Let’s say you have a merchant caravan of spices, going through dangerous territory. The success of your venture is partly, or even mostly, dependent on the actions of many other people. The spice dealer can choose not to sell you spices in the first place. The caravan workers can threaten not to work, or to run off with your spices. A bandit can threaten to rob your caravan; a government bureaucrat can threaten to deny you entry to your destination. Each of these sources of vulnerability will depress the expected value of your spices—unless you can mitigate the risks somehow.

Douglass North makes a key point on this subject in his book on institutions. We have said that uncertainty tends to lower the price of an asset, because the expected value of the asset—the likelihood that you will actually enjoy the benefit of owning the asset—is reduced. But uncertainty can come from several sources. Some uncertainty is “natural,” such as the chance of bad weather harming a wheat field’s harvest. But some is intentional: other people acting to damage or take your asset. North states that in general, the price of an asset will be reduced the more that other people are able to affect its value.

North states that the most efficient way to mitigate the risks that other people pose to your asset is to give each party a cut of the action—to give them incentives to cooperate with you. (Strictly speaking, he says that you should give each party property rights in the asset; but he’s using “property rights” loosely, to mean “a share in the benefits.”)

So you would pay the spice dealer a high enough price to induce her to sell to you; you would pay the caravan workers a high enough wage that they will not be tempted to shirk. You might pay the bandit a toll high enough that he doesn’t want to risk his life fighting for more (and if enough other people do this, the bandit might “go legit” and set himself up as ruler of a petty state controlling that part of the road). And you would pay the government bureaucrat (legally or illegally) to let you into the city.

And despite all of the money you’d be paying out, North says, you’d still end up making more money (on average) than if you decided to bear the risk yourself. True, if you managed to dodge all the dangers without paying, you’d be fabulously rich. But the chances of disaster would eventually catch up to you, which is why the expected value of your spice venture would be so low at the beginning.

Of course, you could decide to deal with your problems in a less cooperative way. You could deter the bandit by outfitting your merchant workers with guns, for example. You could try to smuggle your spices into the destination city, rather than paying off the bureaucrat. You could steal the spices rather than buying them. North, being interested in how people deal with property rights, is less interested in these solutions, but we as authors have a larger toolbox to work with—especially since we like conflict in our stories!

So this was just a quick post discussing another cool conflict that you can explore in your stories: all the ways that a hero’s venture can be stymied by other people, and how your hero manages to reconcile all the diverging interests. (This might be by killing off all the interfering people, depending on your story!)

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(This post is part of Politics for Worldbuilders, an occasional series. Many of the previous posts in this series eventually became grist for my handbook for authors and game designers, Beyond Kings and Princesses: Governments for Worldbuilders. The topic of this post belongs in the planned second book in this series, working title Wealth [Commerce?] for Worldbuilders. No idea when it will be finished, but it should be fun!)