Wednesday, December 2, 2009

The pro version of "I farmed for free"

I didn't think that I will ever link anything on his blog, but hey Markco can surprise me. He made up a perfect example for the pro version of "I farmed for free". The primitive version is that the idiot goes out, spend hours farming, then craft something from the farmed materials, sell them below material price and claim that he made profit as the materials were free.

The pro version is cutting the hours and doing the same: find an idiotic farmer and make a trade agreement with him to sell you materials way below their AH price. So far so good. Then sell you crafted items below material market price and claim you made profit as you sold them above material farmer price. Example:
Frost lotus is 50G on your server, other herbs cost 1G. You can craft 2.5 flasks from it, so you can sell a flask for 24G to be at even. You find a dumb farmer to sell you a lotus for 30G. You craft flasks and sell them for 20G and claim that you just made 20*2.5-30-10 = 10G profit. Actually you could sell the lotus itself for 50G, making 20G profit.

Our persistent but not so bright friend figured out that if he make agreements with lot of farmers, and can get herbs very cheap, then he gets money by arbitraging between the market and the farmer price. However he choose a very strange method: instead of reselling the herbs on the AH or directly to the glyph-crafters, he mills them himself and sells the inks. Since inks are only needed by the scribes themselves, it's obvious that he actually supplies those he wants to defeat. In their absence the ink would not sell. Pretty dumb way to destroy someone using a method that needs his existence. Considering that most glyphcrafting scribes have large inventory, every time one of them leaves and dumps his inventory the ink prices will fall, making our friend selling at loss (compared to selling the herbs themselves).

Make no mistake, he still makes money by having a close-to-monopoly on the herb market by tricking idiotic farmers to work for him for low price. This is a legitimate profit for his hard work finding, communicating with and promptly paying those morons. However he wastes his potential profit reselling the herbs to anyone who needs it by crafting inks that will sooner or later sell below herbs.

There is only one way he is not at loss: if the glyphmakers are ready to buy inks above herb price, simply to be saved from the grind of milling. I usually do that, always checking the AH for inks 0.5-0.7G above herb prices. Assuming the glyphsellers have the same taste for milling as I do, Markco can make gold eternally... as the hourly paid grinder of the glyphsellers.

Of course he can craft glyphs of vellums himself below market price, doing exactly what the alchemist of the example did: having huge loss and claim that it's profit since "they farmed it for free".

44 comments:

Flex said...

My first reaction is this is smarter than you give him credit for, because his suppliers would see him relist their herbs on the AH, and then choose to compete with him - ie, he loses his supply and his chance at profit.

But then I realised that there's no reason he can't list everything on a multitude of alts - in which case you're absolutely right.

Nick S. said...

You seem to be ignoring the element of demand. What if herbs just don't sell in the volume he wants?

Gevlon said...

@Nick: if herbs don't sell then inks won't either.

You can make inks from herbs but not the other way and anyone who need inks can make them from herbs (besides the guy who buys them for the guild srcibe to make him).

So if there is surplus of herbs (prices down) then the scribes are better off buying herbs from the AH than buying his inks.

Azzur said...

The problem with Gevlon's posts is that he frequently make some assumptions which are incorrect. So, although the rest of the arguments may make sense, they are made on an incorrect premise. And far too often, too many commentators are too eager to listen to Gevlon without doing some independant thought.

Quoting Gevlon:
"Then sell you crafted items below material market price and claim you made profit as you sold them above material farmer price."

Gevlon's definition of "market price" assumes what economists call "perfect competition". Here, sellers have no influence on the market price (because there are large numbers of sellers/buyers), and are thus "price-takers". In the model of perfect competition, there are so many buyers/sellers that any additional supply (i.e. obtaining herbs from farmers) simply gets "sucked up".

The glyph market does not exhibit perfect competition. The market has barriers to entry (need 450 inscription, addon know-how, etc) and thus Gevlon's "market price" cannot be applied. When a person's costs decreases (because they get cheap herbs), this will shift the supply curve of the entire industry and force the prices down.

Thus, Gevlon's "crafted items below material market price" is wrong because there is now a new market price!

Anonymous said...

To the above poster.

If the cost of the materials CURRENTLY on the AH is higher than the cost of the product you used the same kind of materials for, then you're at a loss.
This is basicly what he says.

Azzur said...

@Tom:
Drama brings in the readers!

Qouting anonymous above me:
"If the cost of the materials CURRENTLY on the AH is higher than the cost of the product you used the same kind of materials for, then you're at a loss.
This is basicly what he says."

My earlier post alluded to this. Gevlon's makes the assumption of "perfect competition" and that the demand will "suck up" the existing supply.

But is this really the case?

Eaten by a Grue said...

Reading the link, it appears that making gold from this scheme is a secondary goal. The primary goal is to drive the goblin glyph sellers out of the market.

Since Marcko does not actually craft glyphs to compete with the glyph sellers, he tries to attack their profits from selling inks of the sea, driving those prices down, and therefore forcing the glyph sellers to raise prices on glyphs to make up for the fact that they are getting less for their inks of the sea.

What I dont really understand is why he even wants to get the glyph sellers out of the market. He does not sell glyphs, so why should he even care about this competition? This makes no sense to me.

Phil said...

I think markco is quite right, he posts his method which then gets viewed and commented on. With those comments he can refine, improve or validate his process. No harm in posting a method that makes money, but could make more. I suspect the commented and improved version then gets popped into his gold guide, for those too lazy to read through the forum.

I don't think I'll ever make a goblin, my profits are only 200 / 300 a day, but the back and forth of the blogging format gives me a little more information that's really quite helpfull.

Good luck on your next lowbie run, and I hope 3.3 brings new heirloom trinkets to make the slighlty too challanging ones more managable.

dobablo said...

When I first read the jm2c article I thought that his prices for herbs were around market value. I guess it is just my server that has lichbloom/icethorn typically available on the AH for 12g a stack.

Zeran said...

... really?
He posts an experimental strategy for destroying your and the MMO-champ kids way of making gold, and all you can find wrong with it is that he's loosing some potential profit?
Wow... Personally I assumed he had some thoughts about what to do after the goblins had moved to more efficient ways of making gold.
Underestimating your adversaries is a way to find a quick demise.

Olga said...

just a random thought about "price of materials". On my server snowfall inks cost around 10g on AH. But you can't sell them at this price. You may call it in-elastic demand, as we had times when price dropped to 6g (price war between glyph sellers lasted like 2-3 weeks). But regardless of price you can't sell as much snowfalls as you produce them to sell glyphs, i even didn't sell more inks for 6g than for 10g.
I craft off-hands, scrolls, but i can't get rid of inks. So i started to make cards. Yes, they will go below row mats cost. But you can't sell that mats at that cost.

Gevlon said...

@Zeran: he actually doesn't hurt the glyphsellers, unless he start using the cheaply gained herbs to craft glyphs himself undercutting them.

Since he elevate the price of materials for ALL sellers, none of them will get into worse competitive situation.

Getting herbs low, crafting glyphs at loss until they give up would make sense, though it would be just annoying. If I were on that server, I'd simply wouldn't have sales and work, while he has no profit and works his ass off. If "Gevlon didn't sell anything" worth him that work, go ahead.

Anonymous said...

I'm enjoying the sometimes subtle, sometimes not, back and forth between Gevlon and Markco. Thusly, I think I'd like to see a challenge.

Both of you make new toons on a new server and directly compete to see who can make the most money in a month. You'd have to have someone like Tobold be a judge.

Now that would be fun.

Spinks said...

Yeah, it does make me wonder who is buying all the snowfall ink. Do people really buy that much?

Or are the goblins on his server just nutters who don't mind losing money to try to drive each other out of the market?

Anonymous said...

quote: They sell super cheap and I get to mill at starting prices that no one can compete with unless they farm the herbs themselves.

Priceless

Anonymous said...

Inks aren't only sold to scribes. They are also mats that can be bought by people looking to have a friend scribe create a glyph for them. He's not supplying just the competition, he's offering a shortcut around the middleman for those who want it.

Your logic is flawed.

Strutt said...

@ anon
I think that would be pretty cool to have a face off between the 2, have Gev try to hold on to a market and have Marcko try to stop the goblin. Or as mentioned above see who can make the most money.

Spinks said...

Why would you buy inks to have a friend create glyphs for you if the glyphs are all listed at crazy low prices?

Wooly said...

Wow! I just thought of an even better method to beat even Markco's imba tactic. I'm going to find herb providers to sell me stacks of herbs to me for just a /hug and a /kiss and then I'll spend hours of milling and ink making and spread around the world for freeeeeeeee, and everyone except glyphsellers will be happy!! Wheeeee!!

[/sarcasm]

Alex said...

I'm not really sure wth Marco's idea is. If herbs are going for around 10g a stack (aka, Gevlon is wrong and he isn't doing a 'I farmed it for free'), then this just seems to be him taking potshots at Gevlon vicariously through the 'goblins' on his server.

If he is getting herbs at half market value (just about every one seems to say he is, my self included), then he is actually pulling a monopolist ploy, something else Gevlon regularly ranted on. The problem with trying to 'control' a market like WoW's is that you can't. He might be able to drive the goblins out of what ever market he is trying to corner (Vellums I think), and control it. But that only lasts for so long. Once he stops this game of selling at a loss (yes, he IS selling at a loss if he is getting herbs for 50% off), the goblins will just pop back up and enjoy the market reset.

I dono, maybe Markco's server has a REALLY strange economy, and he is simply doing deep undercuts (traditional goblin practice) with the goal of driving 'goblins' out of the market. Maybe he is pulling the stupid "I'm going to control the market" idiocy, something that isn't sustainable.

Or he could just be taking pot shots at Gevlon.


Side note on 'goblins': I see no difference between the M&S who buy vendor items on the AH and the 'goblins' who find a guide on the internet (Gevlon's or otherwise) and just follow it to the letter. They aren't being goblins, they are just following a get rich quick scheme that happens to work. I'm no goblin, I'm a slacker. I don't work hard for my money, I will buy up expensive items on the AH to power level a trade skill (when I could just wait for a decent price to show up), I don't really know the AH, I don't really know the economy on my server, I only have around 10Kish gold amongst all my characters, etc etc etc. I did however follow a few of Gevlon's notes on the Glyph economy, checked prices on my server, and just started casually making a few hundred glyphs and selling them. With the low posting cost I make money if one glyph in 200 sell per posting (normally it is about 5-10), however I still make most of my cash via selling xmuted epic gems (woo, 200-300g profit for 5 seconds of work). This makes me a Slacker, not a goblin. If I felt like it I COULD really follow Gevlon's advice, learn the market, pay attention to trends, make a huge industry, etc etc, but I still wouldn't be a Goblin as I am just following Gevlon's guides (as disjointed as they are).

Meh.


Ninja Addendum:
Reading through comments his goal seems to be pissing off goblins.
"If glyphs get above 3.5 gold per then I've won."
WON WHAT?

Anonymous said...

i remember a particular goblin selling glyphs for 3g when they were going for 50g.

The Gnome of Zurich said...

Markco seems very confused. It's not at all clear to me how driving down the price of ink is going to hurt a typical goblin unless by milling mass quantities of herbs and selling the ink for a pittance, he manages to drive up the price of herbs, in which case he's basically losing even more money (in opportunity cost), and the goblins (as opposed to people just following a system with no thought) will simply buy his ink instead of the herbs. Letting him do all the farmer recruiting and milling work for very little profit.

I don't know where he gets the idea that goblins are making money off selling snowfall ink. The impression I get from all the big scribes is that snowfall won't sell in the quantity required to keep up with their glyph sales at any reasonable price, so they typically are putting it into offhands and cards to a degree that drives the prices of those items down, and sometimes they are even willing to treat the snowfall input to those items as essentially free because they can't get rid of it all anyway.

In general Markco's strategy as written here is just ridiculous. I'm not sure if it's supposed to be a satire of all the putative goblins talking about being willing to make next to nothing in order to drive other people out of their markets?

Anonymous said...

I think a lot of people are confused about markco's strategy. I'm pretty sure he mis-spoke when he said that he is trying to lower the price of Ink of the Sea down to 10g - he meant snowfall ink.

His logic is this:

1) People are selling glyphs at 3g or less prices because they CAN - by making their money back in Snowfall ink prices.

2) By lowering the price of snowfall ink with cheap herbs, they will be forced to sell their glyphs for more money or they will lose their profit margins.

3) Adding cheap IotS will allow more people to purchase materials for less than their prices and cut their sales further.

4) These sales are a byproduct of his real cash-cow, weapon and armor vellums, so any sales done are extra money, or simply make his invested money back, depending on how you look at it.

I don't think he's targeting Gevlon since he simply goes by market value on his postings. This is directed at the AH campers that sell glyphs for low, low prices similar to what Gevlon used to preach.

The Gnome of Zurich said...

Gevlon vs. Markco challenge would be freaking hilarious.

I volunteer to put up 1000g starting capital for each if they roll new chars on a server where I have a few kg languishing and don't expect I will do much playing there.

This extra gold was the result of my own personal "How quickly can I make 5k gold from nothing on a completely new realm?" challenge. Answer, about a month with less than 1 day played (I was still keeping up my other realms and playing alts and mains).

Didn't even do professions except mining/enchanting to get starting capital. All prof arbitrage except low level smelting and DE was done through trading. My #1 money maker? Void crystal ---> large prismatic shard arbitrage. I typically paid 1g per voidshatter and and sold my LPS for around the same price as I bought the voids (8-10g), for close to 50% profit.

Markco said...

OMG To the anonymous who noticed that I had written ink of the sea instead of snowfall ink you win the internets. I can't believe I didn't catch that and I was reading these comments like wth are these fools talking about?

Thank you!

Knipsen said...

On of the comments that made me laugh:

Neva said...

I have been selling glyphs for ages and there is no way this tactic will drive the goblins out of the market.

I'm buying Adder's Tongue for 12g (ah price is 15g). On average I'll get 6 Inks of the Sea and 2 Snowfall Inks from stack.

Snowfall Inks sell for 6-10g not to mention if you bother making Runescrolls of Fortitude or offhands it pays the price you used on herbs.

If I sell around 200 glyphs a day for 2g each it's 300g profit since the Inks of the sea are just profit and it's easiest to get rid of them via glyphs.

The time the posting takes nowdays with QA2, postal and reload macro it's just too easy to repost all that have been undercut. It's still very good gold/hour


Let's say he sells his snowfall for 6g. That makes it 12g (herbs) - 6g (snowfall) =6g for the inks from that stack. Average ink per stack is 3 wich makes it 6g/3=2g per ink. So basicly he's losing the parchment-price and AH cut for every single glyph he sells :)

Alex Cresswell said...

I think a competition would be awesome, and to make it fair both sides would have to have a time limit, otherwise it would just end up being an AH camp-fest. I run my glyph business in about 2 hours a day. That sounds fair.

Anonymous said...

I am not sure you can so quickly dismiss the fact that some parts of the supply chain sell more quickly. In the case of ink if I am going to have someone craft vellum for me I buy ink and send it over. I don't by the herbs to make the ink.

Put another way why is leather rarely priced appropriately; Why can I buy normal/scraps borean leather created heavy borean leather and sell at a profit?

Anonymous said...

Gevlon,

you need to remove the whole blog post for today. The fact that you based this on a typo is just bad, Plus even though you deleted references to ink of the sea you didn't replace them with snowfall ink(which is what was typoed originally) because you know that if you look at the corrected blog at jmtc that it makes sense and this here doesn't please just delete the whole day Gev, cause this was a very bad fail where you tried flaming someone but wound up looking more like your beloved M&S because you didn't pay attention and realise it was a mistake.

Ismaris said...

Maybe just add an addendum that says Marcko had a typo.

Willowbear said...

@Knipsen:
On average I'll get 6 Inks of the Sea and 2 Snowfall Inks

You said:
Let's say he sells his snowfall for 6g. That makes it 12g (herbs) - 6g (snowfall) =6g

Looks like you are only accounting for the sale of one ink. If that person sells 2inks then: 12g(herbs) - (6g (snowfall) x 2) = 0g. This doesn't even account for the fact that snowfall ink can be used for even more profit elsewhere (eg runescrolls). Based on the correct calculations he is selling for a profit at the price of 2g per.

Gevlon said...

About the ink name correction: I did not noticed the mistake and read the post with automatically assuming the correct ink.

Just by milling you CANT push down the snowfall price! The snowfall:sea ratio is the same for everyone. If Markco wouldn't mill them, the scribes would mill them. The same amount of inks are on the market. If he mills too much (just as this post claims) that would decrease the snowfall price, but also the sea price. That's why the whole scheme is wrong: cheap inks (both sea and snowfall) from expensive (at least in opportunity) herbs.

Markco said...

In the experiment I sold the inks of the sea for slightly above normal price, and mostly focused on crafting/selling vellums.

If I were to sell the inks at a loss then yes this would be a terrifically foolish thing to do. By removing the profit of snowfalls "goblins" must turn to increasing the price of their glyphs.

With higher glyph prices means other players will sell their inks of the sea at my new higher price.

It was a really fun experiment to try and I'm enjoying watching it succeed/fail in real time over the course of several weeks. I'll try to maintain it as best I can and it seems that other players have started posting their snowfalls around 7-10 gold as well.

The affect on eternal lifes was interesting too.

Chris said...

@ Marcko:

You arent actually depressing the market though, just funding a sale on snowfall inks through your own opportunity cost.

If you aren't selling the inks of the sea below market price, then real goblins arent buying them. You are preventing the sale (or reducing the sale price) of our snowfall inks, but who cares? The real goblins see snowfall ink as a loss or potential darkmoon cards. I can sell MAYBE 5% of the snowfall inks i mill due to low demand. The loss of that 5% is negligible because I will make it up when I have more snowfall inks during Faire season.

The fact of the matter is, you might be annoying some small time players, but a true goblin probably wont even notice your actions. If they do and get fed up, they are doing it wrong too.

Anonymous said...

Yo Gevlon,

I think the method that Markco describes is intended for pushing somebody out of the market. He gives up profits in the short term in the hopes of having less competition in the long term. In that sense, it is similar to your glyph pricing scheme.

Anonymous said...

@Knipsen:
On average I'll get 6 Inks of the Sea and 2 Snowfall Inks

You said:
Let's say he sells his snowfall for 6g. That makes it 12g (herbs) - 6g (snowfall) =6g

Looks like you are only accounting for the sale of one ink. If that person sells 2inks then: 12g(herbs) - (6g (snowfall) x 2) = 0g. This doesn't even account for the fact that snowfall ink can be used for even more profit elsewhere (eg runescrolls). Based on the correct calculations he is selling for a profit at the price of 2g per.
----------------------
The high end herbs have a 50% chance to drop an icy pigment and it takes 2 Icy pigments to make a Snowfall Ink. You only get 1 Snowfall ink per stack not 2.

Like most scribes I've milled thousands of adder's tongue and the 6:1 ratio of IotS to Snowfall on a stack is pretty much guaranteed.

Anonymous said...

Correct me if I'm wrong, but isn't Markco basically claiming to be able to defeat a Goblin paying herbs less than him?

Lolcat said...

Despite Markco's attacks on the censorship of Gevlon, all comments on his blog is now subject to "owner approval"

He won't post criticisms of his method. I put this critique up on his blog but after about 3-4 people agreed with me he deleted my post (and the others that agreed with me).

@markco

Firstly, to "defeat" a goblin you are actually becoming a goblin yourself. Additionally "defeat" is more like stalemate or draw.

You don't explain why 3.5 gold is the magic UWIN number. You already state that the "goblins" start selling at 40g. They are obviously happy to sell above 3.5g.

These herb prices are very unrealistic. Most commenters that mention herb prices state this.

Can you rewrite your plan without your GF farming herbs for a ridiculous loss (opportunity cost anyone??).

Shifting the loss to a second party who is complicit in the deal is just underhanded. You need to be honest and add the losses made by your GF to the total of the system cost. I'm pretty sure anyone can "defeat" anyone with a farmer willing to bear the cost of losing gold so you can profit.

Ink of the sea, and vellums sell very slowly. So either you will have a massive glut of unprocessed herbs or inks or vellums. You cannot move the volume needed to "defeat" a goblin.

Supply and demand. If you force herb prices so low (god knows how this is possible in a market where you are most certainly not the only buyer) then the goblins will only need to offer slightly more than you to get herbs even cheaper than they did before. If you can, they can....oh I forgot this plan requires a GF.

Again if the farmers get paid ridiculous prices they will either farm less or sell to higher bidders. Unless of course you have enlisted retarded farmers to your cause, who farm for vendetta rather than profit.

Finally, screenshots, book keeping and some real numbers are needed. At the moment this is a "master plan" for fail.

TLDR: Becoming a "goblin" is not defeating one, Plan has unrealistic price requirements, Plan has unrealistic sales expectations, Plan requires a GF, Plan requires a second party willing to make a loss so you can profit, Plan defies economic laws, Plan needs real world proof.

Thanks Markco...I now have my very own blog.

http://justmy2lol.blogspot.com/

Anonymous said...

@Eaten by a Grue

Markco cares about killing off the "goblins" because he lost face in a scam he tried to pull. It is his pathetic attempt to get back at Gevlon (and other goblins).

Oh LOL sorry I forgot Markco is "over it".

See http://justmy2lol.blogspot.com/2009/11/how-to-defeat-goblin-on-your-server-lol.html

and

http://greedygoblin.blogspot.com/2009/11/no-means-no.html

Lolcat said...

Some comments claim Markco is only trying to drive out goblins. When in fact he says it is a profitable way to drive out goblins.

This is in fact a lie as he has just shifted the loss onto his herb farming girlfriend who profits from "picking on people on the AH" rather than gold.

His whole strategy relies on his GF farming for peanuts and other flawed premises.

If he were honest (LOL) he would include his girlfriend's opportunity costs incurred by her supplying him dirt cheap herbs.

Klepsacovic said...

Defeating goblins doesn't work. Defeating people who want to be goblins but lack the mindset/mind to be one, that's more than possible, and profitable.

What we really can learn from this is that bad accounting can yield immense imaginary profits.

Duc said...

This statement may not support my claims below but I would say it anyway. I do enjoy JMTC Forum with intelligent ppl , not the lol blog which rarely provide anything usable ( not even food for thought).

Back to topic
@ LoLcat
Well written and strong argument with logical reasoning unlike that "tragedy" (not strategy )with unrealistic assumption ( recruit more GF to farm for his love, not gold)and a "F" grade type of short essay in a community college economic class. Seriously, Marcko, how can an self proclaimed entrepreneur like you can devise this kinda of master plan. Either Im confused, or you are confused.

Well, to make it simple , here is a funny but relevant scenario.

Let's say Walmart (a giant goblin ) want to defeat Target,Kroger,HEB ... ( smaller goblins ). Walmart goes to China to find dirt cheap source ( AKA recruit GFs by Lolcat). Good, what next. Here are strategy.

A/ Marcko style: Supplying the other stores ( Target, Kroger .... ) with the hard earn resource from China at very low to no profit price. Then Target use that supply , mark up with higher price, and phase 3 profit. So Walmart acts as the middle man who do all the dirty job for little or no profit when other guys happy making money from the buyer. So Farmer(GF) > Marcko > Goblin > Buyer. With this scenario, Walmart ( or Marcko ) will defeat no one, win-win at best and lose money at worst.

B/ Gevlon and other average goblin style: Walmart uses the source from China, and sell directly to buyers. Make profit for itself at the loss of the other guy ( who has the lower price, win ). Or they may lower the price to the break even point so the other store suffer bigger loss. So at best, Walmart took over everything when other goblins "die out" ( no sale, no profit ), or break even at worst when the other guys dont die.

Which plan will you follow ? Im not as smart as Marcko so I go with plan B.

To everyone who "asked" Marcko about how to "defeat" other goblins or campers, don't even try his plan. You will just fail and end up buying his gold guide to recover the loss . If you want to defeat a goblin, become a bigger one with superior advantage ( like having a lot of GF ). If you want to defeat a camper, become a goblin, or become a better camper ( having no RL GF ).

Thank you Marcko, when someone try your plan I know I will make more money because they "farm for free" for me.

P/S LoLcat
LoL at the end of your blog, keep us update when someone get better gears to upgrade his LoLstat.

Anonymous said...

Gevlon, you're a weird dude but some of the stuff you write is really interesting.

The one point I wanted to make about this post is that while technically correct, you forget to include one variable that's essential to maximizing profit.

Liquidity.

The frost lotus/flask market is a bad example because the liquidity in both markets is probably similar, but it's conceivable that a seller would be better served to sell a refined product, even if it's at a technical loss to where the mats trade, if the volume makes up for it and the market is more liquid.

Any portfolio manager will tell you that a paper profit is pointless unless you can actually exit the position without moving the market too much.

Panasi said...

What's the proper terminology that describes the "I farmed it for free" paradigm in the real world? I can't remember what it is for the life of me.

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