Warren Buffett on Taxes

Today Warren Buffett published an article on taxes.

He starts with his own example:

Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.

He continues by refusing the notion that higher taxes make people invest less or even differently:

Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.
I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain.

He closes by telling his reader that the super-rich are mostly quite willing to pay higher taxes:

I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.

If that were an MMORPG, people would comment that nobody keeps him from giving money to the government if he wants to. Just like nobody keeps you from walking instead of teleporting, from looking for a group instead of using LFD or from refusing epics if you want them to be rare to you. Luckily real life is still a bit more serious than MMORPGs (not much).

On taxing capital gains: many people argue that capital gains should not be taxed or that it's good that they are taxed at 15% in the US, because the money has already been taxed before. Mr. Buffett disagrees, and so do I. While the money one invests has already been taxed, the capital gains, the interest or dividend one gains, has not been taxed. And it should be taxed like any other income, because that's exactly what it is.
Investors work hard to find out where to invest the money. In return they earn capital gains. Other people work hard to repair bridges. In return they earn income. There are differences, but none that justify a different tax rate.

On taxes and jobs: an investor is constantly on the lookout for good opportunities. He invests in the best opportunities he can find. If all these opportunities look X% less profitable, this doesn't change his behavior. Keep X reasonable, please. Of course 100% or 99% might change his behavior, but if X = 0%, 15% or X = 50% this really doesn't change his behavior.
And this is true for almost all income taxes. Only very few people would work less if you tax them more. In fact, some people would work more, because they had to, to keep their standard of living. Most taxpayers, especially wealthy people, don't work for money in the first place. They work for prestige and to prevent boredom. They use the money they earn to compare themselves to others, just like everybody else. If everybody pays the same tax rate, the results of this comparison remain unchanged.

The Future of the European Union

I've made similar posts before and I am glad to say that I have not been wrong so far *grin*. However, I haven't been as precise as I will be in this post, I think.

Right now I am quite confident that I can predict three precise scenarios of the future of the European Union, more specifically of the European Monetary Union, the Euro.

(1)
This is the least likely scenario. The large Mediterranean countries, Italy, Spain and France, consolidate their finances. A low, but stable economic growth sets in. China continues to grow fast for at least the next 10 years (unlikely). With support of all institutions, including the ECB, speculators are less and less able to create panic. Eventually the crisis will be over and Europe will mostly look like it looked five years ago.

(2)
This is the second likely scenario. The crisis hits us hard within the next 18 months. Germany has to choose between chaos and Eurobonds. In this scenario our current government, supported by most of the opposition, will draw all jokers and push through Eurobonds, no matter what the population thinks about it. This may be political suicide for the currently governing (conservative) parties, but it will instantly solve the current crisis.
If badly done it will also create a lot of moral hazard that will come back a decade later and kick our asses. Anyway, the current crisis is solved by Eurobonds. In fact, Europeans will find out that the interest rates for the Eurobonds will be as low as the one for U.S. bonds, because it just doesn't make sense to speculate against the Titanic while you are on it. U.S. bonds' interest rates would, however, raise slightly, because there's suddenly an alternative. In my opinion, this is the best scenario. Most people would agree with me a few years later.

(3)
This is the most likely scenario, unfortunately. Somehow the crisis is held at bay with the help of the ECB and inflation. However, it lingers in the background for years to come. Eventually it will turn out that one of the large Mediterranean countries is insolvent. However, the long time that has passed, has allowed many Euro-sceptic parties to take seat in the national parliaments. They will not introduce Eurobonds, because that's the prime reason they have been elected by an ignorant population. The monetary union will dissolve and economic consequences around the world will be drastic. Germany's GDP temporarily drops by 20-30%. Political consequences are unpredictable. A third European/world war, however, is impossible due to globalized trade.
We return to the patchwork landscape Europe is famous for. Two decades later most European countries have a nice standard of living, maybe even higher than under scenario (2). European influence on global politics, however, shrinks to an all-time low and remains there for the rest of the century.


One word about a potential forth scenario that includes the creation of a northern European monetary union or the forceful exclusion of Greece. This scenario would cause great harm to all Mediterranean countries and serious harm to the rest of the world; it would transform Greece into a third world country.
Most Germans think that Greece only has to blame itself. That may be so. However, after starting two world/European wars, Germany would never want to have this on its conscience. Historians would rightfully note that Germany blew up the European project. It's morally unacceptable - unthinkable.
A northern European monetary union might be created in the aftermath of scenario (3). But that's pure speculation.

Scenario (2) is the current direction of German media. Even traditionally euro-sceptic newspapers are reassessing the potential of Eurobonds. It is also for reasons of pride that I favour it.

No matter what happens, this is the world's history in the making!


---
* Note: A "Eurobond" within the context of this crisis is a bond that is issued and guaranteed by all countries inside the Eurozone. That is how the newspapers use the term. Wikipedia defines the term differently.

Insuring your Neighbor's House

(1)
Imagine you want to insure yourself against your house burning to the ground. How do you do that? Well, in a free market you buy a contract from a financial institution.

The contract says:
"Institution X pays the owner of this contract 100.000 Euros should house Y burn down."

This is great for both of you! Institution X probably can take the risk that your house Y might in fact burn down. And you couldn't bear that risk. That's why you just payed money to get that contract. Instead of having a 99% chance of not going bankrupt and a 1% chance of going bankrupt, you pay a small fee so that you can never go bankrupt.

Wonderful free markets at work!
Actually you might also want to buy that contract for your neighbor's house. Why? Well, perhaps because you are pretty sure that his house is going to burn down soon ...

And we see: Insurance is great, as long as you own what you insure ..

(2)
Imagine you have a lot of money. And you want more money. Now, you could insure yourself against French bonds becoming worthless (France going bankrupt). Luckily somebody has created a contract:

The contract says:
"Institution X pays the owner of this contract 1 Mio Dollars should French bonds become worthless."

Let's assume you buy lots and lots of these contracts. Now, you already bought French bonds over a long time. But you're not stupid. Of course you don't want to own French bonds, anymore. In fact, you sell all of them; at the same time!
French bonds drop by 5% due to this. A lot of people see that and, since they are nervous for other reasons, they sell, too.

Due to that drop a lot more people want to insure themselves against the bonds becoming worthless. And they are willing to pay more money to buy the contracts.

Now, you lost a limited amount of money by first buying the French bonds over a long time and then selling them all at once at up to 5% less. But you also gain a lot of money from selling the insurance contracts. And this money is without limit. You could have bought as many of these contracts as you desired!

And that's why insurance papers, like Credit Default Swaps (CDS), are great as long as the owner owns what he insures, but terrible, if he does not. I'm not the first guy to find out. Warren Buffet called CDS "financial weapons of mass destruction". .. in 2003!

(3)
Why am I unable to buy insurance contracts for my neighbor's house? Because no sane institution would sell me papers that insured my neighbor's house. Just like no institution offers insurance against divorce. And that's the difference between these two markets.

The institutions that create bond-insuring contracts are actually performing terribly (banks, for example). But the people in charge do great. They make great money from selling the contracts and should the insured event occur, the government saves their employer with tax-dollars.
Hell - and even if not! They just got their bonus for selling a million contracts. Moral hazard at work.

The Mana Mechanic

In the far past magic was considered to be more powerful than non-magic. Unfortunately this lead to too many players wanting to play magic users. Thus, if a fantasy story was to be transfered into a game setting, and if the game designer wanted to allow everybody to potentially play a magic user, he had to balance magic.

Mana is the traditional choice. The magic user can be more powerful than non-magic users, but he exhausts very fast. This was a simple mechanic with a reasonable simulation aspect that introduced interesting decisions in table-top RPGs. Great.

Unfortunately it doesn't really work with modern MMORPGs. The problem is mostly with PvP. (But while raiding the mechanic is problematic, as well). The fact that dying in most PvP mini-games (like battlegrounds) is mostly meaningless, makes the mana mechanic useless.
If the magic user were overpowered while he has mana and underpowered while he has no mana, the result would be a very boring battleground: The magic user would defeat non-magic users until he is out-of-mana, at which point he is defeated by somebody else. Revive. Repeat. Very boring.

Because game designers nowadays cannot (are not allowed to) think out-of-the-box, they didn't replace the mechanic, but iterated it over the last decade. This lead to magic users that have almost infinite amounts of mana and are actually balanced while they have mana. Should they run out-of-mana, they are extremely underpowered, but since this almost never happens, it's not a problem.

This is an unnecessarily complicated mechanic that doesn't introduce interesting decisions and doesn't even balance powerful magic. If you could play a PvP-specced mage in a WoW battleground who had endless amounts of mana, you wouldn't feel a difference, really.
Ok, you could try to arcane-blast everything to death. But actually .. isn't that what's happening and forcing Blizzard to re-balance arcane blast all the time? If a mage were balanced while fighting in a mana-saving way, he were overpowered, because he could just as well fight in a non-mana-saving way. And, of course, most mages would do just that. Which would cause lots and lots of complaining about OP mages in the forums. And this wouldn't even be unreasonable.

The mana mechanic doesn't work in a PvP game that has 30s respawns. It requires harsh death penalties (remember tabletops!) to work. Thus, we could either introduce harsher death penalties, or we could use a different magic system.

The Crisis of Credit

This video is two years old and nowadays we have different problems. But it is a masterpiece at explaining the most important reason for the 2008/2009 crisis.

Do you know similar videos for the current crises?

Funny, ...

... if it weren't your money ...

http://aktien-boersen.blogspot.com/2010/05/crash-emotionen-live-mitschnitt-vom.html

I was remembered of this.

When Compromise Fails

We're in trouble. I'm saying this for quite some time now. Certainly I feel like being in trouble after watching part of my money melt at 0.3% the hour today. Was a hell of a lot of fun !

.. Europeans are great at compromise. We can get 17 parties at a table with 17 different opinions and walk out pretending that the found solution, while not the best, is good enough. According to U.S. media we live in paradise.

And in many respects we are. But sometimes every now and then there's a problem that cannot be solved with compromise.
.. The U.S. debt crisis is not such a problem. All parties agree that debt has to be reduced and the question is just what has to be cut and what (whether, lol) taxes have to be raised. You can find any compromise here and it's (comparatively) ok. Sure, if you don't do anything you obliterate yourself, but anything else is (kind of) a solution.

The European debt crisis is different. There are two opposed positions and a third way that is the 'compromise'. Unfortunately, that third way is by far the worst. Not just for Europe, but every single human on this planet.

Solution #1 is to create a European Super-state; most powerful economic zone on Earth. Sounds great - but not everybody likes that. It means that Germans have to pay for Greek debt. And there are a lot of institutional problems to be solved. We need some kind of constitution, right? Future moral hazard has to be prevented. We would need to have elections.
Getting something like this right is not easy and it does take a lot of time, even if all parties agreed. Of course, they don't. And we don't have time.

Solution #2 is to split the Euro Zone up again. This is a bit easier to do from an institutional point of view. Unfortunately, it also means that a lot of banks go bankrupt and this would probably lead to a world-wide second great depression. But at least this process could be organized.

And then there's the compromise: We chain ourselves together and at the same time split up ... yeah, right.
Now, this is just as bad as doing nothing! The parliaments of countries like Germany, Netherlands, Austria or Finland might soon not allow their governments to spend the peoples' money at the necessary rate to save Greece, Portugal, Ireland, Spain or Italy. And if that happens we have numerous unorganized bankruptcies. This will also lead to a second great depression. Just that we would probably have to invent a new name for this kind of crisis.

Right now, we are going straight for the third way; the holy compromise. But not all problems can be solved by compromise .. We need a tea party: a party that somehow manages to push the own agenda through - any agenda - in a totally undemocratic way.

Diablo 3 RMT, again

I am running out of titles. The more I think about Blizzard's 'new' RMT solution, the more fascinated I am.

Just a few moments ago I found myself thinking:
"Imagine you find this Pet-Of-Überness while you play hardcore mode. Wouldn't it suck to not be able to sell it?"

Remember, I usually hate RMT in games. And still, the idea that you can actually make money by skillful and serious playing is fascinating me. Even though I hate myself for it.
We all consider ourselves skillful and serious players - otherwise we wouldn't read/write MMO blogs. Actually, most of us probably are skilled, because to become skilled in games you mostly need to be motivated and invest a lot of time. And that's what those who read/write gaming blogs do.

But my point is: if even I think along these lines, imagine the average guy ..

I have a feeling (fear) that Diablo 3 is going to be the next business-defining game made by Blizzard. Respect.

Forget the old microtransactions. The new system is light-years better for making money. In the past, many players had problems justifying the time they spent in games. Especially if they were married. But now, suddenly, they can make a bit of money while playing, while the single upper-middleclass guy can finally spend all that money that he can't get rid of during his 50-hours work-week.

Didn't it suck in the past that you earned so much money working your day job and couldn't benefit from it in your daily hobby? If Diablo 3 is a Blizzard quality game with this kind of RMT, it will hit like a bomb, I think.

The traditional microtransactions felt too much like an outside intrusion. The money-making scam that selling virtual items is, left too much of a bad taste in most peoples' mouth. Buying virtual items felt wasteful and was only going to make the company rich although creating the virtual item doesn't cost anything.
But the D3 RMT feels not so much like a scam. The $-AH just redistributes the items that have been found in the game. And that small fee Blizzard wants feels totally ok.

And items are never overpriced - by definition. You are just stupid if you let other players fool you. No way to blame Blizzard.

And it's more than just a game. If you never buy anything, you will be able to earn a bit of money. And rather consistently! That's more than just a game. It is some hobby that can make you money (even if you end up paying more than you earn - the feeling matters).

In the past we were addicted to advancing our characters - finding that one über-cool item. In the future we will be addicted to advancing our finances. This is the oldest business in the world. And it works so damn well that it is heavily regulated nowadays - even in unlikely places like the U.S. !

The possibility to earn money (even if it's just a theoretical possibility) is a game changer, literally!

Unfortunately, Blizzard shares are listed in dollars. What do I want with dollars ?

Diablo 3 RMT Prices

What will Diablo 3 RMT prices be?

Well, most players, even if they put most of what they find into the $-AH, will make almost no money. If any at all. Some hardcore players will make a few dollars. Some really hardcore players will make a few hundred dollars.
But only some lucky players will make a thousand and more. You will not be one of them.

At all time there will be many items on the $-AH that go for $20-$80. If not, all market research of microtransaction companies has been wrong. It will be interesting to find out whether they were right. I think they could ask more than just $80 for a monocle.

Now, if Blizzard is serious about the amount of revenue they make with fees, they will do everything they can to prevent those 5% of the players, who are willing to pay money, from running out of reasons to do so.

There are two ways to accomplish this: Either some items are incredibly rare, or we get WoW-like tiers of items.

"Incredibly rare" items means so rare, that your chance to find one is so small that it is safe to assume that you will never find one, no matter how much you play. Therefore, the only players to ever own one are the ones who really spend massive amounts of money on the game. And after they did this, they stop spending money.

Now, Blizzard will argue that it is not fair that the best items go only to the richest player. What they really think, of course, is that they don't want the richest players to only ever buy an item once. And so we will get a tiered system like WoW.

With a tiered system the richest players will be encouraged to buy the best items again and again every few months! And it's even more fair, is it not? See how RMT is not just a business model, but changes the game ?


---
About immersion and stuff. I really don't find this kind of $-AH as bad as normal microtransactions. To know that every item has a history inside the game is just great. Sure, it's much worse than a game in which characters got what they have due to in-game actions. But if you really desperately want RMT, do it this way.


---
What I don't really understand is how Blizzard expects to get through with this legally. Fact of the matter is that playing Diablo 3 will be as difficult as using a slot machine. And if you're lucky you can get a lot of money that less lucky players put into the machine. .. That's gambling ..

Eve Online Lessons Learned

CCP has published a nice dev blog.
Among other things there are Lessons Learnt. Most of these apply to any game.

Having to do something tedious every day before you can actually play the game is not cool.

As a dev, doing something just "because it would be cool/neat/awesome" is always a bad idea and will come back to bite you later.

Cost is a useful variable to tune but an unwise thing to rely on to enforce scarcity or balance - players will always be richer than you think.

Making something tedious will not stop players doing it if it's very clearly the best option. They'll do it, and they'll hate it.

People like to do one-stop shopping, and will "go to Jita" for everything unless doing so is comparatively very inconvenient.

Diablo 3 RMT Details

If I no longer need an item I bought in the auction house, can I relist it in the auction house?

Yes. Once you've purchased an item you can do anything with it that you could if you had acquired it through your own adventures, whether that be using it yourself, or, after a cool-down period, trading it to another character or relisting it on either the gold-based or currency-based auction house. In fact, you can generally do any combination of these things -- for example, you can purchase an item in the auction house, use it for a while, and then relist it or trade it to another character. Aside from certain quest items, there will be very few (if any) items that will be “soulbound” to your character and therefore untradable. Please note that the duration of the cool-down period mentioned above will be discussed at a later date.

(link)

Now, that is interesting! It seems this push for "more flexible business models" does finally bring along the elimination of this unimmersive 'soulbound' mechanic.

Blizzard is obviously interested in maximizing the amount of items traded and less concerned about players outfitting their characters too fast. Expect some really, really rare items ...

Ironically, these are things I have always asked for.
Seems a Devil was required to get rid of the Beelzebub :)

---

What is "smart searching"?
When players launch the auction house interface, they’ll be able to select any Diablo III character associated with their Battle.net account. The "smart search" feature will assess which item slots have available upgrades and will sort items available in the auction house based on which upgrades would be most beneficial to the character. You can also search for specific stats to match the requirements of a particular character build.

Will buying or selling items in the auction house reveal my identity?
No. All player transactions in the gold-based and currency-based auction houses will be anonymous, and neither your real name nor your character name will be revealed to other players.

Honi soit qui mal y pense.

---

If my character dies in Hardcore mode, will I lose the items that I purchased in the "Hardcore-only" gold-based auction house for that character?
Yes. Again, Hardcore-mode characters will only have access to a "Hardcore-only" gold-based auction house, not the currency-based auction house, and will not be able to trade with non-Hardcore characters. Hardcore is an optional mode designed for players who enjoy playing with the risk of permanently losing their character if the character dies, and that includes the items they acquired with that character.

Thanks for the added incentive to play hardcore mode. :)

Real Life Gold

The ECB will eventually have to inflate the Euro. Just like the FED is already inflating the Dollar. Of this I am (almost) certain. Therefore, I should put my money somewhere else. But where?

Gold is ridiculous right now. I mean, I sure wished I had decided to buy it a year ago. But gold is useless. It's the biggest bubble in human history. The only reason gold is valuable is because people think that it is valuable. On the other hand, in the end, that is true for almost anything.

Alternatively I could buy some Switzerland bonds. Their central bank (SNB) has just decided that a 70% overpriced currency (compared to PPP) is too much. I would agree. The Swiss are currently buying German cars and laughing at the silly amount of CHF we want in exchange. That's not funny anymore. Of course, the Switzerland export industry is laughing as well - in disbelieve. They can't believe what is happening. Nobody here can afford to buy goods from Switzerland anymore.

The SNB is really between a rock and a hard place right now. Not intervening, however, might crush their industry. So .. I can't imagine the CHF to rise even more. Not a good investment, unless you're really desperate and fear some hyperinflation.

The other strong Euro economies, like Norway or Denmark are mostly about oil. And oil prices will decline in the coming crisis - at least in the timeframe that I am talking about.

This leaves me with exotic investments like Swedish bonds of which there aren't that many or some Asian bonds of which I don't know much.

These are the times, I'd really like to save and reload. Or at least be able to make a new char ;)

Leveling Game vs. Engame

This is the third post in response to the comments posted here.

Helistar encouraged me to blog on this:

Several MMOs have been criticized because they turn into "two games packaged at one", i.e. the leveling game (quest-based, mostly solo) and the endgame activities (raiding/pvp), which don't share much in common.

Helistar wrote more than that. If you're interested, go check out his comment. On the above quote: I agree that this has happened and I agree that it is not optimal.


(1)
Let's first try to understand how it happened. MMORPGs were typically about the 'leveling game'. The designers didn't think about the endgame all that much. They didn't have much hope to keep people in the game after completing the leveling game.

However, it turned out that just attaching some PvP/PvE minigames (endgame) made players play the MMORPG for years! Woah! Nobody expected that. With WoW Blizzard focused more and more on that endgame, because it was so extraordinarily cheap to produce and kept millions of players p(l)aying.

Now, this is a working model. That's why a lot of companies clone it. The leveling game lures players into the game and the endgame keeps them paying for a game they might never have bought, if there hadn't been a leveling game.

The reason there are no pure raiding games is that raiding isn't all that interesting, really. Neither are most endgame activities. These activities are interesting mostly, because they feed on the meaning induced by the leveling game, the community and the simulation (illusion, really) of a world outside the instance.


(2)
Now, after some decade of playing these games, many gamers are bored of it. What can be done about it?

Well, if the single goal of a game is ever increasing character power, not much can be done about it. You can try to find some way to get infinite content. Like Psychochild's storybricks. But if the only goal is to increase character power, all games become boring eventually. And this does not only apply to the specific game, but all games that have character power as goal! Once you played one of them, you played them all.
Humans may be a bit stupid, but they aren't complete morons. We understand quite well that something is wrong when we hit level 77; and it doesn't feel as fun as level 5. This is especially true if all our opponents level with us.

My favorite way to solve the problem is to shift the goal of the game from character power progression (CPP), to other things. For example to defending against an ever-ongoing (and seriously dangerous) enemy undead invasion in a PvE sandbox. You can still keep a weak CPP, but you don't run out of content, if the content is created by the interaction of the players instead of an external designer.

Moreover, the goal of the game is now sustainable indefinitely. There is endless content, because it is created by the inter-player and inter-player-group relations. And we know from the real world that this is interesting for .. forever.

Diablo 3 RMT

After reading a few blogs on the announced D3 RMT I feel .. empty.

You might think that I hate it, but actually, no. Diablo 3 is not a virtual world. It is just a game. And apparently I can play solo and I can ignore the RMT. So .. I don't really care. Perhaps I can make a bit of money by selling stuff - probably I won't play D3 long enough for that to happen.

What's bad about this is the influence it does have on virtual worlds. But I can't imagine at that point that Titan is supposed to be a virtual world, anyway. It, too, will be just a game.

I could care less about the requirement to always be online. For me that is a holy war some people fight there. I am always online anyway. And I don't usually play games when I travel or have no access to internet.

I generally am skeptical of player-made mods. A few Elder Scrolls mods were good, but mostly I don't get much fun out of these things. To be able to change the rules of a game by downloading a mod feels wrong and arbitrary.

One last thing about the RMT AH: One big problem game companies are faced with when it comes to MT is how much each thing should cost. By having a player-run market pin-point optimal prices, they not only get the revenue-maximizing price, but also save the work to determine a good price themselves. Taking some percentage off that market-price feels better, too. And it doesn't disrupt the in-game economy.

Of course, I won't play together with anonymous players in D3, as I couldn't respect their equipment or avatar. But I never planned to play D3 multiplayer, anyway. It is just a game.

Trade, once again

This is the second post in response to the comments posted here.

Dàchéng encouraged me to blog on this:

I'd like to see more development of your very interesting ideas on hauling goods over trade routes. You touched on it when discussing travel here, and developed your ideas here, where I pointed out that the actual hauliers would get ganked by bandits, or bored by repetition, or both. You followed up on that here, pointing out that the repetitive nature of travelling trade-routes could be soothing rather than boring.

All the same, I think there's some fun missing, from the haulier's point of view. I understand that you may not want "action", but some other enjoyable or interesting activity has to take its place (I like your idea that just building tension can keep hauliers interested).

(1)
The point about trade is that it is more than just the process of trading. I wrote before, in one of the posts you linked, that it is impossible to make hauling goods short-term fun for most players. Hauling goods can be safe / dangerous and short-range / long-range. That's it.

There are a few interesting decisions involved, but the real reason I want trade is not because trading is so much fun. Let's face it: For most people trading isn't as much fun as fighting anything.
I already argued that it's not a good idea to make trading any more action-oriented. My point is that trading is fun for a few people and, optimally, safe short-range trade can be relaxing for some players, just like a daily quest. Not really exciting.

The real reason I want trade is because it is fun for all non-traders. They are the majority.

(2)
Imagine a huge fantasy world. One were geography matters. No teleports, two-digit amount of hours required to go from one end to the other. Gameplay-wise each big city and its environment acts like a traditional server. But you can leave this 'server' and can go to another city. (Clarification: It's a completely open world. But most of the environment is empty of players).

The short-range trade is mostly safe, but long-range trade is dangerous for PvE and PvP reasons. Now, imagine we put some magic-deflecting material into the game. It can be mined in just one mine. What happens is this: near the mine this material is rather common and rather cheap. But in lands far away it is very expensive.

Why is this good? Because it offers diversity! The magic-deflecting material changes the balance of the entire game. Warfare between player factions is completely different near that mine than far away from it. Now imagine lots of other items that are area-specific, like that ore from the mine.

The world becomes alive! You can explore the different areas as a player and learn about them. Sure, you can also learn about them on the internet, but to experience them you need to visit these areas. Just like in any good fantasy world, materials from far away are expensive and in combination with other materials from other far places powerful.

The world becomes an interesting place. You can learn about this place. There's even different balance depending on where you are in the world! We replace some finely-tuned gameplay fun (WoW) with an interesting place to explore and interesting interactions between players in an often un-fair, unbalanced world.

(3)
This design contradicts todays industry-standard of finely-tuned gameplay loops: the idea that you first make the first 10 seconds fun, then the next 5 minutes, etc. Instead, it enthralls the players with the promise of adventure and exploration that drives them forward!

If you ask me that is what has driven players forward ever since the first leveling game. That finely-tuned gameplay isn't unimportant, either. But we all know how boring finely-tuned daily quests are!

Abstractly speaking, we don't introduce one finely-tuned pattern into the world that players can explore, but many patterns that interact and thus create new patterns. This interaction of patterns happens via the players. Thus we trade one finely-tuned pattern for many, much more interesting, patterns. This is (passively) player-generated content.

A player-run economy with trade is invaluable for this game. Not because being a trader is so much fun, but because adventuring in a world with trade and traders is so much fun.

The Lesser Evil

Seems I have been wrong with my last post.

This 'compromise' is bad on almost all levels for the President. It's bad from an economic point of view and bad from a political point of view. The only thing Obama can still hope is that he's the lesser evil in the next elections. He probably is.

But that's not an achievement. You could pick any of 50% of US citizens as candidate for Presidency and he'd / she'd be the lesser evil compared to those republican candidates.

On War

I'm going to work through your comments eventually. Right now, however, I'd like to write a bit about war. More specifically, about the political war in the US.

Irrespective of your actual opinion about the debt ceiling discussion, you have to admit that the president is behaving very strangely.

1) He seems willing to make extraordinary concessions to the Tea Party that would most probably cost him the re-election.
2) He constantly talks to the public about it and gives poisoned praise to Mr. Boehner.
3) There are reasons to believe he sabotages any agreement. For example his sudden demand for $400 Billion more revenue just before they had an agreement.
4) His latest speech was highly harmful considering the actual negotiations. And it wasn't anything else!
5) "Don't call my bluff, Eric" - really ???

What the hell is going on here? Well, here's my personal opinion:
The president expertly and painfully anatomizes the Tea Party. And there's nothing they can do. Most probably they don't even see it coming.

Now, perhaps you think I have gone crazy, but look at what is actually happening! It is impossible to blame the president for not compromising enough. He successfully implemented the narrative that he would be willing to sacrifice all his party stands for to reach a deal!
And yet he does everything to sabotage a compromise. The speech this Monday .. what else did it do than sabotage? I mean, I agree with everything the president said, but the political effect of this is sabotage. And the president is not a newbie.

This is the guy who came out of nowhere and beat Hillary Clinton. He then was elected President in a landslide victory. He pushed a health care reform through and a financial reform. That is more than most presidents before him achieved - and he did it in the worst political climate .. ever?
He ordered the execution of Somali pirates in cold blood and succeeded. He ordered the expansion of one of the most powerful death-from-above programs in history in the AfPak border reagion. He ordered an attack on Libya completely circumventing Congress! Most prominently, he was shaking hands and smiling for months while preparing the execution of Osama Bin Laden at night. And he succeeded.

Some supporters think he should lead more. But that he did in the first two years (health care reform, financial reform and countless other reforms). What he does right now is using the momentum of his opponents to throw them flying through the air and on their backs. In fact, he is firing up their momentum. And, yes, this strike is going to be lethal.
Once he is re-elected, he will quietly complete his reforms (Congress blocked major parts of them).

Is he going to be successful this time? Well, I think his plan is working beyond his wildest dreams right now! And even though I mostly agree with the President's goals, I feel a shiver running over my back when I consider how effectively he eliminates his opposition.

On the debt ceiling: He will be the great Saviour when he finally cites the 14th amendment. But he will wait cold-blooded as ever for the perfect moment to do this.

Player Impact on Game Design

This is the first post in response to the comments posted here.

Syl encouraged me to blog on this:

- player power vs. dev power. how big should each be, what's the correct balance, when are they too high? Or: when is player impact still positive, when does it become negative / where should devs keep the ultimate say.

In my opinion player power, when it comes to the design process, is detrimental to the quality of the game. Optimally a MMORPG is designed by one or two masterminds. Two only if they can argue without offending each other - ever. No three-man constellation is ever stable and more masterminds mean too many bad compromises.

The masterminds need to have the entire game design (the big! picture) in their head at all times. They need to share a vision for the game that extends beyond "getting rich". They should be supported by a diverse council of at least five professionals who care enough to argue with them without having any authority / responsibility. The coucil should meet regularily and the masterminds should be required to defend their design decisions in front of the council.

The only way players should influence the game on a game design level is via professional community managers, whose job is to report the status of the community to the masterminds/council. When it comes to forums, I absolutely agree with Elder Game.

The feedback part of the community managers' task is twofold:
1) Gather the few brilliant posts on the forum, anonymize them, and pass them on. Passed on posts should be marked to incentivise thoughtful and concise posts.
2) Help with interpreting statistics.

Optimally, the players consider the developers to be 100% non-responding to player demands. Once players feel they can have an impact, they start to play the developers instead of playing the game. This is harmful for the game and - more importantly - it diminishes the players' fun.

Player impact should always be indirect; via the community managers or via statistics. It is very important that the masterminds know how to interpret statistics. If necessary they should be supported by a professional statistician.

Statistics should be used to refine and realize the original vision, not to increase the cash flow. The reason is that refining and realizing the original vision is the best approach to making lots of money. Whereas making lots of money as a goal, turns out to be bad at making lots of money. Obliquity.

I am not a supporter of Eve's CSM. It is a poor man's community management.

Ask me

Some readers sent me emails and a few others commented on the last post that they would love me to write a bit more about MMO design again. Well, so would I. The problem is that I have only very abstract things to blog about. I don't play any MMORPG seriously for half a year now.

So, I decided to give you the chance to suggest topics. In the comments of this post you can leave questions and topic suggestions. Anything you want me to write about. There's no guarantee, obviously, but I'll try to write a post on what you suggest.

Make sure that you make the topic/question look interesting, please. Also, I have no desire to repeat some of the too frequent topics of the MMORPG blogosphere.

This makes sense to me

This makes sense to me; mostly. I don't buy the "we should spend more to reduce the deficit"-notion and I think the interviewers are too opinonated. But what is said by Mr. Stiglitz sounds mostly plausible to me.

But I'm sure there are some nobel prize winning economists, who say the opposite. If somebody got a link, I'd love to watch/read.

Interview starts at 13:00
The article in question.