My boys received a copy of the game Dominion as a Christmas present.
It’s a super game. You acquire cards with powers. The different powers work together in lots of interesting ways, but of course you must acquire them on a limited budget and have limited time in which to get as strong as you need to be.
Making good choices requires effective strategizing.
After playing the game two times, I wanted to learn more about how to play well. I typed the words “Dominion strategy” into the Google search box to see what I could find.
It pained me to see what turned up.
Dominion has only been around for a few years. And of course it is only a game. So it wouldn’t be a big deal if there were no good materials available. I quickly found lots of outstanding materials. In 30 minutes, I was a much improved Dominion player.
The painful part is in considering the contrast with stock investing.
Type the phrase “How to Invest in Stocks” into the Google search box and you are going to turn up lots of articles that recommend Buy-and-Hold Investing. My view (and I’m right!) is that Buy-and-Hold is the purest and most dangerous Get Rich Quick scheme ever concocted ny the human mind.
How can it be that as a society we are intelligent enough to figure out scores of wonderful strategies for playing a card game but cannot summon up the mental energies needed to teach people even the basics of how stock investing works?
I have come up with eight explanations.
1. The Experts Are Compromised.
The people offering advice on Dominion are players who love the game. They have no incentive to steer people wrong.
Most of the people we think of as stock experts make more money if people buy stocks than if they sometimes go with other investment classes.
2. People Are Intimidated by Money Topics.
Middle-class people are smart when it comes to buying cars and sweaters and bananas.
We love a deal.
We trade tips with each other as to how to get the most value for our money.
When it comes to investing, though, we freeze. We think we are not smart enough, we turn to experts.
The truth is that most expert investing advice hurts more than it helps and we would all do a lot better if we just relied on our common sense.
3. The Game Takes Too Long.
It’s possible to finish a game of Dominion in 30 minutes. Newcomers to the game make dumb mistakes the first time they play.
They learn from those mistakes. They get better.
Investing is a game that extends over 60 years of your life (if you start at age 25 and die at age 85). By the time we figure the game out, it’s over.
4. The Feedback Loop Is Deceiving.
Each time you play a hand in Dominion, you gain insights as to what works.
Most of us don’t learn by reading books or by thinking things through using logic. We learn by responding to feedback.
Bull markets offer the most deceptive sort of feedback imaginable. It makes us feel good to see big numbers on our portfolio statements. No one lets us know that most of the gains experienced in bull markets are phony and are forsaken in coming years. We come to believe that we must be doing something right when the reality is we are being taken for fools.
5. Pointless Information Confuses Us.
The media doesn’t tell us what we need to do to finance our retirements effectively.
It pushes what sells. It’s the horse race stuff that sells. What’s up? What’s down?
That stuff is a distraction. We would be better investors if 90 percent of the information we take in on the subject didn’t exist.
The media doesn’t report on Dominion games. That helps people become better Dominion players.
6. There Are Too Many Dumb Players.
I mean no insult.
There is no law saying you must be smart about investing. The reality, though, is that people don’t play Dominion unless they care enough about the game to become skilled at it. We are all forced to invest, whether we feel any desire to learn about it or not.
The result is that the experts believe that they must not say anything that cannot be understood by people with close to zero interest in the subject. The most important findings from the academic research are rarely mentioned.
7. It’s Too Important for Us to Test New Ideas.
Yes, it’s a paradox.
But the reality is that the best way to become good at Dominion is to play it and try out different things until you catch on to some ideas that work well for you.
If investing didn’t matter so much, we could learn through experimentation. We are too scared of making mistakes to do that. We fasten on to one strategy and then tune out criticisms of it because they make us feel uncomfortable about choices that we know will have a big effect on our efforts to attain financial freedom.
8. The Most Important Lessons Are Counter-Intuitive.
Dominion was developed by one man. So it makes sense. The guy who developed the game made sure of that.
The stock market makes sense too, once you factor in the crazy twists and turns imposed on it by the emotional humans.
But the most important truths of stock investing are counter-intutive. The stock market often acts in ways contrary to our expectations because it is not controlled — it is the product of millions of human interactions.
We care too much about investing.
That’s the root problem.
When you care too much, you can’t bear to acknowledge mistakes. That means that you can never advance in knowledge.
Perhaps it would help if we tried to think of investing as just another game in which strategy matters rather than as a matter of life and death. Perhaps by coming to care a little less we could come to learn a whole big bunch lot more.
Rob Bennett argues that the true cause of the current financial crisis was the heavy promotion of Buy-and-Hold investing strategies. His bio is here.