Fool.com: Playing Like an Investor[Rule Breaker] June 13, 2000

Rule Breaker Portfolio
Playing Like an Investor
An ode to games

By David Gardner
June 13, 2000

Do you love games? On a ho-hum market day with the indices up and the BreakerPort down, maybe I'm in a summer frame of mind. We can talk genome any ol' time, and probably will be soon again. Same with online auctions, cable broadband, or any of our other staple relevant topics usually covered in this space. So maybe I am just in a summer frame of mind. Or maybe games are no mere summer diversion.

Do you love games? Investors certainly should. In fact, I believe everyone should.

For starters, life is a game. A great big board game. (Not to be confused by the way with Life, of which I'm not much of a fan.) In life, there are many ways to win, and many winners, some losers. In the classic board game Careers, before rolling the dice to move your token around the board, you would secretly list your own victory conditions: were you after love, money, fame? All your choice, maestro. Life is like that.

And it's always a game worth playing. Indeed, most of us want desperately to keep playing even as the game ends. Why? Because the game -- and life -- teaches us, challenges us, entertains us. It's rather addictive, really.

Business is a game. Another great big board game. But a strategy game, not a party game. Business isn't a trivial pursuit, neither is it Outburst or Pictionary. When you play the game of business, you begin with these two critical questions:

  1. What constitutes victory?
    (Define that.)

  2. And what leads to that victory?
    (What success factors lead to your definition?)

Having answered those questions you then simply build a PLAN designed to earn or achieve those success factors. Then you enact the plan and watch as your acts of thinking and focusing and risking eventually lead to a satisfying victory or a hard-fought defeat. What a simple and enticing view of business, business as strategy game, a game being played and won every day by companies like Cisco Systems or eBay, and being lost very badly by companies like DrKoop.com and Beyond.com. As business-focused Rule Breaker investors, we are working hard to understand the strategies of businesses we're invested in. We do this because we believe that these corporate plans and actions will be far more critical to our own long-term bottom lines than target prices, stock splits, momentum plays, or candlestick charts. (Gag.)

If you invest in companies that win the strategy game, you'll own the next JDS Uniphase or America Online. Pay attention to strategy, and treat business as a game.

When I read the words "business" and "game" together, I'm reminded of one of my favorite strategy games, the game Acquire. It has just been re-released in a very handsome new edition (page down and look at the board) from Hasbro/Avalon Hill, a game which I would without reservation recommend to anyone or any family that wanted to be educated, amused, and enriched. Why? Because in addition to their fun and the social interaction they promote, good games make you smarter. Good games force you to think, to plan, to risk, sometimes just to guess or hope... but always -- and ay, here's the rub -- the results, your destiny, are tied up in those thoughts and actions. The act of acting and winning, or failing and learning, is an act that emerges naturally from the playing of games. One of our Foolish leitmotifs, personal responsibility, is taught and illustrated beautifully by games.

I believe that if more people played Acquire and less people watched Entertainment Tonight -- all other things being equal -- we would live in a better world. It would be a smarter world, with better planning, more meaning, less waste. If you remain unconvinced of this point, I have failed to communicate the above as a writer. Which means I am failing! Since communicating is what writers should be doing.

(Help me out at the end of tonight's recap and take an extra second to click our poll link, answering my Acquire vs. Entertainment Tonight question.)

Investing is itself a game. We should only do it if we're going to have fun, and we should make the same sorts of plans and take the necessary risks (different amounts of risk, based on what "winning" means for you, and what steps you'll need to take to win). When you invest, you are participating directly in the very game of business I've described above. You are asking yourself, "Will Amazon win? What is winning, for Amazon? What factors must be present? How is Amazon going about achieving those? Is it enacting the right plan, and is it executing on that plan?"

Instead of having to run or operate Amazon, though, the "investment gamer" is able to invest in it at leisure, benefiting if Amazon wins, failing if it does not. Playing the investment game takes much less time than the business game, although the rewards are actually pretty comparable. That's what makes investing such a great game.

Tom and I grew up playing board games, and we continue to play them right through to today. In fact, with a few other Fools we'll be sitting down once again tonight across a game table, for the umpteenth time in our lives... with umpteen many more to come. Minds fully engaged, we'll be considering, determining, planning, and enacting... risking, suffering, transacting. Occasionally bluffing -- one brother to another! It is this act, this discipline, this interactivity and enjoyment that makes games so much fun, and I believe has been preparing us all along the way to be investors and businessmen.

All the games above, and many more, including my five favorite strategy games, may be investigated, reviewed, and purchased on my favorite game site, www.funagain.com. It's run by people with a passion for great games, and gets my highest bookmark recommendation. Also, I have started the Card & Board Games discussion board right here in Speaker's Corner at Fool.com.

Finally, two things. First is, we have a new game on offer here at Fool.com, Stock Madness, which takes only a little work and can provide a lot of reward. (As much as a new Dell Computer or a $1000 BUYandHOLD.com brokerage account.) Check it out, or if you already have, tell a friend! Second, if you would like to weigh in on your feelings about playing Acquire versus watching Entertainment Tonight, take tonight's poll and let the world know your feelings. You can view the live results there, as well.

Tomorrow, back to Rule Breaking. For now, game on!

David G.






Rule Breaker Portfolio

6/13/2000 Closing Numbers
Ticker Company Day Chg % Chg Price
AMGNAMGEN INC11/167.68%$65.69
AMZNAMAZON.COM9/161.16%$49.00
AOLAMERICA ONLINE-1 1/2-2.84%$51.25
ATHMAT HOME CORP CL A1/22.51%$20.44
CRAPE CORP - CELERA GENOMICS GRP-6 3/4-6.14%$103.25
EBAYEBAY INC3/161.78%$68.00
SBUXSTARBUCKS CORP1/166.09%$35.94

  Day Week Month Year
To Date
Since
8/5/1994
Annualized
Rule Breaker -.18% -4.07% 10.54% -18.54% 1,224.11% 55.41%
S&P 500 1.62% .86% 3.44% .01% 220.56% 22.00%
S&P 500(DA) 1.62% .86% 3.44% .01% 234.82% 22.91%
NASDAQ 2.21% -.61% 13.24% -5.36% 434.74% 33.13%

Trade Date # Shares Ticker Cost/Share Price LT % Val Chg
8/5/19944020AOL0.460$51.2511,050.68%
9/9/19972640AMZN3.188$49.001,437.25%
12/16/19981160AMGN21.444$65.69206.32%
12/17/19991260CRA39.756$103.25159.71%
2/26/1999600EBAY50.263$68.0035.29%
7/2/1998470SBUX27.955$35.9428.56%
12/4/1998900ATHM28.040$20.44-27.11%

Trade Date # Shares Ticker Cost Value LT $ Val Ch
8/5/19944020AOL$1,847.65$206,025.00$204,177.40
9/9/19972640AMZN$8,415.03$129,360.00$120,945.00
12/17/19991260CRA$50,093.00$130,095.00$80,002.00
12/16/19981160AMGN$24,875.50$76,197.50$51,322.00
2/26/1999600EBAY$30,158.00$40,800.00$10,642.00
7/2/1998470SBUX$13,138.63$16,890.63$3,752.00
12/4/1998900ATHM$25,236.13$18,393.75($6,842.38)
  Cash: $44,060.03  
  Total: $661,821.90  



Note
The Fool Portfolio was launched on August 5, 1994, with $50,000. It was renamed the Rule Breaker Portfolio in October 1998. The investing strategy began with the first investments of the Fool Port and has evolved with time and experience. In July 2001, the portfolio began adding $12,500 each quarter (We missed Jan. 2002, so we added $25,000 in April 2002). We skip a quarter if we have enough uninvested cash or cash available in stocks we would prefer to sell to make new investments. All transactions are shared and explained publicly before being made, and returns are compared in each week's column to the S&P 500 (including dividends where noted) and the Nasdaq composite. For a history of all transactions, please click here.