True value of early trade: a case study

[La Fayette]

Winning at civ2 is very much a question of choosing the right investment at the right time. That question might be answered using a method named "dicounted cash-flow" in the US, as far as I know. May I try to explain briefly?
If you are getting hungry and you have no money in your pocket, you are likely shortsighted: for you 1$ to-morrow is worth much less than 1$ now. For you, to day's value of 1$ next year is perhaps less than 0.9$ to day or even much lesser than that. On the contrary, some people are very long-sighted. 1$ next year might be worth 0.98 or even 0.99$ to day for those people.
IMHO this method is great because the economist collects the data and does the calculations, but the user, the wise despot, the strong strategist chooses whether to be short or long-sighted. Hence, if a wrong decision is taken, responsibilities are rightly shared.
Anyway, I have recently been busy applying that method to some problems related to civ2. Here are a few results in the field of early trade (#1 briefly describes the method, for those interested, and #2 gives the main rsults for those willing to go trading ASAP).

1) Method
1$ that I'm going to get in n turns from now is worth (1/(1+r) power n)$ now (r being the rate of discount that I am willing to choose).
1 beaker=1 gold (since I always can choose between these using the "tax rate" cursor).
The production cost of a caravan is 125 gold (stepwise rushbuilding with 1 shield in the box to start with).
The "true value" of the caravan is measured on delivery. Therefore the cost, which I name A (since A is not only for Alphabet ), is then 125*(1+r) power m (m being the number of turns travelling between origin and destination city).
The revenue is B (gold bonus) + B (science bonus converted into gold) + C (current value of the continued cash-flow, doubled in case of home trade).
Hence, the "true value" of the caravan is TV=B+B+C-A
(watching TV on the BBC, this should be quite mnemonic for people like SG or EST).

2) Results
The results given here are those of my first case study in that field, playing the Romans on a medium size random map (deity, 7 civs, raging hordes), and sending most caravans to my friendly neighbors, the Indians, onboard mighty triremes, but also a few to my own cities by land, for the sake of comparison.
More precisely, I studied 12 caravans (and the resulting cash-flow during 80 turns). 5 caravans were home trade between roman cities. 4 were fine foreign trade (goods in demand in indian cities) and 3 were second class foreign trade (goods delivered in India, undemanded there).
For each caravan are given:
B=gold bonus on delivery
TV2=true value of the caravan when using a 2% rate of discount ("long-sighted")
TV8=true value of the caravan when using an 8% rate of discount ("shortsighted").

Dye Pompei-Madras (250BC) B=40, TV2=40, TV8=-115
Silk Neapolis-Veii (50BC) B=3O, TV2=5, TV8=-102
Beads Cumae-Pisae (40AD) B=28, TV2=45, TV8=-72
Copper Pisae-Delhi (340AD) B=148, TV2=333, TV8=132
Dye Veii-Delhi (500AD) B=176, TV2=402, TV8=198
Silk Hispalis-Delhi (500AD) B=246, TV2=495, TV8=307
Wool Pompéi-Viroconium(520AD) B=28, TV2=29, TV8=-82
Wine Lugdunum-Viroc.(88OAD) B=80, TV2=159, TV8=-90
Salt Lugdunum-Antium(900AD) B=60, TV2=137, TV8=-37
Gold Pisae-Delhi (980AD) B=76, TV2=168, TV8=-7
Dye Cumae-Delhi (1200AD) B=40, TV2=125, TV8=-23
Dye Hispalis-Delhi (1340AD) B=47, TV2=83, TV8=-83

3) Conclusion
Early trade can be very rewarding (look at that
silk delivered in Delhi in 500AD: net profit ranging from 300 gold (shortsighted) to 500 gold (long-sighted).
But early home trade seems to be questionable (unless one gets much better opportunities than those shown here). All of us would prefer building wonders rather than getting such tiny profits.

Wow! A newbie who doesnt ask questions but instead comes up with strategies. We should put him in a museum!

On a more serious note, I have looked at OCC games, and discovered that the people with the earliest trade routes are always the fastest. Paul in particular seems to get his caravans off quickly.

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Go Redskins!

Email me at
SilverDragon141@aol.com

[Blaupanzer]

La Fayette, somewhere in this is a discounted value of money theory. Based on this start, one should be able to trade off any given economic investment against an enhanced version of that formula. (How much money, LT and ST, will an investment yield, vice another, including a possible caravan?)

This won't solve all of the marginal value of production decisions because of military production. But it could help.

[suas333]

Thanks for your study, howveer early in the game when eve i build a caravan i can't help but think that it could be one more city. And settlers from that one city, especially early can make 5 more cities. Gold would be increased simply by quantity. But as i see players using trade routes with an early republic to get ahead in science and gold, I'll try to use early trade routes in some games inthe future.

[La Fayette]

SD
I am new to Apolyton, but not new to civ2. That's why.
As far as the museum is concerned, I know oedo already has a statue (perhaps two, quite soon, when the unfinished gets finished). If I might deserve a painting one day (even a very tiny one, as long as it is signed Manet or Monet), that would be great!
Blaupanzer
You describe exactly what my current research is about: "di$counted cash-flow" (how could I forget that precious letter?), and trying to improve decision making in civ2 by using that method, which I consider powerful.
Nevertheless, I tried to write a short post yesterday, and it seems to me to day that at least 2 points must be made clearer.
1) I am not arguing against or in favour of early trade; just trying to indicate whether it is rewarding or not.
2) The "true value" is not "true" (after many years of experience I would say nothing is ever "true" in economics). For example:
- 125 gold for 1 caravan is one of many possible values (looked reasonable to me when I chose it, but I wouldn't
blame on someone advocating 100 or 150);
- 1 gold=1 beaker might be discussed with very strong arguments in favor of either gold or science;
- valuing the continued cash-flow in gold is valid only in cities without improvements (in fact that cash-flow is Trade; it would be improved by 50% in a city owing both Market Place and Library).

[La Fayette]

I meant "owning", of course. Sorry!

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aux bords mystérieux du monde occidental

[Scouse Gits]

You omit one tiny detail - for those of us who follow the Goddess ICS the value of a caravan is 200g/50shields when it helps build a Wonder - only later in the game when the vital WoWs are secure do we look for trade/science benefits. How does this fit into your theory?

Further although you are correct that 1 beaker can be changed into 1 gold by manipulation of the tax rate - only by using caravans can one 'buy' beakers in addition to those available from a maxed out tax rate - this can on occasion be beyond price...

Good work keep the ideas coming

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Scouse Git[1]

"CARTAGO DELENDA EST" - Cato the Censor
"The Great Library must be built!"
"A short cut has to be challenging,
were it not so it would be 'the way'." - Paul Craven

[A-Team]

If joining my game, (rules listed under Recruiting Players thread) you will find that when you play without wonder construction, citys must be as strong as possible. Build a marketplace, a bank and a stock exchange. Now Each caravan ( up to 3) will pay for itself via gold revenue if traded between big enough citys or off cont. citys or other civs. But more then that, each caravan will generate 4-8 trade. 3 then will give you say 20 extra trade. with the multiplication of M,B,SE that equals a return of 50 trade per turn!!!! when used for lux or tax. Team up with a partner who trades and uses the extra trade with lib. and universitys and 1 civ produces the tech, the other the gold a marraige made in civ heaven.
This is the kind of things that you can expect in my game. Oh , and by the way, it wont take several months to play a game, it will only take a few sittings as the game has been speeded up.

[markusf]

Look here
http://apolyton.net/forums/Forum2/HTML/001969.html?23

I can regularly build 4 to 5 size 28 cities by 500 AD on 1x 1x, giving me 2 turns a tech for the rest of the game... I also make close to 800 gold per turn at 550 AD. Industrailization by 900 AD with automobile by 1100 AD. The power of early trade and using super cities blows ICS away by a huge margin. I rounded up a couple of players and we did a test, using my strat against ICS, I had over a 15 tech lead, and a launched a spaceship before the other guys got a bit past industrailization.

[Scouse Gits]

markusf - you are of course correct - left to your own devices your strategy will blow we poor benighted ICSers to kingdom come and back. However, do you seriously think that you will be left to your own devices? Fancy defending your five super cities against 100+ vet crusaders with diplo support? Good luck!



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Scouse Git[1]

"CARTAGO DELENDA EST" - Cato the Censor
"The Great Library must be built!"
"A short cut has to be challenging,
were it not so it would be 'the way'." - Paul Craven

[TCO]

How do you get 100+ crusaders while ICSing. Doesn't the time spent building crusaders take away from settler/warrior production?

[Scouse Gits]

Once the Empire has reached it's critical size - depends upon map etc but between 30 & 60 or so cities you are then in position to send out 'orders to the Empire' which might be build barracks, build crusaders - ten turns or so later you field your army - I have never needed more than 30 vet Crusaders against the AI - my MP experience is limited, but would imagine that 150% overkill should suffice...

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Scouse Git[1]

"CARTAGO DELENDA EST" - Cato the Censor
"The Great Library must be built!"
"A short cut has to be challenging,
were it not so it would be 'the way'." - Paul Craven

[La Fayette]

SG
I have no global theory of civ2 and I claim no brilliant results. What I try to achieve is a thorough analysis of some aspects of this great game, especially in the field of decision making (somewhat alike what you did in the field of starting techs).
Then, if we look at one early caravan, my theory would be:
My choice is between using this caravan to help building a wonder (in that case, its value is about 200g, as you stated, which means a "true value" about 75g if we agree to take into account a cost of 125g) and sending this caravan to some big city faraway (in that case, its value is not far from the "true value" that I describe).
Very early, the choice is always in favor of building a wonder (because the supposed big cities are hidden in the black), but then comes the period when I discover at least one big foreign city demanding at least one commodity that I can produce.
I state that if the "true value" of this caravan is much higher than 75g, then the right decision is no longer building the WoW (except in case of strong emergency: "I need that WoW and I know the AI is building it"). The right decision is foreign trade, then buy the WoW and keep the surplus.

[La Fayette]

Settler seems more inspiring than chieftain (at least to me).
Go on posting La Fayette!
Warlord sounds more like it.

[East Street Trader]

Nice thread, La Fayette. And doubly welcome as a Gallic view of matters has previously been sadly lacking in Apolyton.

On top of which you have chosen the most inspiring of the civic subjects for your debut!

Two criticisms of your approach. As A-Team points out that initial trade arrow has value not only in and of itself but additionally by providing the foundation stone upon which the further development of the city can be based. An early local route opens up the possibility of viable and timely investment in the marketplace, the bank, the stock exchange and the superhighway.

Secondly there is the effect on the citizenry. With just a little early trade a city can grow and its citizens be put to productive use, their happiness underpinned by those additional trade arrows. And with a happy citizenry comes the chance of more advanced government. Indeed, from the point of view of success in the game at least, I would go so far as to say it is this which is the primary purpose of trade.

I see no sign that you have factored those elements into your values.

Interesting investigation nonetheless.

PS What a splendid commodity is silk (my favourite I think)!! And how appropriate that a denizen of la belle France should highlight it's merits.

[La Fayette]

Markusf
I read your thread.
I suppose that you forgot telling us that you were playing at chieftain level on a big map with few aggressive AI opponents.
If you wish to convince us that you got those results playing deity, 7civs , raging hordes, on a small or medium map, then it would be fair to come back with strong evidence.
Try and play at higher levels. Believe me, it's fun... and I like to see you go scouting for new ideas.

[La Fayette]

EST
As I stated before, there is no "true value" either in civ2 or in the real world, because side effects and long term effects can hardly be rightly quantified (that's why I used quotation marks; remember John Maynard Keynes: "à long terme, nous serons tous morts").
But the "stone by stone" effect mentioned by A-Team and the "citizenry" effect that you mentioned both are taken into account in my method, since I measure the continued cash-flow during 80 turns after delivery of the caravan.
Of course the cash-flow is increased if the city grows or turns to republic.
Of course you are free to be willing to go further and give a value to anything else you mean to be valuable (let me know what you wish and I do the calculations for you ).
My own experience in real life is that if you start valuing many side effects, it is no good at all for clear decision making.


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[La Fayette]

Markusf,
Rereading your thread, I notice that you mentioned playing at king level. Fine!
And your Kremlinlike cities are real smart!
IMO they are smart enough to play at Emperor level.
Have a try!

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aux bords mystérieux du monde occidental

[La Fayette]

SG,
Rereading this thread, i notice that I forgot answering your second remark "only by using caravans can one 'buy' beakers in addition to those available from a maxed out tax rate".
I strongly agree that this can be beyond price (and I 'buy' as many beakers as I can that way).
But this case study was about early trade. In most of my games I feel just as 'gold-hungry' as i feel 'beaker-hungry' during that period when I am also sending scouts (and always wondering whether one more scout is better than one more caravan).
How do YOU feel then?

[Scouse Gits]

Personally - I do not give sufficient priority to scouting - from the succession games I have seen that for many players it is of paramount importance - but not for me! This could easily be a flaw in my game strategy - I make no claims of godhood - or simply reflect my lack of experience at MP - but my personal feeling is that against the AI having the scouts a few squares ahead of the settlers is more than adequate - and oft times I find my settlers breaking into the black s they found their cities ...

An interesting question! Comments anyone?



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Scouse Git[1]

"CARTAGO DELENDA EST" - Cato the Censor
"The Great Library must be built!"
"A short cut has to be challenging,
were it not so it would be 'the way'." - Paul Craven

[East Street Trader]

Couldn't disagree more, SG1.

I give exploration a very high priority until I have exposed every last square on the board (haven't tried a gigamap yet but I reckon I'll still have my hiking boots on even then).

Getting (more than) my share of the huts is one aspect; finding (and occupying) prime choke points is another; making contact with other civs so as to open up the chance for diplomacy a third.

Then there is identifying prime real estate to which my doughty settlers can be dispatched; finding useful ofshore bases from which to harass distant AI civs; identifying which opponent looks a potential threat and which not; finding trading partners; finding barb cities and spawning sites. The list is endless.

I'd go so far as to say that exploration stands equal in importance to expansion and defence throughout.

Just about everyone prefers the earlier (and faster) phase of the game to the later stages and one of the pleasures, for me, in the opening phase is seeing how I can squeeze out the resources for another unit to send exploring when I am also keen to keep up my expansion, secure my borders and push on with developing infrastructure.

But if I ever notice that I've got less than two or three guys out there poking around I drop everything to redress that particular balance.


La Fayette

Your point about building in some value for long term effects is well made. But you measured over a shortish time scale so it can be no surprise that the foreign routes look so much better. The one time initial bonuses are overweighted.

I have played many games in which I traded only with my own cities. As your first post rightly says, sometimes one gold/one arrow to-day is worth many more a century or two hence. As someone else once said, there is a tide in the affairs of a civ and early local routes often go in when that tide is at the full. They allow a young city to prosper, to fend off interlopers and to help its civ keep up or forge ahead of others in the tech race. Monarchs in particular have always needed honest traders.

I fear I cannot build on your work by suggesting how to turn this into a refinement of your numerical values.

My advice for practical play though is, put in local routes early and prosper.

[La Fayette]

EST,
I mentioned scouting on purpose, since scouting has no easily measurable value, though it is more than valuable in the long run.
So I go scouting a lot (like you), though I'm far from ready to write a post about the true value of scouting.
But, when discussing about caravans, I state that:
- decision making in civ2 has been very much discussed through dozens of threads, but very little valued (mostly by Mark Everson and Adam Smith);
- the discounted cash-flow method is more powerful in real life than any 'no-discount' method dealing with return on investment;
- it should also be the case in civ2, if I (or someone else) use it correctly.

In the meantime, I stick to my answers to Blaupanzer and SG a few days ago:
The "true value" is not true (I know it and I claim that there is no true value), but it is true enough to help one choose the right investment at the right time.
The AI is so dumb sometimes that many of us manage to win at deity level after having made dozens of wrong choices (you and I go scouting,...SG doesn't ).
After having built a caravan early in the game, I can choose:
-building a wonder,
-home trade,
-foreign trade (sending food to a city is generally not a very good choice then).
I never wrote or thought that one of those choices is better, but I think that the "true value"(discounted benefit minus discounted cost) can be greatly helpful when choosing.
You plead in favor of home trade and I won't say a word against it (people building strong SSCs ASAP can greatly benefit from such a choice).
I only wrote that this is not always true (in my case study, there was no fat SSC and foreign trade prooved to be better, that's all).
Just one more word: I don't think I overweight short-term effects at all, since YOU choose your rate of discount (and I measure the effects during 80 turns, and 80 turns is quite a long time in civ2).


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aux bords mystérieux du monde occidental

[La Fayette]

Foreign trade proved nothing, I confess.

[Carolus Rex]

A couple of notes, just for the fun of argument!

I do by no means claim that what I hence write is correct, feel free to point out the flaws. There are many, no doubt!

First of all, you argue that this method is a good way of deciding whether it pays off to make the investment (i.e. rush buy the caravan and trade with it) or not, and I agree with you. If the net present value (henceforth NPV) is positive, then go ahead and buy it. But isn't this only the soccer game's first half?

The problem I have (as pointed out by others) is that the NPV of this investment must be compared to the net present values of its alternatives. Then you choose the alternative yielding the highest NPV.

Now, you make clear that you don't want to pass a judgement on whether early trade is better than other alternatives. IMHO, this has to be done in order to properly evaluate whether to make the investment or not. Per definition it does not pay off if there are better uses of the spent resources out there (meaning yielding a higher NPV).

How can you do this? Obviously you have to analyse the alternatives using the same method you propose.

Do the same calculations you have done above when trading with the camel, but include all the gold spent to send the camel to its destination. For example, if you're on an island you need a trireme. There is a cost associated with rushing it, just like there is with the caravan. This cost reduces the caravan's value and should be incorporated when calculating it.

When considering alternative uses of the caravan, make sure to include all benefits and costs as well. This is what you do with the caravan's future benefits when you trade with it (C in your post above), in all fairness this should be done with the alternatives too (or simply cancel them out, deleting C in your original calculations).

Hence, 50 wonder shields are indeed worth 200 gold, but the future stream of benefits associated with the wonder also has a (positive) present value in gold. For example, Colossus and HG yield extra trade adding to the value of building the wonder (the caravan should only get credit for one fourth of these benefits! ).

This is not to say that your proposed method is wrong, but when used it should be implemented in a thorough and adequate way.

If we're back where we started why bring this up at all? Simply because in these forums the value of trade has been asserted over and over again by almost everyone (including yours truly, who is a big fan of trade! ).

However, the early landings by DaveV (1595 AD) and Arii (somewhere in the 11th century?) without building a single caravan for the purpose of trade (correct me if I'm wrong here, it was some time ago I looked at DaveV’s log) is clearly evidence against the case of trade. Until a trader beats those single player record years, the burden of proof is with the trade side.

Hence the need for a complete analysis of all costs and benefits of rushing that caravan!

Including not building the caravan in the first place. Which is best, 4 camels or 5 settlers?

Carolus

[This message has been edited by Carolus Rex (edited January 11, 2001).]

[Carolus Rex]

Did a little digging myself!

http://apolyton.net/forums/Forum3/HTML/000748.html?16

Seems I was wrong about no trade! What about Arii's game, is there a log available somewhere?

Carolus

[Carolus Rex]

Indeed, there is!

http://apolyton.net/forums/Forum3/HTML/000803.html?11

Lots of trade routes in that one too!

Carolus

[Carolus Rex]

Hm, after rereading DaveV's log I guess that long list of cities must have made a lasting impression on me!

Carolus

[Scouse Gits]

Thanks for digging those links out Carolus - they are now in the GL for easier reference.
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SG(2)

[East Street Trader]

WOW, I MEAN JUST WOW.

But I REFUSE to concede to this ICS thing, REFUSE, grumble grumble pout pout.

Now, HOW can I come up with a perfectionist way to match this, plot plot puzzled frown.

I think the next five years of my life have just gone down the pan.

Unless Civ 3 finally consigns the great game to the bin.

Even then ARII's achievement will deserve to be remembered.

Thanks Carolus.

[La Fayette]

Carolus,
Thank you for posting.
I agree with most of what you wrote, but...
I'm pretty sure that you have noticed what I have noticed when reading the archive to this forum: many many posts stressing the importance of this and that, and long term effects and the like.
But apart from Xin Yu, Mark Everson and Adam Smith, few people have given detailed information about the results of testing what appeared to be wrong in Winkler's Scrolls of Ancient Wisdom, for example (forgive me if I forget some important contributors), until a few weeks ago.

I feel somewhat on the same line as (I suppose) Scouse Gits (with GL and starting techs), oedo (with statue and unfinished) or Slowthinker (with dips and spies): much has been said and achieved by the 'masters' (I won't name any, since you know them better than I do), but much remains to be tested and researched by those interested. That is one of the numerous reasons why this game is GREAT.
That is also why I published this case study: trying to make some people react otherwise than saying "I use home trade and I'm glad with it" or "a settler is better than a caravan". That is also why I thank you for your post.
Then, let me answer briefly:
1) I suppose that none of us wishes to play civ2 with a computer #2 in his back, doing 1/2 hour economic calculations before any move. That's why I tried to make it simple.
2) Even if the "true value" is not true (and I am #1 to state that it isn't), IMO it can nevertheless be helpful.
For example, if we stay in the field of "caravan vs caravan", I state that food caravans sent to the capital are not ALWAYS the best solution when trying to build a wonder and that home trade is not ALWAYS the best solution when trying to boost the number of trade arrows in one's civ. I hope that the "true value" will help convince some players of that plain fact (and I intend to be back with more results within a few days or weeks).





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aux bords mystérieux du monde occidental