6 Key Business Takeaways You Can Learn From Monopoly
Monopoly has been a household game for over 100 years now.
The real estate trading game has become one of the biggest board games all around the world, with over 300 different versions available.
To many people, this is just another board game that they play with their families or when they get bored.
To an entrepreneur, the game Monopoly embodies many valuable lessons that are crucial in business and finance itself.
The word 'Monopoly' originally means the exclusive possession or control of the supply of or trade in a commodity or service.
In economics, monopolies are businesses that own 25% or more of the market share in a specific market.
Google, whether you know it or not, is one of the biggest monopolies in the world holding around 92.5% of the search engine market.
This resonates quite well with the board game 'Monopoly,' because players compete to be the richest, forcing their opponents to go bankrupt, essentially being the last alive.
When I was first introduced to the game many years ago, I didn't completely understand the concept.
I would just hoard all of my cash without investing it into buying any property.
I would pass go, collect my money and carry on playing the game.
Surprisingly, I made it pretty far with this strategy and that's because no one else around me knew how to play the game too.
Monopoly is a simulation of people's inner beliefs around money and investing.
I inherently don't spend a lot of money and don't take too much risk.
That's why when I play monopoly, I don't choose to buy up too much land because I don't want to 'lose' my money.
This was reflected time and time again in my entrepreneurial journey.
The sad truth is, this is how most of the world is programmed to play the game (the real world).
We're told to sit in the passenger seat our whole lives and work for others, collecting a cheque at the end of the month and repeating.
This is why it's important to understand these 6 underlying lessons that we've all been exposed to through Monopoly and how you can apply them to your life or business to stay ahead.
Cash is king
Whether you agree with this or not, having cash on hand is usually the biggest asset you can have as a business owner.
When you're not struggling to pay the bills or your employees, you can have a lot more breathing room to think and assess the situation.
Your goal is essentially not to have cash in the bank anymore, it's to make sound decisions.
On the other hand, when you're running out of runway and your cash is quickly depleting, your biggest problem is no longer the business but having cash in the first place.
Although this could be a double-edged sword.
There have been many startups or businesses in general with too much cash on hand and managed to go bankrupt.
This can easily lead to you spending too much on unnecessary things, burning through cash, and losing it all.
When you're low on cash, you tend to think more creatively.
A balance is always key - maintain at least a 6-month runway in life and business so that you're always prepared if things go south.
Dave Ramsey is one of the biggest preachers of this 6-month emergency fund.
But having too much cash is probably a sign that you're being too cautious and not taking enough risk.
Patience is key but fast decision-making always triumph
In Monopoly, you have to balance a lot of things at once.
You got to make sure that you're not overspending on unnecessary buildings or land, whilst also making sure you're investing in the right places at the right time.
This also applies in the real world.
We've all heard the saying that 'Good things come to those who wait.'
I agree with this saying but I would change one thing about it and that is the word 'wait.'
'Waiting' for things to happen is never a sound plan in neither life or Monopoly.
Waiting is almost like hoping for things to go your way - instead, you should be patient because good things come to those who are patient.
Warren Buffett, one of the world's biggest investors says that "the stock market is a device for transferring money from the impatient to the patient."
The impatient enter the markets with hopes of flipping a profit quickly only to find out they lost their money to the patient trader.
Those who are not patient will most likely lose everything, or see wins and then lose them as fast as they won them.
This is the same in Monopoly too - if you're impatient, you're likely to make the wrong financial decisions that will leave you in ruin later throughout the game.
This leads on to the second part where you have to also learn to make swift decisions.
Decision-making is one of the most powerful attributes of leaders.
Leaders are where they are because they had to make hard decisions swiftly.
I've spoken previously about the things that matter the most when starting a successful business.
In Monopoly, you're given the chance to buy up land when you land on it, or another instance, bidding on land.
You have to learn to make the right decision quickly based on cash on hand, the current landscape of the game, and your future plans or projections, then living with the consequences.
This delicate balance of patience and fast decision-making can kill off a lot of players in a short time period.
Invest your money to generate cashflow
Having constant cash is extremely important as we discussed in the first point.
This is why, in Monopoly, it is your goal to build up a portfolio of land and properties that generate cash flow over the course of the game.
It's important to make sure that whatever you spend your money on is going to lead to a positive return down the lane.
This is why you should not invest in everything you land on - not everything will make you the return you're looking for in the time you're looking for.
This goes back to the previous point. You have to be patient when things are not going your way.
If you feel like you're in an inferior position, this could make you invest in something blindly hoping to turn the tables, only digging a deeper hole.
If your land and assets are not ROI (return on investment) positive, you will be reliant on debt, passing GO, or worse, waiting for luck to strike.
Expensive taste can be fatal
When I used to play the game, I would end up bidding absurd amounts for the Diamond Hills land (my favorite board).
When I lost the game, I would wonder how this happened when I had invested in the most expensive land possible.
This is because these properties were essentially costing me more than they were making me.
In Monopoly, you need to understand how much you can ultimately risk at a given time.
The same holds true in real life.
It's important to start hedging your risks early in the game, but building up a small portfolio will leave you in a better position to go for the bigger fish later.
You don't want to spend over 50% of your cash on a piece of land when there are still high costs associated with it.
Start small and build up a steady stream of cash flow before you start investing in the more expensive land and property.
You wouldn't buy a car in real life for $100,000 because you have it.
There are still other costs associated with owning that car such as maintenance, gas, insurance, and more.
Not all competition is bad competition
Whoever you go to, you'll hear different viewpoints about competition.
If you talk to an economist, they'll tell you that competition is a good thing and we should have it.
But if you go to an entrepreneur like Peter Thiel he'll scream that 'competition is for losers.'
In both business and Monopoly, it's important to understand how to deal with competition.
In a previous article, I explain how to manage competition and how to view it from a business perspective.
There is no single truth to competition - it can be good or bad in different situations.
In Monopoly, there will be many instances where you'll need something that someone else has - be it a piece of land or property.
The opposite may also hold true.
You may have something that is of value to the competition.
This is why it's important to understand that in certain instances, you will need to 'make a deal with the devil (your competitor)' in order to get ahead.
Other times, you will have to set your differences aside and team up to take down another competitor who is getting ahead.
Being the biggest dog is not always the best thing - it puts a big red target on your back.
But no matter your situation, whether it's a place of inferiority or superiority, you'll need to know how to deal with competition to keep moving forward.
The art of sales and negotiation is important in the real world - in more instances than we'd like to admit.
Diversify your investments
If you're a fan or investor of crypto, you'll probably know about the most recent crash.
A lot of people who had massive positions on coins such as bitcoin or Ethereum saw a drop of 50% or even more in their portfolio.
No one likes losing half of their portfolio and that is why you have to learn to master the art of diversification.
In Monopoly, you never want to own a single plot of land and build an entire village on it.
You want to own more than one piece of land at a given time, but just enough to be able to keep a close eye on each one.
In a previous article, I explained how focusing on multiple things at once can be detrimental to your success.
In this instance, it is also important to build up a strong foundation then branch out into more areas.
Owning more than one plot of land will allow you to maintain a clear head when something does not go your way.
Instead of your portfolio plunging 50% like the crypto example, you may lose only 10% give or take.
This holds true for both Monopoly and life as we've seen time and time again.
Crashes always happen - stocks, crypto, housing.
Even in general business, your main income stream can be interrupted in cases of a new market player or a new alternative.
Constantly innovate and build out from your foundations in order to have a more balanced, diversified portfolio.
There are many other lessons that we can learn from Monopoly.
These 6 lessons have been the main lessons that I've picked up and seen others talk about too from their personal experiences.
What are the biggest lessons that Monopoly has taught you?
Which Monopoly board is your favorite?
Let me know in the comments below.
Share this article if you found it helpful and informative.
Till next time,