Greedy Goblin

Friday, September 17, 2010

150G for a macro

I have a macro. I press the corresponding button when I'm in a city. Almost every time it nets me 150-200G. What is it? "LF tailor to craft Glacial Bag, have materials, paying 50G fee".

Now the materials cost 150-170G if you craft the cloths properly. The bags sell for 350-400G. Where do the profit come from? The bag has 7-days CD, so no tailor can mass-produce them. So the supply can't keep up with the demand. Just because someone sees your bag for 400G, he can't undercut you for a week. It works with other CD-ed craftings.

Now let's dig a bit deeper. We determined that it's the CD that's expensive. So why does someone sells his CD for lousy 50G, when he could make 200G profit instead? "He doesn't care" is bad answer, he wouldn't bother to answer my macro either. He wants to make profit with tailoring, he just doesn't do it right. His motivation is the standard M&S fallacies: lack of patience and risk-aversion. If he answers my macro, he gets 50G now. If he crafts the bag himself, he will get 200G profit, but may have to wait several days. Also, he gets 50G without any investments (beyond the already sunk cost of leveling tailoring). If he crafts, he first must buy/farm materials for the clots, and there is a risk that he will never sell the bag, losing the investment. And there is also the moron factor: he doesn't know that he has something valuable.
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I found this specimen in VoA25 who was wronged by the "need before greed" loot settings:

34 comments:

Squishalot said...

Just to note - it's purely risk aversion. It doesn't have anything to do with lack of patience.

Presumably, a person with a lack of patience will always have it on cooldown, and would advertise his service himself. The very fact that he is available to craft it for you, by definition, means that he's been patient enough to wait for a good opportunity to arise, seeing as he doesn't want to cash in on the risky margin himself.

An impatient crafter would advertise himself for 50g, and take a lesser cut when people bargain him down.

Squishalot said...

And there's nothing M&S about risk aversion, unless they're not actually risk averse, but rather, ignorant of the risk.

Risk aversion is a calculated decision.

Alrenous said...

@Squishalot

Impatience is tied to impulsiveness, though. You can't just impulsively make a Glacial Bag. You can, however, impulsively take someone's mats and gold. I'm not in trade chat much, but isn't 50G way up there on the tip scale in any case? Thus, good at blinding people to the opportunity cost?


Yeah, FFT isn't that hard, I was just bad at it. It kicked my ass relentlessly until I was good at it.

Andru said...

I was not aware that risk aversion is a M&S fallacy.

Be right back, investing in junk bonds, since they're risky and I don't want to be a M&S.

Wait, what's that? I have to study the market first and know for myself what's the real risk of junk bonds?

Well, then there's the crux of the problem. Unwillingness to learn and study the risk.

While you may comment that this is also a M&S trait, deliberate ignorance is a blessing.

There's a lot of things I don't know. For example, I don't know what the market for tailor-made stuff on my server is. (Bags and the like.) I know there's money to be made there but I'd have to study.

Why don't I? Simple. I have enough income from gems and enchanting. Why would I invest time, and risk money to study something else, when I'm just good enough at what I do?

That tailor might have been an alt of a main whose interests lie somewhere else.

Not knowing EVERYTHING does not make anyone a M&S, it makes them sane.

thenoisyrogue said...

@Alrenous,

It's not a tip if you consider that the glacial bag has a 7 day cooldown.

Bobbins said...

Is two slots worth 290g? (350-60/2=145g a slot)

I was expecting the bags to be updated in cata so I would not buy (or make) a 350g bag.
Perhaps I need to check the cata notes? But why start investing in top end bags this close to expansion!

Xinge said...

Another possible answer is that with such a long cooldown people simply forget to craft it. I know I have been guilty on occcasion of forgetting to craft them for a day or two after the cd is off. Same goes for Northrend Alchemy Research, the odd cooldowns don't lend themselves to the daily "grind".

Kevin said...

Alas Gevlon, the moron shoe is on the other foot today.

You've made the classic mistake of overlooking the risky of the investment when evaluating returns and compounded that mistake by also overlooking the cost of capital.

As you plainly state, gathering or purchasing the material, doing the combine and selling the bag on the AH yourself is a far riskier venture than performing the combine for a fee for someone else. You could very well endup with a bag no one wants to purchase at a price that clears your costs and you have a far more significant time commitment as well.

Beyond that, you have gold tied up in materials for several days that you might be able to use in an even more productive business.

The moron in this situation is the one that presumes the higher margin is always the better investment.

sha said...

I would agree with Andru. I do not have my glacial bag on CD all the time simply because i only sell it to people who advertise buying the cd for 2 reasons: I don't care to spend the time to understand the tailoring market and I rarely spend much time on that toon so i forget i have it.

In short, I have decided the start up costs are more than I am will to pay (with time or gold). So the 50g for my CD solves my problems of not wanting to spend that time and the secondary problem of just forgetting I have the cool-down.

Markco said...

Bravo Kevin you are spot on. For those of you who realize this is a lousy investment, remember to take the idea behind it and apply it to more profitable items like titansteel or cut gems.

Often players look at a strategy and either write it off or fall in love with it. The smarter player will look into other markets to see if they are applicable.

I enjoyed this month's gold tip very much gevlon and am looking forward to next month's!

Anonymous said...

I don't care to spend the time to understand the tailoring market and I rarely spend much time on that toon so i forget i have it. The very fact that he is available to craft it for you, by definition, means that he's been patient enough to wait for a good opportunity to arise. I have decided the start up costs are more than I am will to pay (with time or gold).

Micah said...

@Bobbins
The extra space is worth it to some people. I assume mostly the pack rat types with lots of BoPs that they don't want to shard/vendor. If you count the 7 bank slots, for an extra 3000-4000 gold you get 22 extra slots. That's like an extra bag slot.

Brandon said...

Another possible answer is that with such a long cooldown people simply forget to craft it. I know I have been guilty on occcasion of forgetting to craft them for a day or two after the cd is off. Same goes for Northrend Alchemy Research, the odd cooldowns don't lend themselves to the daily "grind".

Blastoise said...

People claiming this tip is a fail one should considere the fact that Gevlon is using it, and making profit. So maybe, maybe, it works.

I think it's not a good tip to new enterpreneurs as it really need a heavy initial investment, as jewelry, but still it's a good one. Buying others long cd's to make money.

I can't remember right now, but is there any other long crafting cd after 3.3.3 patch?

Andru said...

It's not a lousy investment, Marcko.

It is an investment that requires study of a non-native market share.

Hmm, how should I put it better.

Crafting for someone (50 g tip/per piece).

Minimal time investment, zero material investment, no effort required. No hidden opportunity time costs.

Studying the market to open a 'factory' (200 gold/piece)

Significant time investment (More if the market share is farther than your native share), Material investment (200 (?) gold/per), as well as time opportunity costs.

Assuming a person does not have unlimited time, it means that branching out is at the expense of your native market share.

Now, why would anyone do that if their native market share is lucrative enough?


Today's tip only applies if your original market share is fiercely competitive, or you don't have one (such, your time is worth nothing).

Indiscriminately branding anyone who doesn't care to make glacial bags morons, is just shortsighted.

Gevlon said...

@Andru: The "he needs research in an alien field" statement is true only until I trick him once to craft for me. He should recognize that his CD worth 50G, strike that it must worth even more if I choose to get materials and spam trade on top of paying 50G instead of buying the bag. He doesn't.

Amaxe said...

I don't believe I have too many cooldowns anymore (and none that long), except the transmutes for my alchemist, but when titansteel was on cooldown I would sell my cd for cheaper than the cost to make a bar.

Why?

Because I neither had the materials to make the titansteel nor the money to buy the mats.

So I would have this choice: Get nothing and keep my cooldown free in the hopes of making enough to buy the needed mats vs. price of completed item or, make some profit for the cooldown for the time period. (50g > 0g).

So I think this is an opportunity cost, not a M&S error.

Vesoom said...

When I have idle time I do the same thing with alchemists and their gem transmutes. Uncut gems on my server about about 90-100g right now. I'll spam "WTB Alchemist Gem Transmute, my mats". I would usually be willing to pay 40g for the cd, but often when I ask the price they'll say "just a tip is fine". In order to not offend them so I can use them next time I'll ask what their normal tip is. Usually its just 10g.

So for about 25g investment they could have made 60, and if they dropped that down to 50 it would sell within 10 minutes (probably to me) in the ah.

I think in this case its difficult to argue that the investment cost is an issue. Or that the risk or length of time to sell is an issue either. I'm not sure whether they're morons or slackers but certainly one or the other.

Bear Pelt said...

Greetings Gevlon. Been reading your blog some time now; though I do not agree with some of your views, they offer a very different--if not interesting--angle to view some matters from.

As such, I would like to request your take on the following matter:

People asking their friends to help them roll on things they need (increasing chances to attain it) so they will not lose to strangers in a mostly guild raid with a few pug-ed folks.

If the above is too obscure a description of the situation, there is a write-up (rant) up in my blog.

Markco said...

I think we can all agree that selling your cooldown is generally a bad idea for the seller unless of course they just don't care and want a quick gold or are willing to immediatley reinvest the gold.

Andru you're now stuck with selling the bag and that takes time. Your money is tied up in selling the bag while the person selling the cooldown gets their money instantly. These bags often take longer than a single day to sell and do not sell consistently.

Could this potentially be worth your time? Absolutely. Is it reliable, consistent income? Absolutley not.

When you compare the seller to the buyer in this case the seller is potentially better off IF and only IF they use the gold they get back to immediately reinvest and make money off other markets. In the 24-48 hours it takes you to make 150 gold as the buyer the seller could have turned their 50 gold into far more.

It's ok to diversify with niche markets but I wouldn't recommend this particular one as being worth more than say selling dalaran vendor pets.

Especially with Cataclysm so close the demand for these bags is pretty low.

Anonymous said...

Isn't the g/hour higher for the 50g tailor, assuming they don't craft using eternals? I.e., the only reason they would be buying shadow and FW is for this bag. They 50g for one minute is the same g/hr as 200g in four minutes. There is tiny incremental cost for some of us to add items to snatch and QA3, but if you are not already doing it, the time is non-trivial.

And with tailoring specializations going away in a couple of weeks, much less incentive to be respecing now

Note also that your actual cost for the cloth does not matter: if you can make ebonweave for 1c but could sell it 23g, then the opportunity cost for your bag is 23g. I.e., if the bag is not profitable at 23g, just sell the cloth.

On AP now, the cloths are going for 38 and 23 each and bag is selling for 280, so the opportunity cost is 244g or about a 22g profit after the 5% AH. And there is deposit risk etc, so if someone came to me I would be pleased with a 20g tip. 10g tip would be about the same on a risk adjusted basis as the 22g and takes no capital or inventory and is much higher g/hr. YMMV

On moronic c/d: I do not know the bigger moron: the one that spams trade wanting an earth to fire transmute or someone who does it (shares c/d with epic gem pattern and that is clearly worth doing.)

recumen said...

I think you are undervaluing the importance of the immediate cash to some people. Don't forget cashflow is just as important as making profit and there is a difference. It also might explain why despite numerus help avalible in how to make money; some people still sit and wonder why they have not reached gold capped.

I think more emphasis needs to be placed on helping people with cashflow, such as explaining in more detail that the reason the people who under by larger margins also tend to have more money is that they are sacrificing larger profits for quicker sales.

Maybe you could go over it on your blog as I could use help in this area in particular i seem to to run in trouble when buying up he mats and waiting to sell them i hit a low point and cant afford things like epic gems (though i usually just by blues in that case).

Nielas said...

Actually the "He doesn't care" reason is quite valid though you have to look at degrees of 'care'. He cares enough to get an easy 150g but not enough to actually pursue the business himself.

My mage can make the bags but I do not bother since I have more gold then I can reasonably spend and would rather do other stuff in the game. However, if I am just standing in Dalaran and someone wants to buy the cooldown from me it is 'found money'. I will not spend the time to make the bag myself and then try to sell it so the cooldown will be 'wasted'. If instead I can get 150g for just walking across Dalaran and pressing a button I will gladly do so.

Just because there is profit to be made in an activity does not mean that one should expand effort in the activity. Heck, part of Gevlon's approach to gold making is to minimize the time spent doing profitable but unexciting activities. It seems quite goblinish to sell a cooldown that you are not gonna use yourself.

Anonymous said...

Do you have bags crafted by the same person more then once?

In personal experience, when someone is looking for a crafter to make a glacial bag, its for their own personal use, not resale. unless I see them spamming the macro 2-3 times more at least after crafting an item for them, I will assume that they had the bag made for personal use and chalk it up to a nice opportunity to make 50 gold off something I wasn't using otherwise.

As I don't sit around major cities much, it is highly likely that even if you do spam that message again, I'll miss it and go along with my original assumption unchanged.

In addition wanting gold now rather then later is a viable strategy in a game that you may be playing in a sporadic schedule, unlike real life where patience pays off more a lot more often.

Don't assume someone is dumb just because they do something differently from you.

sha said...

@gevlon
while for sure there are idiots who don't recognize that there is a bigger profit out there to be had, as others here have said there is a proportion that really have no problem paying you that difference in profit for the effort. On my server, there are more than enough goblins on the AH that trying to branch into new markets is normally a long learning process.

ignoring the costs of learning the ebb and flow of the ah for these items, looking at them right now the mats alone for the bags are 240g on my AH and bags are selling for 290-360g. So by taking you up on your offer, i would be losing between -14.9g(ah cut) and 55g. Too make more money i would have to farm out moonshroud and ebonweave to tailors speced in it and so on.

I don't want to spend that time that you have already spent so i have no problem selling my CD for 50G so you can get your profit.

It is a valid gold making strategy but one i don't want to put time into. You provide me 50g for a CD in which i more than likely forgot for the cost of at most a minute of my time. In return, you gain market share (i am not posting against you) and in theory gain more than 50g per minute per bag.

Anonymous said...

Not sure I get your comment Marko. Gevlon has a decent strat if someone will do it. On my server they sell very slowly but they are a 200g profit. If you get the cool down it is well worth it. As to the cost of capital, for some of you it may be a risk but I have more gold than I can invest at this stage so the cost of capital is minimal. The only risk is you can't sell before cat, small chance at this point.

And to those that can't take the time to understand the market, thanks you make another market just that much better for the rest of us.

Tarel

Mesar said...

If this example was trading a financial instrument I'd consider it a scalp trade. Low reward, low risk.

Nothing wrong with scalp trades and sometimes they're the best trade, but the risk/reward needs to be recognised.

Squishalot said...

Gevlon - he recognises it, but the risk aversion means that he's not willing to take a market risk. He'd rather take a guaranteed 50g profit, than to take the gamble on the AH.

Again, as Andru pointed out - risk aversion isn't a characteristic of M&S provided that he has the knowledge. You're assuming that he doesn't have the knowledge, but you're not noting that both a lack of knowledge and a dose of risk aversion will result in the same actions being taken. Poor assumption on your part this time.

Squishalot said...

@ Alrenous - why do you think the crafter is being impulsive? How do you know that he's not saving his CD for a minimum crafting fee?

I know I used to hold out on Titansteel CDs until I could achieve at least 20g, because that was the minimum 'guaranteed' amount that I demanded before it would be better value for me to take the market risk.

Also note that there is a time cost of playing the AH for your single CD, if you're not an AH user primarily. AH has good economies of scale - the more you work it, the less time per item it takes to play it. It's a lot faster to sell something in trade than it is to port to SW / IF, run to the AH, post the trade, then pay for a portal / wait for HS back to Dalaran.

Derrek said...

He is a moron if and only if he's interested in making money and he does the former by giving away his "valuable" cooldown. From a different perspective, he's not that big of a moron. Maybe, he's a moron for actually helping others, though that'd be quite an exaggeration; most likely he's not the asocial type.

I'll give my char as an example: it takes me 3 min to do the daily JC quest for an easy 100+ gold. I simply don't do it anymore because I have enough gold to sustain all my needs.

Drakenrahl said...

@Andru: The "he needs research in an alien field" statement is true only until I trick him once to craft for me. He should recognize that his CD worth 50G, strike that it must worth even more if I choose to get materials and spam trade on top of paying 50G instead of buying the bag. He doesn't.

So your saying that everyone spaming trade is making money?
After posing something like this a while back
http://greedygoblin.blogspot.com/2010/01/morons-of-week_23.html

He could have just as easily assumed that there where no bags on the auction house and you wanted bags to start leveling an alt over the weekend.

Yaggle said...

If I am near an auction house and I hear somebody who wants to buy a glacial bag cooldown, that is a signal to make a glacial bag and put it up for sale in the AH because probaly the guy is unhappy about the large markup on the glacial bags in the AH which means I have a good opportunity to put one up in the AH and sell it, probably for less than 200g profit but more than 50g. In fact, whenever I hear "WTB" in trade and I have that item or the ability to make it quickly, my reaction is not to contact the person, but to put it up for sale in the auction house for more than they announced they would buy it for. In general, the auction house is the crafter's friend and the trade channel is the buyer's friend.

Anonymous said...

Even though the M&S picture is hilarious the Need before Greed system really fails because no one, even DK's on those gloves can ever click "Need" on resillience pvp gear.

just FYI

Bobbins said...

Time changes everything! And perhaps the new patch too!
4.0.1 came. Abyssal Bags now 22slot bags with no CD and cheaper to make than glacial. 21st Oct 2010.