Game 250: Cartels & Cutthroat$

Run your own megabucks corporation in the economic jungle of Big Business, states SSI's 1982 catalog. A collaborative effort between Dan Bunten, a self-described "systems simulation expert," and his brother Bill Bunten, MBA, Cartels & Cutthroats is alluded to in the appendix of Computer Quarterback's manual, which describes Dan's aspirations as a simulation engineer to educate and to solve real-world problems in government and industry through detailed mathematical models, a dream that he felt personal computers would make a reality. He is presently developing proposals for a business management game, an 18th century naval wargame and a strategic world energy simulator for educational purposes, it says.

Only the first of these three proposals became an actual commercial product, in which you, as the president of a consumer goods manufacturer/oligarch, manage the company on a quarterly basis, making a small number of basic but critical decisions such as how much product to manufacture per quarter, prices, and directions for expansion. Minutiae such as hiring, firing, warehousing, and financing are left to your subordinates but modeled and presented in your quarterly reports, along with performance indicators, economic forecasts, and marketing research data.

 

If this seems a little dry, well, it is. The economic simulation aspect anticipates M.U.L.E. but while that game abstracts most of the complexities beneath a deceptively simple-looking veneer (and gleefully punishes naiveté with ruin), Cartels & Cutthroats is front-loaded with an intimidating amount of simulation data and results. Consequently it feels more like a set of spreadsheets than a game, and a spreadsheet is indeed a useful tool for planning - physical copies came with paper spreadsheets meant for this very purpose. I would bet you could reproduce the game in its entirety in an Excel template file. This stark difference in presentation can be attributed to Bunten's rapid transition from "systems simulation expert" to "game designer" just as much as it can be attributed to the philosophy differences of respective publishers SSI and Electronic Arts.

The play mechanics, in fact, remind me very strongly of one of the first MECC games, Lemonade Stand. The simulation is intended for elementary school children and accordingly simplistic - your only decisions are to decide how many glasses of lemonade to make each day, how many signs to make, and what price to charge, and the only external factors are weather and ingredients price. Derivative calculus shows that ten cents is always the optimal price to charge per glass, leaving it up to trial and error to figure out the exact amount of lemonade that can sell given the weather conditions. Figure that out and you can sell out every day.

This is what peak lemon performance looks like.

 

Cartels & Cutthroats is essentially an undergraduate-level version of that same game, with more dimensions and complexities, including elements of competition alluded to in the title - price-fixing cartels, and cutthroat power plays.

The game is set over a number of quarters, in which each player reviews their company reports and makes plans for the next three months:

• Amount of raw materials to purchase. Typically one would buy enough raw materials to manufacture exactly as much product as you expect to sell over the next quarter. However, if material prices are unstable, it might be worth it to invest in extras when they're cheap. Having a surplus also safeguards against future supply problems. That said, having a surplus will incur warehousing fees.
• Amount of products to produce from raw material. As with raw materials, you would typically produce exactly what you expect to sell. Your factories have a normal capacity for product, and exceeding this capacity will cost extra.
• Product price. The price you charge directly affects consumer demand on an inverse curve, but in addition, competitive prices make customers more likely to buy your products over the competition's.
• Advertising budget. More advertising means more demand, but diminishing returns will set in at a point.
  
• Research and Development budget. The more you spend, the more likely your R&D department will have a breakthrough, such as automated factories or more desirable products.
  
• Loans. Not something you generally have to touch, as loans will automatically be taken out when cash reserves can't cover your quarterly expenses, and you usually get enough credit to maintain your operations without having to take out additional loans. You can repay loans by entering a negative amount if you expect to have cash reserves after the expenses.
• Factories. You can buy to expand your production capacity starting on the next quarter. Factories are very expensive, and a good way to go bankrupt fast is to buy a factory without having enough credit to pay for it along with your normal operations.
• Miscellaneous events may require you to make a decision, done by either sending a memo to a second party or not.

 

Typical for a Dan Bunten game, play focus is on multiplayer. Games have between 2 and 6 companies in competition. Not all must be human controlled - you can have AI control as many opponents as you wish - but you can't communicate with an AI opponent, robbing the game of diplomacy and scheming if you opt to play solo. Three multiplayer game modes are offered:

• Open play, where everyone can see everyone else's reports and quarterly plans. A beginner's variant with favorable/predictable economic conditions is also offered.
  
• Closed play, where players take turns looking at their own reports and plan their quarters in secret while everyone else goes to the other room where they can make sneaky plans.
• Hard copy play, where reports are physically printed out and handed to each player every quarter.

I played an open, eight-quarter game with my partner "D," whose patience and support has been legendary, and with one computer-controlled opponent.

The scenario is randomized, and each parameter impacts your business tactics.

• The product manufactured is a "luxury good." It's up to the imagination what this product is exactly - let's pretend these are comically long cashmere scarves. This is the only product we produce, and we are the only three companies that produce it. Competitive pricing won't affect demand as much as advertising does. Paradoxically, consumers are less tolerant of highly priced luxuries than they are of highly priced necessities and mixed goods. For example, if a customer wishes to pay up to $400 for a scarf, then they won't have a strong preference for a brand that costs $300. But if every brand costs more than what they are willing to pay, then they'll probably not buy anything at all. Consequently, price-fixing luxury goods tends not to pay off, nor does undercutting.
• Stable raw material supplies means we can expect it to be more economical to buy raw materials as needed than to buy when they're cheap and hoard the surplus.
• Economic growth will be slow for the entire duration of the game, since we are only playing for two years. Advertising can expand the scarf market somewhat, but the GNP dictates a hard ceiling.
• Inflation will be strong. Costs of labor and materials will increase steadily, and consumer goods prices will need to keep up. Because inflation outpaces economic growth, the product market may actually shrink in terms of units sold, even as it grows in terms of dollars.
• A low element of random chance means forecasts should be predictable and accurate.

 

Pre-Q1 forecast. A 15% GNP growth is crazy in real life.

Between quarters, a document summarizes the economic conditions to come, and when applicable, compares company performance. Here, PPI means Purchasing Power Index and can be roughly understood to mean the number of units an average consumer can afford this quarter, assuming the cost rises proportionally to inflation. Prime interest rates are the lowest interest rates available - ours will typically be somewhat higher.

Afterward, individual company reports are shown.

There's a lot to take in, and this is just the first page, but the key takeaways here for me is that in the previous quarter we made $10m (gross dollar values are implied to be in thousands), and spent $405 on each unit sold, making $95 profit on each. All of the other numbers are just subitems.

"COG Sold" here means "cost of goods sold" and covers the costs of labor and materials on the products sold.

One very stupid feature of the game is having paddle controls to flip through the pages of the reports, and this is the default method! Thankfully there's an option to use the keyboard's left and right keys instead, and I can't imagine why anyone would prefer the paddle. Unfortunately the beginner's game doesn't even give you that option.

The next page isn't terribly interesting to me - basically a breakdown of how big your company is, and most of my spending decisions are based on credit lines rather than by cash on hand. Cash reserves are handy for knowing when you can start to pay off loans, but you've got to spend money to make money.

The sales report is very useful! In Q0, we made 20k units and sold 20k units, matching demand exactly. To sell more, we'll need to up the advertising budget and manufacture more units to meet increased demand. In subsequent quarters this page will tell you how your decisions effected demand and whether your supply met it, exceeded it, or came up short, and help you to adjust if necessary.

 

The production report outlines production and warehousing costs. Three things interest me for planning - the direct labor, which costs $150 per unit, production overhead, which is a flat $600k and will increase as my operations grow, and "normal capacity," which means that with my current number of factories I can only produce 20k units per quarter without paying overtime labor wages.

 

Finally there is a market summary page, and the most useful part is the estimation that 61 units will sell during Q1. My performance is also compared to my rivals, but for now we are all equal.

With about $24m of funds available, I decided to continue manufacturing my normal capacity of 20k units, but upped the price to $525. I put $1.5m into advertising, $1.5m into R&D, and bought a factory for $16m. "D" acted similarly, but did not raise her prices, and funded advertising over R&D.

The only graphics in the game.

The between-quarters summary now includes comparative revenue.

I was ahead in revenue, having sold out even with the highest price. "D" told me I won capitalism. But this can be misleading - the game is won in terms of equity growth. Both of us had spent quite a bit more than the AI did, and that's not reflected here. Investments are necessary, but all investments fetch diminishing returns at some point.

My Q1 profits are slim thanks to extravagant operational expenses.

"D" is offered two production improvements. I am offered none.

But my aggressive advertising makes me the market leader.

Quarterly credit lines are usually enough to fund operations and some expansion no matter how cash-strapped you are, assuming runaway interest doesn't eat you alive.

End of Q4 report. Pequod is the market leader, but both it and Baker St. wasted too much money on low-return investments. Applers is ahead in equity growth.

Detailed breakdown. Note the extreme differences in A&M and R&D expenses and how it affects the bottom line.

Starting on Q5, we both ceased all investment in R&D. There just wasn't enough time left for ROI.

Q5 summary. Inflation has hit raw material prices.

Uh-oh.

Baker St. partly repays a loan, as interest rates run wild.

"Labor problems." I capitulate after this.

Q7 summary. Baker St. takes the market lead as I fail to supply demands.

Baker St.'s penultimate sales report.

And market summary.

Oof.

Too subtle.

My final game plan. I sell one factory as production scales down.

Final report. I barely outperformed the economy. "D" almost beat the computer.

 

Lessons learned - don't spend that much on advertising, and always give into the unions. Intuiting the right amount to spend on advertising probably comes with experience rather than devising an exact formula. R&D was a bit of a sore spot - it seemed like I spent a lot on it during the first year, and nothing at all came of it.

I kept records of the game. "Q0" represents a sample quarter assumed to have occurred before the start of the game, and exists mainly as a starting point from which you can work out your plans, which the manual recommends doing in small adjustments.

	Q0	Q1	Q2	Q3	Q4	Q5	Q6	Q7	Q8
							(strike)
Plans
RM Purchase	20	20	30	25	25	30	30	30	20
Production	20	20	30	25	25	30	30	30	20
FG Price	500	525	550	525	550	575	625	625	675
Advertisement	200	1500	2000	2000	2000	2250	2500	2500	2500
R&D	300	1500	600	600	2000	0	0	0	0
Loans	10000	0	0	0	0	0	0	0	0
Factories	0	1	0	0	0	0	0	0	-1
Upgrades	0	0	0	0	0	0	0	0	0
Memos								L
Credit		200	13558	14768	15204	17069	18912	13970	40822
Profit
Revenue	10000	10500	12650	15225	15400	16675	10000	14375	18225
Cost/Unit	405	493	508	468	513	497	633	576	599
Sales
Available	20	20	30	32	28	30	16	30	27
Demand	20	21	23	29	28	29	25	23	27
Sold	20	20	23	29	28	29	16	23	27
Production cost
Labor/Unit	150	150	150	150	150	150	150	150	219
Overhead	600	612	1339	1063	990	1220	1350	1677	1304
Capacity	20	30	30	30	30	30	30	30	20
Marketing
GNP	2620	2729	2852	3005	3204	3422	3646	3833	4024
CPI	236	241	247	253	260	268	276	283	290
PPI	100	102	104	107	111	115	119	122	125
Prime Interest	4.9	11.1	12.2	12.9	14.3	15.7	16.2	15.1	14.3
Total sold	60	60	58	70	72	73	69	75	80
Factory cost	16000	16320	16640	17120	17760	18400	19040	19520	20000
RM/Unit	50	51	52	59	61	62	64	66	68
Funds	23800	22800	23757	25492	26639	28992	24240	29799
Projected costs
Raw materials		1000	1530	1300	1475	1830	1860	1920	1320
Production		3000	4500	3750	3750	4500	4500	4500	3000
Overhead		600	612	1339	1063	990	1220	1350	1677
Factories		16000	0	0	0	0	0	0	-19520

Afterward, I played another round against just the computer. This scenario was characterized by necessity goods and a slowly declining economy. Prices quickly became a race to the bottom, and I managed to undercut the AI and decimate its sales every single quarter, but my own profits were razor-thin even as I cornered the dwindling market. My only R&D advancement improved factory output, which hardly helped me - why couldn't it lower production costs instead of giving me more product that I wouldn't be able to sell anyway?

Weirdly, even though the final status report said I outsold the AI, spent less money than the AI, and grew equity (not much) while the AI's shrank, the final screen still claimed the "dumb computer" won, which suggests to me that the victory conditions are bugged here. Oh well.

GAB rating: Average. Cartels & Cutthroats is damned impressive as a business economics model, and I can definitely see it being a good educational tool on the subject but talk about niche appeal. I love spreadsheets and numbers and still didn't find this very exciting or entertaining. I can see it having more appeal as a social game, especially with its closed-info gameplay modes that encourage diplomacy and scheming, but much like with wargames, you'd need to coordinate a group of players willing to spend weeks learning and mastering the game before it becomes interesting.

It wasn't an especially great seller, either. According to Bunten's game design memoirs, it underperformed compared to Computer Quarterback, though to be fair no business sim of the time would do that much better. Evidently folks interested in playing with the stock market or business, do it in real-life instead, notes Bunten.

But thankfully, one such real-life businessman, Trip Hawkins, took notice and offered to buy its publishing rights. When SSI rejected, he instead struck a deal with the Buntens to join Electronic Arts and produce a slick new game in its vein, which would feature Cartels & Cutthroats-like economics-based gameplay, Wheeler Dealers-like four-player auctioneering, and simple controls and presentation masking immensely deep math-based gameplay like Computer Quarterback. The freelance brothers agreed and expanded their core team to four, which EA would promote as Ozark Softscape and publish their first and most acclaimed hit M.U.L.E. We'll get to that eventually, but first we've got two more SSI games on the agenda, and one game by SSI's second most famous alumnus.