“What’s that you’re playing?”
“Sounds like economics. Great.”
“Yep. It’s educational, you’ll like that.”
“What happens when I press this?”
“Dad, you just spent $1 billion of mine!!!”
“What did you get for it?”
“A hockey team.”
“That sounds about right.”
As an economist, I am always interested in games that purport to teach kids something about economics. In the olden days of mobile apps, I encouraged them to play Lemonade Stand–based on a computer game of my youth. There you had to carefully price and cost out a lemonade stand and make a few shekels in profit. It is a nice strong economic message and was a whole lot less costly to me than setting up a lemonade stand on the street and doing it the old-fashioned way.
AdVenture Capitalist was released a week or so ago on the App Store (and was featured by Apple). The game is simple. You start with a lemonade stand, tap to make some money and then earn enough to buy either more lemonade stands or a newspaper stand. Pretty soon you realize that it is worthwhile to spend some time hiring managers so you don’t have to tap (aka “work”) for your money. Then it gets pretty bourgeois and you spend your attention accumulating businesses, capital, and various upgrades. You also get to pay the piper, so to speak. You can double your profits for 4 hours by watching an ad–this is what puts the “Ad” in “AdVenture.” You can also spend real money, but there was no way that was happening.
So far so good. It is actually a pretty ordinary and somewhat uninspiring economics lesson at this point. The costs of businesses rise at a ridiculous rate, and so, while you might feel rich having a billion or a quadrillion (!) dollars, businesses cost an equivalent amount. There definitely is no free lunch here.
The true lesson in the game comes with regard to investors. As you accumulate more money, you accumulate the potential to get angel investors. Those angel investors are great–they each boost the profit you earn (off everything) by 2 percent per angel. What is important is that does not sound like much, but, thanks to compounding that arises as you spend those profits to accumulate capital, it adds up.
But here is the important bit: to use angels you have to sell all of your shares in all of your businesses and start again. This is a very hard thing to do even when the app itself tells you it is totally worth it. You have to raze all that you have done and start from scratch. At the beginning that was relatively hard work. How do you push that button for a do-over?
The economic calculation here is a no-brainer. When you have angels, things accumulate so quickly that, while you start from scratch, you are back with most of what you had at an increasingly fast rate. So if you were serious about “winning” this game, you could cash out quite often because angels don’t die following resets (unless you spend them along the way).
This is a big opportunity to teach kids about investing and compounding. My son started playing a day before me. However, I realized this issue and razed my businesses to the ground a couple of times more than him and now I am richer and pulling ahead very quickly. Even doing this just a small number of times at short intervals gave me that advantage. Once I explained what I had done, he had learned his lesson. Mathematics plus economics all in one.