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I was playing Railroad Tycoon 3, an old favourite. And as usual, I’ve managed to win Gold in yet another scenario by manipulating the market and the game-world economy and finance.

It is rather easy, especially when there is no “regulation” and your firm does not have to be a going concern – both of which have been my pet peeves with all simulation games, including the ones I’ve played in more formal settings, even at IIMC.

Here’s what I needed to win gold in the scenario (based in the 1850s US): At least 50 oil tankers shipped, at least 30 coffee trailers shipped in from Mexico, company cash worth at least $15 million AND personal net worth worth at least $15 million.

Of course, I tried to play legit, but it was on the hardest difficulty, and I got frustrated after not making it the third time round. So here’s what I did:

Reloaded a saved game that was about two years from end-game, and started buying stock myself, in humungous quanitites to create what is called the self-fulfilling upward spiral. The stock price keeps on increasing because of the purchases I made, and that increased my total leverage allowing me to buy even more stock on margin (since I didn’t have the hard cash, but the company stock could be used as a collateral).

Simultaneously, I had my company issue 20 new 50-year bonds, each worth $500K. (The game only allows 20 open bonds.) The company rating of AAA helped in securing low rates of interest, and since I had rock solid performance in the past, lenders were more than happy to give the company their money. That’s how I managed the $15 million in cash for the company. I also had some excess, which I used to buy back stock, thus maintaining my inflated stock price, just for enough time to tide thru the next year when the game checked the conditions and since everything tallied, awarded me gold.

If the game lasted any longer, I’d not only be booted out of the company (which would soon head for a crisis), but also receive margin calls from my broker, forcing me to sell my stock in order to square-off the transaction, and that would’ve created what is known as the other self-fulfilling downward spiral. Selling of stock causes its price to fall, which means my net worth further reduces, and I keep getting bigger and bigger margin calls, which force me to sell more stock till I go bankrupt.

Fortunately, the game ends there, and so I don’t care. But this isn’t all that difficult to do in real life. Despite all the regulations. That is scary.

There are other ways to completely mess with the economics and finances. For example, here’s an amazing way to siphon off money to my personal account from the company’s account. Let the company grow, strong and powerful. Keep buying a lot of shares. Nothing illegal so far. Then one fine day, sell all owned shares (possibly even short-sell) and stop all trains and revenue generating activities. Reduce dividend to zero. Let the stock price plummet. The buy back previously sold shares and then some, till I am the majority shareholder. Resume all stopped activities. Stock prices zoom skywards, rocketing my personal networth. And no, it doesn’t end there. Then crank up the dividend, maybe even 100% or more. So all company earnings are siphoned via the dividends to my personal account. Use any spare company cash to buy back shares, further raising the stock price, networth and dividend share. Enjoy life!

What I’ve described above is essentially insider trading in real life. Again, very much doable!

Want to be the sole surviving company? Here’s a simple trick: Buy stock of competitors early. In large amounts. Get a majority stake. Propose a merger. This is a sure-shot way to buy-out a company. But what if you can’t buy enough stock? Fret not. There’s always a way: Buy as much stock as you can, then using your cash-cow company, engage in a hostile take over bid. Might help to run-down the other company’s stock by short-selling its shares, and forcing your railroad into their profitable routes.  Let your company pay a huge premium for acquring the other company. Sure, in the long run, your company stock will fall and you’ll have to manage the acquired company well and all that. But if there’s no “long run”, who the hell cares?

True, short-selling is banned in most markets and margin buying has its limitations, and it is difficult to bypass all regulations and prudence that everyone else in the market has (or is supposed to have) in the real world. But it is only that – merely difficult. Not impossible. Welcome to the real world!