More on virtual world economics

March 21st, 2008 5:30am

I recently wrote about migration to virtual worlds. Now the BBC interviews an economist whose job is to analyse the economy of Eve Online:

Dr Eyjo Gudmundsson is the lead economist, a virtual Alan Greenspan, who works to make sense of all the data.
He said: “Within the game I supply players with economic information so they can make decisions about their own production, what they are going to produce and how they are going to produce it.
“It’s basically the same economic questions as in real life. It’s about strategy and an important part about strategic decisions is logistics and having access to the resources you need to win your war.
“It’s like a real war in the sense you have to plan ahead. It’s about long-term planning and long-term strategy.”
Every quarter Dr Gudmundsson and his team produce an economic newsletter analysing trends inside the game.
“We are looking at markets, at production and long-term trends that show the movements of the players.”

Short-termism in (readers of) online news

February 11th, 2008 7:04am

Seamus McCauley has an interesting thought, inspired by, um, me. In The Logic of Life, I write:

"the experimenters offered the subjects a snack: fruit or chocolate. Seven out of ten subjects asked for chocolate. But when the experimenters offered other subjects a different choice, the answer was different too: ‘I’ll bring you a snack next week. What would you like then, fruit or chocolate?’ Three-quarters of subjects chose fruit."

This is just one of many examples when our short-term, dopamine-fired preferences conflict with what we might choose given an opportunity to reflect in tranquility. Seamus then asks what that story implies for online news:

Apply for a moment this understanding of decision-making to newspapers and we arrive at a not-very-comforting conclusion. A newspaper is a package of information, the celebrity gossip and TV listings bundled in with the op-ed and the current affairs. Choose the bundle of news in a newspaper and you satisfy both parts of your decision-making brain. The dopamine system gets the immediate gratification of reading about the fabricated erotic misadventures of some soap actress or the Spurs result; the cognitive system gets the glow of knowing there’s real, hard, investigative news in there somewhere too (don’t worry, you don’t ever have to actually read it to get the effect).
Online, the news package is unbundled (we already know this) and hard news outside the bundle is hard to monetise (we already know this too). But the effect on reading habits of unbundling hard news from the newspaper package seems likely, from this understanding of how decisions are made, to have a disastrous impact on the propensity to read that news (this might be new). Online, news consumption is all about immediate gratification: you choose the story you want to read now every single time.

I think Seamus is saying that you shouldn’t be getting cheap thrills from this blog but should read something worthier instead… His whole post, with lots of tempting short-termist links, is well worth a read.

Microsoft can inflict Vista on us, because we expect it to

January 2nd, 2008 7:23am

Berkeley Electronic Press is a wonderful institution and was ahead of its time when established in 1999, but BEPress editor Aaron Edlin doesn’t want to be ahead of his time any more. He wants Windows XP:

We now buy Dells with the old operating system (though we have heard that won’t last forever) and scrounge around for “new” versions of the old MS Office 2003 elsewhere, which we install ourselves. The added time and expense is worth it…

Now people complaining about Vista is nothing new, but Edlin has a good layman’s expectation of why Vista can catch on even though I’ve never met a person who likes it:

Microsoft controls many things. Obviously, it owns its old software and can decide at what price to sell it and whether to sell it at all. And Microsoft owns its new software. More subtly, Microsoft can control expectations. And expectations turn out to be everything when network economies are substantial, as they are in software markets.
If everyone tomorrow woke up expecting that the world would shift to Apple within six months or a year, then sales of Windows would plummet. Why buy a Windows machine when all your colleagues will own Macintoshes and can help you on them, but not on Windows? Why buy a Windows machine when all the independent software developers will program for the Mac’s new Leopard system, and not Windows? The expectations are self-fulfilling.

Edlin’s proposal?

I hope the antitrust authorities give serious consideration to a remedy that Ian Ayres, Hal Varian, and I have developed. Suppose Microsoft had to allow licensing of old versions of Microsoft software at a reasonable price (perhaps the price of the new version) whenever Microsoft brings out new versions. This would give Microsoft an incentive to make sure that new versions were compatible and significantly better than old versions—otherwise, the new versions wouldn’t sell, or at least wouldn’t sell easily. Wouldn’t it be great if Microsoft’s new software had to compete successfully at least against its old software? Then we would know the world was improving.

In the meantime, he’s trying to change our expectations by urging everyone to stick with XP…

Super scam me

December 18th, 2007 7:02am

Who could resist reading on when an article starts like this?

Would you like your penis enlarged? It is a question I get asked a lot.

Really?

Not by women, thankfully, but in the e-mails I receive every morning. For just $70, I could open up "new exciting horizons of sensual pleasure" and put an end to "being shy of [my] manhood in the showers".

It’s a great piece about a BBC investigation into spam. The eventual conclusion should be obvious but sadly isn’t widely-known enough: that when you click on a spam email you are not only opening yourself up to being scammed, but you’re also encouraging more spam to be inflicted on the rest of us. Don’t do it, bozo. (A sad case of a negative externality.)
Relatedly, Steven Landsburg calls for those who create computer viruses to be executed.

Chris Anderson’s iPhone runs up $2000 bill without him touching it

December 14th, 2007 9:14am

He reports:

I’ve just got back from ten days abroad (from Amsterdam to Israel to several cities in China) and while I was in China AT&T cut off my phone service. Why? Because I’d apparently run up a $2,100 bill.
And how did that happen, when I hardly used the phone at all? Because the iPhone’s email app keeps automatically fetching email every ten minutes even when it’s roaming abroad. I know I am the last person on the planet to discover this…

I doubt it, Chris: you’re the editor-in-chief of Wired, for crying out loud! Read the whole story here.

Is Facebook doomed?

November 30th, 2007 7:10am

Cory Doctorow thinks so, in a piece subtly titled "How Your Creepy Ex-Co-Workers Will Kill Facebook":

Sure, networks generally follow Metcalfe’s Law: "the value of a telecommunications network is proportional to the square of the number of users of the system." This law is best understood through the analogy of the fax machine: a world with one fax machine has no use for faxes, but every time you add a fax, you square the number of possible send/receive combinations (Alice can fax Bob or Carol or Don; Bob can fax Alice, Carol and Don; Carol can fax Alice, Bob and Don, etc).
But Metcalfe’s law presumes that creating more communications pathways increases the value of the system, and that’s not always true (see Brook’s Law: "Adding manpower to a late software project makes it later").
Having watched the rise and fall of SixDegrees, Friendster, and the many other proto-hominids that make up the evolutionary chain leading to Facebook, MySpace, et al, I’m inclined to think that these systems are subject to a Brook’s-law parallel: "Adding more users to a social network increases the probability that it will put you in an awkward social circumstance." Perhaps we can call this "boyd’s Law" for danah boyd, the social scientist who has studied many of these networks from the inside as a keen-eyed net-anthropologist and who has described the many ways in which social software does violence to sociability in a series of sharp papers.

Cory has many more complaints  - and a separate one about privacy here.
Meanwhile Seamus McCauley thinks Facebook advertising is dead on arrival because people will get plug-ins to block Facebook ads the same way we all use Firefox to block the advertising on the rest of the web.

At the heart of Cory’s complaint is the idea that Facebook tries to trap us into eyeballing the site by, for example, sending highly uninformative messages - "Bob has send you a message on Facebook, click here to read it". He believes that we’ll all give up soon enough because it’s all too annoying.
I tend to agree. My research on rational addiction suggests that even heroin addicts will quit if the circumstances that led them into the habit change. If they can kick an unwelcome habit, so can Facebook users.

Virtual migration

November 27th, 2007 3:30pm

Ted Castronova’s new book, Exodus to the Virtual World is out. People are migrating to synthetic worlds - not literally, of course, but they spend a lot of time, money and attention there. I suspect that in Castronova’s capable hands the analogy will be pushed near to breaking point but not beyond it, and I’m looking forward to reading the book.
In a review of his earlier book, Synthetic Worlds, I wrote:

Many observers believe that online games are like real economies. In Synthetic Worlds, Castronova demonstrates that he knows better: online games are real economies. People devote time and skill to producing things that other people value, such as Jedi Knights. That’s supply and demand: an economy. The aliens and the light sabres aren’t real, but the human effort and the human desires are. It becomes easier to realise this when the synthetic economies spill out into the corporeal one - when grand wizards are bought and sold on eBay or Romanian entrepreneurs supervise workshops of virtual gold-miners.
One synthetic world, Second Life, offers no game-play as such but sells virtual real-estate that users can build almost anything on. One real-estate maven, “Anshe Chung”, a Chinese teacher based in Germany, is reported to make $150,000 a year buying, improving and reselling virtual homes in Second Life. Others have businesses designing virtual clothes or selling virtual advertising. “Tringo”, a game-within-a-game that was created and made popular within Second Life, was bought from its creators by Nintendo and released for the GameBoy console. (Tringo’s programmers, not the Second Life hosts, owned the intellectual property.)
At this point it is possible to take the discussion in almost any direction, and Castronova tries many. He has an eclectic approach to research - some amateur sociology, a spot of anthropology, some national income accounting with liberal use of the back of the envelope. The research occasionally seems a little flaky, but it’s well ahead of the gushings of consultants and media pundits. Meanwhile, Castronova’s grab-bag of methodologies works fine for exploring unmapped territory.

Castronova writes about the new book:

I try to project the medium-term impact of virtual worlds on daily life in the real world, especially in regards to politics and policy. To make projections, I rely on the history of human migration: knowing in general what happens when people migrate, we can forecast what’s going to happen as people migrate to virtual worlds. To explain why many will migrate, I propose a psycho-physiological theory of fun. Then I argue that the people who design virtual worlds are actually doing public policy. As such, their innovations will bleed over into real-world policy-making. You get some odd outcomes when you suggest that real world governments will try to please citizens raised in virtual world policy environments: things like zero economic growth, huge estate taxes, and full-employment economies, all at once. Bottom line: big political change is coming.

Be afraid

October 26th, 2007 10:43am

Via Dave Ewalt at Forbes, Bruce Schneier writes about the future of computer viruses.

Symptoms don’t appear immediately, and an infected computer can sit dormant for a long time. If it were a disease, it would be more like syphilis, whose symptoms may be mild or disappear altogether, but which will eventually come back years later and eat your brain.

Read the whole thing - fascinating and slightly unnerving, even for a rugged undercover guy like me.

Incentive-compatible email

October 23rd, 2007 7:08am

How much attention should you pay to those emails marked "high priority"? Not much: it’s all cheap talk. But why not make the signal more credible by adding:

a virtual currency element to e-mail in a bid to help people cope with information overload. Anyone sending a message adds some of their limited supply of virtual coins, called Serios, to show how important they consider that e-mail to be.

My question: how should your supply of Serios vary with your position in the company hierarchy? Should the boss get more, because her messages are more important? Or fewer, because she needs fewer?
Here is the company behind the idea, the man behind the company, and the BBC source.
Here is Marshall Van Alstyne’s proposal to make people pay if recipients judge the message to be spam.

Give Ted Castronova a million dollars

October 18th, 2007 4:19am

I’ve reviewed Ted Castronova’s book and I’m a big fan of his work:

A small group of researchers now believes that a new experimental tool is at hand. One of them, the economist Edward Castronova, calls it “a social-science supercollider”. He is talking about the new breed of online computer games, in which players log into a fantasy universe and control characters who trade, argue, fight or, depending on the world, have sex with each other.
That sounds a little crazy, but in many ways this is a more realistic setting than Vernon Smith’s lab. Players invest a lot of energy into getting what they want. Real people work hard to produce things that have real value to themselves or to others. Make no mistake, some games support real economies inside make-believe universes.
Experiments are easy because virtual worlds exist in parallel. For technological reasons, a popular game might run 10 or 20 subtly different versions on separate servers. The researcher can adjust the money supply or the system of property rights in some of the worlds and observe the differences.
Castronova has secured funding to construct a game world where he can put his ideas to the test.

Well, the funding has run out. Somebody write that man a cheque.