Pretty much as long as I can remember I’ve been big into the fantasy genre (starting, of course, with Tolkien) and role playing games (RPGs). They were both excellent forms of escapism for a shy kid that loved the ideas of magic and fighting monsters. So, when the game “Fable” was released in 2004, and its successors in 2008 and 2010, you’d best believe I was all over it.
These games had all the classic tropes and conventions for the genre. They were set in a pre-industrial society (at least initially) where the village-folk needed protecting by a noble hero wielding magic and weaponry to ultimately save the world. There was the classic system of gaining experience through battles and quests to “level up” and gain new abilities and spells. They also had less common features like the ability to become evil or good based on your actions- which had an impact on your appearance and how people would react to you.
Now, I’m not going to claim that the Fable series was the best thing since slice bread or try to bore you non-video-game-people with a recounting of all my heroic deeds. What I want to talk about is a neat little feature in the games that actually ended up tying in well with the investing strategies I use and recommend.
Building a (Virtual) Real Estate Empire
I don’t know if it was just a throwaway feature they added for funsies or not, and I’m hazy on recollecting how it evolved over the course of the three games, but one of the things I really took advantage of in the games was the ability to buy property.
Just like in the real world some of the various residences and storefronts throughout the world were available for purchase if you had the cash. The prices would vary based on the size of the property, what condition it was in, and of course: location, location, location!
When starting off, with a few measly gold coins to my name, I could only buy something simple like a “gypsy wagon” or run-down, old shack. By the late game though, I was rolling in money and making it my mission to buy up every property available including sweeping mansions and profitable businesses!
“Okay, good for you, but what does this have to do with anything?”
Fair question, dear reader, but bear with me.
There are a lot of ways this process of virtual tycoonery relates to real life investing. In fact, it probably informed how I invest today without me even realizing it. Here are the top 4 parallels:
1. Opportunity Cost:
Anytime I bought a piece of property in the game, it meant my gold coins weren’t going somewhere else. I wasn’t buying the fancy new sword or the food and potions that would keep me healthy while fighting the baddies. Especially in the early days it meant forgoing some of the things I wanted for the sake of a long-term strategy.
This is the same with investing in the real world. Every dollar contributed to a 401k is a dollar that doesn’t end up in your checking account to pay for the quality of life that you want. Sometimes, by committing to investing goals I’ve had to give up the bar and restaurant tabs that my friends were living it up with. Despite that, I had a plan and a goal and I stuck to it. If you can deal with a little bit of delayed gratification, you can really set your future self up for the good life.
2. Assets vs Expenses:
Probably the only thing I liked about the “Rich Dad, Poor Dad” book (which, don’t get me started here, it’s awful) was his emphasis on the purchase of assets that “work for you” and produce income. In the game, I was buying properties that would regularly pay me rental income and, unlike in real life, it was completely passive. I didn’t need to deal with tenants or maintenance or taxes. I just bought the property and then it trickled in regular cash payments over time.
In the real world, a good analog for this would be a diversified index fund like VTSAX. Simply by buying shares, I will regularly receive dividend payments for as long as I own it. (I’m ignoring capital appreciation here for simplicity). Just like in the game, the percent of the purchase price that I make in income every month or year will feel pretty small, but it adds up significantly over time. (See #4 below.)
The alternative use of money, in the game or in life, would be buying expenses where the money is gone immediately and the item or service I’m left with has no lasting value or depreciates rapidly (like a car). When these types of purchases represent the main use of our income, we end up tied to the need for a regular paycheck. With the consistent purchase of assets, we can eventually be free to live off the income and spend our time however we please.
3. Capital Improvements:
In Fable, if I remember correctly, another aspect of buying properties was that you could furnish and improve them. This would increase the value of the home and result in you, the player, receiving higher rents from your tenants. Quite clearly this is the same in our world. Whether for house flipping or land-lording, the investment of money and time into fixing up a property can often mean a higher sale price or better rents. I don’t invest in real estate myself, but if I ever go down that path, I’ll certainly be looking to invest “sweat equity” by making my own improvements to the property in the hopes of a better return on investment (ROI).
4. Compounding Gains:
Einstein’s “8th Wonder of the World” is compound interest and understanding it is perhaps the most important finance lesson there is. In Fable, the way compounding worked for me is that the more houses/shops I bought, the more income I had coming in. I then turned around and used that income to buy more properties. By the time I was late in the game, I had gobbled up every property I could find and I was earning more money than I could actually find a use for. I ended up buying all the best weapons and supplies and ultimately got every property that was even available for sale, just because I could. The cash pouring in was just unstoppable because it had compounded over time. If, on the other hand, I hadn’t bought the properties and had just relied on my monster fighting income, I might have been struggling to afford purchases for the entire game- saving up for each successive weapon upgrade and then (with the purchase) being wiped out back down to a net worth near zero.
In my life, compounding has been equally amazing. If I invest $1000 into the market, it may pay me something seemingly insignificant like 10 bucks a month. However, if I keep doing it and also keep investing those $10 bills, the monthly payments get much more substantial. At some point, the money I’ve got invested will be enough to pay for everything I buy each month or even replace all of the income from my day job. It will never stop blowing my mind that such a thing is possible!
So, next time you think that video games have nothing to offer, remember these lessons that the Fable games (probably unintentionally) taught me. Then, do me a favor, and go increase your 401k investment percentage and maybe set up some other automated investments. A couple decades from now you’ll be amazed at how much those investments have compounded and the income you’re earning from money that might otherwise have been frittered away on potions or swords or whatever people buy in the real world.
*Disclaimer: Fellow video game nerds, please don’t judge me if I’m misremembering some of the details here. This is at least how it all exists in the fond memories in my imperfect brain.