Chinese Logistics

I had the pleasure to spend the Sunday of Thanksgiving weekend with both sides of a major American logistics firm that is expanding into the Chinese market. I met several of their experts from Shanghai, and had just a wonderful time. Texas Hold ‘Em, Guitar Hero, and Call of Duty provided the entertainment, as did several delightful young children.

I probably would have done better at Hold ‘Em if I had bothered to learn the denominations, instead of just calling the chips blacks, reds, blues, and whites. Still, my strategy of making sure that some of every color were in each pot made for an interesting game, worthy of Wall Street (or my new favorite boardgame, Credit Derivative Monopoly).

5 thoughts on “Chinese Logistics”

  1. It is much more fun than standard Monopoly. And, as far as I can tell, it is a legal interpretation of the rules.

    In real Monopoly, you do not get paid for landing on Free Parking, and all fines, taxes, fees, etc. go directly to the bank. People like to play with those fees going in the middle, and being given to whoever lands on Free Parking, but that creates inflationary spirals and makes it likely that the game will never end… or take a tremendously long time.

    Likewise, real Monopoly prohibits lending. Not only is interest illegal, but so is selling cash now for cash later.

    Similarly, real Monopoly forces a player to sell back any houses or hotels at half the purchase price to the bank if the player needs liquidity, and requires that all sold property be clear of houses and hotels.

    Credit Derivative Monopoly uses financial engineering, however, to create Housing-Backed Securities. Say a player owns Boardwalk and Park Place, but does not have any cash left. Likewise, another player has no monopolies, but perhaps $400 in extra cash. Credit Derivative Monopoly allows transfer that extra capital in exchange for the asset of, say, half the rental income on those two houses. So if a third player lands on Boardwalk, half goes to the property owner and half goes to the player who purchased that housing-backed securities.

    Of course, there is no open credit derivative market, either in Monopoly or real life, so credit derivatives take whatever form the negotiation imposes on them. So one HBS-swap may free the purchasing player from paying rent; another may give the HBS half of the income regardless of what it is, or enforce a steady cash payout. (so, say, if a player lands on Boardwalk, and transfers the dead to a mortgaged utility to the property-owning player, in one HBS the other player is still owed $100 cash, in another only $38, etc.

    In our two games of play, the instruments got increasingly complex. In one, the price for purchasing 8 houses was half the rent, plus forgiveness on all rent owed by the purchasing player to the selling player for the next three landings, plus the rent owed by the purchasing player to a named third-payer player for three landings.

    My proudest moment was the point in the game I was the richest player, with the most income, and only possessed one property.

    Sadly, the ‘margin call’ inevitable came. After one of my partners had gone bankrupt, forcing him to liquidate the houses I purchased for him, I acquired deed to the land and proceeded to build houses, as well as hotels in another monopoly. Then, however, I picked up the maintenance card for my houses and hotels, and had to sell most of my buildings to pay it. That game ended in a three-way tie, as the web of instruments we had created prevented any player from going bankrupt.

  2. Purpleslog,

    My proudest stratagem was to big the price of North Carolina up to $900 early in the game. Player “Z” needed it to obtain a monopoly on green, while player “J” had the cash to spend. Z and J had negotiated a House-Backed Security whereby J would purchase it at auction, Z would refund that money, and J would earn half of the future income from the monopoly.

    When the bidding got up to $700 or so, “Z” mentioned to me that considering I was now bidding half of my cash and had only one property, if if I won. I pointed out that Z would also go bankrupt, as he would be left with no monopoly and no cash.

    “I’m fine with going bankrupt, if I take you down with me,” I said with a smile. You don’t get big in the rela estate market without living on the edge. 🙂

    “J” won the bid, nearly exhausting his cash. That left the J-Z strategic alliance almost devoid of cash. Predictably, the were the first two players out of the game.


    Not sure — it seemed to be set in the modern era in an arab or middle eastern country.

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