Children’s gifts teach economic lessons

David MoonBlog

by David Moon

The board game Monopoly traces its origin to the Landlord’s Game created by Elizabeth Magie in 1903. Magie never intended to glorify capitalism; she designed the game to condemn private ownership of property as inherently unfair, enriching owners to the impoverishment of their tenants. Monopoly teaches that most of a person’s success or failure in life is due to chance.

Hasbro will sell more than a million copies of the game this year, almost half of which will be Christmas presents.

If you’d prefer not to unintentionally spread the gospel of Bernie Sanders to the kids on your Christmas list, here are some simple gift ideas that more closely mirror a capitalist’s mindset, if that’s your preference.

Despite most people’s initial reaction, card games actually teach that investing is not gambling; the educated use of skill can give a player a massive advantage over his competitors. Card games are a wonderful introduction to the real-world concept of risk assessment.

Like card games, all decisions in life involve some degree of uncertainty. Great investors, however, learn they can reduce the impact of mere chance by assessing risks and probabilities, rather than relying on hunches.

Card games also warn against assuming that trends continue into infinity; eventually a deck runs out of aces. And when someone else pulls the card from the deck that another player needs, card games demonstrate that risk does not exist in a vacuum; it is influenced by the actions of others.

In the short-run, randomness is the prevailing factor in a card game’s outcome. But in the longer-run, a player who properly focuses on process enjoys a significantly improved outcome.

Don’t worry that teaching a kid to count cards introduces him to the sins of gambling. The state of Tennessee has already done that with radio Christmas lottery ads.

The game Battleship is less mentally demanding than blackjack, but can teach probability assessment and process of elimination.

For kids too young for poker or Battleship, buy them a copy of the popular children’s book, “The Little Red Hen.” The irony is that this book about work ethic, personal investment and delayed gratification has its roots as a 19th Russian folk tale.

The Savvy Money Piggy Bank adds a couple of new twists to the traditional favorite. It features multiple pig compartments for money earmarked for spending, saving and giving. The bank makes noise as it accepts change and is translucent, allowing budding little Warren Buffetts to see and hear their portfolios grow.

By the way, I love Monopoly, but the best lesson it teaches is about the slow destructive power of inflation. Buffet paid $26.5 billion for railroad BNSF; B&O Railroad still costs $200, the same as in 1935.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN)