Monday, March 31, 2014

Business post: a perfect idiot bubble

We often see economic bubbles when mass hysteria and groupthink make people buy, buy, buy, way over the intrinsic value of the item. But you can rarely - if ever - can see such a perfect idiot bubble as we could withness with the item RX-804 in EVE:

Zainou 'Beancounter' Refining RX-804 is an implant. It became famous with the dev blog about reprocessing. To get the best results in reprocessing, you need this implant. It will be mandatory for large-scale miners. After the dev blog came online, the price spiked, way over 200M. Why was it completely idiotic?

Because the intrinsic value is obvious. This is a general LP store item, you can buy it from lots of corporations. Therefore its price is linked to the highsec LP price. Nothing stops missioners working for any of these corporations from buying this implant en masse. It costs 79375 LP and 31.75M ISK, like many others. Therefore there was absolutely no reason for this item to cost more than the alternatives in the long term.

The dev blog clearly mentioned "summer expansion", therefore the buyers couldn't expect to ride a short-term shortage either, when miners buy it en masse, but missioners don't have enough LP for a day or two to provide supply. Nothing pressed the end users (those who'd plug it in) to buy it now.

There was absolutely, completely no reason for anyone to pay this thing much more than the usual 110-130M. Then why did they do it? Because the price was going up and they expected to sell their stuff even higher. Of course they couldn't, as missioners kept pouring this thing into the hubs, making the bubble pop in a few days (see the extreme volume increase).

What did I do? Kept buying it for cheap (though higher than usual, about 140-145M) buy orders. I ignored the dozens of 0.01-ers above me. Missioners sold enough to fill all of the buy orders, as they were still better off this way than selling alternative implants even on sell orders. I instantly put the items for sale, 10M below the lowest price if it was under 200M, and with a fixed 190M limit if it was higher. I sold a lot, netting about 1.5B profit. All this money came from idiots who invested in the hopes of selling even higher, despite having exactly zero chance to.

PS: I realized that there is hope for the "for fun" people. After all the Cnidaria managed to survive for 580 million years, with similar nervous system.

3 comments:

Arrendis said...

Eh, it was completely predictable, though. And it made those RX-804s a great investment of LP for a little while.

jstk said...

Reminds me when people kept trying to buy and sell RF Mindlinks for 1b just after a devblog explained they were going to be available in LP shops for cheap in the following expansion.

I guess some people with lots of ISK don't really know much about the game afteral.

Maxim Preobrazhenskiy said...

You can't have a game - especially an MMO - without for-fun people playing it. So the notion of "hope for for-fun people" is kinda backwards.

But yeah, for-fun people are going to be around always and likely won't change the fundamentals of their behaviour patterns. In that sense parallels with what passes for nervous system in medusae (and how it endured over millenia) are are perfectly fair

I'd say that the way it really works is that there is hope for all of us non-for-fun people, because for-fun people are so enduring and adaptable.

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