Greedy Goblin

Wednesday, April 8, 2009

Businessmanship

The "secret" of the goblins revealed: You can leech on the idiots but not forever. They either run out of money or patience. Do something useful. For profit.

The social people consider business lowly and essentially evil, or at least vulture-thing. You feast on the stupid, the ignorant and the desperate. It's not true. Making a prospecting business need you to create useful product. It's about working. The difference between a successful business and the endless farming is the profit/work ratio. Being rich needs you to create something useful - what other people gladly buy - with little work. How can it be done?

Find a work opportunity that few people think or capable of. So you won't have many competitors and can keep your prices high. This move is called: innovation.

My current job is glyph manufacturer. Glyphs are created from inks, which are created from their respected herbs. In the goblin science of economics, the glyph is called refined product while herbs are raw materials. The creating is therefore a value-adding procedure. So glyph prices are always (except for rare and short market swings and non-market factors like skillup glyphs) higher than its raws.

Glyphs are needed by everyone. Can only be created by scribes. Since not all glyph-users are glyph-creators, there is a market need for glyphs.

So there is need and there is a value adding procedure available to me (since I'm an scribe). All I has to do is buying herbs in the AH, take a walk to the inscription supplier for parchemensts and start crafting. It's a quick job. When ready, I take a walk to the AH again, check the prices and put 5-10 stacks to sell.

One thing has to be kept in mind: by making a production, you always work against your profit margin. By buying herbs I elevate their prices. By selling glyphs I lower their prices. If I would do nothing than buying raws, crafting 24/7 and selling products, their prices would soon reach each other and no further profit would be available.

How does it affect the world?
  • By lowering the glyph prices I help the non-scribes, so they are happy.
  • Since the glyph prices drop, more people can afford to buy them, (they are happy). More profit for the same price: happy me!
  • By increasing the raw prices the herbalists who pick the raw from the fields get more money for their hard work. Happy!
  • Since the herbing became more profitable, more herbalists will go to a mining tour. Herbs, that would otherwise be left alone, are collected. More raw materials for the whole industry. The whole industry is happy!
  • In Azeroth, the herb nodes just magically reappear. In a world where the resources are limited, this increased industry would deplete them and increase the pollution of the environment, making it unhappy.
  • Those who use herbs have to pay higher prices for their raw material. They are unhappy, and so their customers.
  • My competitors, who made the same business also affected by the price difference decrease, making their industry less profitable, and them unhappy.
The last unhappy group makes no one cry. The problem of the other herb users is definitely smaller, than the profit of the lots who made happy by the industry. The environmental and depletion issue is a bigger one but luckily not in Azeroth.

One more thing: if I alone would be the one who craft glyphs, I could be very rich by only doing this, limiting my output. For example I could say I sell glyphs for 50G and not for cheaper. People would be forced to pay this price. However there are competitors who will definitely undercut my price and force me to lower it. This price war continues until someone says, "this profit is too low, I don't run back and forth for 15s/stack". He leaves and the profit increases a bit. So don't expect to be rich by any single business. After a while your competitors force you to find a new field.

In order to make profit, you always have to seek new ways to create useful products, making people happy. Happy people for your profit. Fair trade.

13 comments:

*vlad* said...

Nice post.

Sydera said...

I have always said in my comments here that I make my money by producing useful things. For me, I concentrate on flasks with a sideline in potions. I'm not doing this for reasons of altruism, but rather because it's a steady market that has served me well since BC and will probably continue to do so. If there's a price war, I just don't list stuff for a few days and the market corrects itself.

A couple of vocabulary suggestions: you should say "their respective herbs" as opposed to "respectable" herbs, and the word for a person who follows the inscription profession is either "inscriber" or "scribe." Minor errors to be sure, but someone might get a chuckle out of them.

Firespirit said...

Gevlon:

I would really avoid making sweeping generalizations like "The social people consider business lowly and essentially evil, or at least vulture-thing."

I am a social person, and I don't consider business evil. I do consider it a "drag" so to speak. I don't want to be working tirelessly for hours on end. Hell, if I wanted that, I would work all day long in real life, rather than play the fantastically social game we call WoW.

What's the good with gold when you have no time, or friends, to share it with?

Liu said...

Great post, as always (though I can't help but feel that we saw much of this already in your previous production businesses).

Quick grammar fix - it should be "How does it affect the world?" not "How does it effect the world?" - "effect" would only be correct if you were creating the world which, rich as you may be, I don't believe is within your power.

Feel free to delete this comment after seeing.

Kring said...

> So don't expect to be rich by any
> single business. After a while
> your competitors force you to find
> a new field.

You're only doing glyph since WotLK for your main income. You're just lucky that nobody tries to force you out of the glyph market?

Stabs said...

I don't think this it is true of glyphs that competition will kill your ability to sell.

When I sell glyphs I simply check for what isn't on the AH and put two of those on for 48 hours. I'll also undercut very expensive glyphs, Glyph of the Ghoul was selling for 150g each for a while on my server.

There are two players on my old server who try to keep up almost a full stock of glyphs at any given time as well as several less serious businessmen but because there are always gaps since the product range is so huge I will always find some glyphs to list for high profit.

The Saronite Ore market works as you describe but not the glyph industry.

One other thing. The glyph industry doesn't really harm other herb users. Alchemists suffer from the price of most of the herbs going up but benefit hugely from all the cheap frost lotuses that appear as a result of people herbing for glyph and card making. It balances out.

Mark said...

I post about 400 glyph auctions a day and make on average 1k a day from those auctions. I've lucked out and found a supplier of ink of the sea for 40g a stack which makes my cost per glyph of 2.5g. I would wager my average selling price is about 12 to 15g per glyph so that works for me.

I've had a few competitors but usually I drive them away because I will usually check a few times a day to see if I have been undercut and react accordingly.

Gevlon said...

@Sydera, Liu: grammar fixed

@Firespirit: social people tolerate business till the businessman charge little. After that he is a hearthless evil thing.

@Kring: yes, I think I'm just lucky that no one tries to take even a segment of the glyph market.

Kiryn said...

I've made a lot of money from inscription since I got it high enough to make the Northrend glyphs and started learning more recipes. Ink is less than 4g each on my server, but most of the glyphs sell for 10g or more. Considering how easy it is to level inscription, I'm amazed that I only have a few people trying to compete with me regularly.

Because my profit margin is so high, I don't really mind if some of the glyph prices go below 8g or so. I make a tidy profit regardless, and if the price of a certain glyph gets too low, I just stop making them for a while and let my three competitors fight it out for a while.

I find that the "making something useful out of something useless" especially applies to netherweave bags though. Who wants to buy netherweave, other than tailors? Non-tailors find far too much of the stuff when leveling than they need for their first aid, so it's useless. But our friendly neighborhood tailor can craft them into bags that everyone needs!

Happyending said...

You're only doing glyph since WotLK for your main income. You're just lucky that nobody tries to force you out of the glyph market?

You would be surprised how few people have the will to even be a business man/woman in this game. As a test of my server, I've been doing the same experiment that Gevlon did. I created a DK bank toon and only using the gold I had when leaving the starter area, I've been playing the AH. I only deal in glyphs and netherweave bags.

For Glyphs I scan the AH every morning and night and only buy the ones that I can make a minimum of 5gold from re listing for fast sales. A lot of the time I will scoop up 20-50 Glyphs that are under priced by 15-20G.

For netherweave bags I will only buy the cloth or bolts, by the ruin thread and mail it to my main to craft the bags once a week. I will then turn around and put 10 bags on the AH at a time for 10g a bag, and they have generally sold within 12hours. Sometimes I will be able to sell 20 a day. I can buy all the mats, mail the raw goods to my main and mail them back for under 5g a bag. I really can't fathom how I can sell so many bags.

Funny thing, on my server I find the weekends are the best time to buy glyphs and bag mats and during the week it is easier to sell.

My next project is going ot be leveling inscription on this DK and making her craft the glyphs. I'm thinking I can make a lot more gold then I am now.

BTW, I think I started with 12gold and am now up to 1200g in 2 weeks.

Kurt said...

"My current job is glyph manufacturer. Glyphs are created from inks, which are created from their respected herbs. In the goblin science of economics, the glyph is called refined product while herbs are raw materials. The creating is therefore a value-adding procedure. So glyph prices are always (except for rare and short market swings and non-market factors like skillup glyphs) higher than its raws."

So, you are saying that creating glyphs adds value, because of what glyphs and herbs happen to be called in the goblin science of economics? That is putting the cart before the horse, then killing the horse, standing in the cart, and beating the dead horse. I've given an argument and an example disproving this claim, yet you keep making it without even an attempt to back it up. I wouldn't point this out again, except that I'm genuinely curious as to your motivation.

Pangoria Fallstar said...

@Kurt:

Umm, I think he's using it to compare to real world manufacturing.

You can buy linens and cloth cheap, but clothes can be expensive.

Cloth would be the raw, and a shirt you sew would be the refined product. Same idea.

No cart, no horse. If I'm not a scribe, and I'm not an alchemist, herbs mean NOTHING to me until I get them to someone who can make me something, therefore, that something has MORE value than the herbs.

In this case, glyphs.

Kurt said...

"Umm, I think he's using it to compare to real world manufacturing.

You can buy linens and cloth cheap, but clothes can be expensive."

This is an example of a real world analogy. There are several different ways to critique an analogy. In this case, I would point out that clothes are not necessarily worth more than linen cloth, it depends on supply and demand, which a large variable being how well the clothes were made. Ugly clothes, made poorly, will be less valuable than the raw materials.

Gevlon didn't use an analogy, he made the claim that since he called something raw materials, and something else finished products, it was necessarily a value-added procedure. This is crazy, it's not even true for actual raw materials and finished products, let alone just by calling it that.

E.g. In wolfish economics, prancing animals are called raw materials, and wolf shit is called a finished product. Therefore, eating the happy bunnies is a value added procedure, turning useless bunnies into valuable fertilizer. See what I did there?

In Gorean economics, gasoline is called a raw material, and carbon dioxide is called a finished product, ready to warm the planet to make us toasty roasty. Therefore, combustion is a value added procedure.

I believe that the way to find out if something added value is not to call things by certain names and then claim you've proved it, but to actually compare the value of those two things. If you don't do this, then when you are wrong you blame "non-market forces" for the numerous exceptions as Gevlon did in his article, and instead of adding one useless level of descriptive complexity, you end up adding two or three.

"No cart, no horse. If I'm not a scribe, and I'm not an alchemist, herbs mean NOTHING to me until I get them to someone who can make me something, therefore, that something has MORE value than the herbs."

False, many glyphs list for less than production cost, the herbs have more value than those glyphs, same is true for potions.