A Computer Game
Railroad Tycoon is a wonderful computer game that should be issued with a warning: BEWARE: THIS GAME CAN BE ADDICTIVE.
I speak with considerable authority on the topic!
You’re the CEO of a railroad. Depending on which of the dozens of different scenarios you choose to play, you’ll have up to 31 computer-generated competitors. You can also play with real competitors over the internet. It’s your job to build your company into the richest, the biggest or the most profitable of all; carry the most freight; or become the richest player in the game (and, in some scenarios, all of these and more).
Built into the game are economic cycles that go from boom to depression and back (though not always predictably); the normal constraints that every manager must face between issuing equity, debt, where best to invest (build more track, buy more trains, invest in the industries you serve, take over a competitor), and so on. In your stock market account, you can buy shares in your company — or the competition’s. With or without margin.
It’s a great teaching tool for teenagers, who can learn about building a business, the economy and investing without knowing it while they have a lot of fun.
One of the most powerful lessons you can learn from Railroad Tycoon is about leverage. It’s frightening to see your entire wealth disappear in just minutes because you were over–leveraged and you face a margin call you can’t meet — while your company goes bankrupt. But it’s a lot cheaper to learn this lesson on a computer than with the help of your friendly stockbroker.