How I caused a banking meltdown

£€$ (Lies)

Directed by Alexander DevriendtProduced by Ontroerend GoedRunning at the Almeida Theatre until 18 August (6pm & 9pm)

The comedian Charlie Chaplin once took part in a Chaplin look-alike contest for a joke. However, the joke ended up being on him, as, instead of winning, he didn't even make the finals.

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In a similar vein, on Wednesday night, I took part in £€$ (Lies), currently running at the Almeida theatre in Islington, and it ended up teaching me a thing or two.

Lies is a piece of "immersive theatre", directed by Alexander Devriendt and produced by the Dutch theatre group Ontroerend Goed. In immersive theatre, the audience is expected to actively take part, rather than just sitting back passively.

People are divided into ten groups, with each group representing a country named after one of the players, and each person representing one of the country's banks.

Capital, in the form of gambling chips, is then allocated to each participant in proportion to the amount of real-world cash (thankfully this is returned at the end of the show) that they are willing to contribute.

During the next two hours, players place bets and make decisions which will affect their balance sheets.

A realistic simulation of investment banking

At the start, the only bet on offer is a simple even-money bet, where you can bet a single chip (but no more) and get another back if you win. Since this bet pays out if you roll a three or higher, players should come out ahead, even though they have to pay every fifth chip that they make back to the dealer as "taxes". This represents the profits that banks can make from "narrow banking" or traditional low-risk activities.

The game starts to get progressively more complex. For example, participants are offered the option to pay a "lobbying fee" in order to make riskier, but potentially more lucrative, bets. Later options include a form of short selling, mergers and even speculation in the bond market.

As you'd expect, it all ends messily (or at least it did for my "country" and around half the teams). Though even the inevitable meltdown isn't the end of the story, as teams have to vote on how they deal with the aftermath.

It's important to stress that some of the detail isn't 100% accurate, and a lot of things have been tweaked and simplified in order to make the game playable. For example, in the game, when a country's debt rating improves, the amount that they have to pay also goes up, which doesn't happen in the real world.

Still, all things considered, it is surprisingly realistic and the production does a surprisingly good job of getting across concepts such as money creation and fractional reserve banking. Indeed, the production team even take the trouble to point out the inflationary impact of a surge in the money supply.

The entertainment value is further increased by some deft satirical touches. For instance, when two "banks" merge, the players are told by the dealer that, they "are now too big to fail".

Similarly, when one participant had a run of bad luck they were offered the opportunity to "try a new strategy", which involved exchanging their dice for an identical pair. Another player who inaccurately calculated their taxes was threatened with being reported to the authorities.

Overall, this is a clever, slick and imaginative production that should appeal to everyone, from the layperson to experienced investors. Perhaps the only possible quibble is that productions are at 6pm and 9pm, so if you want to catch it after work you'll be leaving the theatre at around 11pm though it is definitely worth the effort.

The lessons I learned

The evening also taught me several lessons that can be applied to investing.

Firstly, there's nothing wrong with simplicity. Had all teams stuck to the simpler bets, everyone would have made money. As it was, even the best performing team lost a lot of money.

You should be sceptical of "can't-fail" investments. About halfway through, we were told that a certain investment had a minimum value, which it could never fall below. However, this proved not to be the case.

This leads into the final lesson don't get overconfident.

At one point, I thought that I had found a fail-safe way to make money. While I did make big "paper" profits from my strategy, when I tried to cash them in, I ended up losing everything as well as causing the collapse of another team.

More generally, while it's a good idea to concentrate your investments, you still need some diversification.

£€$ (Lies) is currently on at the Almeida Theatre, ending on August 18. Tickets are £35 (almeida.co.uk).