Tag Archives: monopoly

The resonance of monopoly (3-2): Selecting the right strategy

Monopoly

Monopoly

In the previous posts, we have seen through the history of monopoly game and the source of its popularity. We also see how monopoly is not simply a game of chance. For this blog post, we will answer the question of the previous post: why shouldn’t we choose to invest in Red and Yellow block, while they are great in term of ROI (Return on investment) ?

Every financiers love ROI, not? The number provides a way to compare the benefit we can yield from different projects, given that we don’t have enough money to invest all of them. We need to figure out how, with our limited resource, we get the best result we can get.

But ROI doesn’t mean everything. There are two other key issues here: timing and resources.

We all love ROI, but it doesn’t tell how fast the money will come back to you after your investment. And you need money to invest in other properties and to pay your own rents, no?

Capital Turnover

In the beginning of the game, you have a certain amount of capital, but far from enough. Usually, I will need to calculate very carefully when I have bought my first 7 – 8 properties. You don’t want to over-spend too much that later you need to sell houses to pay for lunch.

And that comes the equation. Providing that the amount of money to buy the Red/Yellow block is fairly high, it is not a good use of money to pursue a domination on Red block. Chance are, if you managed to own these properties, you will run out of money. A property block without houses is like a tiger without teeth: in fact, you can’t sustain a steady income in any property block without houses.

For the Orange block, though its ROI is somewhat less, it’s the block with the highest chance for players to land on. What does that mean? That means it will take less time to recover your investment, and later you will have money to build houses or sustain your business else where, even buying more blocks!

 

The resonance of monopoly (3-1): Selecting the right strategy

Following the blog post Monopoly: The Game of Finance, we have seen how important it is to realize the “real” value of a property in Monopoly. Needless to say, it’s the same with the property of real life: the business value of a house is not at its price. If you plan to use the building for business, you had better build it where there are lots of people.

Many of beginners make that mistake. They love building on Boardwalk, where they can charge their visitors a hefty price. However, these naive business owners don’t realize that they have to store in a big fortune on these blue blocks too. With the same money, one can easily generate a better income flow elsewhere.

Our question for today: out of all building block in the Monopoly board below, which one yield the best Return-on-investment ratio? That means the block which will give you averagely the highest rents in the same amount of time.

Before you scroll down for the answer, think a minute. It may not be obvious as you think.

Monopoly Board

Have you got the answer? Great!

The property block which will give the best return on investment is the Red and Yellow block. They give great rent for a fairly ok price and their chance to be landed on ranked second in the game! So if you own one of these two blocks, you have a very good chance to win.

But… In the last post, didn’t I advise you to buy the Orange block first?

Yes I did, and it has a reason.

To uncover this reason, you can check my next post.

The resonance of monopoly (2): Game of Finance

Monopoly

Monopoly is one of the most popular board games in the US.

However, people seldom gets it right.

It’s not until last year that I got my hand on a document on the origin of Monopoly. It is so different to what I have thought! The game is made as part of a thesis (what?) to illustrate how the big guy gets rich by bankrupting the small businesses. It outlives its creator, however, and lives on…

Like I say on the previous article, this game is not a gamble. With the development of computer, now we can calculate the chance of a property will be hit in a single trip around the board. And no, not every property has the same chance. Some has better chance to be hit, some has worse chance, and the gap is quite significant.

Need a hint? The orange block is your friend. Although they are quite cheap, they have the highest chance to be hit in a single round of travel, thanks to their position after the prison. The blue block, though attractive, doesn’t worth a crap at beginning, since you will never have enough money to finance its hefty price.

Lesson: never judge a book by its cover (so classic)

Monopoly Board