Stealing

Valuation Games are often played as a means of lowering or raising acquisition costs. Buy-side Commanders want to lower their cost of investment, sell-side Contenders and Commanders want to push prices up to maximize profit. This is all based on the assumption that there will be a transaction of some sort. It may be one-sided or it may be a win-win, but regardless of outcome it is an exchange.

What if you could win the game without spending anything or only a fraction of what you'd spend in a standard Valuation Game? Wouldn't it be nice if you could just have what you want without all the legal and economic fuss? This is a line of thinking that many players of Valuation Games lean on, some act on it in two specific ways: force and fraud.

Force

We tend to think of the creation of resource pools through the lens of modern economies with sophisticated legal systems. Some people do break rules and laws, but by and large the modern story of resource pools is non-violent. Most battles are fought in courtrooms and markets, not actual battlefields.

This is not how it's worked for most of human history, nor is it universal today. In previous eras, when social mobility was nonexistent, legal systems were underdeveloped and resources far more scarce, the best way to move up was to take someone else's pool by force, fraud or both.

Although wars are not fought exclusively for control of resources, it has been (and continues to be) a prime incentive. Conquests of foreign territory are most often about seizing the pools of others. This translates into a lower-friction transaction (for the conqueror) through the side-stepping of legal systems, transaction costs, negotiation, and so on.

In the modern era, the outright seizure of assets often falls within the purview of state actors or criminal organizations. Nations engage in wars or covert operations to lay claim to natural resources, like oil or minerals, which are pivotal for maintaining their economic and political hegemony. Russia's Wagner Group, a quasi-governmental private security company used by the state to seize land and resources on multiple continents, is a contemporary example of such behavior.

These acts, often justified by national security or economic necessity, can reshape global power dynamics. Similarly, organized crime syndicates exert control through intimidation and violence, compelling businesses, states and communities to forfeit their assets. This form of resource acquisition is raw, brutal, and often effective, albeit with high stakes.

Anyone who engages in this behavior needs to have a big and powerful enough pool to withstand the heat that comes with it. International condemnation, sanctions, lawsuits and other forms of attempted punishment are common. The reputational damage is often severe enough that strategic isolation is a risk if the game is not played carefully.

For example, the United States and China have competing goals across the world and always seem to be on the brink of some kind of conflict. But there's so much business done between the two economies that an all-out war would cause serious damage to both sides. They're too interconnected and interdependent to let that happen—for now.

What's interesting is that, despite the use of brute force, there are still Valuation Games possible within the Force paradigm. This is rooted in the fact that there are real risks anytime players resort to violence. Even if you have an overwhelming advantage, you will still lose people and property in the process.

So a Force player leverages the threat of force much more than they use it. They exist on the sell-side, but their pitch revolves around what non-compliance looks like. The old drug cartel saying, "plata o pomo" ("silver or lead") is an example: either accept our money, or take a bullet. Most aren't interested in testing out their threats, so "silver" is the popular option. This is how most Force players operate.

It's only when those in control of a pool can act with confidence in a unilateral way that the consequences of pure aggression start to look like a cost of doing business rather than a significant risk. Fortunately, that type of behavior is not that common anymore. Outside of countries with weak rule of law and situations where great powers clash, fights over pools don't usually involve real violence.

Fraud

Since raw aggression isn't an option most of the time for those who want to acquire control at the steepest discounts, fraud is the next available option. This gives an unethical player all the benefits of using a Force strategy without the physical risks (at least until they cross the wrong people).

It's fraud that keeps buy-side players up at night more than anything else. They know they don't have to worry about sell-side players robbing them most of the time, but they do know that a well-spun story can ruin them if they aren't careful. All it takes is one instance of misplaced trust, and suddenly the fortunes of the buy-side player can shift dramatically.

Consider the example of Theranos, the fraudulent blood testing company created by Elizabeth Holmes and her partner Sunny. They laid claim to technology that could pull an unprecedented amount of data from a single drop of blood, which represented a true revolution in medicine. This elaborate dance was pulled off by disguising run-of-the-mill medical technology, fabricating data and telling outright lies about how it was deployed on active battlefields.

Investors, including powerful figures like Henry Kissinger and James Mattis, lined up to write checks. Nobody asked questions in time, and eventually the fraud was discovered. Investors believed Holmes was a genius, and trusted her with their capital. Her net worth inflated to over a billion dollars before it came crashing down, taking all of those investor's money with her.

Holmes was a world-class sell-side Valuation Games player. She knew exactly what to say and do in order to generate the trust needed for big commitments from investors, and she invested significant resources into maintaining the illusory integrity of her pitches. The buy-side Commanders she dealt with just didn't do their homework, often because they already saw the riches they'd make when Theranos took over the blood testing market.

Cases like this ironically motivate some sell-side players to go black hat. I've personally spoken to entrepreneurs who see Elizabeth Holmes as a worthy example, someone who pushed the boundaries in order to pursue a grander vision even though the technology wasn't ready yet. The fact that it was all a fraud is most often viewed with a shrug. If she could reach a billion dollars on her Valuation Games skills alone, who cares if it wasn't 100% accurate?

What's even more incredible is that, knowing all this, many buy-side Commanders still don't bother with in-depth due diligence. All that can be said for those people is, "buyer beware."