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I'm Drew Breunig and I obsess about technology, media, language, and culture. I live in New York, studied anthropology, and lead strategy at PlaceIQ.

These are reactions to things I feel are important.

Posts tagged economics

Exploiting Virtual Gaming Economies 

During beta testing for Star Wars Galaxies, one player discovered developers had no plans to regulate the in-game economy. Immediately, he stopped obsessing over making the game great for fans and started building a business plan.

It worked:

I was now making real-world money for making virtual money by making real money. It was amazing, and it worked perfectly. I would transfer 10 mil credits to Tan; he would pay me via bank transfer. He would then sell the fake money for real money at around a 100% mark-up. The player would get his 500k or million, and turn around and buy my merchandise for 1.5mil. This happened across the board, at all levels.

I remember with crystal clarity when I realized I was making more money from this enterprise than I was at my full-time job. I quickly decided to expand and hired four guys in Singapore to play 24/7.

Soon the money was stacking fast and I needed to expand again, and again. At the peak, I employed 12 men and women. I controlled, for the most part, the economy on four servers, and I was bringing in almost a six-figure salary.

The whole piece is worth a read just for the character study.

The author starts out contributing, “I made copious suggestions, everything from combat to social aspects. I complained for a week about how the zabrak horns should look.” Once he discovers the economic loophole, he becomes absorbed in gaming it. From a nest of computers, soda, and snacks he takes over virtual star systems, space ports, cranks up prices, and expands.

Finally he becomes frustrated as developers compensate for a tight economy by increasing the abilities and assets with which a player starts. Fascinatingly, his frustration comes more from the dilution of the game itself, rather than the hit to his finances.

More on the Shutting of a Virtual Currency

I asked Nick Kam (who unlike myself actually understands law) to take a quick look at the virtual currency class-action lawsuit filed against Google. Here’s his take (emphasis mine):

Upon a cursory review of Google’s Notice of Removal to Federal Court which contains a summary of the Complaint filed in Santa Clara Superior Court, it seems the Plaintiffs’ central claim is one of unjust enrichment. They didn’t get the benefit of the bargain with Google through their purchase of gold from the in-game store or from the secondary market, which they claim Google and Slide, Inc. promoted or at least encouraged. Said another way: Google got something for nothing and the Plaintiffs want their money back.

But there’s more. If you look at item three in paragraph five, the Plaintiffs want the game to stay online: they seek “an injunction barring Defendants ‘from terminating the SPP gaming application as announced in September, 2011.” Not only do Plaintiffs want their money back, they also want to keep playing SuperPoke! Pets. Presumably they’ll turn around and buy more gold once the game’s back online.

It’s important to note that Plaintiffs’ first claim of relief sought is preventing Google from enforcing the Terms of Use of SPP. I’d be willing to wager there’s something in there that says: “This gold has no real world value and we can shut the game off whenever we want.”

You’d have to review the Complaint to see all of their causes of action to try and recoup their virtual-bucks for a better idea of how this is going to shake out.

What Happens when a Virtual Currency Disappears?

In 2011 Google acquired social games maker Slide for approximately $200 million. Only a few months later, as part of their 2011 spring cleaning, Google decided to shut down all but one of Slide’s existing games including SuperPoke! Pets. Player outrage was impressive following Google’s announcement, and today we learn that it was not empty: a class action lawsuit against Google has been filed.

The suit focuses on the matter of virtual currency which was purchased with the expectation that it’s value would hold. I Programmer quickly sums up the complaint:

Although the lead plaintiff,Christalee Abreu, says she spent more than a thousand dollars on virtual gold, the class action represents thousands of people across the who purchased gold and/or subscribed to a $4.95/month VIP subscription with the total “amount in controversy” exceeding $5,000,000 - a sum that is credible given that there were at least 7,000,000 users of the SPP site just before Slide sold out to Google.

Not versed in law, I cannot evaluate the claims Abreu makes but it is interesting to consider the long-term contracts that virtual currency might imply. When an app or service goes under is their an obligation to refund the currency? Should virtual currency be treated as bonds or debt? I imagine these products receive similar treatment to gift cards, but what happens if a Facebook currency catches on as a standard? At what point does the currency graduate from gift card to currency?

How to Control Every Gang in Southern California with only 150-300 People 

Make sure everyone in your gang is behind bars.

Alex Tabarrok explains:

The Mexican Mafia is a fairly small prison gang (perhaps 150-300 made members) and it has significant operational control only within prisons in Southern California yet the Mexican Mafia is extremely powerful. In fact, the MM taxes hundreds of often larger Southern California street gangs at rates of 10-30% of revenues. How can a prison gang tax tax street gangs? …

The key to the MM’s power is that most drug dealers will sooner or later, usually sooner, end up in prison. Thus, the MM can credibly threaten drug dealers outside of prison with punishment once they are inside prison. Moreover, prison is the only place where members of many different gangs congregate. Thus, by maintaining control of the prison bottleneck, the MM can tax hundreds of gangs.

They even use their clout to regulate drive-by-shootings. This is all detailed in a new paper by David Skarbek, “Governance and Prison Gangs.” (Via Marginal Revolution)

Last Tuesday, the NY Times published an article on the increasing use of Food Stamps. The pundits weighed in about the cost and acceptance: the mainstreaming of poverty.

Over here in tech-land, I found myself talking about virtual goods, the success of games like Farmville, and companies like Zynga. How ironic, I thought, that people spend hours tending to virtual farms while we spend billions helping feed the hungry.

This morning I gathered some data and crunched the numbers. I’m assuming that the daily users of Zynga games play 30 minutes a day for this thought experiment. My previous experience with online gaming suggests this is a very conservative assumption.

Simply put, if we could turn those small bits of the day (but on a stupid large scale) into minimum wage worth tasks, we could pay for the entire Food Stamp program and then some. (And this is just Zynga. I haven’t even factored in Yahoo, Playfish, SGN, … )

While I’m sure my numbers err in some way, this thought experiment confirms a thought for me: the greatest challenge of our time, and what could pull us out of this economic muck, is the sustainably* monetization of down, boring hours, and the reluctant leisure time of the under-employed. Crack this nut and you’ll make untold fortunes and save the economy…

* I say “sustainably” because the answer lies beyond virtual goods and Netflix subscription trial offers.