I have a good friend who has been challenging me recently to backgammon online. While he's a pretty good player, I had only played backgammon a few times in the past. Needless to say, he regularly cleans my clock, but we still play several times a week and I'm gradually improving. My friend also happens to be a key mentor in my financial education. In fact, if I had been playing anyone else, I might not have made the connection between playing backgammon and investing.
At first I didn't even recall the basics of the game. I made a lot of stupid mistakes. I failed to consider the consequences of my actions. I didn't look far enough ahead into the future. It only took me a few games to realize I tended to make a few mistakes over and over.
In the beginning I took too many risks; I jumped out without realizing the consequences. I would be amazed and annoyed when my friend would promptly send me to the bar. Then I made the mistake of playing too conservatively, and I'd lose badly again because I didn't have my assets in the right positions. I've also discovered that I can be an emotional player, so I need to be aware of that and not let the excitement of the moment push me into a stupid move.
My opponent, on the other hand, always has a plan. No matter how the dice roll, he stays focused on building this incredible defense. His plan is usually to advance his men while keeping me at a disadvantage with a block that improves with nearly every move. Even on the occasions when I am solidly ahead, he keeps working on his plan just in case I make an error.
Gradually I've learned there are a few standard opening moves that will help lay a foundation for a more solid game. I also began watching his moves carefully, and I learned how he set up that darned block that kept me trapped in the backfield.
I once had a near-perfect block set up -- it was extremely likely I'd get all my men home before my opponent even had a chance to get around the board -- but then I just couldn't resist putting that one blocked man on the bar. After all, there was only a one in six chance he'd be able to get back into play before I moved the open piece. Well, he did get that one in six chance, and put me on the bar where I stayed for quite a while because he had me fully blocked. I lost the game, but I learned a lesson.
So what have I learned from playing games that I can apply to investing? Here are a few things:
Take care of the basics first: Lay a foundation for investing by having your debts paid off and an emergency fund in place.
Take the time to learn a few strategies that work for you. I've begun learning what strategies I'm comfortable using and what sorts of companies are out of my circle of competence.
Investing too conservatively or taking too much risk can lead to a bad outcome. You can screw up a perfectly good game by getting cocky at the end.
Try to learn where the traps lie.
Having too many open positions can be risky.
When the odds are clearly in your favor don't be afraid to place a big bet, but you also need to know when to cut your losses.
Mainly, what playing backgammon has taught me about investing is: be patient, take your competitiveness out on the game boards, and finally, don't be so consumed by winning that you forget to have fun.