10 May 2009

On "The Stock Market Game"

When I was in perhaps 5th or 6th grade, I recall my math teacher making a halfhearted effort to get us to play The Stock Market Game as part of our curriculum. It didn’t go very well and certainly wasn’t effective as a teaching tool; I remember a couple of class periods spent pretending to make sense of the NY Times’ stock pages while actually reading the comics, and very little else.

A few years ago when I first decided to play my own little stock market game with some Excel spreadsheets, and found myself learning a whole lot more about economics and the market than I had ever really intended, I wondered why I’d never done it before. And then the memory of that abortive attempt to do exactly that came back.

It strikes me as a rather sadly missed opportunity. Until I started playing with my little virtual portfolio in Excel, I had only a very vague idea of how the equities markets worked – and this is despite having taken the two semesters of required Economics in college. Would I have picked a different major or career path as a result of getting that little bit of fundamental understanding that you gain from playing with a paper portfolio earlier? (And would that have been a good thing?) I have no idea. And really, that question doesn’t interest me that much; I have no regrets, certainly, about my actual choices with regards to education or employment.

What does interest me is trying to figure out why, despite someone’s intentions that we would use the Stock Market Game in our math class, it never ended up amounting to anything.

The first problem, I suspect, is that my poor old math teacher – who had been teaching from the same curriculum for probably 30 years – didn’t know that much more about the stock market than we the students did. (I also suspect that she wasn’t the one to decide to include it in class; it just doesn’t, and didn’t at the time, seem like her style.) That combination was deadly, right off the bat. Whatever educational utility a virtual portfolio game might have – and people are rightly skeptical of them at times – it evaporates instantly when the teacher isn’t knowledgeable and interested in it themselves.

Perhaps the root of this problem was making it part of a math class in the first place. There really isn’t that much ‘math’ involved in maintaining a paper portfolio, and what there is represents pretty basic stuff – if you’re using a stock market game to teach percents, chances are you’re not really getting into what makes the stock market interesting and important; you might as well just stick to lemonade stand examples and save students the confusion.

The stock market game would probably have fit better into the history or social-studies curriculum than into math. That might have also caused the focus of the overall lesson to be more about the equities markets themselves – how they work, why they exist, what the effects are of market fluctuations – rather than simply on generating a short-term return in a virtual portfolio. (That would also go a long way towards addressing most of the criticisms of stock market games as propaganda tools expressed in the article by Maier, which are in my opinion mostly quite valid.)

The second major problem had to do with how the game itself was executed; this being the pre-Internet era, we did everything on paper and got pricing information out of the newspaper. Hopefully this wouldn’t be a problem today; it would be simple to use Google Finance, or even the Excel sheets I played with a few years ago, to do it now, and you’d at least get pretty graphs out of the bargain.

The only benefit I can attest to as a result of having to once try to use, or at least look at, the printed financials pages, is a vast appreciation for the electronic tools that are available today to the individual investor, or even to the merely curious. From the looks of the photos on TSMG’s website, they have changed with the times. (Damn kids will just take them for granted. Get off my lawn.)

Aside from simply replacing graph paper and the Times financial section with some pretty electronic system, bringing in computers also allows for a lot more research than would have previously been possible in a classroom setting. Research and due diligence are a huge component of investing and non-technical speculation, and that’s a lesson that you don’t need to become a stock broker or day trader later on in life in order to appreciate – anyone with a 401k will do.

I think the concept of a stock market game is a pretty sound one, in terms of teaching students about a fundamental and important part of our economy – one which can, as recent events have made plain, affect their lives whether they pay attention to it or not. I can only hope that how that concept is being executed today is better than the pathetic attempt I experienced many years ago.

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