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It all began with a strange email

blogs.valvesoftware.com

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Re: It all began with a strange email

#21

Post by DanielBMarkham »

Four years ago one of my first startup ideas I pursued was setting up an arbitrage between virtual economies. I believed then (and still believe) that it is a huge chunk of the future. Everything that is tangible now will become software and intangible in the future. That means the virtual economy is set to eclipse the current one.

I spoke with some somewhat famous startup-type people; several I met on HN. None of them seemed interested in my pitch (I was looking for a cofounder). One basically said "I've already got my FU money. This just doesn't excite me that much."

I'm looking for some cool things to happen in this space over the next decade. When I was kicking this around we had all sorts of things we wanted to try. It'll be interesting to see if any of them come to fruition. One of the key questions in this space is whether it's even possible to manage virtual economies as this guy wants to do, or it there's always some level of abstraction that's remains out of reach. My money says the thrill of being able to finally experiment will be short-lived. Odds are each economy we create with gaming rules will simply be a small subset of a much larger informal economy. Cool stuff.

Re: It all began with a strange email

#22

Post by dkarl »

an economy where we do not need statistics since we have all the data!

I simultaneously feel his elation and am mystified. If you have such a quantity of data that you must relate to it via statistics, how is that better than only having the statistics? Is it because you can define and calculate your own creative statistics, or...?

Re: It all began with a strange email

#23

Post by creamyhorror »

dkarl wrote: post #22

an economy where we do not need statistics since we have all the data! I simultaneously feel his elation and am mystified. If you have such a quantity of data that you must relate to it via statistics, how is that better than only having the statistics? Is it because you can define and calculate your own creative statistics, or...?

Off the top of my head: you no longer need to sample to obtain your statistics, and you can obtain good statistics on virtually everything and every sub-component of the economy, sliced every which way, as many times as you like -- which is much harder in the real world. You can't just go out and gather information on sales of all red, oblong widgets in shops owned by couples aged 50-60 with one dog and one cat -- but you can in a game economy.

Basically it's a huge data laboratory where you are able to record every transaction in the world, and work from there. That's massively useful to economists, because they can now test a far wider range of hypotheses and, furthermore, eliminate them much more quickly.

Re: It all began with a strange email

#24

Post by creamyhorror »

Among virtual economies, EVE Online's economy is the real deal. The EVE game economy is I dare say more developed and complex than nearly any other games' - it has many kinds of input factors and stages of production, and many of the production facilities/resources are player-controlled and their fate determines on political maneuvering, war and sabotage between player corporations (guilds). The price of most items in EVE (ships, weapons, components, structures) is determined by the state of production and speculation in the economy, so CCP has to consider the economic impact of nearly every single change they make to the game world. (They hired their in-house economist in 2008 IIRC.)

If any of you folks are interested in reading about a truly fascinating, active digital economy, you have to read the EVE economic reports and other investigations of EVE. It's like reading about mining, manufacturing and stock markets - against a background of eternal war between corporations - in far-future space.

EVE Quarterly Economic News, by CCP's economist Eyjólfur Guðmundsson (link courtesy of xb95): http://cdn1.eveonline.com/community/QEN/QEN_Q3-2010.pdf

edit: links to additional content ----- http://pc.gamespy.com/pc/eve-online/855380p1.html

>>> EVE Online was developed to have a very dynamic economy from the very beginning. It was decided that "time" would be treated as a valuable player resource: for that reason, raw materials were spread all over the galaxy map, which takes hours to traverse. This created regional pricing. Interestingly, there were no trade hubs built into the core game design -- players gradually settled into certain areas and made their own pockets of population where trade thrived.

>>> Gudmundsson had some fun examples of how intelligent virtual economies can be. He showed a graph displaying the prices of a mineral in the game known as Zydrine. Zydrine is hard to find in the EVE universe, but players had discovered that killing a certain class of drone often leaves behind Zydrine in the wreckage. This hole in the market led to lots of drone-farming, and subsequently the price started to drop. Drastically.

The developers decided to tweak the drop rate and this change rolled out onto the test server, unannounced, and mixed in with all sorts of other tweaks. Still, clever players noticed the change. Word got out. And suddenly, even though nothing had yet been done on the live server, prices for Zydrine spiked dramatically. Markets make for great predictors of future events!

----

http://blogs.wsj.com/economics/2010/06/21/real-economist-tak....

>>> One of his team’s first big findings is somewhat sensitive. Confirming decades of gender research by economists, sociologists and anthropologists, Mr. Turpeinen’s group found that the same biases that have historically favored men in the real world exist in a virtual economy. Their research demonstrates that both women subscribers and female avatar characters operated by male subscribers in EVE are biased toward a slightly lower chance of success in competition with their male counterparts.

Re: It all began with a strange email

#25

Post by [deleted] »

katsaroles wrote: post #20

A bit of a background: Varoufakis is something of a celebrity in Greece for being one of the first and the most vocal economists to speak out against the European strategy for resolving the Greek sovereign debt crisis. His predictions have proven to be tragically spot on so far, although it remains to be seen whether his proposal for renegotiating the European bailouts, a proposal that the left-wing SYRIZA political…

[deleted]

Re: It all began with a strange email

#27

Post by neotek »

objclxt wrote: post #18
petitmiam wrote: post #15

Fascinating read, just like many of the other Valve blogs. Though, I do wish this guy could explain why real-world money Steam games in the US are often half the price of those in Australia/Europe.

Advertised prices in $ exclude sales tax, because for most states it isn't levied on digital downloads. However, VAT in EU countries (don't know about Australia) is included in the price. This causes a fairly substantial discrepancy, as VAT can be rather high (in the UK, 20%). Other discrepancies can usually be put down to exchange rate fluctuations, which with the recent financial issues in Europe have been somewhat…

Regarding Australia, our GST is a flat 10%, and the AUD is near parity with the USD (and has been above parity for most of the last 12 months). The price discrepancy is far greater than it should be if those were the only factors.

The Australian Competition and Consumer Commission, an independant regulatory body in Australia that oversees the Trade Practices Act (among other things), is in the process of inquiring into the so-called "Australia Tax" to find out why companies like Apple and Valve charge far more for software sold in Australia than in other countries despite the low true cost difference.

Re: It all began with a strange email

#28

Post by unimpressive »

DanielBMarkham wrote: post #21

Four years ago one of my first startup ideas I pursued was setting up an arbitrage between virtual economies. I believed then (and still believe) that it is a huge chunk of the future. Everything that is tangible now will become software and intangible in the future. That means the virtual economy is set to eclipse the current one. I spoke with some somewhat famous startup-type people; several I met on HN. None of th…

Interesting. I have some questions. (If you don't mind answering.)

> Everything that is tangible now will become software and intangible in the future.

When you say this what exactly do you have in mind? Virtual reality? Living substances made through bio-hacking?

> or it there's always some level of abstraction that's remains out of reach.

What sort of abstraction do you feel would be prohibitive in this environment?

> That means the virtual economy is set to eclipse the current one.

In what capacity? Like bitcoin, or like for the win[0]?

[0]: http://en.wikipedia.org/wiki/For_the_win

Thanks in advance.

Re: It all began with a strange email

#29

Post by snowwrestler »

jwallaceparker wrote: post #12
steve8918 wrote: post #4

This is truly fascinating. I remember hearing about virtual economies where money can be injected at any time through gold mining, etc, and that they were inherently unstable. Once you got the gold farming schemes that sold gold on e-bay, it created massive hyperinflation. And it totally made sense that hyperinflation would occur since the creation of virtual gold was limitless and effortless, so the gold farmers did…

> And it totally made sense that hyperinflation would occur since the creation of virtual gold was limitless and effortless The creation of the US dollar is also limitless and effortless.

Only for the Federal Reserve, who has a mandate to manage for a stable economy--so they are careful with their currency creation.

If every U.S. citizen could create dollars, we would indeed have hyperinflation.

Re: It all began with a strange email

#30

Post by DanielBMarkham »

unimpressive wrote: post #28
DanielBMarkham wrote: post #21

Four years ago one of my first startup ideas I pursued was setting up an arbitrage between virtual economies. I believed then (and still believe) that it is a huge chunk of the future. Everything that is tangible now will become software and intangible in the future. That means the virtual economy is set to eclipse the current one. I spoke with some somewhat famous startup-type people; several I met on HN. None of th…

Interesting. I have some questions. (If you don't mind answering.) > Everything that is tangible now will become software and intangible in the future. When you say this what exactly do you have in mind? Virtual reality? Living substances made through bio-hacking? > or it there's always some level of abstraction that's remains out of reach. What sort of abstraction do you feel would be prohibitive in this environment…

Manufacturing of tangible goods will become a commodity as 3-D printing becomes mainstream. In addition, many services that were verbally or physically contracted will be handled completely in virtual reality. Think home robots cutting hair, or auto-drive cars.

And as you point out, that's not even touching bio-hacking, which is also converging to digital/created lifeforms.

Call me cynical, but this article struck me as nerd candy. It's a totally-awesome idea: we finally get to really measure and experiment with economies! But in my research several years ago I was already uncovering hundreds of millions of dollars in a virtual goods black-market. People will take a character of yours and spend all of their time leveling him up and getting lots of goodies. Then you log in and take over. You pay them through some back channel. Or you leave an item where somebody else can pick it up, etc. No matter how you design a virtual world, there are plenty of ways to make economic transactions outside the walls. The illusion that you somehow have a god-like view and can see and observe everything of important is just that, an illusion. But I'm willing to wait a few decades for the economists to figure that one out :)

The virtual economy will merge along multiple different lines. I don't think there's any one answer here. There's no reason your WoW character can't be traded for BitCoin and used as a downpayment on a VR piece of real-estate that you then later sell at a profit for options on a futures market in some rare item coming out in a game next year. Thinking in a linear fashion can really handicap the possible solution sets out there.

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