The Game
Business 682 badass dog-eat-dog open market simulation which will exploit the players’ self-interest and competitive advantage in exchange of higher learning and preparation for the real world
Presented before Professor Sorensen this Fourteenth of June, 2010
The game will exploit a combination of self interest and a desire for one’s debate team to perform in order to accumulate maximum wealth. Each person is both a selfish player but also a co-owner of corporate stock (a two person debate team). One’s self interest will be directed towards accumulating wealth by collecting bonus bucks but also contributing towards the corporate performance in order to drive the demand for one’s stock and realize a profitable sale. Corporate performance is based on the quality of one's debate team and as a result - predictable grade received for the debate presentations. The debate grade assigned by Professor Sorensen will play an important role: it will determine the dividend paid back to shareholders of each corporation's stock. Therefore a display of quality debate will both drive the stock price high (in anticipation of a good grade) and pay out higher dividend once the team’s performance is graded by the professor.
Shares in one’s corporation are worthless unless sold on the market. Therefore one will gain by displaying promising corporate performance in order to compel others to seek one’s stock. The same will also compel shareholders to engage in market trading rather than keeping their worthless stock in their own corporation to themselves. Once traded for the first time the stock becomes an open market commodity and can be resold indefinitely, including being purchased back by its original owner.
The final individual grade for the class will be based on total net worth (yes the professor has agreed to the rules). One’s net worth will be the sum of 3 components:
1. Bonus bucks available in one’s account – equivalent to liquid cash in the real world.
2. Value of all stock owned in any corporation – equivalent to equity in the real world. The stock price will be locked based on the last trade before market closes on the last day of class.
3. The sum of all dividends collected from any shares owned in any corporation after debates are graded.
Each corporation (debate team) will be assigned 10 shares. Each debate team member will receive 5 of those shares. As with any IPO the shares have no value until sold for the first time on the market. After that initial sale the shares will bare market price set forth by the forces of supply; demand and company performance. As we will see later in this proposal each share presents the promise of future dividend paid back to the share holder based on current performance.
Game phases -- The game will go though 3 phases consistent with the class syllabus and published schedule on iLearn.
Phase 1 – each individual player is focused on selling a product (class participation) in exchange of accumulating maximum number of bonus bucks:
6/7 Topic: Introduction; Course Overview and Goals.
Topic: Models of Business-Government-Society Relationship
Readings: Steiner and Steiner, Ch. 1
Topic: The Dynamic Environment
Readings: Steiner and Steiner, Ch. 2
Case Study: The American Fur Company
6/9 Topic: Business Power
Readings: Steiner and Steiner, Ch. 3
Case Study: The Standard Oil Trust
Topic: Corporate Social Responsibility
Readings: Steiner and Steiner, Ch. 5
Case Study: The Jack Welch Era at General Electric
Topic: Practice Debate
Topic: Assign Debate Teams and Topics
6/14 Topic: Making Ethical Decisions in Business
Readings: Steiner and Steiner, Ch. 8
Case Study: Columbia/HCA Healthcare Corporation
Topic: Government Regulation of Business
Readings: Steiner and Steiner, Ch. 10
Case Study: The FDA and Tobacco Regulation
6/16 Topic: Multinational Corporations
Readings: Steiner and Steiner, Ch. 11
Case Study: Union Carbide Corporation and Bhopal
Topic: Environmental Policy
Readings: Steiner and Steiner, Ch. 13
Case Study: Owls, Loggers, and Old-Growth Forests
Phase 2 – each corporation will present its product as part of the debates. The market opens for trading. As each corporation projects the promise for better grade, its stock will trade based on that perception. There will be a direct correlation between the quality of one’s debate and the stock price of that team’s corporation. The promise for better grade will realize higher dividends to those who own that corporation’s stock.
6/21 Topic: Debate 1
Topic: Debate 2
6/23 Topic: Debate 3
Topic: Debate 4
6/28 Topic: Debate 5
Topic: Debate 6
6/30 Topic: Debate 7
Topic: Debate 8
7/7 Topic: Debate 9
For example, Team #6 had presented a good understanding of their material, made an excellent rebuttal and answered intelligently during the Q&A. Team #6 is likely to receive an A for their debate, which means the owners of Team #6 stock will receive a higher dividend. Demand for Team #6 stock is high which causes any owner of Team #6 stock to ask for a higher price per share. Team #6 original stock owners will be unerring in their effort to sell their shares so that they can use the proceeds (bonus bucks) to either buy it back or buy someone else’s stock.
Phase 3 – Debates are graded. Market is closed and no more trading is allowed. The last price at which a stock traded becomes the official price per share for that corporation. The grade each corporation receives is used to calculate dividend which will be paid to the share holders. The following formula is used to calculate dividends:
Debate grade Multiplier
A 1.5
B 1.0
C 0.5
Below C 0.0
Once debate grades are assigned by the professor to each corporation, dividend payments are distributed to each share holder according to their stock volume; the grade assigned to that stock and the stock price.
For example, Team #2 stock last traded at $1.40 per share and received an A on their debate. Each owner of Team #2 stock will receive 1.4*1.5=$2.1 bonus bucks per share owned.
Team #5 last traded its stock at $0.35 per share and received a C on their debate. Each owner of Team #5 stock will receive 0.35*0.5=$0.175 bonus bucks per share owned.
A play out scenario for a well performing corporation follows:
Team #6 had accumulated 22 bonus bucks each during Phase #1. Team #6 debate occurs on 6/28/2010. That team made an excellent presentation and insinuated an A for their debate. After several bids all 10 shares of Team #6 were sold. Each member of Team #6 knew that they need to push their shares out on the market as soon as possible because they are worthless to the owners and because sales should be done before any other team could possibly make even a better presentation which would devalue Team #6 stock price. The members of Team #6 also purchased stock in another corporation believing that those people will perform well and yield a better than 1=1 ROI on the bonus bucks they spent for these shares. Now Team #6 balance sheet looks like this:
Team #6 Opening Sold their stock Purchased Each member
Members Balance Received proceeds Team #9 stock for $1 per share Net Worth
John 22 5*1.2=6 3*1=3 22+6-3=25.0
Jill 22 5*1.5=7.5 2*1=2 22+6-2=27.5
Sadly for Tam #6, the shares they purchased of Team #9 proved bad investment since Team #9 was assigned a C (a dividend multiplier of 0.5) for their debate. Hence the dividend John and Jill will receive is less than $1 for each bonus buck per share spent on Team #9 stock.
Their balance sheet after debates are graded will look like this:
Team #6 Opening Shares of Team #9 stock Received dividend from Total Net Worth
Members Balance Owned Team #9 stock
John 25.0 3 (1*.5)*3=1.5 26.5
Jill 27.5 2 (1*.5)*2=1 28.5
As one can see from the post-grade situation both investors benefited from their investment. Although John and Jill received different dividend on their stock, they were both better off (meaning their wealth increased) investing compared to keeping the bonus bucks for themselves. Conversely speaking keeping the bonus bucks would have yielded 0 ROI (or no growth in their wealth) while by engaging in market activities they both realized an ROI greater than 1 for every 1 bonus buck they subjected to a market risk.
How does “The Game” bring the bonus bucks system of reward to a higher level of competition? Can we reward strategic thinking?
The system of bonus bucks does reward performance. However the total wealth of our class economy is limited by the money supply. That is the total number of bonus bucks injected into the economy by Prof. Sorensen in exchange of class participation. I see this static nature of our economy as a major deficiency resembling a zero sum game. The missing element here is the ability of anyone to engage in value adding activities. The introduction of investment concepts tied to one’s self-interest, I believe, is a major instrument of leveraging risk as a rearguard for balancing supply and demand while opening the door for value adding activities. Tying all this to academic performance absolves the game creator from any suspicion of market manipulation and fraud. Moreover “The Game” provides an important vehicle for creation of wealth, one which is unavailable in the bonus buck system of payment-for-service. The Game also provides another significant vehicle for creation of wealth: the consequences (be it positive or negative) of a debate team’s performance are no longer limited to that team’s members. The entire class now has the opportunity (a choice, not a requirement) to be subjected to the outcome of how other teams are doing via the instrument of stock ownership.
As each team presents their product the potential investors will have first hand opportunity to exercise their judgment and forecast each team’s performance. However if they can also purchase stock for that team a potential investor can now benefit from one’s comparative perception about the final outcome of the debates.
What makes this arrangement unique is that each investor is also an owner of a competitive firm – a firm in the same industry and with comparable resources. The ownership in a competitive firm is what places our potential investors into the unique situation of having indirect influence on the overall market. That influence is exerted by one’s control over one’s own firm, their performance, ideas and willingness to do better than the rest – a classic manifestation of competition. Due to the relativity of the market the end result of this game will be a higher quality product compared to a fee-for-service reward system.
