Game Economist Cast
What does the new wave of open economies mean for monetization? Will negative externalities overcome cosmetics economies in the long run? What exactly does a game economist do?
Game Economist Cast is a roundtable discussion of the latest developments in mobile, HD, and crypto games through a bunch of people figuring it out using the economic tool kit.
Game Economist Cast
E33: Halo's Economist & Player Price Experiment Complaints? (w/Dr.Jason Arentz)
Anti-cheat economics, web3 property rights, Deirdre McCloskey, institutional incentives, Halo UGC, and the if single player games have a natural advantage outside the West. Oh my.
Dr.Jason Arentz finally guest stars, and he's bringing the econ juice, finally striking a 50/50 web3 split on the case.
Zynga Car Price Experiment: https://www.gamesindustry.biz/zynga-apologizes-for-random-dlc-pricing-experiment
Eric my one request, though, is if you could get a white t-shirt so we could be Backstreet Boys for Halloween.
Speaker 3:Oh yeah, Let me grab one real quick.
Speaker 2:Do you have any like clear-rimmed glasses by any chance, eric? That would really help the look.
Speaker 1:He doesn't have his eyes anymore. He can't hear Fuck.
Speaker 4:Let's start with utility. I don't understand what it even means. Everybody has some kind of utils in their head that they're calibrated. There's hardly anything that hasn't been used for money.
Speaker 2:In fact, there may be a fundamental problem in modeling that we don't want to model Game Economist cast, episode 33. We're here, we're on schedule and we've got a plus one, the one we've been trying to get on the cast forever. He's foiled my requests up until now and he's finally here, jason Arnett, if I'm pronouncing it correctly.
Speaker 4:Arantz. Actually, I don't know. You guys who live in Scandinavia can maybe tell me We've had disagreements across my family for a generation now. Maybe it's Arantz, maybe it's Arantz. I'm not totally sure, I don't know. I think we have history in both Germany and Norway Sweden, so maybe y'all can do some research for me.
Speaker 3:You're American now. You're American now. It's pronounced however you want to pronounce it.
Speaker 2:Yeah, so, aaron's, it's been like. You think it's been like six years when I first found you Trying to collect the Avengers. I don't think it's been six years.
Speaker 4:It's been a few years, though You're right, it has been a while.
Speaker 2:Let's chalk this about layoffs is I suddenly have some time when I can talk. I love how we made like the opportunity cost docket, like where we are opportunity cost. Finally, we like moved up our ranked list. That's the thing about I don't know the games industry.
Speaker 4:I feel it's a lot of fun, I love being in it. It's just it's not permanent crunch time, it's just it's really hard to find space where you have also energy and attention to like really be able to do side things. So I just it's really hard to find space where you have also energy and attention to like really be able to do side things. So I just have had zero side hustles and also I've got a kid. So I think that if I didn't have like a daughter, that might also make a big difference.
Speaker 1:You used to be an academic, so it's probably like the opposite of academia, where, like in academia, you have these very strict semesters. When the semester is done, you finally have some time to do this stuff that you've been sitting on forever, not like that in the games industry.
Speaker 4:That is true. That is true, it is the opposite. I also find it more satisfying, though. I found academia to be pretty soul crushing. Personally, I think all the incentive structures were wrong and I respond to incentives too much, so I had to get out.
Speaker 3:Tell us about your background in academia and what's wrong with the incentive structures.
Speaker 4:My name is Jason Ahrens and I'm a phycothymist. It's great to meet you guys. I have a weird path into gaming industry. First of all, my undergraduate was actually in physics, so that's weirdly Maybe economics is like physics.
Speaker 2:You flatter us.
Speaker 4:Well, I find that physics is weirdly the unifying piece of my whole story, because when I was in high school, I knew I wanted to study physics because it's so silly. I specifically, you know, I wanted to know the language in which the poetry of the universe was written. It was very specific. That was the like highfalutin goal of it all. And then, after I got my undergrad in physics, I realized I love it as a consumer, but as a producer like I just balancing mirrors or like adjusting mirrors on, like slates that are floating on mercury and like a basement, like just not fun I actually love people a lot more than I loved electrons.
Speaker 4:I wanted to make my life's work about people somehow, so I started hunting around for what other things I should go study, or like other directions I should go in Played with a few things. Interestingly, though, the big moment for me to bring me into economics was there. We used to have this conference of world affairs thing at CU Boulder and Deirdre McCloskey came and gave a lecture and she was amazing. So, like Auntie Deirdre was like my introduction to economics, like directly. I talked to her afterwards. Do you remember what it was about?
Speaker 4:Yeah this was in her, I forget like which of the bourgeois virtue, bourgeois dignity, like stage that she was in. She was on the lecture circuit like in preparation for that magnum opus and it was so fascinating and she was really generous with her time. I talked to her after the lecture and I was like I'm a physics background but what you're doing is amazing. Where should I go? And it was actually by her recommendation. She said if you've got the math chops and you've got the scientific background, you might want to consider experimental economics at George Mason University. And I was like I will just take your advice, having no idea what you just said. And I went to George Mason and absolutely got into the experimental program with Vernon Smith there, met my wife there. It was like the single best sentence of advice that were taken and that's what brought me into economics was like the single best sentence of advice that were taken and that's what brought me into economics was like through that program did you?
Speaker 2:do you even know what you were signing up for with mason? No, and like what the masonry is like the history the pedigree no idea, no, it's not a bad thing. If you only knew that, though yeah oh shit, they have the nobel prize and basically the person who put this on the map was vernon smith your advisor or he just at the university?
Speaker 4:He wasn't my direct advisor, but he was very hands-on with everybody who was in the experimental program. So I took classes with him and we did grad school paper presentations to one another and he was in the room giving advice. He was super. That guy is amazing. I don't want that much energy when I'm 90.
Speaker 1:He was he started the experimental program at purdue.
Speaker 2:I'm sure you know this at this go to uva too, fuck. And then may have been there but he started.
Speaker 1:His first experiment was at purdue and then, I think probably in the 90s, left or something like that. So by the time I got there it was like his. He had been gone for many years, but that's incredible.
Speaker 1:That's so funny because deirdre mccloskey also had an impact on me pre-grad school and Vernon Smith was like a prominent figure at the grad school that I ended up going to. So I met McCloskey at a history of economics conference in Chicago and I was actually just I think I was checking people in I was just like a grad student who they were like we'll give you a hundred bucks in a room if you like, if you come do this conference. I was chatting with her and I just I just went up to her really awkward. I was like, hey, I'm a huge fan, I just wanted to let you know it's really cool to meet you. And she just had like such positive, encouraging things to say. She was like it was incredible. I was like, yeah, I'm going to Purdue.
Speaker 4:I was like I know it's not like I needed. While I was at George Mason, within the experimental lab, you had various grad student duties or whatever. One of the ones that nobody else wanted that I signed up for was managing the lecture series, and so when we had her come out to give some talk and there's also some overlap between the experimental group and, like the Mercatus Center, it's one of the advantages of Jordan Mace. It's just a huge program and, like people aren't precious about those kinds of resources.
Speaker 4:She actually came out a couple of times, but once, yeah, I got to meet her at the airport, like I was like, yeah, I'll be the taxi, absolutely.
Speaker 2:You trap her. She has to talk to you Exactly.
Speaker 4:I'm fantastic, right, who would miss out on that opportunity? Went out to dinner and stuff too, so it was fun to be in. I don't remember I think my third year or something like that and said, hey, I took your advice and thank you for that advice and now I can talk to you in a more serious way, having actually read your stuff and knowing what's going on in the world. Yeah, it was amazing. So where did it all go wrong?
Speaker 2:It nowhere went wrong. I'm very hold on. Can you tell us about your dissertation a little bit so experimental?
Speaker 4:econ, probably looking, probably popping around, then when his friend smith get his nobel prize. What was that? Somewhere in the 90s, before he got his nobel prize in 2001?
Speaker 2:oh it was much later than I thought. Actually. I know it's late 90s, okay, so stuff's really popping. Stuff's really five, six, yeah, it was popping I yeah, so my dissertation. Yeah, it was popping.
Speaker 4:I yeah. So my dissertation was in. It was experimental methodologies, but in political economy I had a chapter on case study comparison between Mao Zedong and Joseph Stalin. I did a laboratory on Bruce Berman theory, so I created a little laboratory environment where, like you, either needed a majority to maintain your dictatorship or you needed, like a smaller minority, to maintain your dictatorship oh.
Speaker 4:It's a selectorate like ratio to the overall population, where, like, the main choice that the dictator makes is how much to tax and then like how much to spend on public goods and how much to like, just take and hand off to your winning coalition. And it was fun, it was very interesting. It's very easy to turn undergraduates into dictators. It was fun, it was very interesting. It's very easy to turn undergraduates into dictators, it turns out. And it's also fascinating how quickly the winning coalition figures out the game too. I did have a couple instances where students tried to be benevolent dictators and I'm just gonna maximize the global they were immediately executed. Somebody was like I bet we could find somebody who's more corrupt, who would take care of us better. That's immediate. And one of my students came to me was like, wow, I guess I'd pick a good mafia boss.
Speaker 2:I'm like, maybe I'm not doing good things in the world. So how do you move the equilibrium I immediately think of? I think of like kind of the second world countries that have fallen into these, like communist dictator states. They like just hang around South America. Can you do anything with this?
Speaker 4:Does anything about like getting outside that equilibrium. I will Bruce the mosquitoes like perspective on that would be. It's largely an institutional story and you've got to build out of that institution, so that isn't a small group of people who have that control. When you look in the like actual populace, that small group of people is usually like the generals of the whatever corrupt military groups and whatnot. So how do you to not have that power anymore? I don't really know. It's a tough. It's a tough question.
Speaker 4:But yeah, he would say that this is the benefits of like more democratic institutions, but only if they're actually constitutionally constrained, because otherwise you end up in this terrible situation where you get like a hypothetically democratic scenario with a rigged system, so that everybody then has an incentive to pretend as if they support the existing dictator, which he would say is like a Putin kind of arrangement. So yeah, it's a tough. It's a tough problem. That was originally what I thought I might go do in. The, though, is like try to help on those problems and try that stuff out. Boy is it messy and boy is it like thankless work, and I didn't find a lot of like hope there, honestly, but I also saw a lot of people who had good intentions went to try stuff and then it made everything worse. So I was very nervous about that and I thought maybe I'll go get some real world wisdom before I start like really pushing specific policies.
Speaker 2:You ever read Easterlies? Easterlies Adventures and Misadventures in the Tropics.
Speaker 4:Yeah.
Speaker 2:Fascinating stuff right. That one had a big effect on me personally.
Speaker 4:Yeah, the whole Easterly versus Saxon, all of that stuff in contemporary Asimoglu and Johnson and power and so on. There's so many different perspectives in there. It's just a lot to really wrap your head around if you're going to go and try to do something practical in the world. I think if you're just like writing equations on whiteboards and like writing papers, it's not too bad. But I've always wanted to be a little bit more in the field than that. You know, the economists I've always admired the most were like Adam Smith in a pin factory and like Coase, like actually in there talking to actual firms and doing work in the space, and that's part of why I think I always was never really comfortable just in the academy.
Speaker 4:So you do take a professorship after Mason, yes, so like I said, my wife and I met in grad school. She graduated before me. She had already had her master's when she went into the program, so she had a bit of a head start. But she's also just smarter than I am, so she finishes a little bit ahead of me and she did originally want to take the academic track. And she did the whole classic job market story and went and got a position that had a good laboratory and good funding for her so she could continue doing experimental work. And then when I graduated, I at first just followed her because I was a little bit undecided about what I wanted to do. But my first move was to go into business intelligence analysis with a transportation company. The position she got was in Arkansas, which is a place I didn't expect that I would ever live, where I had more culture shock than I did when I lived in Taiwan, but was great in its own way. Northwest Arkansas, in particular Fayetteville, it's like proto Austin Texas. The music scene there is bumping, there's a great art museum. It's a proto Austin Texas Like the music scene there is bumping, there's a great art museum there's. It's a cool area actually. I do recommend it but anyway.
Speaker 4:So I followed her out there and went into the transportation industry and suddenly became, like aware of this thing called supply chain management, which is applied economics the same way that, like finance is applied economics and learned a lot about how products move and what damaging it is to be late and how hard it is to know whether or not somebody has been late, like, started learning about telemetry, started learning about how data is used and how it is often misused in contracts, negotiations and so on. It was just, it was a great crash course but the supply chain management department there I formed some friendships and relationships and I'm like we could really use a token economist in our department, particularly to talk about like policy related things. So I ended up being being like sucked back into the ivory tower for a little while I did on policy and supply chain management, which was super interesting, and that's where I was really leaning a lot on Milton Friedman. We watched a lot of his videos about like trucking industry and what unions did within trucking union within the trucking industry, what deregulation looked like in that space, and that was really fun. You pulled in some Ayn Rand as well, which was also interesting, as you can totally describe Atlas Shrugged as a supply chain management story, so much so that you can actually map it out as a like supply chain management analysis experience. So that was a time like I really enjoyed it.
Speaker 4:But what I enjoyed was the teaching, not the research, as like you can't like that's not. It's really hard to have a successful teaching career and I just wasn't feeling it. I just I was like I don't love this work I don't want to be doing. I love teaching but I don't love the research work that much. I was increasingly burning out. My wife was increasingly burning out. Both of us were just not liking. The academic like world did not feel like it was incentivized. It was incentive aligning us towards maximizing value creation for other people. That's my summary of the incentive structures in academia. I personally started meditating on what I would do with tenure and I think it would be bad for me. I think tenure would make me an unhealthy person. I've met the professors that I think I would become if I had tenure.
Speaker 4:Do you think the average marginal product of an industry economist is higher than? The average marginal product of an academic. It's orders of magnitude more productive and I think we are doing a terrible disservice to the economy, to people's well-being in the general sense, by strongly incentivizing all of these smart people to not be producing real value.
Speaker 1:It's almost hard to incentivize economists to go into academia. Now, most people it's like why would I go into academia? There's not really any return to being unless you get tenure and you're at a prestigious university. But there's no kind of marginal benefit of being bad. It's like these big giant leaps that you make. That's all or nothing.
Speaker 2:It's supposed to be about these positive externalities. Right, that's what this was supposed to be when you produce research, but I do think there's something to like the Nobel Prize winning papers, like I do think there's something to definitely think there's something to Vernon Smith.
Speaker 2:There's something to things that he ended up revealing. But I'd also say in the private specter there's also knowledge spillovers. That happen pretty frequently. How At Google, I'm sure the shit he's done on second-price auctions has made its way to Meta, has made its way to all these different companies, and so that doesn't always get properly credited.
Speaker 1:What did he do on?
Speaker 2:second-price auctions. He they do on second price auctions. He optimized a lot of the algorithms that google ended up using because they switched back to first price auctions.
Speaker 2:Did they really? Yeah, they did three years ago. They're using like a modified vicky auction or some shit. I'm sure he's done a ton of work on their auction theory, though, if there's, it would be shocking to me if he didn't, and he's been there for 20 years. So he I think even the work he's done, like he it does spread. Yes, that kind of gets underappreciated and it spreads in a lot of ways.
Speaker 4:I think one of the most underappreciated ways is that most people in tech have worked at a lot of different tech places.
Speaker 4:Like the knowledge transfer is quick, like the trade secrets and like the specific things that you're like not supposed to share from place to place, but like the day to day structures, or like the management wisdom even right, like most of the most of that like it transfers rapidly. A lot of companies deliberately hire from people who have been at specific companies because they're trying to recreate that culture or like that workflow or something in that structure in their own environment. Yeah, it's huge and I just think that like that it's tangible, it's specific, it's like actually making actual people's lives higher productivity, lower prices, like better products, like more. I just it's so strong. So, yes, I agree, like on the one percent level, right, like maybe one percent of academic economists are doing something really amazing that is better than they could have done in industry. But every once in a while you get one of those top economists who then goes into industry and it like explodes. Right, like, just like does incredibly. So like I don't know.
Speaker 2:Does that bring us to Halo?
Speaker 4:No, it does not. Anyway, that's my general feel on it. I am generally of the opinion that most economists should at least try going into business and then if you want to retire back into the academy, then now you've got real things to talk about, the same way that, like, coase and Adams have had real things to talk about, and I just personally wish that was the model, instead of the go in as a person who's never made anything and try to model what it means to make things. I just don't think it's the societal best structure.
Speaker 3:Kind of second that I feel like in industry you have so much more data, so much more resources, whereas as an academic you're like trying to these public data sources or whatever, whereas industry is like, oh, let's just run an experiment. Yeah, we've got millions of users, no problem.
Speaker 4:And push. Even when I was really stressed out and trying to finish the sixth chapter of my dissertation which was an absurd amount to write, great, but like when I was like stressed out about that too right, I still wasn't as productive as I am now, part because you're agonizing over the minutiae of what some ass in the back row is going to be like really Did you consider? Like you're so wrapped up in it, it really slows you down even when you're stressed out and working hard. Having a lot of that stripped away Everybody's, we don't care about the fifth order effect my God, make us money this month. It's. It really transforms the way you work and so, like even hardworking people, I think, experience within themselves a productivity boost.
Speaker 1:Moving into industry, Jason, talking about this industry versus academia. Your primary field was in experimental economics and I'm sure you've done experiments in industry since you've been in it.
Speaker 2:You were in my industry.
Speaker 1:Oh yeah, definitely. One thing that I noticed is so I ran a few. I was not, experimental was my secondary field, I was mostly labor economics, so I ran a few experiments in the lab and it just is a completely different experience compared to an industry where it's okay, we've got two different uis, it's super fast uh, completely different, like a completely different approach. For one you're not fucking doing irb, so I don't know, do you have any thoughts on that?
Speaker 4:so my wife went amazon and ad space, and so she's been doing experiments like all the time yeah she also worked briefly in that transportation startup, but it was tech and, yeah, you're right, exactly, it's UI stuff and you're almost always in a situation where statistical significance is like the least of your concerns because you've got like a billion observations. Takes so long to process how much data you have.
Speaker 4:Make your algorithms good so it doesn't have to run all weekend. That's it's totally opposite. So much of our training in experimental was you've only got 20 points. Can you discard anything or not With a rank sum test? Right, I'm going to try to be tricky. Like none of that is relevant. Biggest tricky thing I feel in the game space, though, is that it is such a messy environment. It is very difficult to parse what is meaningful, and also, my God, if players don't talk to each other, like in the lab, we would go out of our way to prevent communication between players. We have them in different rooms. We do have people monitoring to make sure nobody was like whispering to one another, and in the video game space, can you imagine having two different prices for like in-game goods, like for like group a and group b?
Speaker 2:like they would know, in 10 minutes all over reddit there's a thing they would freak. There's a famous kutaku article we can actually look this up right now where zynga price tested fast and furious two cars one of the variants. I think was 30 and I think the other one was five. It was a high number. Don't quote me on that. We'll see if I can't look at.
Speaker 2:That would be a huge difference but that immediately, then immediately, was typed up on kutaku. But I guess my question would be like who gives a fuck, who cares? Who cares if players talk Amazon to your point, they're testing prices every single day, every single minute, every single refresh. Airlines do this all the time. So I've heard this criticism and I've never quite understood it. It's like oh, it's the Hawthorne effect, like people will know they're being experimented with and it'll change the settings, or if it's price, I think there's a legal concern.
Speaker 1:What's your?
Speaker 4:legal concern on it, like if people are getting different prices.
Speaker 1:Okay, yeah, maybe that's fair, you're right though that's what makes it tough to run experiments in our game, because there's like literal money attached to every single decision player makes. If we hinder somebody's ability to make money, we've like effectively fucked with their wages, which is good I.
Speaker 4:I get that, but even legal, I think there's a strong brand impact that people have and I think the damage you do to your brand makes it not worth it.
Speaker 2:Why is it damaging, though? Isn't it how you frame it? Someone got a lower price right. This was the King experiment. Someone got a lower price, they didn't increase prices. Isn't that the hedge?
Speaker 3:Yeah, we did that at Riot. There was a promotion. It's up for two weeks. You get random offers with different discounts on them.
Speaker 4:Yeah, that would be the way. I think that's the least bad way.
Speaker 3:You frame it as personalized, you frame it as a benefit, and then they don't complain.
Speaker 4:But did they not complain?
Speaker 3:Not much. We did some tricks to make it like, anchor them, to make them feel good, like everyone got one item at the best discount. Everyone got one item at the worst discount.
Speaker 2:I forget what it was called. No, it's like.
Speaker 3:Night Market and Valorant, if you've seen that, anyway, but yeah, no to your point, though it is difficult to give people different prices and not have them be upset.
Speaker 4:Exactly, they follow it, they know. But the other issue I think is independence. You lose a lot of your argument of independence, so it makes your statistics a little bit more complicated.
Speaker 2:But would we know the direction of the bias though ISP?
Speaker 4:I don't think it would be a broad stroke generalization. I think you'd have to really think through very carefully the specific instance.
Speaker 2:But if you knew there was a discount. Another variant you could withhold your spend now in anticipation of a future discount, like it could be rolled out in the future. So I guess you could see an overestimation of the delta because your control group is potentially withholding spend and maybe even your B group that's in the experiment knows it could end, so they might push their foot to the pedal. I don't know, maybe something like that. I'm just spitballing, sorry, go ahead.
Speaker 3:Even beyond pricing, everything from game balance to matchmaking there's all these spillover population level effects.
Speaker 4:Yes, exactly.
Speaker 2:Jason, tell us about what games you worked on. Hold on. We get to transition. We got to get to the moment where he's I'm going to do games.
Speaker 4:The moment when I realized I'm going to do games was actually. It grew over time. I was getting increasingly frustrated with the internal politics of the university. I was getting increasingly with and it is politics Like it's got that like duplicitousness, where people will be friendly to your face and then like vote against you in a committee and it was so like ugly and I'm so fair because the stakes are so petty.
Speaker 4:I was just about to say the stakes are so low. It's exactly it, that's exactly. I lived that and it was horrible. And so LinkedIn posted an ad for a game economist at 343. And I was like I can't not apply for that and it was like very much like a far shot. I was like I don't have the industry experience. How is this going to work? But I probably do a few other places too. But that it came through and it just turned out that they were interested in. I think that they were largely inspired by the Amazon, like we just hired some economists and magic happened. Right, microsoft has a central economics team that is largely research driven and works together with other teams, but they are doing big statistical analysis, but they hadn't really built out a lot of embedded economists.
Speaker 4:But 343 itself was large enough I would argue too large and had the resources. At the time they were building the slip space engine for Halo Infinite and they were like maybe we can do something special and different with, for example, forge. Most of the things I was originally hired for all got scoped out. Is there a place to transform a forge like thing into a roblox like thing? Probably not. That's not really what that's for, but should we explore it? They also wanted me to comment on things. I think that the leadership at the time had pretty much already decided that they didn't want to do loot boxes the way that Halo 5 had done loot boxes. But they're like can we still make money if we don't do loot boxes or are we, like, constrained and bound to this? So I went in and did a bunch of theoretical analysis with them. I was also a liaison with the central Xbox data analytics team. I was one of the few people, I think, who was at 343, but in constant meetings with other people throughout Microsoft, which was super fun.
Speaker 4:Infinite was delayed and then all of a sudden, like all hack time shenanigans like came to a grinding halt and a lot of stuff got scoped out right. Like when a game gets delayed by a year, it really changes, like the experience dramatically, and so it was in the context of all of that, I ended up shifting over to the publishing wing and got a much broader view of what smaller titles, third-party titles wanting to publish through Xbox and what they go through. Learned a lot more of the finance side, started doing more financial forecasting, structuring it in such a way that you can make a pivot table on it and turn it into a balance sheet which is really valuable. And it was actually in that context where I first encountered a game that we were working with Partnership, that the gap that they had was in product management. They needed strategy, they needed to be able to link from their vision to a roadmap to an actual product. And I just jumped on that opportunity because I've always enjoyed institution thinking, strategic thinking, let's go for that. And it was awesome and I fell in love with it and it was like the thing that I enjoyed the most, like far and away.
Speaker 4:And so then I socially met Robert Bowling, who is one of the founders at Midnight Society and has a famed history in the game industry for quite a long time, and he told me about dead drop and dead drop being a first person shooter but an extraction shooter with kind of a fun niche in extreme verticality, which it really does change the experience of the game dramatically. But where is it possible to make a game where you shoot somebody, take the thing out of their backpack and now it's yours? And I was was like that sounds horrible, that sounds like a lot of problems could be in that, like how are you going to deal with this? And this is like I don't know how would you deal with that. Like me, let's figure out. I didn't actually say it, so they like hunted me down. They're like we need somebody, we need you or somebody like you Like how would you actually do this stuff? And so they gave me an offer I couldn't refuse and pulled me out of publishing and into the startup world, which is fantastic. I really enjoyed the startup environment and I have never since I graduated I've never used such a large percentage of my graduate training before I was using my political econ to keep track of what the hell the SEC was doing.
Speaker 4:I was using all aspects of micro, of identifying opportunity costs, identifying trade-offs, like within teams, like what is your actual production function?
Speaker 4:What is the production function on like new geometry for a weapon, like how does that actually run?
Speaker 4:What are the upstream and downstream costs?
Speaker 4:So there's like supply chain management stories there as well, but they're complexity stories and every person, like every new weapon that comes in, has to be even if you outsource it it has to be integrated and that's taking time away from an artist who could be making their own thing on their own right, like that is so fascinating, and I think that's one of the reasons why I advocate for economists to try out product management, because you have to hunt those things down, like you have to be an ethnographer, like you have to like learn what everybody's doing and listen very carefully and have a pretty detailed understanding of all of the pieces so that you know which things to negotiate for and which ones to let slide.
Speaker 4:And it's been a lot of fun for me. So that was the thing I loved the most and if it weren't for the vicissitudes of Web3 funding, leading to a tragic 50% layoff, I would still be there. I loved it. So that's the tragic moment I'm in now is watching this thing I loved in a community I loved. Get away like that. It's been pretty painful.
Speaker 1:I work in a very similar position. Multifaceted job, do everything from data analytics to design. I certainly have had my fair share of realizations. I've come to appreciate the industry in some ways, and I've come to not appreciate the industry in some ways. I'm curious. I have my own thoughts, that I don't even necessarily share publicly, about where I think the industry needs to go or where it is going. I'm affiliated with a company, so I have to be careful with my verbiage, but now that you're not, affiliated with this on-chain concept.
Speaker 1:I think that's something that's certainly, in the last six months to a year, has been completely forgotten. Nobody gives a shit about it anymore. It feels like people are like, eh, we'll just do a cryptocurrency and that'll be the game. So I'm really curious how important is that to you? For me, it's extremely important. Other people have different opinions. I'm curious to hear yours.
Speaker 4:I'm not married to any particular Web3 aspect. Our perspective at Midnight Society was always let's make a great game and if there are things that Web3 tech can improve on, can make more interesting or more cool, let's do it and let's lean in hard. But it was never the initial point for us in that space and that's how I feel about it is if these are superior technologies, let those superior technologies win out in the marketplace. That's very much where I land. That having been said, let me give my personal pitch for why I think NFTs and video games are very interesting and why I really like it.
Speaker 4:This is going to be my quick nod to Bart Wilson, who was at George Mason when I was a grad student there at Clemson University. He and Vernon Smith have done a lot of great work together, but Bart has a book out called the Property Species and it's a great deep dive into the evolutionary, psychology and linguistic backgrounds of words such as property and how we emotionally connect with it. And where is the property? A bunch of the book is like where is the property? What does that mean? I think that most players seasoned players anyway who have had the experience of playing a game, spending money on stuff and then not having that stuff afterwards have started to have a little bit of a detach in their minds about what it is that they're buying, and I do think that there is something even though it might be somewhat ephemeral about saying that I own this thing that is verified not just by this company, but everybody agrees. The ledger tells me that this is my thing, and when I give it to somebody else now it becomes their thing.
Speaker 4:When I sell it to somebody else, it now becomes their thing, that is powerful in a way that like a centralized trading market, whatever wow, like it's all on a Web2 space that it misses, that is really powerful. Like interoperability is like a different challenge and there's a lot of hurdles there. But even just for a game, if it is a game that has some staying power, that sense of ownership, I think biologically shifts the way we feel about the object and that is very interesting to me you see in public discourse all the time there's.
Speaker 1:It's really interesting because there is simultaneously and it's paradoxical there's a paradox where hardcore gamers desire ownership so much they miss the physical disc, they miss owning the console, they miss putting it in and reading through their manuals, simultaneously and paradoxically saying that they fucking hate nfts. And it's like there's just this. You don't even understand that that that's what we're trying to do, is we're trying to what was the game of steam? It was steam. They recently updated their like, their tos or maybe some disclaimer that was like just so you know you're buying a license, you're not buying the game. And I remember a whole bunch of people, certainly on twitter, maybe on reddit, getting upset about this. They're like what the fuck? Of course I own it and it's guys. This is what we're trying to do.
Speaker 1:I know it doesn't seem like it's you because you hear the word nfc and you get angry but we're trying to make it so that when you do purchase this thing, you do own it yes and then anyway, I totally agree with you.
Speaker 4:But let's continue on that for a minute, because I think it's it is very interesting and I desperately wish that there hadn't been so many damn scams coming into it one of my experiences was like okay, I've never worked in a Web3 space before. Let me learn what the other games are doing. Oh my God.
Speaker 1:There's no point, there's like no point in doing outside research, because there's not really anything out there and the most successful products are not really Web3 that much anyway. So it's not that helpful and you're not able to do the correct types of analytics, most kind of the most accessible part. Other projects for us are things like soul casino, which is a gambling game, right, or what used to be on chain was a game called. I'm blanking on it, phil, dang it.
Speaker 2:I'm sorry I ruined your give me some hints, it's the horse one horse, zen run, zen run zed, zed, run, zed, run, zed, run, run.
Speaker 1:You know you're like you've got this on-chain again, mostly gambling game. So there's not a lot of good reference material and the best reference material is Web 2, material that basically should be brought into the 21st century, your EVE Onlines that are now, with the release of Frontiers, doing Web 3. So, yeah, I can't even imagine. When did you start working at Midnight Society?
Speaker 4:Was that 22, 21? I was there for two and a bit years. Something like that two and a half years.
Speaker 1:Yeah, certainly in the beginning there was nothing. We've had a few breakout hits in the industry and we'll probably get to the big one. The recent news in a little bit.
Speaker 4:Yeah, it's super fascinating and I think it's so for me to be honest, like in an interview, this would be like an example of product management through a big pivot and like incorporating customer feedback of a story. The original vision of Dead Drop was literally every weapon that you get, however you got it, whether it's one that we dropped or you bought, like a thing on chain, it's in your backpack when you die, anybody who picks up your backpack, that's theirs now, and it was really interesting that players were very nervous about that, extremely skittish, and some of our engineers were as well. Honestly, actually, one of my big internal alignment stories was discovering that not everybody really understood that that was the vision of the game, right, and making sure that. Literally. Okay, you guys, I need you on board about this yeah, yeah.
Speaker 2:It's not completely antithesis, though, to exactly what you were saying, though, about ownership, because you're telling, you're saying you can go in and the game can dictate ownership and rewrite property.
Speaker 4:That's like a fundamental doesn't dictate ownership your skill dictates ownership you're opting into the game in which you can get robbed yes, and that's the property right story that's so interesting to me.
Speaker 4:It's like this is the business question Do players crave an opportunity to go into a space like that? And I think the answer is there is some desire there. But, oh my goodness, the expectation value calculation is difficult, especially if it's a lot of people on the map at the same time. If you're expecting that 90% of the time I watch it in the map they get murdered, that's a difficult probability to weigh against about why you would choose to carry something into that map, and I had some solutions to that. I think that you can do a lot with quality of life stories. It's tough when the thing is just power. I think that would be a really interesting game to run. Yeah, you have a high probability of losing, but you spent money on a gun that is more powerful. I would love to explore that. Our players hated that idea. Our founders hated that idea, so I was like okay, set that aside. I think that would be a thing worth exploring if you were just upfront about it from the beginning.
Speaker 2:The game can still take a property right though, like I have something in my backpack and you can take it without my permission, or, I guess, give your permission when you entered the map. See, this is this, I think, gets you in a sketchy territory, because this goes back to like how you can justify homeowners associations. This is how you justify it Like cuts the idea of ownership.
Speaker 2:But you're giving up some of your rights in a mutual association for mutual benefit, and we can say the same thing for, like, steam licenses that Chris was saying. It cuts back to the thesis, though, if this is how I think it cuts back to the thesis, though, if this is how. I'll touch on that. I'll touch on that. I know I'm poking a little bit of fun at this. I think their answer I know it's good, no, it's good.
Speaker 4:It's good but, like personally, I lean dangerously close to being almost just contractarian on this. Like, on some level, I feel. If it's not a particularly abusive situation and people are generally pretty well informed, almost any contract is okay, and so I don't have a strong moral opposition to the light model in video games. I know a lot of people in the web three space do. I don't share that moral outrage for that. I think'm very interested to see if true ownership in some sense wins out over the library card model, and I think that it could. I think that it probably would. That, having been said, for all of the reasons that we're saying, gave us a lot of feedback and this is one of the advantages of Midnight Society's development model, which is super rare and I wouldn't recommend it for everybody, but I loved. It is like just being super open. In pre-alpha we had a lot of people playing the game and we were on discord and we let them stream the game.
Speaker 1:When it was like block out, there weren't even textures on anything right, we're exactly the same way at star atlas, like the players are playing stuff and it makes it difficult, but it also it helps to drive our development okay, which feature especially on chain and nothing wins over an internal business team Like hearing your players say I love this, but that sucks. We can literally. There are some times when we're in the middle of a difficult decision. I just go to the community and I'm like guys, can you just post this?
Speaker 2:survey in the Discord.
Speaker 1:Yes, I just am curious. And then we get like a 90-10 split.
Speaker 2:Yes, and it's like oh that was easy, exactly, exactly.
Speaker 1:Yeah, so I really love this conversation. I want to bring up the obvious. I see it's already on the list here, so Extraction Shooter game. The hotness of the last couple of weeks has been the I'm so bad with names. What's that new game that everybody's?
Speaker 4:off the grid.
Speaker 1:Off the grid. It's a huge success. Blah, blah, blah. We saw.
Speaker 3:Mr it off the grid. It's a huge success. Blah, blah, blah.
Speaker 1:We saw mr, not mr beast, mr mustache guy who wears the doctor disrespect, doctor disrespect and crypto stash, but doctor disrespect is playing. It's got like millions of people watching. It seems like that initial marketing push would probably which probably ran them a couple, 10 million dollars or so, maybe even more. It's fizzled out. Not a lot of people necessarily streaming it anymore. Still a lot of transactions going through. Still presumably a lot of players. Really interesting project, but as far as I'm concerned, not a lot of. It is on chain right, like you're not literally dropping that nft and somebody's picking up in game and it's being associated with their wallet, as far as I can tell but that's mostly because I do on-chain analytics.
Speaker 4:So if I can't find an on-chain program, I assume it's not on-chain yeah, and we, that was so just to connect these two right like I, that was ultimately the pivot we ended up making was to not have in-game actions translate directly to being on-chain property right transfers, like, and I'm sad about that.
Speaker 4:Personally, I really wanted to pursue that, but, yeah, that's what players decided, and let's take a moment and discuss some of the reasons why, because I think it's worth it, because it wasn't necessarily what I was the most concerned about To props to my engineering team. One of the biggest things that they called out was the impossibility of actually getting cheating down to a level that, like makes people feel like that was actually a fair transaction. Right, it's tough, and you look at how much cheating is going on, even just in Tarkov, which doesn't have the on-chain like property transfer either, and yet there's like whole videos about the wiggle right Like we're like there's so many cheaters that they'll like wiggle to each other through walls to identify who's a cheater. Then that's like a community of cheaters, right?
Speaker 1:okay and they have this problem off the grid.
Speaker 4:They have this problem and off the grid, like it's one of the biggest criticisms and is that there's exactly, and now incentivize those cheaters and make it so that you have a specific profit incentive to be cheating, not just to be griefing people right, tough. And so you're signing up for an arms race, and that is a very difficult arms race to win, like we. Part of the costing for that business model was like yeah, you can get things in game, but here's like the number of headcount we need to hire this like team, this like secret service team, who's like gonna be monitoring literally every possible piece of telemetry and set this up at amazon games.
Speaker 2:We did it for we did for all the mmos we needed to. For this exact reason, we needed an anti-fraud, anti-cheat, because as soon as there's tradeability that means whether or not there's cash in the game or not people are gonna there's financial incentive because you can just go off platform and trade things and then do it and execute the trade in game I totally hear you exactly right.
Speaker 1:So you just use ai or something to catch these guys, or did you literally have an army of qa people who were just there to make sure there weren't cheaters? Were you successful? Oh, yeah, we did massive bandwaves.
Speaker 2:So if you go to lost ark right now and you look at lost arcs psu curve on steam you'll see these huge drops. And these huge drops are when we did bandwaves so there are things yeah, trading bots, sometimes bots in themselves.
Speaker 1:Gold farmers, hard currency so what's wrong with a trading bot? It's not necessarily they're just making the market more.
Speaker 2:It's not necessarily the trading bot. So there's an economic problem where, if you do have a bot, they're basically farming resources really rapidly and so they're pushing prices down to zero. That's the problem.
Speaker 3:That's the problem. What about the trade?
Speaker 2:bot. I misspoke. I didn't mean just simply a player that's programmed to execute a trade. Sometimes they're just trying to keep market prices stable. Ironically enough, like they're just trying to buy. So no, we didn't ban that. That's what I meant. Maybe farming bots is more appropriate. They're just usually always involved.
Speaker 1:Yeah, and I've thought a lot about this, having worked in web3, and I've identified like two different types of problems with respect to bots is one is a skill type of bot that's in a problem for games like off the grid and and like in jason's case, and then there's like the economic bots who are duplicating behavior that's causing prices to drop to zero. I think there's a pretty easy solution to this one. I think that the skill-based one is actually like the bigger problem and it poses a significant hurdle. You can imagine the most extreme kind of play to earn game would be like chess, but with states the chess is the easiest game in the world to cheat at.
Speaker 4:Ironically, yes, chesscom struggles with that ferociously.
Speaker 1:And there's no financial incentives there, and yet they have 35% of their users. I think the official number is like 8% or something, but I think that's bullshit it was a salty after that last loss. It was cheating, so you guys pivoted away from that. And to what?
Speaker 4:Essentially the idea was that there would still be items. They would still be nfts, you would still buy them. But what you're buying essentially it's just. It was painful because it's such a departure from the property species thing, but what you're buying is like a customization thing, like a customization factory, like a bot, it's like a 3d printer, but it's gonna pay. It's very specifically specifically paid, like only that one weapon and it's going to do it the same way every time. So you have to find the assault rifle on the map and then, when you get it back to your hideout now you can like paint on its. Its thing cosmetics economy.
Speaker 4:So it's a cosmetics economy, it's just yeah, exactly and so you can trade that out to somebody else and what we were to preserve. So the one of the other NFT like excitements, in my opinion, is you know you have some like big moment, you have a streamer or you have a competition or just like something, and then you have this like emergent moment where something cool happened and I won the game and here's the video clip and it was with this sniper rifle and it was like this 360, no scope, like headshot, and oh my gosh, it's so beautiful and the player signed it and here's their like name on it which will be like marked upon it now forever, and that now is a item with history and whoever owns that item has all of that item history and some of that is in like an auction house. You can have that player like literally auction off that weapon and cool like that would be super fun. You could even have some that never had a financial transaction on it, but still it's wow.
Speaker 4:People have all owned this, but I follow these three streamers and all three of them had it or I loved this weapon so much I'm on a quest to get it back and I'm gonna push. Hey, play this game on this day, bring in this weapon and I'll bring in whatever else you want me to bring in. But you gotta give me a chance to get my thing back Right. There's so many cool stories that are built into that at the weapon level. Could we do that with that kind of a cosmetic only story? Yeah, but it wasn't lost. But I can stamp and say you, you used, we're using that cosmetic at the time, in that moment. And then the trader it's such a weaker story, it's still there.
Speaker 2:It's like it's such a weaker story. It's still there. Csgo does not. Csgo has this exact thing you're talking about, or the signed weapons, the tradeability. So does it go back to the point you're making earlier, that because the blockchain has this decentralized, trustless, verifiable scarcity that, ultimately, is what will separate it from everything else, and that notion is really powerful, and that's why the steam marketplace is not a viable substitute for blockchain stuff.
Speaker 4:Yeah, that's basically it. I think that, given that we no longer have what I would consider really the most natural, evolved biological story of property, so since we have stumbled away from this precious thing and are doing this Ersatus-like model, yeah, I think that is still a differentiator. The other major differentiator is where can you trade that thing? Because if you're engaged with the CSGO, there's only one place to trade it. They make it a pain in the ass to try to cash out. People have ways of doing so, but it's sketchy and you're going against the terms of service. So it still doesn't really feel like ownership in that space for most people most of the time.
Speaker 4:I think and I do think that's a stronger story. Also, maybe there will be other people who generate I don't know some other Web3 platform that specializes in game usable items in a way that like spins up commodity markets in that space that gain other like efficiencies or breadth of knowledge, and then all of a sudden you're like, wow, that game, that gun looks amazing. Which game is it for? Oh, that's cool, I'll go play it in that game. That's interesting.
Speaker 3:I think that there's like a number of different aspects there. Can I ask another question about extraction shooter economy design? Dead Drop was an extraction shooter like Tarkov or Dark and Darker. I played a bunch of resources and over the season people get higher, more resources, more power level and they handle this with seasonal reset right. It's like very similar to Diablo or Path of Exile and that hard reset works great in those games. But when the players have this expectation that I don't know their items will be permanently tradable or hold value, like how do you do this?
Speaker 4:reset hyperinflation cycle or do you have a different sort of cycle? No, I agree with you. You're exactly right. That's a major challenge and there's a couple of different directions that you can go with it. In our case, since after the pivot, I think the simplest answer is you build in the resets into the game and so you have. You need to have a progression system that's growing. But the progression system doesn't have to be the item. It could be some other thing. It could be like skill with a weapon, it could be like other unlocks, it could be like other aspects of customization, for example, maybe in your hideout or other places. But, like you're right, you have to fight the hyperinflationary aspects somehow or another and it gets really tough. I think that's.
Speaker 4:I'm actually not 100% sure what the final state on dead drop is going to be. I know that was one of the things that was like in discussion is how do we handle this hyperinflationary problem, but I think that's a totally viable solution is to make it so that people are excited about day one of the next season. Right, give them the hyperinflationary environment. Resist the hyperinflation when it is unresistible anymore, let it saturate like you're a Bolshevik. And then when everybody's like, oh, the hyperinflation sucks, and you're like, and then you're excited, I'm going to take it all away. It's a bit of a dance, right, but so long as there is some other aspect of progression that's maintaining, it's a little bit like it always a game. Zagreus is the main character.
Speaker 3:Hades.
Speaker 4:Like that sense of every time you're playing a game you're not really starting from zero, like you lost everything, but you're building a little bit. So I think that you you need some sort of not reset progression story, but the stuff itself, the stuff you're using in the game, doesn't necessarily have to be the permanent thing. Another option would be to allow it to be a like it degrades over time or it hasn't like durability or something like that.
Speaker 4:Like you have a durability story, but mostly have you heard about my staircase tax. Yeah, I think I remember hearing you talk about your series. Yeah, I think that the durability is generally hated, though it's really difficult to make durability that players are excited about and it also takes you out of immersion a little bit too. Most gun owners do not feel like you put assault rifle 20 times time to throw it away and get a new one.
Speaker 1:It just doesn't sit. So I think I have a pretty controversial take here. I think it's okay for you. Look at my house. I've got more stuff. Every single month. I buy something else. Some of it I consume like food and fuel, and maybe even some things degrade over time. If I play one of these board games a thousand times, it's going to be just a bunch of fluffy cardboard left over. That said, I don't think accumulation is necessarily a bad thing. Now, obviously, if we're talking about hyperinflation, okay, that's fine. It's like we don't want that. But I'm generally okay with the fact that players might have this arsenal of items. It happens in fortnight and obviously it's a completely different economy, but but I have spent very little money in fortnight. I still have dozens and dozens of skins, but in some people have thousands but in an extraction shooter like it's gameplay affecting.
Speaker 2:So there's also, like these wealth inequality effects of okay, if you're top skilled, you can't do matchmaking very well. That means there's going to be, there's going to be, a one percent that has all the awesome weapons and the other people are going to fucking suck. There's all these really interesting dynamics and I'm sure you've been thinking about that too. You think about for religious amount of time.
Speaker 4:I've been thinking about it a lot. One of my hopes was that we would have such a large player base that we could do matchmaking not on skill but on loadout. There's the two factors on. That would have actually potentially solved my other problem also, which is addressing the expectation value calculation of an item that you have purchased while you're going in with like approximately 50 bucks in your loadout, according to the current market prices, we're going to try to matchmake you with other people who are approximately 50 bucks it's never going to be perfect, but it's.
Speaker 4:That's like europeans.
Speaker 2:It's like you go up the league system and, yeah, when you're in premier league, everyone's going to have a certain club value versus being in a lower league.
Speaker 4:I know this is, I've spent too much time exactly, and so I think that there's a similar story that you can do with the power side of items as well, but now you've got like a two-dimensional face space that you're trying to again, and crazy how quickly matchmaking time.
Speaker 2:Okay, how many people can be? 32 players? Okay, now we're gonna drop the skill parameter. Now it's just gonna be. Well, fuck, that could be an awful experience for some people game the wealth score as well.
Speaker 3:Dark and darker did this just under the cusp right, oh, and now you think about marketplace dynamics.
Speaker 2:Right, because you can buy yourself into a matchmaking slot. Almost.
Speaker 3:That's interesting got a selection of good things on sale stranger.
Speaker 2:We have a special guest, Jason Sure. We'll focus on you today. What have you been playing these days?
Speaker 4:I have only been playing Black Myth Wukong.
Speaker 4:That game has absolutely sucked me in a degree. I love it. I'm a huge fan. I love the pace of progression in that game. I generally don't like Dark Souls types games. They're just a little bit too Not quite that much of a masochist. I think is the basic Playing a game that it beats you up but you do learn the patterns on the bosses and can eventually make it through greatly satisfying. Like the sense of satisfaction that I have gotten from beating that game is greater than the satisfaction I've gotten from almost any other game in a very long time. Like they really nailed the difficulty curve at least for me personally and you can over level a little bit but you still have to memorize the boss moves. Like they will still crunch you even when you're like pretty tough.
Speaker 4:I have really been enjoying it. It's been reminding me of the fact that single player games are actually one of my favorite things. I love stories. I think that as a genre I'm sorry, not as a genre as a medium video games are almost unique at being able to convey certain kinds of stories because you feel so present in the story in a way that you just don't in books and movies. It's just extraordinary, and I like the Journey to the West. Anyway, I'd read like an abridged version before. But like Monkey King has always been like a fascinating character, you just nail it. It's just like the environment, like the vibe, the dialogue, like the characters. It's just outstanding. I'm a huge fan. Makes me wonder about single player games though.
Speaker 2:So that was actually the most convincing argument I've heard for storytelling in single player games is that by having this omnidirectional relationship, there's a sense of presence that you literally can't get with anything else, because I always just shit on storytelling in games, because, at the end of the day, we're telling most of our story with cut scenes, which, by definition, is it's, not it's you're taking away what makes games, which is the omnidirectional piece. It becomes or just me, game games are the bidirectional piece that becomes omnidirectional. Okay, that just means we suck if we're going back to these methods, but that is a really fucking convincing argument when I had it my opinion communicate while you're playing.
Speaker 1:They're telling you the story as you're. That's what I love about Dark Souls types of games. While I'm talking Sekiro, you should try Sekiro out, similar kind of vibes as Wukong, and then, once you get through that, then you just go to Dark Souls and you're fully converted, I'll be converted.
Speaker 4:Wukong does a good job on this. I think they tell the story in multi-facets. Part of it is just in the game, part of it's how you're walking around, part of it's listening in to the bad guys as they're talking to each other before you, like, storm their camp. A lot of it's just in the environment and just like seeing what happened to the temple after it was burned or whatever the moment is right. It's multi-faceted. But I will say in a cut scene where I have been playing as this character and like struggling as this character and feeling like my heart race when I accidentally fall down and take falling damage, I'm like, oh, like I get that because I'm so embedded in the character. In that moment the cut scene still feels like me. It still feels like a reward of what I'm doing, so long as the character does something that I might plausibly do. Like it can throw me out if they immediately do something like counter to the character in some way.
Speaker 4:But my experience of a cutscene is not the same as my experience watching a TV show. Another example of that one of my other favorite first player games ever was Nier Automata. Oh my god, I love that game. I couldn't really get through the anime, something about to be a 9S like walking around, talking and doing these other things. It was very well done, it's beautiful, but I wasn't there. I wasn't in the show, but the cut scenes in the game I did feel like I was in the show. So again, I think that there's a difference there as a narrative experience.
Speaker 2:This is fascinating to me because you studied physics, you go on to do economics experimental economics, you also work in supply chain management and you like narrative-based games.
Speaker 3:What is?
Speaker 2:wrong with this fucking crew?
Speaker 3:I just what's so unusual idea?
Speaker 2:that you get a pass for fighting well, I think, but we should be focusing on rpg like spreadsheets.
Speaker 4:We should think of live service, mechanics, systems, institutions like the main problem doesn't mean you don't like stories that's right and it has magic in it, which is the binding force of X and L in a previous episode.
Speaker 1:That's true. I think Phil's main problem with these types of games is they're much harder to monetize in any way.
Speaker 2:that's not boxed, that's true, but I guess what I find powerful about games is mechanics. It's so much fun to think about mechanics, right, right, the systems that that we can create, the bi-directional systems are so interesting. Streaks, power up, score streaks, that those things there are systems in single-player games.
Speaker 4:I am seriously like I'm. I am a hair's breadth. I have seriously thought about going onto reddit, finding somebody who has done some of the damage data and like doing the partial differential calculus on whether I'm better off increasing my defense score or increasing my damage reduction, because what's the difference between these? Right, I can nerd out on the mechanics in a single player game like this as well.
Speaker 2:Yeah, yeah yeah, well, let's I guess but. I want the institution to survive for a really long time. Right, there's the section of economics which is, or even political economy, which is, about the constitution. Right, like how do you make the most?
Speaker 2:the best constitution, the one that survives the longest. Okay, we'll make an amendment process that does this, or we'll make it so you can amend this. So there's all this, all this work we've spent into building constitutions and I think about games in the same way, like we're trying to build these constitutions that can persist for a really long time. That's why we were talking about, like, best game economy of all time match. That's why I think match the greatest design, because it's an institution that is infinitely refreshable. Like it's very clear what you need to do to win. On that, the institution is designed, the mechanics are clear. You just plug in content and go. It's easy. It's like a spinoff show. I already got the IP, I already got everything. I just plug it into the system. That's the whole thing. It falls short for me on single player games.
Speaker 3:Feel this way about your other media consumption. There's an optimal TV show, and I just want the Simpsons to run for 5,000 seasons.
Speaker 2:I want progression on progression. Like I love talking about serialized versus procedural television, that's been a major shift over the last couple years. Very similar to live service conversation were happening. Like you can have persistence, you can have references to the back show. People can go back and listen to it. Like you could definitely tell a story about, I would say, linear media coming around. I would argue to us, even if you look at like dan harman, if you're familiar with him, he's like a creator of community. He writes in game loops. He writes specifically in loops, in progression loops. He has these things called circles on his website where he talks about a character going through a crisis and going through a character arc in that, just like you would in the game, like trying to solve a problem and then you walk away with some permanent progression. That's the last part of a circle. Everyone has to walk away with something that they take to the future oh, don't credit that.
Speaker 2:That's like joseph campbell's but see, I also watch like a fuck ton of rom-coms, but it's because I want to study the mechanics. Like girl falls over in front of her love interests, laughs like that to me is a mechanic. I thought we'd be united on this as economists well, so like.
Speaker 1:So what's your thesis? I want to give jason phil is yeah, please, I I agree.
Speaker 4:Let me just I don't. I don't disagree with you. I think that these mechanics are really, and I think that one of the things that kills a perpetual life service is when they fail on those mechanics and just think a new season of new flashy items is all that I need.
Speaker 4:But there isn't that sense of progression, there isn't that sense of danger. Nobody's changed, Nothing's advanced in the narrative. But I don't think I'm. I am very happy to accept that video games can be both, can do either of these things and don't necessarily have to do both. Personally would like to have one or two I don't know lifestyle games. You might say I'm logging in with my buddies every Wednesday and we're going to do like a raid and it's social and it's like an ongoing experience. I don't want that to change very much Like I want to have a sense of mastery over that and have an ongoing, steady account progression. On the side. I also want to watch or play through a bunch of like self-contained stories where I feel like I'm connecting with something deeply human or like expanding my thought process in some kind of crazy way. But I don't want to have a whole bunch of lifestyle games that I'm playing and I don't want to only be doing single player games, because then I'm missing out on that like social aspects and missing out on like the long term art, and so I really I think that we do definitely want both of those things to exist. But like, one of the great moments, in my opinion, for a single player game is when you've done all of the things and you put it down and you're like, oh my God, I love that.
Speaker 4:Like I haven't picked Cyberpunk up back again after I did the third, like playthrough of the third class type, even though I'm an IRL corpo. I wanted to experience the hell out of every part of that game and I loved it. Oh my god, the city was a character in Cyberpunk Like I just oh god, it pulled me in. Similarly, with Wukong, I just finished the New Game Plus first time. But I'm going to do the full three loops and get all the stuff and make sure I've got unlocked every spirit and I'm going to put it down and I'm going to be very happy with my experience and we'll definitely buy the next game that they come out with. It doesn't need to be like the permanent game. I close the book, I put the book back on the shelf and I admire it from time to time.
Speaker 2:See, that's a very healthy relationship.
Speaker 1:Phil doesn't like that because he wants to be. It's about addiction. It's caffeine. Caffeine, it's your coffee, I don't want to put. It sounds like, phil, you see a game being a composition of a bunch of mechanics, a bunch of little building blocks that create the whole game, and what you like about live service is that you can always add a new block and charge for every single block, versus a single player game that's typically sold as one giant collection of these blocks for a single price, because I'm I think we're all on the same page. I don't know what your thesis is, phil, and why you get so upset when we talk about single.
Speaker 2:One of the things I've been thinking about is like recasting part of what we do in the cake eating problem that we all had to solve in grad school, like that dynamic optimization problem of okay, I have a piece of cake and I need to figure out the optimal way to eat the cake that maximizes my utility, so like, on one hand you could just stuff the cake in your face that's one thing you could do, but you might hit midstream returns really quickly. I can have a bite every 15 seconds. I give a bite every 30 minutes. I give a bite every 15 minutes, then I have 30 minutes, then I go back 15 minutes. So we're trying to solve that, that really fun intertemporal problem, and I think part of what you do in systems design is you solve that in some way.
Speaker 2:You're trying to figure out how to ration the content to players on what schedule maximizes net present lifetime utility of the game. What is that, that feeding schedule for content? And when you have a game, it, because when you have a single player game it's finite, right, and that that, I think, makes it a particular set of problems. But when it's infinite, like candy crush for instance, it's almost. How often do you? It's not just okay, there's a set amount of oil in the ground. We need to figure out the optimal pace to get the oil out of the ground. It's oh, we can invent fracking and we can find new oil deposits, and that's what I think you get in live service. That that makes the problem really interesting. In addition to the cake you problem that you get in single player I still think that there's.
Speaker 1:I think, while I think each game has its own unique, not indifferent set, but its own unique utility, and I still I can play these live service games up until a point, I get bored of them, the same way I get bored of a single player game. I have played Dark Souls for well over a thousand hours, even though it's a single game. I've just beaten it many times. And I've played Fortnite, probably for I don't know 220 hours, which presumably Fortnite should have gotten much more play time. But I have a completely different utility function for these two different games and I always, personally, I always. I don't think you can like this is probably more philosophical, but I don't think you can change the shape. Fair enough, fair enough.
Speaker 4:I have a question for you guys. We're on the single player topic now, so I really want to hear your forecast predictions about single player games, though going into the future, because I remember there was a time a decade ago when everybody was like there's just not going to be any single player games, the economics don't make any sense, everything's going to be blood serviced. It's interesting to me that we've had a bunch of very successful single player titles come out in the last few years that have been beloved. I do wonder is there a comparative advantage for them coming from abroad? Like it seems that, like the biggest ones, at least in my own biased, like to my own availability bias there's like a. There's an import advantage there.
Speaker 3:Right, stellar blade, right, those have been the peak titles say import, you mean like foreign to the us, so like everything from Japan, right, elden Ring yeah.
Speaker 4:Yeah, that's true.
Speaker 2:What are the big ones from the US, phil, you mentioned a couple, but I was thinking Spider-Man, last of Us, god of War, were the ones that kind of came to mind.
Speaker 1:I think you could put Half-Life in there. Don't those all come out of Santa Monica?
Speaker 2:That one very specific peer in Santa Monica.
Speaker 1:There used to be like Max Payne.
Speaker 2:You remember that old franchise?
Speaker 3:I looked up the top selling box games and it was like all EA Sports and like COD. Oh yeah, of course.
Speaker 4:But the question really is like why Is it just an issue of? And actually, when I said import, I didn't really mean US, that's not actually quite right. I really meant because Cyberpunk.
Speaker 3:Games industry sectors you're talking about.
Speaker 4:Yeah, it's like smaller game industries and I'm wondering if the comparative advantage in this case is wage, where it's just it's prohibitively expensive to make first make a single player title in the west at this point. Or is that? Or is it something else? Am I like just looking at the simplest input cost inappropriately? And it's actually culture. It's actually like some other barrier to entry or something like that. I don't know, but I'm really curious about that.
Speaker 3:I'll throw one theory out it's less that the single player games are worse in the West, but that the single player US has a particular advantage in live service games because bigger companies, more established industries, larger marketing budgets right so they can make single player. The US has a particular advantage in live service games because bigger companies, more established industries, larger marketing budgets right so they can make these much larger shots. And because these live service games require critical mass and a really professionalized, productionalized content pipeline right, and as a result, the fledgling industries in Poland have to go for the niche where it's like smaller bet size, lower risk.
Speaker 1:It's still a comparative advantage story, though right it is. We're good at this, they're good at that relatively speaking.
Speaker 4:But you think it's like the network effects and economies of scope are like what are driving that difference more than you think, just merely the wages and input cost.
Speaker 2:But don't, we have to tell a change, we have to tell a change story. Right, we can't just tell a level story. What's changed? That would change the industry in the established?
Speaker 3:US has got bigger and bigger, more larger companies, larger conglomerates, and it's starting to crop up to these grassroots developers in Poland. Where is Baldur's Gate made? It's like Netherlands, or something I thought it was.
Speaker 1:No, it's not Poland. The interesting thing about Poland is actually it's economic. It's been one of the fastest economically growing countries in Europe. I'm not sure where that technological growth is coming from. I would be surprised if it's coming from tech, though it's not possible, it's not impossible. Their economy used to be coal and now it's not coal, so it's got to be something. I'm curious if we were to look at that, because I guess, if they were to be, I assume that it's our accumulation of capital, in particular processing power and storage facilities, like for cloud computing and stuff like this. That's probably where our computer, but that's where our yeah, that's where our. I guess what you were saying like a change, right, that's where the dynamic is coming, where all of a sudden, we've specialized in that. I don't think japan is like, or south korea has stopped producing games at the same rate that they were producing this.
Speaker 3:That's true. This Nintendo generation has a lot of great single player games, and those are all still produced in Japan.
Speaker 2:And I would argue, though, that I think there's a largely empirical question, and I haven't seen a lot of good data on the growth or decline of single player games as a share of the industry. I think we get into it that it's significantly declined, though, and the reason I would argue that is because there's no single player games on mobile, and mobile is half the industry and mobile is an increasing share of the industry, and I think it's reached equilibrium now at 50 50, but that instantly crush a multiplayer game.
Speaker 2:Let's hand it to our panelists. Jason, what do you think is candy?
Speaker 2:crush a single player game. Do you think that's? Is this along the lines, the questions you were thinking about? Because normally we think I think more scripted stuff. Because, because I think it's not what I had in mind. It's interesting though, I think, to tell the story you want to tell about this, right? Is that costs? Again, we have to tell a change explanation and I'm not quite sure why single player games would become increasingly unprofitable. Is the story I haven't been able to tell to myself?
Speaker 4:I understand, and substitution is a new entrant If what you're saying on the capital accumulation side, right, exactly, but you're substituting also just at the which games are going to get made. Well, we want to make at some level. Some investors are going to say some investors are like I got like a pet project, let's go make some cool indie thing. But for a lot of people, if they want that return on investment and they think that since we've got the comparative advantage here, since we've got the capital accumulation and we can do the big multiplayer game like, like that's going to get us the billions, whereas the single player game we would only expect hundreds of millions or something like that, I think I like that story, like at the margin, like ultimately, like when you buy a single player game, if you're a publisher you're buying a fixed stream of income, like it's pretty clear that the tail is going to extinguish, whereas if I'm buying a live service game, I'm buying a stream of dividends.
Speaker 2:And not only that, the stream of dividends, that model, that preference has become more viable. Distribution, all those things. Okay, I think you could win at the margin, but I would argue it's more about live service than it is anything about single player. I don't think single players changed only at the margin in response to live service might be one other way to think about it. Point that makes sense.
Speaker 4:Yeah about it. That makes sense. Yeah, and also, once you've got the accumulation, you've got the mature industry, you can your time horizon. Profit is going to change for a big company willing to accept, to be patient and have the long chain of annuities there was.
Speaker 1:We need more games like Tumor. Oh my God, tunic. We really do Simple, effective, they're not expensive to build. They deliver an exciting experience.
Speaker 2:That last that was astrobot. That was astrobot, like a lot of people are seriously calling for it. Yeah, a lot of people are seriously calling for that. What?
Speaker 4:is fun. That's a good one to play with the kid. By the way, my daughter really enjoys astrobot have you ever tried to unravel.
Speaker 4:Yes, oh my god, we love both of them. For the first one we played like handoff and some of the tougher puzzles I would do, but we played through the entire game in the two-player. That was a masterful class. It was like the challenges were tough but accessible enough. I think she was six when we were doing Unraveled 2. And it was like she would request it every day, like let's go play more Unraveled. And she would grief me like crazy, I'd go to jump. She'd pull on the rope, I'd fall down. She'd like it was hilarious, it was such a good game yeah, we really liked that one.
Speaker 2:You can really help your partner out to your point. That makes it so accessible Because you have to assume their skill is like zero and the other player can almost do all of it, and I mean that in a good way.
Speaker 4:Although she got really good. We got to the point where we were both just like Spider-Man-ing through the tough sections. It was fine.
Speaker 1:I feel like a little big planet game would rock right now. They had that. They had a little Sackboy, they had a Sackboy adventure game.
Speaker 2:Oh really, sackboy Adventures, something like that. I missed that one.
Speaker 1:Sackboy A Big Adventure. I did not know that. When did that come out?
Speaker 3:20 years ago, I just bought Unravel 2 because of your promotion. Let me know what you think about it. What?
Speaker 4:was the other one. It's a two-player only. Experience, oh it Takes. Experience, oh it takes it takes two yeah yeah, it takes. Two is also really good that there's one specific scene that she had to leave the room for a stuffed animal and it was like serious themes.
Speaker 4:It was like parents going through divorce it's true, which was great, though, as, like a context, talk about this stuff because it turned out that's something that, like, she had fears about, and so being able to talk about it and address it was like really like an emotional experience for me as a father, to be like it's okay, honey, but thank you for sharing your fears about this. Let's talk about it. We're ice skating together on this like crazy explosive like platform.
Speaker 2:This is what I think brian caplan missed and his selfish reasons to have more kids is a co-op partner. I think it's the missing link I know totally have this too. He's been raising yeah, we've been playing. She loves it. That's not the game to choose.
Speaker 3:That's a divorce game. I was like, hey, you want to play Zelda, and she's like, no, let's play Overcooked, I want to make some mushroom soup.
Speaker 1:I'm like all right, I like the first five levels of Overcooked and after that it gets way too crazy.
Speaker 4:She requests from me are nine parchments play on switch.
Speaker 2:Um uh, mario course an oldie, but a goodie an oldie, but there's also army of two when she's older when she's old I'm gonna hold on there's another one called two brothers.
Speaker 1:That's a two-player game, a two-player coordination, yeah that looked great, too similar.
Speaker 4:I haven't played it yet, but it also looked like it had a lot of potential should a dm find them on linkedin available to the ladies available to the employer thank you, I got my monopoly monopsony contract is firm still for this the marriage front dude.
Speaker 3:We should teach this to our children. Economics is major, major. Everyone has to major in economics. Number one for personal survival. Economics is major.
