Welcome to Jester's Trek.
I'm your host, Jester. I've been an EVE Online player for about six years. One of my four mains is Ripard Teg, pictured at left. Sadly, I've succumbed to "bittervet" disease, but I'm wandering the New Eden landscape (and from time to time, the MMO landscape) in search of a cure.
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Thursday, October 25, 2012

Faustian bargain

Sometimes you make a deal with the devil for a short term gain in exchange for your eternal soul, hoping to outwit him later on a technical point before you have to pay up.

On this blog, I first pointed at the button-orbiting FW alt issue four months ago in late June.  I personally expected it to be an extremely short-term issue with a quick fix.  That is why I indicated it was an "enormous bone-headed decision" but then stupidly commented in early July that those taking advantage of it "should make hay while the sun shines."  I let things sit that way for about six weeks, when in utter disgust I finally indicated in late August that those not taking advantage of this enormous wealth fountain were failing a basic EVE Online IQ test.

CCP, meanwhile, made it clear enough that they were aware of the problem, but it wouldn't be fixed until December 4 before deciding to surprise-implement the fix this week.

But that was two months after my "IQ test" post and four months after I first mentioned it on this blog.  As I said earlier this week, the damage has been done.  We're almost certainly never going to know how much hard ISK has been exchanged for implants, data cores, and Navy Cap Boosters, but you can rest assured that the number is in the tens of trillions of ISK, if not more.

Why did CCP let this blatant, obvious wealth fountain persist for so long?  I have a few theories, each slightly more cynical than the last.  First off though, I reject the notion that CCP was unaware of the problem.  People were being very public about cash-outs, methods, and tier 5 spikes as early as mid-July, more than three months before CCP got around to fixing the problem.  The word "push" had firmly entered the EVE lexicon by August.  Hans Jagerblitzen on the CSM was writing about it all through late July and into August.  He seemed to lean less toward destroying it and more toward simply making it much, much more risky (and therefore presumably spreading the benefit to more players).  So I find it impossible to believe that CCP wasn't aware of this issue.  Strike that theory.

I also reject the notion that CCP was aware of the problem but unable to fix it.  The net fix we're left with is pretty typical CCP heavy-handedness.  But there were a dozen simpler ways they could have addressed this issue temporarily, the simplest being to reduce the pay-outs per site by a factor of ten while they decided on a permanent solution.  Doing so would have made running these sites worth 30 to 50 million ISK/hour, still high but not outrageously so.  People would have continued doing it in the interim but wouldn't have been left with the hundreds of billions ISK in assets they have today, merely tens of billions.

No, the simplest -- though cynical -- explanation for CCP taking four months to fix this issue is that while they may not have wanted people taking advantage of the fountain, they were willing to accept that it was happening.  Remember the old CCP axiom that "players are always richer than you think"?  I describe FW alt button-orbiting as a wealth fountain and not an ISK faucet, because it wasn't an ISK faucet.  It was an ISK sink of the highest order: tens of trillions of ISK have been drained from the EVE Online economy.  Every implant purchased during a tier 5 spike had to be purchased with ISK, and a lot of it.

It's well within reason to think this was the goal of the exercise.

I believe that CCP was willing to take a short-term hit to the implant and data core markets to facilitate that.  After all, implants and data cores are pretty small beer in terms of the larger EVE economy, implants in particular.  If the short-term hit of implants being unreasonably cheap for a year or so is the price that CCP has to pay to drain tens of trillions of ISK from the EVE economy, I could see them seeing that as a very small price to pay indeed.

But it's a Faustian bargain, for a couple of reasons.

First, a good portion of this wealth in assets went to generally newer players.  Older players probably weren't as quick to jump on this opportunity, seeing it as short-term and having well-established income methods already in place.  The overall number of players taking advantage of the wealth fountain was also relatively limited to a low four-digit number.  One player within my own alliance has been playing EVE for less than a year and took advantage of this big-time.  He hasn't publicly revealed exactly how much ISK in assets he's sitting on.  But it's easily the equivalent of him holding on to a personal tech moon for every hour of every day he's been playing EVE so far.

Needless to say, he's a little bit ragey about losing his wealth fountain two months earlier than he expected.  Other short-term players made it public that they'd bought high-end industrial characters, high-end PvP characters, and very expensive ships with their new gains.  These players are publicly ragey.

This is a problem because EVE is a long-term game.  If you are piloting a Nyx after less than a year playing EVE... where exactly do you go from there in year two?  What can possibly hope to match that?  That's Faustian bargain number one: CCP might have made themselves an entire generation of players who feel entitled to wealth fountains on this scale.

The second Faustian bargain they've made concerns their richest players.  A lot of these players were already extraordinarily rich, and the players that took advantage of the wealth fountain generally weren't among them.  Problem is, these item-rich players are now ISK-poor: the tens of trillions of ISK that were pulled out of the EVE economy came out of the wallets of these early- and mid-level players, not the richest ones.  Whether by loans from richer players or by rapidly converting a percentage of their initial stocks of implants into ISK at very low values, the players that took advantage of the wealth fountain are now generally sitting on livable amounts of ISK... and large piles of assets that -- on paper! -- are worth enormous amounts of ISK.

CCP even made it easy to salivate over their piles of leprechaun gold by putting a wealth estimator right on the unified inventory... where they can see it every day.

Only these players don't want to sell those assets until their value increases dramatically over current levels.  Today, you can buy a full set of +5 implants for about 400 million ISK, not much more than their ISK cost of 325 million (plus LP, of course).  A full set of +4s can be had for 75 million, or only 30 million if you limit yourself to +4s for just the skills being currently trained.  A very large net positive of this is skill training speed will be up for quite a while all across New Eden.  In the aggregate, this benefits newer players more than older richer players due to the law of diminishing returns for EVE skill points.

But the negative is that there are going to be hundreds of players out there playing chicken with those implant values, all struggling mightily to turn their paper wealth into real wealth.  Only all of them will also be struggling mightily to be the last to sell.  The first people that sell their stocks, after all, will probably end up selling them to very rich EVE players who are willing to hoard those implants for a year or two if need be to get a good return on their investment.  Already, I'm seeing offers out there to buy large stacks of implants and data cores for just over their current market values.  The potential buyers are obviously willing to play a long game.

The newer players won't have this kind of patience.

As a result, in the long term, the second Faustian bargain that's going to result here is that very old, rich EVE players will be able to convert their liquid ISK almost en masse into a pile of liquid ISK of double the (already enormous) size through the exercise of just a little bit of patience.  They just have to wait for implant and data core prices to normalize... however long that takes.  If CCP thinks some players are too rich now... just wait!

The good news here is that both of these problems have been firmly exported into the future, which is why this bargain is Faustian.  For now, those that took advantage of the wealth fountain might be grumbling, but they can't be too unhappy sitting on piles of implants that they believe will eventually make them barons of EVE.  The even richer players won't be able to cash in on investments made now for a year or more.  So these are future problems, not current ones.

Which brings me back to my initial conclusion: by doing this, I believe CCP was solving a short-term problem hoping to avoid the long-term problem later on.  We'll see how successful they are.

36 comments:

  1. If only the dev that used to tweet statistics was still around. I'd be very interested in how much isk was actually drained from the game.

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    1. A replacement for CCP Diagorasis desperately needed.
      Then again fuck it I'll just startpublishing esstamates as fact & ruin the economy faster then CCP thinks its helping the economy by silencing economic DEV blogs.
      The last economy DEV blog was when Jester?

      -Anyone wanna bet Incursion payouts are now less then 1.5 trillion & bounties are pushing 40 trillion a month now?
      -I bet the drone alloys are now finally depleted expect the 'mineral imbalance' between HI & NULL sec to widen
      -Over the past 5 months enough attribute implants were sold to FW farmers than the last 3.5 years combined at three quarters the ISK sink
      anyone else want to add some Diagoras-esque stats?

      Delete
  2. Except T5 reduced the isk requirements also. It sunk a bunch of isk in the short term by moving future sink events forward, but I don't think consumption will go up 4x to compensate. That means in the long run less isk is sunk.

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    1. I would love to see what Dr E says about that next fanfest if he dares! The LP store ISK sink will surely be further dwindling .

      The BullShit about the ratio of LP & ISK reduction that some spouted in the forums just goes to show the general public's ignorance about economics
      ~DarthNefarius

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    2. Based on the numbers I've heard about I'd say that more that 4x the normal amount of stuff has easily been bought from the FW store - so yes it's almost certainly sunk more ISK from the economy than would've been if the system had never changed.

      Whether or not those items have actually been used or not doesn't really matter - the ISK is sunk already.

      Delete
    3. If $X the amount of stuff was bought at three quarters the price the amount sunk is normal then... simple math

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    4. Yes, it does matter. Until those stockpiles are depleted fewer new isk sink events will occur. They borrowed future demand, but only got a 1/4 of the sink amount on that activity.

      Delete
  3. Have you got the stats on the number of characters in FW after the initial changes?

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  4. They nerf incursions, then implement an ISK sink. Smart perhaps. Suppose we are back to a older lvl of EVE game maybe then.

    I also think it took CCP so long to fix the FW LP is becuase CCP enjoyed it in a way. In a F&I thread one of the rebalancing devs (not fonzie) said they watched players spend hours cashing out LP items after tier 5 was reached. He was also saying they want to make it easier, so players don't have to spend so much time cashing out after making tier 5.

    Also EVE is about scamming and getting those ridiculous kill reports. In a way I bet watching this happen was funny for CCP like watching crazy kill reports come in or those funny market scams anyone is able to do legally.

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  5. Also wanted to add that CCP only nerfed FW two months early is that they were messing with PLEX prices and that messed up too many players EVE time and experience.

    If the FW people were smart and didn't mess up PLEX they probably would still be making tons of LP right now. Perhaps that also shows CCP enjoyed a little bit of mad LP farming.

    So lesson learned, is next time an exploit comes, don't mess with PLEX, unless you are done making the ISK or whatever they come up with next. Or if you are trying to get the problem fixed early, use it on PLEX and ruin prices.

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    1. PLEX prices skyrocketing were ruining their precious New Eden Open tourney. This is why they rushed the changes.

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  6. A player in my alliance has been playing for about two years. He's never participated in a capital op, not even as subcap support.

    He used about a third of the proceeds from his FW spree to buy a Hel, and a pilot to fly it. He excitedly remarked about adding Cyno 1 to the training plan for his main toon. You could hear one of our directors on Mumble literally head-desking.

    I am looking forward to seeing the lossmail on our killboard.

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    1. So is everyone else.

      Or, you know, someone with a brain and skill could pull his happy ass aside and teach him how to use that bad boy and he could become a valued asset in the alliance.

      What am I thinking, this is Eve, you should get him to insure it and scam him into a hot drop trap to get onto his kill mail yourself.

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  7. Jester I personally believe that you are under estimating the time it'll take for the implant market ( especially attribute implants ) to recover. One year will stretch out to 3-4 years of low costs due to the 3/4 cut in ISK reductions IMHO.
    I suspect too that over the long term (3-4 years again ) the LP store ISK sink function will drop from ~6 trillion last February to ~3 trillion per month over at least the next 5 years unless new faction items are introduced.
    ~Darth Nefarius

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  8. You cannot be too cynical about the sad state of affairs when it comes to Eve's economy. They don't care. Certainly not enough to interrupt their summer holidays! No other explanation makes sense. Occam's Razor and all that.

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  9. You seem to be arguing that CCP "let it run" to sink isk out of the economy. You may even be arguing that they planned it this way from the start.

    To the first argument, I say, "possible", but the second one is flat bullshit. Two points, in reverse order.

    First, they cracked down rather hard on myself & my cohorts in the Faction Warfare Forex scheme. What we did was a perfectly legitimate use of game mechanics up until CCP ruled it otherwise. Had they planned this from the start, they'd have been THRILLED - we sank a few hundred billion isk (at least!) out of the economy just in the process of the scheme, and were sitting on LP that would have sunk something well north of another two trillion isk. So I conclude that CCP didn't plan it this way from the start.

    Second, the surprise patch. It feels very knee-jerky. My theory (which I've had for awhile) is basically that CCP may well have decided to let things play out after that first cashout came, but that they didn't really keep their economist in the loop. Only when he went "WHAT ARE YOU IDIOTS DOING" did they realize that maybe it was a bad idea. The fact that the devblog on it calls out plex prices specifically supports this, for what it's worth.

    A note to the anonymous poster two posts up: FW players did nothing to actively mess with plex, it was just an overall effect of having a widely available and enormous wealth fountain in the game.

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  10. I have to agree with your thinking here Jester and think you hit the nail on the head. I think CCP LET it go for so long because they saw the amount of isk being pulled out of the system each T5 push and deliberately decided to wait until they had hard numbers showing negative impacts in other economic sectors.

    Some quick and sloppy calculations. For me, average high sec mission gave about 7k lp, LP/hr was about 40k. FW mission average LP was about 30k, LP/hr was about 120k. So that's about 4x the LP generated right there. When T5 hit, I'd cash in all of that LP.

    So, since the ratio of isk sunk/LP was a constant 1000 isk/LP for most items. I sunk about 4x the amount of isk that I normally would have had I been running missions in high-sec, because I was making 4x the LP. Judging from that, I'd say the isk sunk into the FW LP store was at least double if not three times that of an NPC mission corp with similar numbers of mission runners. (Some items that were popular had lower iskSunk/LP ratios, not all people cashed out before the fix hit, etc.)

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    1. The arguement "So, since the ratio of isk sunk/LP was a constant 1000 isk/LP for most items." used to justify the wealth faucet is a big stinking pile of bullshit when you realize that per item 1/4 the ISK was sunk on items (implants mostly ) then in ANY other LP store plus these items have VERY inelastic demand!
      The LP store ISK sink has suffered an 2-3 year blow

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  11. Eve's is an artificial economy. If CCP's "economy guy" says that 10 trillion ISK needs to be drained from the economy to keep it going for another 1-3 years, CCP can (and will) drain it. The relative redistribution of the remainder is less of an issue, so long as opportunities remain for newer players to earn. This is as opposed to the real world where the drain must necessarily lead somewhere.

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    1. If you re-listened to Dr E's fanfest presentation you'll hear him say that Eve needs more ISK sinks but due to the expansions comming out until Dust the lack of sinks situation will continue. I think DrE did tell the DEVs what wouldhappen & he was over ruled anyways.
      ~DarthNefarius

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    2. IMHO, this anon is mostly right.

      Didn't they acknowledge FW as a large contributor to the rise in PLEX prices? If so, it is obvious that CCP started seeing FW as a problem when the PLEX bubble made people close accounts. It was nauseating for me to listen to so many people closing accounts because of PLEX prices. This was timed for December in such a chill way, that something really blunt must've struck Iceland to change the course of their ship so fast. Or we were played from the beginning, which although smart, doesn't fare well with the trust your customers have put on you, because it houses the posibility of a kickback.

      To whoever said something about asking these questions to the lead economist next fanfest, i suspect there will be no such presentation, and if there is, expect lies or smoking pots all over the place or such an economic mayhem next expansion that this whole deal will pale in comparison.

      I'll be watching, with unsubbed accounts or not, who knows...

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    3. I am just one of many players I know who have either hibernated characters or consolidated trained characters onto one account in the last 6 months.

      I went from 4 to 1 account now that plex is nearly double what it was pre-incursion and FW buff

      Delete
  12. Another possibility is that CCP thought that the EVE economy is actually better than it is. It can be very quick at adjusting to changes in the game.

    In this case, perhaps they anticipated that the price of implants would drop to its new equilibrium (where running FW plexes) paid out roughly the same ISK/hr as anything else (missioning/mining/incursions/whatever), and there is no more wealth generating machine, and the net result is that implants and datacores are cheaper which could be seen as a good thing for new players and the game as a whole (cheap implants benefits new players more than old, and reducing the barriers to T2 industry could be seen as a positive thing also).

    However, for whatever reason, the market didn't adjust, and the wealth being generated seemed increasingly unfair. The fact that it seemed to be affecting PLEX prices seems to have been the final straw (CCP also seem to have realised that this scheme would nerf missioners income, not sure whether that was intentional or not).

    I don't know whether this is actually the case, but I can see Dr E predicting a much faster rate of adjustment than actually happened (it's what I expected to happen), so it might be an alternative explanation.

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  13. I hear the newest FW fotm is have alts in stabbed up frigates sit in complexes in your home systems. Then if you hear the locking noise, just warp off. 30mil/hr was the number I heard.

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  14. I'm sorry, but the math is completely wrong. FW button orbiting was an ISK FAUCET, not sink. It's not trivial to understand, so let me give an example.

    Before FW a +5 learning implant cost 65M ISK and 65K LP. Every time someone bought one in an LP store, 65M ISK was removed from the economy.

    In FW T5 a +5 learning implant cost 16.25M ISK and 16.25K LP. Every time someone bought one in the FW LP store, only 16.25M ISK was removed. 48.75M less than before.

    It is true that as the ISK:LP ratio was 1000:1 the FW guy could buy 4 implants for the same LP, removing the same ISK. However if you check Jita, the +5 implant trading value did not jump up 4x, just about +20%. Why? Because as the price tanked, the highsec missioners stopped buying them in their LP stores. They either moved to ships where they had comparative advantage (you still had to provide a full ship in T5, not 1/4) or abandoned missioning fully and went to miner (or FW orbiter).

    However the idea of Faustian Bargain is right and insightful. I think I know why they did it. It is much more cynical than you think (I post about it Monday).

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    1. Less of a sink does not a faucet make.

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  15. The biggest mistake CCP made was announcing the proposed changes.

    There were market traders making ISK from the swings around the T5 push, but the long term outlook for the market was that FW-store items would just drop in price (due to an excess of supply, and no increased demand.) As you can't short the market, long-term investment in FW-store items was a bad idea, so the profits were in day-trading.

    Unfortunately as soon as CCP announced a reversion to the old pricing system, it became obvious that prices would _eventually_ rise again to previous levels. Suddenly they become a long-term investment opportunity. At this point anybody with large amounts of ISK doing nothing started buying-up FW-store items.

    So announcing the changes has effectively released a whole load of, effectively dormant, ISK back into the market - whilst technically not an ISK faucet, it's had similar effects on the market. Prices for FW-store items stopped falling in price - which left farming as hugely profitable.

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  16. those huge piles of implants are not very liquid. if CCP did plan it from the start perhaps they are smart enough to now slash the value of the current implant stock piles.

    either by introducing new implants or a new cheap source of the current implants. if they are particularly evil linking the new implant source to DUST would be poetic.

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  17. The faucet/sink model of cash is so laughably flawed that it makes me lol every time I see someone accept it as if it were a fundamental law of nature.

    Despite ample RL evidence that the model does not actually work in practice, economists and governments still hold on to it tightly, as if it were a life preserver, futilely attempting to modify computer models to make RL facts fit the fiction.

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  18. I don't see how this makes any difference. L4 mission running still prints endless ISK....

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  19. CCP/Iceland summer holiday. Nuff said, nothing will ever get done during summer. Tanking a bit of sun >> internet spaceships.

    Conspiracy nuts, move along.

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  20. If u want numbers here are mine as an example. I started to orbit buttons in late august and have since then participated in exactly 5 cashouts. I orbitted buttons at a rate of 70k lp / hour for the frst two, for the others i ran missions at a rate of 120k lp/hiur. Im not a greedy person so in those 5 T5's i cashed about 7 million lp. That was me getting about 1.3 m lp every 2 weeks, lots of people did that DAILY. Im not too dumb, but i did start with a capital of only 100m isk. So i had to sell my frist batch of implants at the station i got them at for prices like 4-5 m/ +3 implant. Guess who put thos orders there?
    Overall now im sitting on 42bill if i sell right now, at a rate of roughly 6000 isk/lp, if i wait a few months i can get a return on my datacores to be as high as 9000 isk/ lp i think. So in a uear this pile is worth about 63 bill.

    Now im a 2 year wh pilot and i love killig shit and im not stupid enough to buy me a cap pilot having never even sat i one before or fought alongside with one more than 2-3 times. But this is the side of a lazy guys who only wants to buy his main toon back. Can u imagine the isk made by people doig fw missions every day? Or who continue to flip items on markrt throughout the year to more than double their returns on that whole deal? Its crazy!

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  21. Looks like the guy in your alliance quickly went back to incursions... I doubt he'll get the just under 40 billion ISK which the CCP price esitmator says he could get for all those implants unless ho holds onto them for a longtime but he appears to like the game enough before hand he probably will stay long enough to sell all of them... Which brings me to a thought which CCP may have used to justify this bonanza: maybe they were under the impression that these FW farmers where taking mega ISK out of the game even with the 3/4 ISK reduction but these newer pilots would notbe in the game thatlong anyways and quit with all these items still in thier hangars thus not hurting the market that bad.
    ~DarthNefarius

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  22. I'm a newer player and I've made around 6bil on the FW payouts. When I heard about the upcoming changes I took everything off the market and I'm sitting with about 12bil worth of goods ready to sell when prices come back up. Lots of people blew the cash they made quickly, but a lot of us saw that it wouldn't continue forever and stock piled goods for resale later. Though I am really a piker compared to what others made in my corp. I spent a total of 3 weeks farming and only 4 hours a night during those weeks. Others farmed 16 hours a day.

    It was a nice way to get started without having to spend a lot of money on plexes which is probably the reason CCP shut it down. New players sell plexes and instead new players where buying plexes.

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  23. If you're flying a Nyx in the first year, where do you go in year two? You either find a band of people you connect with socially and stick with the game or you have your fill of fun and have your bittervet retirement party early. If you're going to burn out on the game you'd do it sooner or later anyway. Doing it sooner just lets you move on and enjoy something else rather than continually torment yourself for some future payoff that probably isn't even that satisfying.

    As for players hoarders playing chicken with their stockpiles, new and old players will fill the same temptation to cash out early. Older players have better foundations but newer players have less obligations and costs. Unless they're an idiot or have uncontrollable greed they'd cash out just enough to live comfortably and play the long game in exactly the same way as the vets.

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