Khan Academy Hosts a Stock Market Simulation
Khan Academy’s Economics and Finance lessons provide an introduction to Stocks and Bonds and are a great way to learn about capital markets. Another great way to learn about markets? Participating in a hands-on game with friends and family. True to their goal of empowering learners of all ages, Khan Academy team members hosted their first-ever “Market Simulation” on a Saturday in February. Watch the video below!
Thirty “Trading Teams” (Khan Lab School families) participated in the simulation, which introduced players to how the stock market operates. The simulation focused on trading strategies and trader behavior, and participants used play money and colorful construction paper to make trades.
Sal Khan, founder of Khan Academy and Khan Lab School, decided to use the board game Risk as the reality for the market to predict. To speed up that “reality,” our five Risk players played the “Paranoia” version of the game, in which each player secretly draws another player’s color and aims to eliminate that color from the board. (Essentially, rather than aiming to conquer the whole board with one color, each player’s only goal is to remove one target color from the board.) In Paranoia Risk, once a player eliminates his or her target, that player wins the game. During our event, that player not only won, but the market simulation came to a close and the winning color became the only valuable stock.
“The whole point of this is to understand how markets work, how markets are tied to actual reality, how prices and probabilities are related – prices of securities and probabilities of various events happening,” said Sal. “I think in the everyday world, when you think about the stock market, people don’t realize that those are real people dealing. But here you see the people and you see the excitement, or when people get down on the stock you can see it very viscerally.”
Each Trading Team (family) was presented with a packet containing $300 of play money and three pieces of paper representing each of the five colors in the Risk game (15 “shares”). In addition to the five Risk players, there were also a number of roles filled by Khan Academy team members: five Station Leaders and five Specialists (representing each of the Risk colors), two Bankers (who helped provide change), one Referee, and one Facilitator. Each Station Leader managed a whiteboard where they helped Trading Teams write down their “bids” and “asks” for that particular color. Ben, the Engineering Manager at Khan Academy, even created a graph which projected each color’s stock price in real-time, based on the trades entered into Google Forms at each station.
Victor, an 11-year-old student, took it upon himself to document the simulation.
“As Sal counted down to the start of the game, people were already rushing around buying stocks, guessing who would win,” wrote Victor. “Half an hour later, on the playing board, Yellow had holed himself up in Australia and Indonesia, using all his troops as a defense. Orange decided to haul his main force into Africa, and Blue took Europe and northeast America. Green occupied the remainder of America, while Black was scattered around the Middle East and Asia. Trading Teams rushed around, still unsure who would win.”
Sal, who facilitated the simulation, noted that not every team watched the Risk game in order to determine which stocks to purchase. Many teams ran to stations to buy or sell stocks based on which prices were going up or down, or based on which Risk player they had a “good feeling” about. After an hour, the Yellow Risk player made it clear that he was out to eliminate Orange, and the game ended when he clustered all his troops in one country and bombarded Orange off the board. (Victor, our student writer, wrote: “Yellow launched a massive assault on Orange, slowly inching through Africa while annihilating anything in his path.”) At this point, all Yellow stocks became worth $100, and the other four stocks (Orange, Green, Blue, Black) became worthless.
Each team added up the value of their stocks and their play money, and after Sal announced winners, the whole group reflected on what they noticed and learned.
“One thing about simulations is that you learn something while you’re in it, and then you go home and you think about it and you learn a lot more,” said Sal. “It was a lot of fun!”