How Settlers of Catan can help you achieve early retirement - Episode 43

As a kid, family holidays meant board and card games. Canasta was very popular, as was Monopoly, Cluedo, Squatter, and various other games. As an adult my love of games has continued and fortunately I’ve been able to convince my home tribe to join me (and usually crush me). Of the various games that we play, Settlers of Catan has to be my favourite, and I know I’m not alone.

So today’s episode, is a bit of a nerdy self-indulgence, but I hope you’ll enjoy it. For those fellow Settlers of Catan lovers, hopefully these musings help bring your early retirement dreams closer to reality, and for those who’ve never had the pleasure of a great game of Catan, I hope this inspires you to put the word out amongst a few friends, and give it a go.

One of the hottest trends circulating around the globe at present is board and card games in cafes and bars. Perhaps we've started to reach a tipping point with social media and screen time, where the appeal of getting out of the house, not a screen in sight, holds enormous appeal. The opportunity to talk and have fun with actual people in the same room as you satisfies a deeply entrenched need for connectedness.

The game in a café also solves another potential social obstacle – what to do if we run out of things to talk about. I’m not in the dating phase of my life, but if I were, I think I’d go with a game in a café pretty early as a really low-stress ice breaker. You’d certainly get to know someone a whole lot better than sitting next to them at a movie.

Settlers of Catan, the German game released in 1995 has undoubtedly been an essential element of this rise in board game popularity. Some refer to Settlers of Catan as the modern day Monopoly, though whilst I enjoyed many hours playing Monopoly as a child, now that I've experienced Catan, Monopoly just wouldn't get a look in.

Reid Hoffman, LinkedIn's founder, Microsoft board member, and a board-game aficionado, says that Settlers of Catan is "the board game of entrepreneurship".

So how does Settlers of Catan help with your early retirement aspirations? I believe many of the game elements have parallels in the planning and investment process.

Let’s start with Settlements. To have success in Catan, you need a) to have settlements in good locations, and b) to have as many settlements (and cities) as possible. The order of those two factors is not by accident. Broadly speaking, the more settlements you have the better, but as with investing, quality matters.

For the uninitiated, Settlers of Catan requires players to gain resources in order to build or buy things. You gain resources either through the placement of your Settlements, or through trade. In some cases claiming a particular port that links to a resource you are well endowed with provides you with a solid path to victory.

So when thinking about planning your Early Retirement, before you make any investments, think about what your broader goal is, and as with the placement of your settlements, remember that quality, especially early on, is more important than quantity.

Another really important aspect of building wealth to enable early retirement is recognition of the importance of compounding returns. All of us, when we start investing, start small. And sometimes it can feel like progress is glacial because the incremental gains month to month are perhaps only in the single or low double digits. But reinvest those earnings, and you start to get earnings on those initial earnings, and like a snowball rolling down a hill, as time progresses your investments get larger and larger. The magic of compounding! It’s important therefore to not be put off by the early slow progress.

We see the parallel of this in Settlers of Catan. Early on we have only two settlements, and so the accumulation of resources can be a little slow. But as the game progresses, we eventually build extra settlements, and ultimately cities, and so we gain from the benefits of compounding – with each turn in the latter part of the game, we tend to get more and more resources.

You can’t win at Catan without trading, and that means you can’t win in isolation. If you are to realise your early retirement goal, you similarly need to involve others. The most obvious is your significant other if that is the circumstance you are in. It is extremely common, when I sit down with a couple for an initial meeting, to find that they’ve never discussed their long term plans with one another. One might be thinking that she’d like to retire as early as possible, whilst her partner might be worried about being bored, or losing the social interaction of being in the workplace, and want to work as long as possible.

Stepping outside your immediate household circumstance, a relationship with a trusted advisor is very likely to be wise. We can’t all be excellent at everything, so consider where your knowledge and interest gaps are, and find people who can plug those holes for you.

When investing, we often talk of the need to diversify. Never put all your eggs in the one basket is the common refrain, and it has a lot of wisdom. Different investments have their day in the sun at different times. They also have different income, growth and liquidity profiles. Therefore a sensible person, when working towards early retirement, will build up assets across a mix of areas, such as shares, property, bonds and cash.

The equivalent in Settlers of Catan is your resources. Have too much of a particular resource and you’ll become desperate for others to enable you to build and progress. That’s a recipe for some very lop-sided trades and falling a long way behind, especially in the early game.

As anyone who’s played Settlers of Catan knows, the robber is a frustrating yet essential element of the game. The robber tends to pull back on the leader of the game, enabling others to catch-up and in so doing, making the game much more enjoyable for all. Indeed the lack of a similar mechanism in Monopoly and other traditional games is a key reason for their declining popularity.

In the real world the robber essentially stands for bad luck. In life, things don’t always go your way, but there are actions you can take to recognise this potential and plan for it.

One tool is diversification as mentioned earlier. This means that if share markets experience a drop, your investment property is without a tenant for a while, or interest rates move in an unfavourable direction for you, your plans aren’t torpedoed.

Another is insurance. Ensuring your income is a good place to start. Home, car and health insurance likely all have a role to play. Insurance isn’t free, and you hope you’ll never need it, but the idea is that you can plan for the cost of insurance, whereas you can’t necessarily plan for an illness that means you can’t work for 8 months.

In Catan, you can buy insurance too. It’s called a Knight. Your knight can move that robber along when he’s troubling your citizens. Holding that insurance becomes very valuable, particularly later in the game if you find yourself in the lead, and with all of your opponents trying to slow you down. In Settlers of Catan your knight not only solves your robber problem, but it then inflicts that pain on one of your opponents. Fortunately this is not an element of modern day insurance.

Finally, when thinking about the parallels between early retirement and Settlers of Catan success, I think it’s worth reflecting on the time frame involved. Whilst Catan isn’t a long game, it’s certainly not one that can be won in a few moves. To succeed you need a plan, and you then need to be flexible enough to adjust the plan in response to the actions of your opponents, and the luck of the dice.

Succeeding with an early retirement goal requires much the same approach. Think long term, have a plan, but recognise that things happen that can’t be foreseen, and so be prepared to adapt and adjust your plan as needed.

Well, that’s it for my slightly self-indulgent Settlers of Catan / Early Retirement post. I hope you’ve enjoyed it. There’s no toolkit for this post, but if you haven’t already grabbed your copy, be sure to download our Early Retirement for Australians – the multi phase approach paper and learn how you could gain choice in your life.