy all the plots of a certain neighborhood and integrate them into a whole, then upgrade the whole to a high-level building. In this way, as long as the opponent comes in once, he may lose half his net worth.

This point, we understand that its essence is: monopoly

As long as we monopolize an industry, or a region, or even a single product, we can all go to unlimited profits, and then again exploit others.

Let's take a look at the most profitable and best companies in China.

China Tobacco, China Power Grid, China Mobile, PetroChina, Tencent, Alibaba...

The core of these companies is that they have monopolized the entire market.

The pricing power of the entire market is in their hands.

The cost of nuclear power from the nuclear power grid before the network was said to have been around 0.2 yuan once, but to the people would be more than 0.4 yuan, if it is industrial electricity, then more than 1 yuan. This is a 100%-500% profit.

The cost of tobacco may be as little as a few bucks or even a few cents, but China’s most expensive cigarette affiliate, Fuchun Mountain, is worth 20,000 yuan. That is a 100 yuan. Therefore, the Tobacco Bureau is the best business unit in all cities. There is no one.

So, if we want to make money, or want to quickly exploit others to become rich. Must be able to obtain some monopoly in a certain area or area. Even if it is only a temporary act, it is enough for you to quickly complete the accumulation of wealth.

Do not think of monopoly too hard.

Even if you are in your circle of friends, the best purchasing or doing micro-business is doing the best, you have formed a sense of monopoly.

Or rather, one of your professional areas, in your circle of friends, is also the most prominent. Even if it is not the most prominent in the country or the whole city, you are forming a monopoly within a certain area.

Let me talk about the advanced gameplay in this game and some inspirations for us.

When we play this game in college, there will be a game, called a mortgage.

You can mortgage your property or property to a bank or other player at an agreed discount at the price of the purchase. (We generally play more exciting, mortgage to the player)

You need to pay a certain amount of interest to creditors.

For the most exciting time of play, every time you lose a color, you pay 1%-10% interest.

Because according to the rules of the game, as long as the cash on hand is not enough to pay for the expenses that you need for the round, you have to go bankrupt and withdraw.

We have quoted this rule in order to play a longer game time.

Allows the player to mortgage his assets before the game. If he starts the game and really loses the sieve and goes bankrupt, then no mortgage is allowed.

Of course, because of the game's limitations, mortgages mostly occur when a player is about to hang up.

But this may give us another business idea that can take shortcuts: leverage

Early in the early accumulation of primitive capital, we could expand our principal by using a common financial leverage. As long as it can be within reasonable risk control, it can carry out a favorable bad risk arbitrage.

For example, we have a good unit and a good professional background. Then we can get some big credit cards from the bank.

The total amount may add up to more than 100-200 million. (Of course, I have seen higher, but that is not the threshold that most people can achieve)

Or, we can make a mortgage on the real estate, car, or equity that we currently have, or we can take out some cash.

This means that we have an extra tens or millions of capital pools.

Thus expanding their available funds.

With this “other” money, we can expect a good business opportunity and we can foresee the opportunity to exploit others. We can do a buying action. Then exit after a certain period to complete the stage of risk arbitrage.

In addition to the cost of capital itself (usually no more than 10% annualized), as long as the difference can be exceeded, then this part is actually zero cost arbitrage.

In fact, in China, the most effective leverage for the people is to buy a house.

This is why the real estate speculation in China is so hot.

Because the property is a tool with 3.3 times leverage.

We only need 30% down payment to buy a 100% house.

Even if the house price rises by 10% a year, the 30% fund you invest in will have a growth rate of 33%.

It may be a bit complicated to say so. Let me give you an example to understand:

I spent 1 million down payment and bought a 3.3 million house.

Then the house rose 10% in a year's time, and it became 3.63 million.

So my actual profit is 330,000.

Compared to the one million yuan I invested, my annual return is 33%.

Excluding 10% of interest costs a year, this 1 million net return is 23%.

This is the reason why those people are keen to invest in real estate.

Low-cost, high-leverage, as long as you are quasi-optimistic, choose some areas that will be able to rise or rise in the future, and quickly harvest those who meet your orders. Naturally your asset growth will be very fast.

Of course, if you don’t look at it correctly, then you’re a leek harvested by the local government or a real estate agent.

In my opinion, any financial model is a Ponzi variant. Or in the case of the Chinese, this is a game of playing drums.

He does not produce value by himself, but mobility gives him value.

Never let yourself be the exploited person. Or, the person who took the last shot.

How do you prevent yourself or your child from becoming the last person to succeed?

You see, I didn't teach you at the beginning.

You should go to play monopoly.