We here in the information age do not appreciate the transforming powers of the steam engine. In this country the first revolution was in the transportation of farm goods down the Mississippi or the Erie Canal. Prices dropped 20-fold with the introduction of the barges. When steam engine railroads were introduced, trade routes were no longer bound by waterways. The subsequent flow of goods effectively reduced prices another 20-fold, causing an economic boom (The Great Game, by John Steele Gordon, p. 75).

Coincident with the rise of the railroads was the move of the populace from the country to the city; the population in urban centers equaled those in the rural regions for the first time. The industrial revolution that started in England had spread worldwide, and the concept of supply chain came into existence.

At the same time that railroads controlled transportation, the robber barons came into existence. Many of the players came from industries that fueled the railroad expansion. The steel (Carnegie), railroad (Vanderbilt, Huntington), and banking (Schwab, Morgan) industries all created powerful characters. These robber barons had egos to match their empires, and stock market manipulation was rampant. On the other hand, it must be said that the government legalized bribery, and these men were often disgusted with the government. They preferred markets to government regulation. Over 62% of the U.S. stock market in terms of capitalization was railroad stocks at the beginning of the 20th century (by comparison today that percentage is 0.2%; Triumph of the Optimist by Dimson, Marsh, and Staunton, p. 24). You couldn’t build a railroad company without the accompanying stock market manipulation.

The inseparable partnership of building a railroad company and playing the stock market is nicely illustrated by Railroad Tycoon II, a great game by Pop Top.

Train runs haul cargos of different time sensitivities. Raw materials are low-margin items that keep their value for a long time, so a slow low-priority train can handle the shipment. Processed goods have higher margins, but their values decay quickly with time. Finished products command very high margins, but only if the raw materials and in-process intermediate goods are delivered efficiently and effectively to the factory. You have control over the speed of the engine with the initial engine purchase, the priority of the shipment through cargo handling, and the departure of a train depending on its load being full, half full, or departure at the earliest instance possible using a flag system.

Passengers represent the bulk of the healthy revenue, while mail is the absolute highest-margin and highest-priority good on the rail network. To give you an idea of the relative importance of these last two household-generated goods, a dedicated train would often run one mail box between two cities, and a dedicated passenger train would take two passenger boxes with an attached dining car.

A gaming friend described this game as “a spreadsheet hidden in the guise of a game.” Fair enough.

Railroad Tycoon’s attention to the business side of things wins kudos from me. As an avid supporter of the real stock market, I’m pleased to see a game that teaches what megalomaniac CEO’s can do. With a solid business behind him/her, a player can purchase prosperous industries. These industries are gushing cash because you haul raw materials to them and haul away finished goods for sale. Why not partake of the industry that you helped create?

If true empire building is your cup of tea, try to merge with (a.k.a. swallow) your competition through cash offerings for their stocks. In growing your own company you can choose to take on debt or sell more securities to the open market. And if you want to get mean, short your competitors’ shares. Be warned though. Declaring a financial war can lead to retaliation and financial ruin. Leverage also plays a large role in this game. Vast fortunes can be won or lost with this game that has a 50% margin requirement (a modern rule). It’s scary to think of the pre-1929 era when 10% margin requirements were the rule.

I never did finish this edition of the game, since it came with so many maps and scenarios. It will keep the true aficionados happy.

A true story of the real-life magnates is recorded in the history of Wall Street, which may give you a flavor of the railroad era (The Great Game by John Steele Gordon, p. 138). Vanderbilt controlled a railroad line, his competitors Fisk and Gould controlled the Erie line, and a price war for bringing cattle from Buffalo to New York City ensued. The competition between the two lines dropped the price from $120 per carload to $40. Vanderbilt then decided to drop the price to $1 to ruin the competition, thinking that he could sustain such a price war longer than Fisk and Gould. His competitors promptly bought cattle and shipped it on Vanderbilt’s line, making a handsome profit. Too bad you can’t do the same thing in the Railroad Tycoon game.