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Sunday, June 12, 2005

I think the chilli is expensive because that's how restaurents make money... sell cheap things at high price. To illustrate this concept, i highly recommend this old pc/snes game called Uncharted Waters 2. It's an RPG set in the 15th Century and your protaganist sails around trading/exploring/pirating etc. One favourite way to make money is to trade Glass Beads from Amsterdam for gold in the East African ports. (Glass beads for gold, can you imagine that... exploitation by the angmohs started way back.)

Anyway, here's the maths:

Price of 1 lot of Glass Beads in Amsterdam = $2~$3 depending on market conditions
Price of 1 lot of Glass Beads in, say, Somalia = $90~$100
Price of 1 lot of Gold in Somalia = $600~$700
Price of 1 lot of Gold in Amsterdam (or any other European port) = $900~$1200

Scenario A

Assume worst possible case where we buy at the highest price and sell at the lowest. (Actually there are worse things like getting robbed by pirates or sinking in a storm but it's irrelevant to the current discussion.)

Starting with a capital of $1000 in Amsterdam, we buy 333 lots of Glass Beads for 333 x 3 = $999.
Cash on hand: 1000-999 = $1

We then sail over to Somalia and sell the whole load of Glass Beads for 333 x 90 = $29970.
Cash on hand: 29970+1 = $29971

We then buy 42 lots of Gold in Somalia for42 x 700 = $29400.
Cash on hand: 29971-29400 = $571

Next, we sail back to Amsterdam and unload 42 lots of Gold for 42 x 900 = $37800.
Cash on hand: 37800+571 = $38371

Profit: 38371-1000 = $37371
% Profit: 37371 /1000 x 100 = 3737.1%

Scenario B

Assume best possible case where we buy at the lowest price and sell at the highest.

Starting with a capital of $1000 in Amsterdam, we buy 500 lots of Glass Beads for 500x2 = $1000.
Cash on hand: 1000-1000 = $0

We then sail over to Somalia and sell the whole load of Glass Beads for 500 x 100= $50000.
Cash on hand: 50000+0 = $50000

We then buy 83 lots of Gold in Somalia for 83 x 600 = $49800.
Cash on hand: 50000-49800 = $200

Next, we sail back to Amsterdam and unload 83 lots of Gold for 83 x 1200 = $99600.
Cash on hand: 99600+200 = $99800

Profit: 99800-1000 = $98800
% Profit: 98800 /1000 x 100 = 9880%

So there you have it, that's how businesses make money. Actually the figures aren't accurate because i forgot to factor in the cost for the ship, the crew's wages and the food supplies... which happens to be rather substantial because it takes about three months to sail from Amsterdam to Somalia if i remember correctly from the game (should be even longer in real life).

Anyway, this game is really fun and requires some geographical knowledge and mathematical skills. i always play it with a calculator and an atlas. It's kind of cheapo but i always look up the location of supposedly "undiscovered" places with the atlas while exploring the "uncharted" seas. Very fun game, should go and try.

In conclusion, as you all can already see, i am very bored.

The Kuku Master

Anonymous at 6/12/2005 09:44:00 PM

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