Properly managing cash flow

I'll clean this up when I get the chance

After neglecting to properly manage cash flow, and consequently bringing my empire to a crashing halt, I mused over the decisions, both right and wrong, which led me into this predicament.

As we all know, maintaining a generally positive cash flow is of paramount importance in this game: Without it, you cannot buy goods which you desperately need, and cannot buy new ships to expand your merchant fleet. Most horrifyingly, your army tends to desert you, which leads to dire consequences.

To manage this cashflow problem, each player is left with 2 choices:
1. Maintaining a positive cash flow through one's citizens.
2. Maintaining a negative cash flow within one's cities, relying on exports to bring in the extra money

The first option is clearly the safer bet in all circumstances, but it has a problem: Growth is massively retarded.

The opportunity cost for producing 1 resource is 3 gold or less. (A forester's house or temple of gaia, for example, can further favor resource production)

The price of a resource is 5-10 gold, depending on location and which resource it is. (Marble tends to run the highest prices around my islands, sulfur the lowest)

If the market prices are the prices at which resources can be safely sold, this makes each additional resource produced net a profit of 3-7+ gold over not producing the resource. (Vengeful price-setters can prevent this from being actualized)

Thus, for each player who does not have a town population large enough to support its defending army, scientists, resource gatherers, and future merchant fleet expansion, maintaining a negative cash flow and exporting the goods seems to be the best option. If all players were to follow this self-serving mechanism, natural prices for resources would have to fall, as fewer people would remain to import these items, which suggests that our commodity prices should be falling.

Army usage can dramatically increase the advantage of export-reliance. Through the use of intelligent pillaging, one can bring in far more than the army's upkeep in values of goods, while at the same time increasing the non-export based deficit of the player. If one logs in 4 times per day to send out their fleet of 40 ships, and each returns half-full, this can add 40,000 resources daily to one's resource supply, which is not terribly difficult with adequate spying techniques and intelligence (This means that one cannot attack players that push them into horrible wars)

One can take these policies and easily apply them to an alliance, encouraging it to generally produce resources, pillage, and be a net-exporter of goods to those around it to ensure growth and prosperity.

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I used this economic model to push myself into as fast of growth as possible, very rapidly increasing my total score, but unfortunately soon running into problems, stemming primarily from political pressures: price setting ruins this system for everybody. As can be established, preferring resource production over gold production is generally mathematically favored. Players which do this should be more successful, become more prominent, and drive down prices with the excess resources they produce.

Unfortunately, this model is ruined by price setting, which is bad in several ways, both to those who follow the rules and those who don't, in the following ways:

1. Increased supply without complimentary increased demand leads to stockpiling of effectively worthless goods; goods do a player no good if they run out of gold and lose their army.
   
2. Undercutting completely ruins one's economic model unless the undercutter's supply can be ruined. If the price of the price-setters reflects market prices, this undercutter is not a threat, as their supply will quickly be bought up at bargain prices. If the good can be sustainably sold at a higher price, it is profitable to buy up this good and resell it at the set price. If the undercutter is selling at market equalibrium, other suppliers remain unable to sell, and will eventually run out of gold, forcing them to abandon the economic model until actions have taken place to
   
3. Otherwise stupid military actions are required by the price setters to prevent the undercutters from ruining the prices. These people naturally become preferential targets for pillaging, even though they will not necessarily net the highest yield of pillaged goods for the cost of the military action
   
4. Undercutters get attacked, and must waste resources in defending themselves
   
5. Suppliers, as a whole, are not able to sell as many goods, assuming the set price can be maintained. At higher prices, quantity demanded by consumers decreases. Even to stupid people, alternatives to purchasing (trading, or establishing colonies to produce the additional resource, become favored alternatives) Depending on the elasticity of demand, the supplier will likely have a harder time pulling in as much profit.
   

As a result of several of the above, I found myself effectively unable to sell the 30k wine I had pillaged (as an undercutter was holding out at 6 and my army was too far away to deal with him), and I ended up running out of money; the only marketable resource I had regular access to was direly needed for building my city walls up...

Especially for our younger members, this model proves the best economic policy for fast economic growth, but at the moment, it can be insolvent to to its instability.


I hope to be able to improve the quality of this at some point; I just wanted to get it down on paper, and open for discussion

Although I didn't make a negative income (It was 0 or slightly above.), I still used a similar method of gaining gold. I got a lot of wine from my second colony, and I used to be able to sell it for very cheap because I didn't spend any money on it. However, since the price has been increased, I ended up deconstructing my Market because goods weren't selling... So, now I don't have as much money to spend on trading ships/resources/offerings. Luckily I was able to get enough gold to found 4 colonies, but that's as far as it went...

My stance is slightly different then your own but this is still a worthy read.


I think in general having a floor on prices is a good thing, of course there are exceptions to this just like anything else.

One ticket of note is when the only people selling goods within a certain radius happen to all be RGST.


If this is the case it behooves us to have some members selling at say, 8 gold and others selling at 12. If the only option is to buy RGST then our prices should be equal with another, allowing the person to choose the closest RGST member to them and purchase from them.

Now to keep that fair I would say within a 3 island radius, beyond that I don't feel a lower price is undercutting my own as my sphere of influence for all intents and purposes is likely 2 islands.


For anyone out there I'd advise them to always keep at least 20K gold on hand to allow just a little bit of flex should you need to go -income for a bit.