Big thieves hang little ones.

-Russian proverb

Rulesets and how they're enforced play an outsized role on player behavior in any game. But Valuation Games aren't normal games: the stakes are bigger and the consequences for failure far more impactful.

Who sets the rules? Who enforces them? When can a player be forced to follow them? In some sense, there aren't any rules. There are laws designed to dictate behavior, but in a globalized, complex world, it's difficult to hold anyone accountable.

A good starting point is to keep this heuristic in mind if you want to understand how rules are created and enforced: The biggest pools make the rules, the smallest ones suffer from them.

Inverse Enforcement

There's a concept I call the Inverse Enforcement Principle (IEP) that encapsulates much of how this all works:

The larger the pool of assets under control, the less rules are enforced.

This phenomenon can be attributed to two primary factors:

  1. Large pools often possess significant influence, be it economic, political, or social, which can lead to a certain level of immunity or leniency in rule enforcement. Think of major banks that only pay minor fines after getting caught money laundering—they're so politically juiced in and integral to the financial system that it doesn't matter.

  2. The sheer complexity and scale of these pools make it challenging to enforce rules effectively. Consider the maritime shipping example above, where there are just so many pieces moving in so many places that it's impossible to keep track of it all (even for those who control the pool).

Before anyone brings up all the very real regulations, oversight and red tape that large pools of resources are often forced to deal with, remember that the emphasis here is on enforcement. Rules on paper don't matter if they aren't enforced, and those who control the largest resource pools tend to not have rules imposed on them. Or, if they are imposed, the consequences are not significant enough to warrant changes in behavior.

Small Players

The opposite of the IEP also holds:

The smaller the pool of assets under control, the more rules are enforced.

While "small pools" in this context may represent the interests of a Contender or group of Contenders, in many cases the game is between Commanders who occupy different levels of power. There is not one universal, homogenous world of Commanders—there's a hierarchy, and Commanders push other Commanders around all the time.

Smaller pools, lacking the influence and power of larger pools, find themselves more susceptible to the full weight of regulatory mechanisms. Their operations are often more visible and manageable from a regulatory standpoint, making enforcement more straightforward and consistent.

A neighborhood grocer that doesn't pay the appropriate fees to local authorities will be fined, in some cases to an extreme degree. Small business owners who try to tamper with their tax bill will draw the attention of the IRS.

Large pools also like to shift rule enforcement onto smaller players, sometimes even people within the pools themselves. If an employee who broke rules with full knowledge of the pool's Commanders suddenly creates a mess, the Commanders will use them as a fall person to ensure their own survival.

This is on full display in many financial scandals, such as when Wells Fargo was caught creating fake accounts in order to generate fee revenue in 2016. The bad conduct was blamed on employees and an ephemeral cultural failure, and some lawsuits were filed.

But the executives who created the situation didn't suffer any substantial consequences. John Stumpf, the CEO, walked away with a $130 million dollar compensation package, while many employees lost their jobs and had their professional reputations ruined. That's the nature of the game when you don't have your own pool to command.


Maritime Shipping

Ocean-based shipping is the center of international commerce, responsible for a staggering 1.95 billion metric tons worth of goods—about 80% of all goods worldwide. The scale is impossible to wrap your mind around, which is exactly why it's a prime place to break rules.

Even though port authorities have the ability to scan shipping containers for contraband (such as drugs and weapons), it takes substantial effort to do a single scan. Every minute behind schedule costs companies money, and ports don't want to be responsible for slowing down international commerce.

Not to mention the sheer volume of containers that come through any major port means it's just not physically possible to scan more than a trivial percentage of them. Even well-intentioned authorities just can't keep up with the scale of the problem, so the majority of rule breakers get away with it.

Despite the existence of many rules around maritime shipping containers, enforcement isn't a priority. If enforcement is nonexistent, do the rules even matter? This opens the flood gates for those with the biggest pools of resources to do what they want without fear of consequences.

The biggest rule breakers in this example are multi-billion dollar companies. Everything in their supply chain is structured to minimize liability, evade rules (and taxes) as much as possible, and keep cash flowing towards any authority figures who can help them out if they're unlucky enough to get caught.

A specific example is the story of the Brillante Virtuoso, which was an oil tanker that was destroyed in what turned out to be an insurance fraud scheme. Not only did the people behind the fraud get paid out, but an investigator was murdered—a crime that remains unsolved. Although it was clear serious crimes were committed, nobody went to prison.

This is just one industry and one example, but that dynamic exists all over the world. Knowing that, it makes sense that Valuation Games follow this same realist logic: if there aren't any rules, or if there are but they aren't enforced, then some players will cross lines. That may mean violating norms or it could translate into outright illegal activity—even murder.


The most straightforward example of how pool size and influence affects rule enforcement is the Global Financial Crisis (GFC) of 2008. Large pools in the form of financial institutions engaged in behavior that was ethically ambiguous at best and outright fraudulent at worst, but in the end everyone involved walked away unscathed. Nobody went to prison and governments handed over generous bailout packages.

Not only were there all kinds of political dimensions involved due to large influence-buying campaigns by the banks, but the sheer scale and complexity of the financial system meant those who were supposed to be watching them were caught off-guard. It was too easy for players to conceal what they were doing through esoteric derivatives and the cooperation of ratings agencies.

As a result, the supposed rule enforcers were either caught with their pants down or flat out refused to do their jobs. And once the situation became dire, the savviest players were rewarded, rather than punished, for their behavior.

Bernie Madoff's Ponzi scheme also fit this profile, although at a much smaller scale. He was a suave, politically connected titan of finance with a gigantic resource pool at his disposal. The claimed success of his so-called split-strike options trading strategy, the number of people invested in it, and the sheer length of time it'd been around meant rule enforcers left him alone.

Even after independent investigator Harry Markopolos repeatedly identified that Madoff's returns were impossible over the course of almost a decade, the SEC took no action. In fact, he'd been investigated 8 times over the course of eight years without consequence. It was only after the GFC trigger a mass exodus of capital from his fund that Madoff confessed to his sons, who then reported him to the authorities.

Madoff's case is a harsh reminder about how pool size and perception can make rules a non-factor. Even an outright criminal who is caught over and over again can operate for extended periods of time if they play the game intelligently.


The largest pools don't always win though. Sometimes, with the right conditions in place and players who understand how to leverage competitive advantages, the small players can overcome the big ones. When this happens, it tends to be because rules, traditions and other boundaries leveraged by the big pools are disregarded by the small pools.

Mongolian conquests under Genghis Khan are the prime example of how this can play out. The Mongols were a small, fast-moving tribe of nomads who overwhelmed empires that had existed for thousands of years. They swept through large swathes of the planet's surface by virtue of the fact that could move so fast and had such an intrinsic disregard for how things were done beforehand.

Armies they fought expected them to line up and maneuver they way they did, but the Mongols used horse archers, guerrilla warfare and other unconventional methods to off-balance their enemies. Once they took over a territory, they brutally suppressed resistance and then issued warnings to nearby rulers: surrender now and live, or fight us and die.

Most didn't want to deal with the consequences, so they gave up—which allowed the Mongols to simply collect their loot, send it home to the main resource pool in Mongolia and move on. This also meant they didn't need to waste resources on garrisons, another steadfast principle of warfare from that era.

Any small pools who want to turn the tides against large pools needs to adopt a similar stance. Following rules that the big players set will only create unwinnable situations. Rules must be broken, and actions must be swift.

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