Greedy Goblin

Wednesday, January 14, 2009

Delayed gratification

If you have some spare Zapptrottle Mote Extractors, please send it to the embassies of European, especially Eastern-European countries. If you live in the US or in the Asia/Oceania region, you probably have not heard of our gas crisis. In short: gas is the primary source of heating in these countries and the majority of the gas comes from Russia, through Ukraine. These two countries had some debate and in the meantime gas transports halted leaving half of Europe without heating in the middle of a particularly cold winter. Some countries were "luckier" than others having some alternate source. Hungary for example had a huge underground gas storage enough for the people for two months. Industries had to shut down though, losing 0.5% of this year's GDP. In Serbia homes and schools remained without heating in the -15oC cold.

The reason of this "bad luck" was tolerating a monopoly in the supply of an important item. The reason for this action was simple: an alternative like a new gas pipe under the Black Sea or a new nuclear reactor cost billions of dollars and no one wanted to pay extra tax as long as the gas came. Of course the GDP loss because of the industry shut down cost almost as much as a new reactor and this situation can repeat itself any time because of political debate or a terrorist attack.

The reason of monopolies is bad luck. The Russians did not "earned" to have gas, they were simply lucky for having gas below the surface. However the reason for the survival of monopoly is simply short-sighted thinking. There were issues with the gas previously yet no one wanted to pay the price of the alternative energy source. Breaking the Russian gas monopoly costs lot of money now, and the benefits will only be felt in the future, if the Russian gas stops again.

We faced another ape subroutine: the desire for immediate gratification instead of the greater delayed gratification. The apes were unable to plan for the long run, so they were unable to create subroutines for long term investment. The subroutines that rewarded successful actions now were better than nothing, so these subroutines emerged. We have them in our head. We are all happy when something good happens now. Yet some of us are capable to abandon this instant gratification for something better in the long run.

One of the greatest psychological research was the marshmallow experiment. 4 years old children were given a marshmallow (a type of candy). They could eat it right now, but if they waited, they got further candies. The children were evaluated when they were at the college. Those who were capable of waiting for the candies were much better students (200pt advance on SAT) and had much less juvenile crime and underage pregnancy than the instant eater group. Our ability to resist our ape-subroutines are very important for the success in life.

Ryan mentioned in a comment that grinding (the most time-ineffective activity) is explainable by not peer pressure but risk aversion. Grinding surely provide a few silver coins and vendor trash worth another few coins, while investing may provide better results, but may end up with a loss. This is most probably right, but instant gratification is maybe an even better explanation to this nonsense behavior. Killing a monster give silver coins and trash now, while even mining (which is more or less risk-free) needs hours or even days of waiting for the auction to sell. So our little ape keeps on grinding, and "having fun" (receiving mental gratification) ignoring the fact that is obvious to even non-AH-businessmen: mining, herbing and skinning are better than grinding.

Monopolies grant us instant gratification. We get gas or overpriced crystallized fire now. Breaking the monopoly (building nuclear plant or buying a full eternal fire), costs money now (instant punishment), and will provide reward later.

My advice is obvious: if you depend on a monopolist, break this monopoly. It will cost you an investment now, but it will reward you more. You are at the mercy of the monopolist and he will take advantage of it. Even if you assume that he is "not selfish", you are still at the mercy of his accidental acts. What will happen to my little sheep if I forgot to list enough crystallized fire?

If you often need an item, and see only a few suppliers don't accept their instantly buyable item. Instead:
  • research the item (instant loss of time), find out where it drops or who can craft it
  • get materials for greater quantity of the item (instant loss of time or money)
  • spam trade for crafter (instant loss of time and risk of frustration: maybe no crafter is online/care this evening)
  • you will have plenty of this item, so later you won't have to pay for it (delayed gratification)
The Standing Dragon wrote an interesting comment: the paladin of Matticus's guild did not put more effort to get gear than his guildmates, he was just lucky to be the only holy paladin. He had a monopoly, therefore he could take advantage of it. To break his monopoly the guild management had to accept lots of small but instant annoyances (punishment) in order to prevent the greater long term loss:
  • spend time recruiting another paladin
  • take the unpleasant situation of benching the first paladin or other healer to let the new recruit in
  • take the extra wipes caused by the new paladin
  • take the extra time and unpleasant dilemmas when distributing loot between paladins
  • having the long term reward of having two not burned out and geared paladins.
Another, funny but true example from a commenter, who was kind to contribute to the quality of this site by fixing lot of grammar errors: "Another example, Greedy Goblin did not take time to properly learn English (instant punishment [for a kid, learning grammar is felt that way]) and now is unable to write high quality posts in English because of this."

PS: grammar correction notes will be deleted according to the commenting rules, but very welcomed.


Anonymous said...

I am surprised by your position on this. I would have imagined your point to be more like this:

"Elected Western/Hungarian politicians did not care too much for varied sources of energy, because there were other issues that the voters cared more about. They did a good job of not caring about this and are happy.

Western/Hungarian voters do not want to bother with such issues (hence their voting decision) and will continue to not bother, paying a price for it (more expensive energy). They are happy.

Russians milk some money and bully Ukraine. Russians are happy.

Ukraine is bullied, but -hey- they have been rather stupid to trust the Russians. While not worrying about the Russians they too must have been doing something that will make them happy.

After all, everyone is more or less happy."

That was a joke.

Seriously now: if force or breach of contract is involved in a world where there is no (international) police or courts of law, then the issue is no longer economical in nature, but political or military.

So this is not really for goblin economists to deal with, but for human politicians.

Gevlon said...

French farmers COULDN'T bully the European people because they have alternate food sources (both domestic farmers and overseas transport).

Russia COULD bully them because they were in monopoly situation. Breach of contract and using force is attracted by weakness. Tolerating monopoly is weakness.

Anonymous said...

Russia is really in the strong position. When your people are freezing, there really is no time for international courts and a military solution is not viable either.

As higher gas prices have forced automakers into serious consideration of fuel economy, this will hopefully force the countries effected into change.

Anonymous said...

Interesting article on the instant gratification issue, but what you fail to mention is the reason why in fact all of us (to greater or lesser extent) do it. In economic terms this is the 'time value of money'. We all have a personal value for this discounting based on the importance of the current need and opportunity cost (i.e. if I were to give you 100g now or 110g in a month, you would probably take 100g now as you could turn it in to more than 110g in that time). The reasoning for whether to go for instant or delayed gratification must be based on how much of a premium the delayed gratification gives. Inflation of both gold and gear is a major factor in this issue, as we all know that whatever we have now will probably be replaced very soon, creating even higher desire for instant gratification.

Carl said...

Same logic works for your card business. People would pay more to get a full deck now rather than collecting individual cards as they come up at some point in the future.

Anonymous said...

this is very interesting

I like what second annonimos commenter said - time has a great deal of value. as an example of my own situation - Ineeded a glyph of steady shot for my main. I hve a scribe alt, so theoreticaly - I could wait untill I discovered it myself - delayed gratification. to buy that glyph in AH - cost me $25 gold. said glyph upped my dps conciderably and was one of the contributiy garanteed raid spot. Amusingly enough- I STILL haven't discovered siad glyph. but even if I had discovered it the very next day - it was worth buying it when I did (yes, I did raid that night)

wether its worth it to wait for a delayed gratification result is directly contingient on what that result would be.

as an aside, I'm amused, becasue I always thought that when I would go to sholozar basin and kill drakes for their meat, skins and scales, while watching out for herbs that I would pluck as they respawned - I was grinding. seeing as grinding is generaly a repetetive activity.

some people just know how/when/were to grind I suppose :) Last night - I needed to have some flasks made. lichbloom alone costs 120 gold a stack on my server. for each flask, I would need 7 lichbloom, 3 fireleaf and a frost lotus. fireleaf is rarity on our AH, and when it appears - its costly. the materials for each flask would cost me in the area of 70 gold. now if I were to buy flasks directly - each flask would cost me a minimum of 90 gold, according to going rate on our AH. in aproximately an hour of "grinding" I got enough mats to make myself 8 flasks. not counting the elixir mastery procs. which would make it 720 gold an hour. this is not counting the eternal lives and almost 2 stacks of icethorn that I got in a process.

some people make gold and some people make items so that they don't have to spend said gold. in the end - result is basicaly the same. (ALhtough it just occured to me that the hour of grinding that I did pretty much proveyour point about delayed gratification o_O - this would be the case of the result being worth delaying the aquisition of nessesary flask for an hour)

Amava said...

@lupius -

I would assert that "Deck Assembly" is a service that garners a fee, rather than simply an impatient buyer spending more to get full deck immediately.

Assembling a full deck requires time and resources. Not huge but definitely more than "purchase one eternal fire. right click. receive ten crystal fire."

Deck Assembly requires researching market price and conditions for each individual card, checking AH/trade regularly for each card, storage of cards until full deck is ready, plus taking the risk that stored cards may lose value.

If a buyer wishes to avoid that, he may choose to pay a fee to a Deck Assembler instead. Of course, there's no such thing as a Deck Assembly Fee, but rather a premium he charges for full deck versus his cost of finding and buying all the cards.

Hatch said...

Frankly, I think your english is fine. Anyone who knows english can understand what you are saying, and you mostly miss verb conjugations, which are more confusing in english than they are in almost any other language.

More on-topic, it sounds less like the paladin Matticus talks about didn't really have a monopoly, he was just in a situation where he got rewarded more than others for the same amount of effort. This is much like how you make 1000g in the time it takes a grinder to make 100g.

On it's own there's nothing wrong with that. Except when the person you are making this profit off of notices that you are using him, he should take action to even the books.

And I think that's why Matticus would have an immediate reaction of anger: the guy took advantage of them to get more reward than them for the same contribution. They should have had a system in place that somehow protected them from being taken advantage of this way, whether as part of guild rules or a DKP system.

Anonymous said...

The wonders of living in the UK where we have our own gas or get it from Norway.

Hmm.. a Militant Norway, interesting prospect.