Greedy Goblin

Thursday, November 27, 2008

Dumb people

Cuthbert of the newly started WoW for profit wrote an interesting thing. He claimed that our profit comes from information asymmetry. It means that one party of the trade (us) has better of more information than the other, so can trick the other into something he would never do if he would know what we know.

While technically it is maybe true, however I would make a (non-scientific) distinction between two types of asymmetry.
  • When one party has little-to-none chance to get the information. Typical example is the health insurance. If I get my genes tested for diabetes mellitus, and find that I have good chance to get it at the age of 40-50, I can buy an insurance, claiming I'm completely healthy and the company has no legal right to perform the same test.
  • When one party has the chance to get the information but too lazy or dumb to do it.
Now let's see the WoW economy:
  • Vast majority of the trades take place in the Auction House, observable for everyone
  • Auctioneer addon gathers this information in 5 minutes, the addon is available for everyone
  • Tradeskill material costs, slvl and specification requirements can be read on WoWhead
  • Everyone's gear and tradeskills can be found on the Armory or inspected in-game, so their financial status can be very easily and accurately approximated
  • The prices of vendor-items are static.
  • There is only gold-for-material trade. There are no stocks, derivatives, insurances or even loans in the game economy, that would require any knowledge of the science of economy.
  • The world is static, node positions won't disappear or appear, bosses have static loot table readable on WoWhead
Summary: all information on WoW economy is just a click away. If we add that in WoW the items don't have expiration date, storage is practically limitless (bankalts, mailbox) and no one have unavoidable costs (like food and home rent in real life) there is absolutely no time-pressure on anyone to make business before he wants to.

So we can say WoW is the most forgiving economical simulator existing. (BTW what do you expect from a +12 video game?)

Yet people make extremely stupid choices like buying 10 crystallized fire for 10x14G instead of 1 eternal fire for 1x80G. All my profit came from actions that anyone could do. Yet, only a handful does it. Why? Because they lack the very basic knowledge of economy, the common sense.

The excuse that they don't "like it" or "care" is only acceptable if they don't have to farm. If you have financial freedom, you can buy anything you need for your raids or PvP or whatever you like than you can afford to ignore the economy and live like a lazy millionare. However if you need to go find mining nods or do dailies to buy necessities and you ignore the economy, you are simply dumb and doomed to mindless farming forever and ever.

The underperformance of the people in this extremely simplified economy really concerns me. If someone buy 10 crystallized fire, for 80% higher than 1 eternal, how on earth can such a person make a smart decision on mortgage or investment into his pension fund or choosing between the tax plans of presidental candidates?

In my eyes there is no excuse for them: they are just this.
Business is just as hard as PvE: "Sometimes there is fire. Don't stand in the fire!"

PS: I write my own business plans on this blog. So any competitor has a huge leverage over me, he knows my next step and I don't know his. Yet money is just flowing into my bag. So Cuthbert, don't worry that your business be damaged because of your blog. The people who are in the deepest need of information are the ones who don't do a thing to get it.


Anonymous said...

I Think a lot of it comes down to lazyness.

As in lazyness to wait for the price to change or to wait for teh lower ones to sell.

Lazyness to spend time learning the market.

Thats my problem hehe

But i am trying to change

Cuthbert said...

I can't agree with you more. While I might hesitate to call people dumb, most people in the game are extremely lazy. I know a few guildmates that would vendor netherweave cloth, along with most white drops from mobs. Hopefully everyone reading this knows the trick about making sure to buy up netherweave that is sold for less than 3g a stack to make into bandages to vendor. In the weeks leading up to the expansion I would make 600 bandages on some days. Just click on the create all button and alt tab to something else for 10 minutes or so.

Gevlon said...

@cuthbert: "lazy" is questionable here. After all they have to farm hours. If someone don't do something that cost him 5 minutes just to do something instead that cost him 2 hours is not lazy but dumb.

Lazyness can play when someone with 5K ignores the market and don't do a thing until he runs out of money.