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Let’s break this down.Does the assumption really hold water?By environmental standards, I assume you mean air, water and land. Let’s take a look.“The United States primarily has done an excellent job, moving from being a very dirty place in the 1950s to quite a clean place today,” said Dr. Carlos Dora, the health organization’s coordinator for its department of public health, environmental and social determinants of health.Europe, he added, “has also moved from being extremely polluted,” but it has lagged — a delay that experts have speculated may result from factors that include wider use of fertilizer in urban areas, weaker environmental regulations and the popularity of diesel-powered engines.Europe Trails U.S. in Cutting Air Pollution, W.H.O. Says—Let’s keep looking.U.S. land conservation efforts are strong by European standards. The percentage of national territory protected in the United States is about double that of France, the UK or even Sweden, despite its vast Arctic parks.Europe Vs. America: Some Inconvenient Environmental Truths - The Globalist—Le’ts take a look at an actual map:http://aqicn.org/map/world/You’ll see there is not much difference in air quality—Let’s look at energy use:Once again, the numbers tell a different story. Everybody knows that the United States' oil use per capita is high. But if you measure it as a function of economic production (in other words, if you put the input in relation to the output), energy consumption remains within European norms — and indeed lower than in Portugal, Greece, Belgium, Luxembourg, the Netherlands and Iceland.Yes, the United States has the highest per capita rate of CO2 emissions. Everyone knows that. Between 1990 and 2002, America's carbon dioxide output rose. Few people, though, know that per unit of GDP it fell by 17% — a greater reduction than in nine western European countries.In its output of renewable energy, the United States is in the middle of the European spectrum on all counts, whether biogas, solid biomass energy, geothermal, solar or wind.Europe Vs. America: Some Inconvenient Environmental Truths - The Globalist—Let’s look at food:Agricultural land devoted to organic farming in the United States is lower than anywhere in Europe. But conventional American farmers are far less chemicalized than their European colleagues.Europe Vs. America: Some Inconvenient Environmental Truths - The Globalist—Let’s look at food further:While it is true that the EU has higher standards, it results in a higher cost of food.Many foods are less expensive in the United States than in the wealthier countries of the EU, but food is somewhat more expensive in the United States than in the less wealthy countries of the EU. Bhttps://www.ers.usda.gov/webdocs/publications/40408/30646_wrs0404f_002.pdf?v=41465While this may be true, it does not mean American consumers are void of healthier options. We have the options and freedom to buy more expensive food that may be organic, have less preservatives or a host of other things. It means we can CHOOSE to eat less healthy options.—Let’s look at employment protection:Minimum wage:Europe. There is no Europe-wide minimum wage law. For example, Italy, Austria, Sweden, Denmark, Finland and Cyprus do not have a minimum wage.Germany did not have a minimum wage until introducing it in 2015, relying before then on collective bargaining agreements and unions to protect workers. England has a staggered minimum wage that increases with the age of the worker. France has a monthly minimum wage. The take-away is that each country is different, not only in whether a minimum wage exists, but also the level of the minimum wage and the role that unions play in the employment landscape.United States. In the U.S., federal law sets the mandatory minimum wage, which can be trumped by higher rates set by individual states and local city laws. So the minimum wage applicable to your employees depends on the state and city in which the employee is working. (There are some categories of workers who are not protected by minimum wage laws, but the general point is that most employees will be protected by some form of minimum wage law wherever in the U.S. he or she works.)DIFFERENCES BETWEEN U.S. AND EUROPEAN LABOR LAWS: Part 1 Minimum Wage - Stanton Law LLCTermination:“The world’s employment law regimes really divide into two parts: there’s employment at-will—which is only the U.S.—and then there’s everybody else.” Don Dowling Jr. told us in a recent BLR webinar. Most other countries have indefinite employment. They regulate employment, but you can’t fire people for no reason as you can in the U.S. If an employer operating in Europe wants to terminate an employee, specific legal procedures must be followed.“In the U.S., because we’re employment-at-will, employers are shy or reluctant to give employment agreements.” Dowling noted. However, the reality is that U.S. employment agreements exist, they’re just typically oral agreements. If someone is employed, they have a contractual right to get paid, even without a written contract. Even though it’s terminable at will, it does exist.European Employment Law 101: Employment At-Will Is Truly a Foreign Concept - HR Daily Advisor—In most EU countries, they provide a higher amount of vacation time, health benefits and more paid maternal leave time.So at the end of the day, it looks like we’re pretty competitive. The EU has many cities with worse air quality, but it is on par with the US.The US we have more food options, and are not void of eating healthier foods if we want to pay for it.The EU does seem to have better working conditions.So, no. I don’t really care how the EU is doing. I’m not all too envious, and I don’t think the quality of life there is much better. Especially when our HDI is better than 20 of the 28 EU countries.

TOP QUANTITATIVE HEDGE FUNDSD.E. SHAWFounded: 1988Based: New York CityEmployees/Size: 1,100/approximately $26 billion in investment capital (as of March 1, 2012)Description: “The firm has a significant presence in many of the world’s capital markets, investing in a wide range of companies and financial instruments within both the major industrialized nations and a number of emerging markets. Its activities range from the deployment of investment strategies based on either mathematical models or human expertise to the acquisition of existing companies and the financing or development of new ones.”Strategies: “The firm’s quantitative strategies are for the most part based on:the use of mathematical techniques to identify profit opportunities arising from subtle anomalies affecting the prices of various securities;the application of proprietary models designed to measure and control various forms of risk;the use of quantitative techniques to minimize the transaction costs associated with the purchase and sale of securities; andthe utilization of proprietary optimization technology to construct dynamically evolving investment portfolios based on these profit opportunities, risk factors, and transaction costs.In the course of identifying profit opportunities, the D. E. Shaw group analyzes an enormous amount of data associated with tens of thousands of financial instruments, along with various factors not associated with any one such instrument. Data is obtained from many countries throughout the world, and covers a wide range of asset classes. When this analytical process yields a new model the firm believes to be of predictive value, it becomes eligible for deployment within one or more trading strategies, in some cases along with a dozen or more other models involving some of the same financial instruments, but arising from different market anomalies.The firm’s proprietary optimization technology was designed with the objective of maximizing expected return while controlling the aggregate risk associated with a portfolio that may in some cases include simultaneous positions in several thousand securities. Rather than consider each transaction in isolation, the firm’s portfolio optimization software is designed to account for complex interrelationships among a large set of financial instruments that may range over a number of different asset classes. In many cases, the firm’s optimization algorithms are able to enhance risk-adjusted returns not only through conventional diversification, but by establishing offsetting exposures to various risk factors at the portfolio level.Portfolios are often reoptimized on a more-or-less continuous basis, with a steady stream of trades executed to take advantage of newly emerging potential profit opportunities and/or to manage various forms of dynamically varying risk. Time-sensitive trading decisions are often made very rapidly using real-time data obtained from various sources throughout the world’s financial markets. The firm trades on nearly a 24-hour basis, and typically executes tens of thousands of transactions per day.”QUANTITATIVE MANAGEMENT ASSOCIATESFounded: 1975Based: Newark, NJEmployees/Size: 36 investment professionals (plus additional office staff)/approximately $83 billion in assets under management (AUM) as of March 1, 2012Description: “We see investment potential in small but widespread mispricings of securities. Active strategies can play a key role in meeting investment objectives. Asset prices occasionally deviate from values implied by underlying fundamentals, and active management can improve returns by positioning a portfolio to profit from an eventual return to fundamentals. These deviations from fair values create opportunities that our processes are designed to identify and exploit. Because these are patterns that persist over time, rather than fleeting trends, we are confident that our processes can continue to outperform over the long term.Our bottom-up approach combines the principles of valuation theory and behavioral finance with the skill and judgment of our investment professionals. Team members— averaging 20 years of investment experience and bringing diverse perspectives, including university professors, engineers, physicists and economists – have worked smoothly together through a wide range of market conditions.Our proprietary optimization process generates diversified portfolios across a large number of stocks. And by constraining risks such as size, sector/industry, and deviation from benchmark, while vigilantly focusing on liquidity and transactions costs, we believe we can target alpha generation more effectively.QMA’s investment approach is sensible and sound-but not static. Through ongoing research, we continue to find ways to enhance the adaptive nature of our investment processes.”Strategies:Quantitative Core EquityValue EquityEquity IndexingAsset AllocationStructured EquityTWO SIGMAFounded: 2001Based: New York (Hong Kong, Houston and London satellite offices)Employees/Size: About 300 (estimated)/“several billion dollars” (May 2012)Description: “We have been successfully applying our disciplined, process-driven investment trading strategies since 2001. These strategies, which are expressed across various markets and asset classes, are based on statistical models developed using rigorous mathematical analysis and the industry insight of Two Sigma’s large and experienced team. Developing these strategies requires vast computational resources to successfully identify, quantify and act on market opportunities while closely monitoring risk exposure.Technology is an integral part of the trading strategies, corporate functions and life in general at Two Sigma. To us, technology is a profit center, not merely a cost item, and it continues to be a driving force behind our company structure. Each day, we work in small teams to develop and improve analytical and measurement tools for the financial markets, and we encourage collaboration— a structure that seems rare in the financial field. In fact, many have observed that we look and feel a lot like a software firm.”RENAISSANCE TECHNOLOGIESFounded: 1982Based: Long Island, New York, LondonEmployees/Size: 275/$15 billionDescription: “Renaissance Technologies LLC is an investment management company dedicated to producing superior returns for its clients and employees by adhering to mathematical and statistical methods.”ALPHASIMPLEX GROUPFounded: naBased: Cambridge, MAEmployees/Size: 28/naDescription: “AlphaSimplex specializes in absolute-return investment strategies that are implemented primarily with futures and forward contracts. Using leading-edge quantitative techniques, our unique approach to investing provides the adaptability and contextual decision-making usually associated with fundamental managers, but within a purely quantitative, risk controlled framework. Each of the firm’s investment strategies is based on a multi-model approach to portfolio management that seeks to generate alpha with greater consistency and that facilitates the regular addition of newly developed models.”Strategies: “Quantitative Global Macro is a multi-model quantitative global macro strategy that relies on a diversified set of factors across many different markets. The component models that make up the product have been developed over a number of years and a diverse set of market environments. For any given market environment, there are at least one or two component models designed to generate alpha for that specific environment. The manager uses advanced statistical techniques to dynamically weight the component models to most effectively exploit current market conditions.Global Tactical Asset Allocation is an extremely capital-efficient overlay or “portable alpha” strategy whose target is to add an incremental 1 or 2 percentage points of return to an existing portfolio without increasing the existing portfolio’s volatility by more than 1 or 2 percentage points annually. The strategy can also be managed at higher risk levels to generate higher returns.LASER and GLOBAL ALTERNATIVES use futures and forwards to replicate exposures to a diversified set of the most common liquid risk premia driving hedge-fund returns. This strategy provides similar diversification benefits as a fund of hedge funds, and is well-suited for large institutional investors who cannot otherwise find adequate capacity among hedge-fund managers, as a liquidity buffer with an otherwise less liquid portfolio, and for smaller investors who would not otherwise have access to the diversification benefits of hedge funds because of minimum-investment requirements.”CAPULAFounded: 2005Based: London (Greenwich, CT and Tokyo)Employees/Size: Under 50/$9B (2011)Description: “Capula Investment Management LLP is a global fixed income specialist firm. The firm manages fixed income trading strategies in absolute return and enhanced fixed income products, along with a tail risk hedge product. Capula Investment Management LLP focuses on developing innovative investment strategies that exhibit low correlation to traditional equity and fixed income markets.What differentiates Capula is its macro focus, strong trading discipline and short-term orientation rather than a medium-term investment style. The firm’s understanding of liquidity risks and tail risks has helped it thrive through all stages of the investment cycle, including periods of extreme market disruption. The Capula GRV Fund is focused on interest rates and macro trading. The fund engages in relative value and convergence strategies that seek to exploit pricing anomalies in the government bond, interest rate swap and major exchange traded derivatives markets and employs a defensive macro overlay. Investment themes are primarily driven by alpha generation and are intended to stay neutral to directional moves in major capital markets. The Capula Tail Risk Fund invests in a range of instruments primarily in G7 markets. It targets superior returns in times of liquidity and systemic crises while minimizing downside during normal market conditions. Both funds are actively managed in the proprietary trading style.”AQR CAPITALFounded: 1998Based: Greenwich, CTEmployees/Size: 190/$44B (end 2011)Description: “AQR Capital Management is an investment management firm employing a disciplined multi-asset, global research process. AQR’s investment products are provided through a limited set of collective investment vehicles and separate accounts that utilize all or a subset of AQR’s investment strategies. These investment products span from aggressive high volatility market-neutral hedge funds, to low volatility benchmark-driven traditional products. Investment decisions are made using a series of global asset allocation, arbitrage, and security selection models, and implemented using proprietary trading and risk-management systems. AQR believes that a systematic and disciplined process is essential to achieve long-term success in investment and risk management. In addition, models must be based on solid economic principles, not simply built to fit the past, and must contain as much common sense as they do statistical firepower.”PANAGORAFounded: 1989Based: Boston, MAEmployees/Size: 50-200/$22.3B (end 2011)Description: “PanAgora is a quantitative-based investment management – financial institution that utilizes both “bottom-up” stock selection strategies, as well as, multi-alpha “top-down” macro strategies. We seek to provide investment solutions using sophisticated quantitative techniques that incorporate fundamental insights and vast amounts of market information. While PanAgora’s investment strategies are highly systematic in nature, the processes deployed within these strategies are built and overseen by talented professionals with significant and diverse investment experience. Innovative research plays a central role in our investment philosophy and process, and is an essential component of our firm’s ability to deliver attractive investment solutions. Investment teams are organized into an Equity Strategies group and a Multi Asset Strategies group. Most investment team members are engaged in original research using fundamental intuition, market intelligence, modern finance and scientific methods.”PanAgora’s investment strategies are based upon these guiding principles:Capital markets are not perfectly efficient and therefore present attractive investment opportunities for disciplined investors.Innovative research that blends creativity with modern financial theory and statistical techniques (art and science) is the foundation of a successful investment process.A systematic approach to investing that combines intuitive, fundamental thinking with quantitative techniques is likely to generate persistent, and attractive risk-adjusted returns.Attention to risk and efficient implementation may preserve and often enhance performance results.Clearly defined objectives, transparency, and access to talented investment professionals helps to achieve client satisfaction.”ACADIAN ASSET MANAGEMENTFounded: 1987Based: Boston (Singapore and London)Employees/Size: ~200-500/$48B (3/31/12)Description: “Acadian has a rigorous and structured investment process. We quantify most aspects of our investment process, including the excess return we believe each security in our investment universe will generate over a particular horizon, and the risk we expect a particular portfolio to experience relative to its benchmark. The objective of this note is to explain why we believe a quantitative approach makes sense, and what advantages and disadvantages such an approach has relative to more traditional approaches. We believe that quantitative techniques are tools. They are ways of applying traditional approaches to making investment decisions in a disciplined and systematic way. Thus our approach to investing is not at odds with a traditional approach. We use the same tools many traditional portfolio managers use, but attempt to apply them in a very systematic and disciplined way, avoiding emotion and slippages in implementation.Acadian specializes in active global and international equity strategies, employing sophisticated analytical models for active stock selection as well as peer group (country, region and industry) valuation. We also offer fixed income strategies in the emerging markets. Our proprietary database covers over 40,000 securities in more than 60 markets worldwide. Acadian’s extensive research capabilities are used to develop customized investment management strategies for our clients.

I was just working on some “second decade success” research and it seems applicable here.1) WIDE ANGLE VIEWHere is my current top 10 list for enduring success as a game development business.Correct Investment at the startGood industry Business IntelligenceExperienced staff esp. in steeringAbility to create fun on demandGood IP(s)Platform diversityLocal ownershipIdentity/cultureRevenue rectification strategyCellular team structuresNote: this answer is pretty lengthy. You will see that top 10 list 2 more times. I will follow the format of an old school game pitch:Wide Angle View: Consider the first version of the list to be the one-page executive summary for the Chairman/CEO.Zoom In: I’ll follow up with the steering committee version, that turns each of those points into a couple of short paragraphs for the VP’s.Macro Lens: Finally, I’ll walk through a more specific, detailed plan that implements the points, similar to a design document.Before we get on to the steering committee stuff, let’s take a quick look at what not to do. These are some popular ways to fail in a hurry:Bad Business Model – not enough profit in itFighting Among Owners - gridlockGrowth - too much, too fast or noneInaccurate Accounting – not knowingPoor Cash Flow Management – d’uhMediocrity – not adding anything newInefficiency – energy and time sinkManagement – bad, too much, not enoughSuccession – what if an owner quits?Market Change – not predicting, respondingIf you go to the Wikipedia list of game studios and just run down their current status, you see some general themes: List of video game developersLots of them fail. Some succeed to death. Some were bought, merged and managed by a disinterested party. Some had bad products, in-fighting, poor methods, failures to deliver or to change with the times.The longer term winners have been able to renew themselves periodically. They have an identity. They have at least one great IP. They value talent. They have good methods, good tech and keep a sense of fun. They are self-owning and self-steering.Ok VP’s, get in here. You are up.2) ZOOM INCorrect InvestmentIf you are going to start something new, you will need cash.You don’t see as much venture capital involvement in video games as you might expect. VC’s scouting around games often know too little, take too long and ask too much. Game developers are suspicious of them, having heard negative things, true and otherwise. It would be interesting, at some point, to hear Marc Bodnick’s thoughts on Elevation’s work with Bioware, having heard some of the lore inside the walls.The point is, game investment is mostly a job for angels, family, friends, crowd sourcing and the like. Many game start-ups are self-funded. Origin was, Bioware was, id, Valve and Tripwire were also self-funded. They and many others somehow found enough cash to make a go of it. Or, in the cases where external funding happens, it is more like a movie deal. Experienced insiders work out the framework of a deal quickly, using a shared lingua-franca. Game companies, especially publishers, are an important source of funding for games, since they understand how money is made with games. Obvious, but true.In any case, not having enough cash to complete a sellable product means certain failure. Be realistic. We can design something to generate returns at various levels of investment, but you will need some money. The right amount for the right concept.Good industry BIYou cannot plot a course without a map and your own starting coordinates.You have to scour the available material to understand where the industry is, where it is going, what the trends are, who the people are, what works, fails, sells, sucks and sinks. Everyone from producer on up should spend a fixed portion of their day taking in business intelligence, analytics, news and commentary, from forums to blogs to formal reviews.I will also suggest you start to use a trend prediction methodology. It takes time to make a game but the market is changing every day. All the figures and examples I use below will start being out of date as soon as I type them. The whole thing is a moving target. It helps to understand where public tastes might be arriving, in the future, at the time you hope to sell units.Here is a link to the system I use: The Trend ClockExperienced staff esp. steeringThere are only so many people that have even worked on a successful game start to finish. There are still fewer that have managed that effort and guided a game to completion, to market and to profit. Fewer have repeated the process for years and years.Of course, I will tell you that to do this you need someone like me. Surprised? I do believe it, not only because it feeds me, but because for every detail in this long answer, there are more than a hundred others not documented here. It takes years of trial and error, bruises and sutures, to pick up the knack. It is far cheaper to buy that experience than build it. Just as it is cheaper to license a game engine rather than write one from scratch. Both get you to profits faster.Every small set of game company founders needs professionally competitive creative, technical and business people.Ability to create fun on demandThis is a great business, but to keep at it, we have to pay ourselves and our friends. That is why I am a student of game theory (esp. behavioral).Un-fun games are not successful. Cut and fit game design is very expensive and time consuming. Theory gets you on target quicker and reduces the time spent on feeling around in the dark. It lets you spend iteration time to go from good to great instead of from awful to acceptable.Starting smarter means you don’t run out of time and money before you get to the most important final polishing pass. It also means you won’t be the sophomore studio with a minor hit and no idea how to recreate the magic. This is your profession and there are formal foundations to game design. Learn them.Good IP(s)More than anything else, a good intellectual property will sustain you over time. An associate of mine is fond of saying how the Star Wars IP has a nearly limitless number of possible stories, settings and products because of that rich, imaginary universe.Further, looking at all of the successful, second decade+, game companies you see the value of cornerstone IP’s – Madden, Mario, Fallout, Far Cry, Call of Duty, World of Warcraft, Grand Theft Auto, Halo, Diablo, Civilization, Mass Effect, Counter Strike, Sims, Resident Evil and so on. Good IP’s are value. More on this below.Platform diversityLet’s do the math. If it takes X dollars to make your PC game with potential sales of a million units AND it costs 1/10th of X more to port it to consoles with potential sales of one to two million units, why would you not do it? The platforms appeal to different segments; you are gaining whole new audiences and multiplying your total sales for a small investment.The best days for developers are when there are multiple, popular platforms. The worst days are between console cycles when PC alone must sustain us. These are good days.Local ownershipHistorically, one of the greatest challenges to having a lasting game company is remote ownership. It is great to get that big influx of cash, at first. Then, after several years, you have a weak season, they get bored, the world changes and the remote owners start to mess with you, sell you off or shut the place down. EA does this endlessly. If you must take VC money or need to be bought by a big publisher, try to buy yourself back later.Consider Bungie and Ensemble. Microsoft bought Bungie for Halo. As time went on, vigor was lost. Then, they bought themselves back from Microsoft. They then made Destiny. Now compare Ensemble. Even after making a mountain of cash for Microsoft with Age of Empires, Ensemble was just switched off; click. Point is, you have a stronger sense of self-preservation than remote owners.Identity/cultureSo, you made an ok game, but who are you compared to the other people that also made ok games? Are you mainstream, a bad boy, hardcore, forward looking, nostalgic, humorous, mysterious or just hungry?You need to put a handle on yourself that buyers’ minds can grasp. You instantly know who Apple is, EA, Rockstar, Nintendo. Who are you? Tell the buyers and the potential employees something authentic and consistent about your organization that you can live with and then go live it. Grow up to be the people you want to be when you grow up.Revenue rectification strategyCash flow management keeps the studio doors open. Making games costs money. Selling games earns money. Up and down, just like a waveform. Once you have more than one game, the waves of spend and earn for each project can be rectified to produce a more stable cash flow. In fact, they almost must be, because too much spend in the very short term, even when you are profitable in the midterm, is deadly.Just like phasing any other waveform, timing is your main tool. Someone in the group needs to have a feel for this stuff – not just project management, portfolio management, not just cash flow management, revenue rectification.Cellular team structures.Team A with 36 people makes a surprise hit game that sells a million units out of nowhere. They book 25 million dollars of revenue or $694k per team member (avg salary ~$80k). Nice.Meanwhile team B with 140 people, all with AAA experience, releases a so-so follow-on to a popular game. It also sells a million. Their $25 million of revenue is only $183k per employee (average salary ~$110k). Ouch.If team B had split their 140 people into 4 teams of 35, where one team totally failed, two earned a little, like the bland, big team and one earned as much as the hit indie team, they would have ended up making $268k per head overall. Better.The moral of the story is, as your dev company grows, build new teams that are the minimum size for your maximally successful game making pipeline. Cover every job function you need (almost) to make sellable product. Contract to fill gaps as needed.Hire to duplicate the successful team in chunks. Map making group, art asset group and so on. Train them by making sellable DLC or add-on content, like characters and maps. When you get the whole second set, you can make 2 products at a time.This concept can be extended in a cellular or fractal way, for more teams. Some can be external. Think hard before building big teams. Two small but functional teams are often a better choice than a single big one.That takes us through the veep level explanation, which means it is time to dig deeper into details for those of us on the ground.3) MACRO LENSCorrect investmentLet’s say our first major goal is to make a game that puts a new company on the map and keeps local ownership. Where small indie games have seen some good times, today there is a lot of competition for shrinking sales numbers in that sector. We’re not betting on recreating Minecraft. We need a reliable success and that means a ‘real’ game of a scale and scope that provides undeniably good value. Those are the new game products that succeed. The formula is many hours played for the price paid.So, let’s say we need to get $20 million committed to a project that will establish the company and our flagship IP. That probably means a handful of angel investors. We want to keep the number of investors small, to not diffuse control, while still insuring enough money to fuel the solid win we need to anchor the company.[At this point, let’s also mention an optional, small, bootstrap project. A new team that cannot put together seed capital among the founders could do a small game first, to start earning cash. This answer is already too long, so feel free to ask me, in a different question how to tackle that, very different, problem.]Meanwhile, use seed money to get the legal paperwork done to be a real business. Get a tiny, humble office (but one you can walk away from when you need to spin up a team and get more space). Minimally pay the few founders to not have to work full time for six months if possible. If you can’t do it yourself, pay for some good concept art for the big game.For this example, our financial pitch will be:We propose making a game with a 4 year, 3 to 1 return on investment. A ‘real’ video game, on 3 platforms. Not “indiepocalypse” stuff but a bigger, better, safer game that punches above its weight and competes with name brands.The business entity would be a LLC, just for the purpose of this project, like a movie (to buy ourselves back in the end). The work would be centered in Austin, the #2 game making place in America, right behind San Francisco, but at half the cost of living. The game would be made the way games are made, by people that already know how to make games.The numbers look like this:Seeking $20M to provide 1400 developer-months of effort @ $10k per month “fully loaded” (with tools, space, electricity, insurance, coffee, etc) or $14,000,000. That means a team of 40 for 3 years in this case. Half as staff, half as contractors.We also need $5,000,000 more for initial marketing through launch. With a million in discretionary/variance, that puts our cost to release at 20 mil.We’ll offer a standard unit at $44.99 retail / $27.70 wholesale and do all the math with that figure, but we will also have a Deluxe unit at $59.99 / $36.60. We’ll also offer DLC at $6-10 wholesale.That puts our breakeven point at 719k standard units sold, across all platforms.Year 1 sales projections here are by platform, with low middle and high estimates, then our projection, in 1000’s of units and in dollars:PC (installed base = 30M) – L 300, M 700, H 1500 – P 600 @ $16.6MPS4 (installed base = 36M) – L 200, M 1100, H 2500 – P 1000 @ $27.7MXB1 (installed base = 19M) – L 120, M 400, H, 900 – P 300 @ $8.3MProjected year 1 revenue on standard unit sales = $52.6MTo put those numbers in perspective, those are not hit sales numbers like Destiny, Assassin’s Creed, Far Cry or Batman. Those are about the same sales numbers as Farming Simulator 2015.Extended earnings in year 1 would also include:Vanity DLC packs @ $1MDeluxe game and upgrades @ $1.8MCreator kit editor and content packs @ $1.2MServer side monetization @ $4.8MFor $61M gross revenue or ROI of 3:1, conservatively.Double these sales figures would not be particularly unusual for a good game.At the conclusion of the term, investors are paid out at 3x investment and the team retains only revenues over $60M, future revenues, the code base and the IP.The team’s bet here is that sales come out 10% over estimates (and the estimates are made that way), so they end up with a year’s operating funds in cash, plus on-going DLC sales.The longer term plan will require getting two franchises running as soon as possible. The reasons and methods are below, under experienced staff and revenue rectification, but the short version is, to keep the business flourishing, we need a push/pull model with one team earning while one is spending and both earning more than they spend every cycle.Good industry BIAll those numbers got a little heavy. Let’s take a break to review some recent industry business intelligence, to insure we’re on the same page.Video game revenues are now bigger than the movie industry.(Quoting Anya Kamenetz in Fast Company, on game revenue)Grand Theft Auto did $800 million in worldwide sales in its first 24 hours. That was the biggest launch day ever for any piece of entertainment—any movie, any record, anything at all.It also cost $266 million to make—more than any Hollywood blockbuster…Last year, the category-leading first person shooter Call of Duty: Black Ops 2 made $1 billion in 15 days. It took Avatar, the top-grossing movie of all time, two days longer to earn the same amount.The video-game industry is projected to grow from $67 billion in 2013 to $82 billion in 2017. At the same time, global movie revenue, both DVD and ticket sales, hit an estimated $94 billion in 2010, down 17% after inflation from 2001… overall domestic box office is pretty much flat since 2009.(Quoting Tom Chatfield in the Guardian)Last year will go down in history as the point at which the UK videogames industry pulled decisively away from cinema, recorded music and DVD sales to become the country's most valuable purchased entertainment market… more than DVD and music sales combined, and more than four times cinema box office takings.(Other sources)Worldwide film box office in 2013 = $35.9B – Theatrical Market Statistics 2013Worldwide video game revenue 2013 = $70.4B – 2013 Global Games Market ReportWorldwide video game revenue 2014 = $102.5B – Statista dot comGames as a service is an important, global model(Quoting Jason Della Rocca, former head of the IGDA, founder of consulting firm Perimeter and incubator Execution Labs, on multiplayer, online, game as service models)More and more genres of games, from shooters to sports, have some kind of social experience built in, and operate more as a service than as a product…You cannot pirate a service!An interesting case study is Korea. Like much of Asia, there was no viable game business since everything was pirated. Then about 15 years ago, there was a tremendous business innovation (games as a service)…now Korea is a multi-billion dollar game industry global juggernaut.The demographics of games have changed and are not kid stuff. According to the ESA (Entertainment Software Association):4 of 5 US households have a game platform and an average of 2 gamers.For the first time women are the majority of gamers (51%).The average male gamer is 35 years old. The average female gamer is 43.The most active purchasers of games are men with an average age of 37.Gamers have been playing for 13 years, on average.More seniors play games than males under 18.31% play games-as-a-service, 30% play action games, 30% play puzzle, board or card games.62% play on PC, 56% play on consoles, 35% play on phones, 31% play on tablets and 21% play on dedicated gaming handhelds.Gamers spend 39% less time watching TV shows and 40% less time watching movies.Gamers average 8 hours of play per week and 54% play multiplayer games weekly.The “game together family” is a new norm involving partners, parents, children and friends.“Millennials are putting video games at the center of their entertainment preferences, but it is a new kind of gaming that is more social, interactive and engaging."– Neil Howe, President of LifeCourse Associates, leading researcher on millennialsBest selling games of 2014 (ESA)On PC: The Sims, Diablo III, Elder Scrolls Online, World of Warcraft, Titan FallOn Consoles: Call of Duty, Madden NFL 15, Destiny, GTA V, MinecraftBest selling games for the first half of 2015, all platforms (NPD)Mortal Kombat X, Grand Theft Auto V, Battlefield Hardline,Call of Duty: Advanced Warfare, Minecraft,Batman: Arkham Knight, Dying Light,NBA 2K15, The Witcher 3, Super Smash BrothersOk, back to work.Experienced staff esp. steeringGoals 1 and 2 were to get investment and then make a game that stakes an IP. Now, in year 4, we have one winner. This is where good managers really go to work. We can start turning this beachhead into a destination; maybe even a luxury resort.The first game was made without the support of a publisher and the deal with the external investors is now complete. The team is not left rich, but they are more experienced, equipped and established.A second version of the game is almost a sure thing and multiple publishers would be willing to fund the development.We have a year of cash buffer in the larder and on-going DLC revenues.Goal 3 is to set up our push/pull business model which needs two IP’s or franchises.Goal 3 will require us to divide the original team into 2 halves. Put one half – the asset creation heavy half, on a nice update for the live title. This needs to be done in less than a year, but earn enough to mostly support the half-team for a year and extend the life of the game.Next, we can use the other half of the original team (the leadership heavy half) in a deal, with a publisher to make version 2 of the game. This ultimately costs money since we’ll be paid a royalty, instead of the lion’s share of revenue we could get if we could self-fund. On the other hand, the milestone payments support this half-team, leaving our cash alone.Now we have a year’s cash and almost everyone’s salaries covered from other money and two new revenue sources on the list – one near term, one a couple of years out.The creatives will need to find the time to brainstorm a new IP, before the update to game 1 is finished. Tell them to provide a couple of options.When the update goes on sale in year 5, we’ll pull some of the leaders off of the IP #1, version 2 game, now that the design is firming up. We’ll back fill with asset-side people coming off the update. Recall that a full year of salaries lasts 2 years for only half of the team, since the publisher is paying the other half.Jumping ahead, we’re going is a place where, not too long after we sunset the original game, version 2 (funded by a publisher) is being announced.Meanwhile, in year 6, our internal project, IP #2 is approaching a vertical slice/ first playable stage.When IP #1, version 2 ships in year 6 or 7, we’ll have new revenue and everyone can pile on IP #2 to finish it.IP #2 then releases a half development cycle later, initiating our push / pull mechanism.Goal 4 is adding a 3rd team, for better revenue rectification by year 9.Goal 5 is adding a fourth team to complete a dual, push/pull arrangement in year 11 or 12.With that machine in place, you have some fault tolerance, robust revenue, the ability to make a public offering if desired and a generally reliable mini Activision that could last a long time.Ability to create fun on demandThis is where I mention, again, the usual 6 requirements of a game:Entered into knowingly, willinglyHappens in a non-real placeHas a goalHas challengesHas rulesHas an end or graduation state.I will also mention the 3 stages of game activities:Playing – A fun, flexible, forgiving state of discovery and explorationGaming – A tense and close observation of rules while striving to win.Mastery – An advanced state where one can win, even improvising.And the behavioral game activities that trigger brain chemistry rewards:Amassing value - food, money, arms, land, points, etc.Building skills – rank, abilities, levels, spells, accuracy, etc.Public skills display – running, throwing, shooting, jumping, etc.Public wealth displays – elite outfits, armor, hats, mounts, gear, etc.Political negotiations between hierarchy and equality.Now, peek ahead to see what IP concepts are selected in “Good IP(s)” below then come back here and think of 2-6, single word, action verbs for each IP. The verbs should accomplish things listed in this section and be cooperative with the proposed game worlds. Expect verbs like fighting, trading, casting, solving. If you come up with more verbs, cut some. Those 6 or fewer words become the keys to the game design. Games are activities and those are all you need.Now answer all those questions implied above – what is the goal, what are the rules, what challenges do we face, what are we amassing, what skills will we build…I happen to know that both concepts require character classes and skill trees, so I hope you’ll investigate this linked post showing how combinatoric number surfaces can help you create classes and trees are guaranteed to be able to be balanced, that contain equilibrium and yet are also satisfyingly asymmetrical.Game Design TrianglesOh, and if you simply must have some story, maybe this will help:Minimal Nareme ExampleGood IP(s)Ok, let’s dip into the portfolio management thing. What do we know so far? We need 2, maybe 3 excellent, franchise worthy, game IP’s. The only ideas we have so far are all of our pet concepts and we’re not doing those unless we can do all of them.Never make your masterpiece first. No, we need to get rational. We know we want titles on PC and consoles. What do those people like?Well, the top 3 genres on each box looks like this:Top 3 PC Genres by ShareStrategy 37.7%Casual 24.8%Role Playing 20.2%Top 3 Console Genres by ShareAction 28.2%Shooters 21.7%Sports 20.2%Hmm. So we need dual-platform IP’s but the top 3 have nothing in common. What should we do? hybridize? RPG/Action? Casual/Sport? Strategy shooter?Ok, what have the creatives been working on? Let’s look at that high concept list:Palidonnas – Dark, female-centric, Action RPG set in Rurik Eastern Europe circa 1200. Magic, combat, quests. Believable armor for a change. Unique art style.Live Slice – Sim with all human inhabitation limited to a 15-mile-wide north/south band that moves east at 1 mile per year. Constant new building, tech tree, crossing terrains, oceans.Wood Age – RTS set 11k years ago. Factions from real places lost to post ice-age flooding. Sundaland, Zealandia, Doggerland, Beringia, Kerguelen. Lost civilizations, tech.All Mine – Future FPS set in a massive, planet mining operation that fell down. Miners, corporates, unions, gangs, guns, heavy machines, bugs, rare gems, rarer air, traps, traders.Well, Live Slice could be ok on PC if it was dense, or ok on phones if it wasn’t, but it doesn’t work great here, so it is out.Wood Age could be a fine base for a DOTA or Heroes of the Storm type thing, if those didn’t already exist. Why pick a fight with tigers? Let’s set that aside for now.All Mine needs a better name, but a sci-fi shooter could work on console and PC, even though FPS only pulls a 6.5% market share on PC. We’ll need to beef up the role playing aspect for PC, adding character classes and skill trees that can be streamlined on consoles. Think Bioshock meets Borderland in the mine complex from Aliens.Palidonnas is a chance to appeal to women (a strong demographic), to turn a genre on its ear and to show a really recognizable art style. That one builds identity, so it goes at the top of the list as IP #1. Think a Slavic, Daughters of Boudicca meets Bayonetta, drawn by goth Mucha, after playing Witcher 3.The visuals and eras are very different in a good way, for visual differentiation. Both games can share an engine and some code, including character class libraries, animation systems, physics and even some UI functionality, reskinned. Done & done.Platform diversityWe have 12-year plan sketched out, which will take us through a whole new-gen console cycle and out the other side. The bad news for us is the low ebb, when PS4 is old and outmoded, comes just as we’re getting our 2 IP, push/pull strategy implemented. Shucks.We have 2 choices here:Either speed up the dev cycles slightly to get titles done for the golden, end of the cycle era, where the maximum number of consoles are out there waiting for content.Or, we delay to ship on the oh-so exciting, but not yet sold in great numbers, next gen boxes. We also probably would have to do some refactoring / re-porting and maybe even engine version upgrading, which hurts, a lot. So, let’s hurry instead. Even if we have to reduce scope. We want next-cycle products to line up with next-gen consoles.Also, beyond 5 years, it is not helpful to guess what new hardware will look like. Who knows, we may be playing 4k, 60 FPS, massively multiplayer shooter, live world wars on Google glasses. But I bet we’ll still be playing something.All we can do is keep an eye on the data (like the Steam hardware survey, EE Times and the GPU / CPU pages on Passmark) and set strategic goals to evaluate coming hardware as early as possible.We can also plan some mitigations, like a phone or casual game, a VR game next year or the year after, special releases for non-US markets where hardware is a little behind us.Local ownershipListen up you would-be game company founders. A lot of this falls on you. First you have to scrape around to put the fledgling company together. You also have to be skilled enough to contribute development work to the effort, because that is fewer people we have to pay. You have to deal with the cranky, questioning investors, the press, do annual reviews, keep up with accounting and a thousand other things.The hardest part is, you have to grow personally, for the company to grow. It starts inside. Make yourself better to make the company better.Always carried an extra 15 pounds? Lose it.Dress like a slacker grad student? Buy a suit for E3.Have a some narcissist, tenderfoot, daddy’s girl proclivities? Get over yourself.Not confident in your written communications and spelling? No excuses, tune it up.Have a temper? Tame it.The good news is, you are now a real game maker and you even own part of a business. The bad news is, you woke up this morning a business person. Something as un-game, un-cool as state tax breaks for new employers can really impact your business. Saving on janitorial supplies suddenly matters.Here are a few more leader things to remember.You are not special, destined or above the rules of business.You have to learn 3 modes of speaking – super frank, efficient, truth talking among execs, softened speech for the employees that automatically add extra drama to whatever you say and super controlled and metered speech to the press and public.People’s mortgages are on the line here, stay focused.Being friendly gets tricky. It is hard to be a boss and a buddy.It is surprising how many times you have to repeat something for it to sink in sometimes.Write things down, don’t rely on memory, like a bad waiter.Never argue for something that doesn’t make sense, because of rules.Salaries comes from accomplishments, not need.It is reasonable to expect good work for good money and to say so.Letting a person go for not delivering is fair, it is business and it is not a reflection on them as a human being, just as an employee, here and now.Thinking of things we could do is the easy part. Trimming it down to the things we must do is the art.Identity/cultureCompany identity faces outward to the world and culture faces inward, to the employees.Company identity and culture need to be native, organic and true. The features should be drawn from the organization itself and slightly amplified, but not so much you can’t live with them for years. They should also be aspirational; a little ahead of where you are and closer to what you want to become. They should be somewhat distilled, purified and idealized. They are the codes you draw strength from in a tricky press conference or personnel action.These things are so custom crafted to match a set of individuals and the energies around them when they collaborate that I cannot just pull something out of my pocket and call it culture. Every studio is different, in this respect.Tripwire came from the modding community and retains a bit of hot rod and heavy metal culture today. Bioware was founded by doctors, so instead of a bowl of candy on the reception desk, they had a bowl of tiny bottles of hand sanitizer. Cali-centric EA once gave us central Texas employees a logo-ized drink cooler “for the beach” and corporate Nerf balls. Sony online had perk discounts with the Sony store, Sony home entertainment hardware, Sony music and movies to make you feel like part of the global entity.The example here is just an example. It is pure fiction just for illustrative purposes. Not what to think, just a bit of how to think about it.Identity starts with a name. We can imagine that at some point, the founders of a start-up game company would have cause to celebrate. The first meaningful investment, renting a first office, completing a milestone, signing papers, earning a dollar and other firsts might call for a round of champagne. Some game people have odd things lying around the like toys, comics, airsoft guns, sports equipment and even a few swords have been seen in game studios. Putting all that together, let’s imagine the venture under discussion here will be called Sabrage Games.Sabrage is the name of the act of opening a bottle of champagne with a saber. The name suggests something bold, flashy, celebratory, upmarket, vaguely dangerous, historic, romantic and madcap all at once. The sword or bottle imagery could be part of a logo or letterhead. Those same elements could be animated for a logo roll. The act itself can be played out in a press event for effect and a glass of ceremonial bubbly each can be like a company sacrament at key moments in the shared adventure. Finally, pictures exist of nearly every famous person in the last hundred years, even competitors, sipping the signature symbol.Now we have the beginning of culture. A name, a logo. The celebration sacrament. The One official champagne sword (because we don’t want an office full of blades) on the wall in reception. We have a game release tradition and the name for it “tasting stars”. We have the makings of a great picture for the press and the first question in an interview and yes, even a source of controversy for public discussion, which is still better than no discussion.As sabrage practitioner Napoleon Bonaparte once said, “Champagne. In victory you deserve it, in defeat you need it.” Sabrage either way. That might end up in an ad someday.Revenue rectification strategyIn electronics, rectification is a means of converting (fluctuating) alternating current into (continuous) direct current. It works because of a little thing called phase relationships. The short version is, if you have 2 rising and falling sine waves and put them together, but offset them in time, the rising of one cancels the falling of the other. Phase cancellation it is called.In cash flow, it is easy to graph incoming revenue as points above a zero line and spending as point below that line. When you do that for a whole game development cycle you may see a rising and falling wave, with spending during development, revenue from pre-orders, spending on launch advertising, revenue from sales, spending to make a patch/update/DLC, followed by more revenue and so on.The resulting wave looks a lot like the audio waveform that synthesizer players call ADSR for Attack, Decay, Sustain and Release. Like a piano note, this game cash flow wave has a big spike (attack) when a game is launched followed by a quick fall from the maximum peak (decay) before reaching a sustained period of moderate earnings that eventually decline to nothing (release).When you have more than one game, you have more than one waveform of earning and spending. While they are not exact duplicates, they are similar. When in phase, as in the simultaneous releases of 2 games, the peaks and valleys are exaggerated. Revenue is roughly double, but so is spending and that is the problem.For most game development companies, protecting and building the cash reserves is essential. A greater than expected transient of spending is a dangerous thing. Even if you are solvent for 11 months of 12 and only insolvent for one, you are still out of business.If we stage the game releases over time, we may achieve some phase cancellation between spending and earning, thus rectifying the cash flow. I know this sounds completely obvious, but you would be surprised at how often it is overlooked.Now, consider two games each coming out on 3 platforms each. We can stage the release dates of the different products and we can also stage, or smear, the release dates of each product, per platform so the console release precedes the PC release, for added cash flow smoothing.If you have rolling forecasts for your game products’ spending and earning, you can put the monthly estimates (Samples) on a grid, as a line. Then you only need to add integers to predict the net result for a month. “plus 12 on product A for July and minus 6 for product B puts us at plus 6 for the month.”A number of products can be superimposed and summed for given points in time. Strategies arise for tugging one product forward or back in time to produce improved rectification.Since the amplitude and frequency of waves change over time, you can, by careful planning, not only rectify earnings, you can even produce “gain” by using the changing frequency to align additive positive peaks more often, while keeping negative-going features more phase cancelled.For instance, managing the marketing spends for multiple platforms and the individual spikes of earnings for releases to the best advantage. You might pay for PC marketing, then release the PC version timed to negate the marketing spend for two coming console releases with PC earnings. While the PC release earnings are greatly reduced, the simultaneous release of both console versions are additive and have pre-paid marketing, resulting in greater peak profits than 3 discrete releases.Cellular team structuresYou could do a lot of game making with a 35-person team. If I was ordering one up, custom made, I would probably ask for:1 Producer1 Associate Producer1 Lead Designer5 Designers (1 systems, 1 gameplay, 3 gamespace)1 Lead Artist / Art Director2 x 2D Artists3 Environment Artists2 x 3D Modelers (1 character, 1 hard surface)1 Rigger3 Animators1 Lead Programmer11 Programmers (1 graphics, 1 AI, 2 engine, 2 gameplay, 2 generalists, 1 audio, 1 UI, 1 back end)1 Audio Lead1 UI / UX Specialist1 FX ArtistTogether they cost about $350k per month fully loaded or $4.2M per year. $120k/yr each. They have about 7000 developer days of capacity per year to apply to a project. Three and a half developer years, per calendar year. Their work should bring in north of a $400k* per team member per year, in a 3 year ($12M) development cycle.That means their game needs to earn $42M, which means 1.5 million units sold across all platforms in 3 years, which equates to a 3:1 ROI after some extra expenses.They are a game making machine, if you build a quality machine and maintain it, it will deliver. Put in a good idea and 12 million and 42 million falls out three years later.You could replicate this kind of team several times over for different titles. Put in your first 12M, get 42M back, then put 12M each in three different team machines. Stagger their start times for more continuous returns.Better yet, use a 2 speed gearbox approach that applies fewer people to the pre-production, problem solving phase of game making and then uses a big production phase pile-on of extra people, to get everything finished, now that we know how to do it.That means the 3 teams share some of the asset creation people. Roll some of them on to a project and then off, in a well-timed bell curve and we can get the price down to about $10M per cycle, averaged over 2-4 teams, without reducing the size or quality of the products.BTW, there was an asterisk back there, on the $400k per team member metric, often called contribution to earnings (CtE). Let’s look at how that shakes out.I am reading from a screen of data that I can’t share with you, but it lists 10 studios with some current top selling products, that you would have heard of. The screen shows their headcount and revenue which gives us a rough CtE for each.Good, reliable indie studios and a large, established AAA studio hit between 300 and 350k per head. Here is where you are a stable business – 3 to 1.A well-established team with a version 2 sequel to their hit, a mega-hit indie team and a new team made up of experienced devs with a popular first game have all managed to land between 600 and 800k per head. This is a great place to be. You can’t do it all the time, but you try.Two teams on the list edged over $1M per head. They are an experienced team that introduced a new franchise a few years ago and released two successful versions in short order and a new, small group you might not recognize, that saw limited success with their first effort, but had so few heads, the numbers look great. These results are giddy good and hard to reproduce.ConclusionSo there you have it – my collected thoughts on what it takes to start and keep a game development group running for 20 years. A pragmatic and rough how-to. I doubt many will make it to the end, but no worries. It is just the kind of thing I pull together in my job, so I had source material at hand. It can hang around as a reference, though the figures will gradually go stale, the steps should still be valid. If any of the slanguage is unclear, ping me for clarifications.Good luck.