To counterpoint Ask the Pizza Guy's excellent advice, those same tactics can be used to a significant extent by those more interested in a less aggressive, or even turtle-like approach to the game---there are a bunch of ways to play it, and it's up to you which suits you best. ATPG's approach is certainly astonishing, but personally that's not at all how I like to play the game.
1. Pick your fights. Absolutely. Under any approach this is key, because trying to fight everyone at once is a recipe for disaster. If you're less aggressive, you may want to let others pick the fights. And by that I don't mean your Council of Nobles or the Pope. Do their missions if they coincide with your goals--the first one or two usually do--and ignore them otherwise. Never go on a crusade unless it's part of your own goal. The pope can always be bought off by a tribute of a couple hundred per turn, and the Nobles can't do anything whatsoever to you. I generally prefer to let enemies attack me, taking a diplomatic hit and getting themselves excommunicated. Then call a crusade against one of their major cities, if you like, preferably the most distant one, and then rampage across his territories with your holy army of vengeance, being sure to follow a route that gets you the best economic territories and occupying them if feasible. Being somewhat passive in MIITW can generally get you so you aren't fighting on multiple fronts very often, and allows you to build your econ through something other than loot and pillage. ATPG's advice about spies, watchtowers and diplomats are all well founded and work under a nonaggressive approach just as well. One point to remember in deciding who to antagonize is to pay close attention to the allies of your potential foe; you may take a massive hit in your economy if you lose trade rights with sufficient numbers of your foe's allies.
2. Watch your budget, and begin your expansion. and 3. Prioritize your economy. For the most part this advice applies in a nonaggressive game just as much. In a nonaggressive game, you'll want to think about converting some fortresses to towns (especially those on seacoasts so you can build more ports, which are great cash cows) and converting troublesome border towns to fortresses. You'll want to make sure your roads are as good as possible, because you're going to not keep a bunch of armies around. Rather, you'll have the fortresses equipped to build them quickly and with all the armor and bonuses they can muster, but your main focus has to be your economy. That said, generally avoid building mines in border territories, since those can provoke attacks. When you want someone to attack you and earn the pope's ire, the mines can do that for you. Make sure you squash rebels ASAP because they do a lot of invisible damage to your economy. A very key point: Don't forget that economic expansion can be done very effectively *without* ever declaring war. Build four or five merchants, four or five priests, two spies and two assassins, and put them on 3 or 4 boats. Don't let them rot in your homeland; they won't learn anything. Instead, send them to a very distant land, preferably a non-Christian one, moving the boats slowly (that is, click them ahead a little to clear sightline, and if clear, click them ahead a little more, etc.) during your turn so as to avoid pirates whenever possible. Once you land, keep the priests together in one province, and they will convert the populace quickly without falling to heresy, and greatly increase your chances of making cardinals and eventually popes. This has the bonus of increasing unrest there, so that when you come in later in the game the population is already Catholic and ready to greet you with open arms. Send the merchants to far-off goods along with the spies and assassins, using the spies and assassins to kill off any competing merchants, where the merchants willl generate tons of money and increase in skill so that you can use them to seize other merchants' assets. Timbuktu is best for this, though it takes a while to get there, and it has a bunch of ivory and gold for trading. The reason I say two spies and assassins is that they have a bad habit of dying on shipboard, but you really only need one of each to arrive with the merchants in order to get the job done. Build more priests and merchants while you send the ships back to get them. Lather, rinse repeat, and soon you're generating 20,000 per turn from your economic conquests alone, without conquering anyone. That said, never leave a merchant sitting on a financial asset when there's another enemy merchant within one move nearby; the risk of losing your 500 ducat investment (and more importantly, your investment of time and patience) is too high. Take your merchant off the asset, and move the spy and assassins in for the kill. When it's safe, put him back. Once your merchants are powerful enough (this doesn't take long if you have a monopoly on an asset in the region), then have the merchant do the asset seizure himself rather than using the assassin. If the merchant is too tough to kill with your assassin, or to seize his assets with your merchant, bide your time; usually when they see you're not on the asset they'll wander off the next turn. This does require some micromanaging on the map, but it's well worth it.
4. Build a real army. Your initial forces should be able to take any nearby rebel settlements without adding mercs or additional forces; combine stacks if necessary to accomplish this, but make sure you get all of the adjacent rebel territories first so your economic base is larger. Early on, your army will be defensive in nature and needs to be very mobile, and thus a cavalry based approach, mixed with some archers, will be preferable. But in that early going, keep it as small as possible, while still being effective for the defense of the realm. Horses aren't cheap, and every one you add is a major drain on your economy that would be better spent on more roads, ports and markets. The horses can always be split off from the archers to maximize the range of what you can defend. On the plus side, cavalry is devastating to most early forces so you should be able to repel most invaders without much effort. Depending on your situation, you may need 2 or 3 of these small defensive patrols, which may or may not be headed by a general, depending on whether they're more valuable to you as governors. Armies in the actual cities you control should be small, reliant on spears (to kill cavalry) and archers (to kill everything else). Milita, which require no upkeep, are perfectly fine for this purpose. Defensive fortifications are key; build ballistae towers and cannon towers as soon as you can. They're cheap, and they're deadly to besieging forces. Only when you're being attacked in force should you generate the larger armies, and even then you should encourage your foe to get excommunicated so you can use the crusade tactic whenever possible to eliminate upkeep and get even better troops. Once your economy is going great guns, you should be able to support the larger forces necessary to keep expanding without doing any sacking. For these purposes, always target seacoast provinces and build up the ports and roads first, if they're not already. Expect your early game, before you get around to building a real army, to last 100 turns or so if you're not being aggressive. Bend, but don't break, is the motto here. It takes long enough to besiege a city that you should be able to get your patrol there before the city falls. Once you're on a sound financial footing, then it's time to build the real army and equip them in style.
5. Build a real Empire This all applies, other than the sacking bit. By this point, you shouldn't need to sack and you'll be able to occupy cities (exterminate only if the unrest is too high to control), generating even more income. The cycle repeats and off you go to the races.
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