In last week’s blog post, I discussed the games and people that inspired me to make 18EUS. As part of that, I mentioned that one of the key new elements of 18EUS is the Bank of New York, which allows players to either take elective personal loans or invest in the Bank if they do not hold loans.  I wanted to explore a space where players had access to more capital in stock rounds, like in 1817 with short-selling, with a different, unique mechanism.  Some have pointed out that the 18EUS “loans,” which both charge interest and increase in principle, do not behave like loans in a technical sense, but rather like stock shorts.  Indeed, the main design inspiration here was to create a “friendlier” method of short-selling that would appeal to a wider audience.  

In 1817 and 18USA, short-selling can produce a huge variety of outcomes.  It can be disastrous for the company or disastrous for the short-seller.  In my first two games of 18USA, I ran over-valued companies that were shorted into oblivion.  Not only did the stock price plummet, but the companies fell in operating order and didn’t get to run their trains.  I learned from my mistakes and still enjoy these great games, but those initial experiences were tough.  In contrast, in 18EUS, the Bank is an impersonal entity that behaves exactly as expected given the player inputs.  Those player inputs, however, are quite influential.  Although I would describe the Bank of New York feature as “friendlier” than short-selling, it is certainly not “friendly” as players seek to outmaneuver each other to gain the upper hand in the bank vs loans balance.

On a basic level, railroad company shares are quite lucrative, especially 5-share companies in the second set of operating rounds.  Loans, on the other hand, charge a relatively small amount of interest compared to the payouts of railroad companies.  The only factor that modifies the strength of the loans is how fast they grow.  The stock market is purely exponential, and the exponential growth is quite steep.  Small changes to the growth rate produce big differences in value.  At small growth rates, loans can be quite good if they allow for advantages in railroad shares.  At large growth rates, loans can be crushing weights for players with too much debt.  Meanwhile, since players have limited starting capital, buying Bank Shares early usually means investing quite little in railroad companies.  This means missing out on potentially huge payouts.  However, if enough loans are taken, a Bank Share not only appreciates quite rapidly and generates acceptable payouts, but it also increases the growth of the debt of the competitors.  The overall result is that the Bank exists on a tight balance.

Much of the design of 18EUS was intent on making this balance work. One reason that the balance works is that, in stock rounds, once players commit to going in a certain direction either toward loans or away from loans, they may not reverse course until the next stock round. Another reason that the balance works is that Railroad companies have predictable liabilities that presidents must account for. In 18EUS, Railroad companies are incrementally capitalized, may not take loans, and may not merge. So, it is easier for players to gauge the health of a company.  Overstretched, aggressive players may be compelled to continue buying their own shares to account for their liabilities and be forced to forego paying off loans, which incentivizes bank investment. However, a company that is run well could very well be a better place to invest your money. Discerning which place is the best in which to invest at any given moment is as dynamic as the play.I have played games where the player who takes the most loans won, and games where the player who buys a Bank Share in the first round and held on to it won.  I even heard of a game in Seattle where the winner bought a Bank Share, invested in other players’ railroad companies, and never started his own company.  In one game, the player who went in precisely the opposite direction as the majority of the competitors each round won.  In some games, the Bank does take a back seat, and the outcome hinges on the strengths of the railroad companies and the strength of players’ portfolios, like in many 18xx.  Overall, the Bank of New York mechanism is an influential and fun feature that greatly expands the decision space of 18EUS, while remaining quite approachable to newer players.

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Author: Greg Holton