WoWMidas

Musings on minting money on Malygos…and more

Opportunity cost

Many do not understand the concept of opportunity cost.  And those who understand it (yours truly included), often fail to fully acknowledge its implications.  Read on for some food for thought…

Put simply, opportunity cost is the (time) value of the best alternative to what you are doing.  For instance, if your highest gold-making activity is farming and you can make 500g per hour doing that, then your opportunity cost is 500g.  If your sole objective is to make money, therefore, doing anything else doesn’t make any sense.

There are many aspects of opportunity cost that folks might not adequately consider when they are evaluating gold-making strategies.  Consider the following violations of opportunity cost:

Low RL opportunity costs lead to poor assessment of market opportunity costs.  Many players have very low real-life opportunity costs.  They are young, and wouldn’t otherwise be spending their time making money.  Hence they have plenty of time for play.  But this leads them to place a very low value on their own time – and by extension, on the time of other players as well.  They think that services should be provided cheaply or free.  This leads to bizarre paradoxes, where they’re readily willing to drop 2,000g on an item from the AH, but might find it absurd that someone might want to charge 50g for crafting an item.  Which is why, unless you have some rare patterns or skills, barking is not likely to be the best use of your time.

Trying to do it all yourself.  You’ll see many players whose opportunity cost is 200g-300g per hour (just about any level 80 toon with maxed professions should be able to generate 250 per hour somehow!) will waste time farming every last mat (for crafting, or to fulfill a quest, or for something else) rather than buying it cheaply off the AH. They’ll spend time on activities that generate 100g or less per hour.

Failing to factor in all the time required.  In my regular rounds of gold-making blogs, I frequently see posts where people refer to how much gold they can make per hour, yet clearly excluding the time it takes to mail / log in on multiple toons / smelt / prospect / disenchant / craft, and to parlay all the resulting items through multiple auctions until they are sold.  For activities such as instance farming or other money-making projects that don’t involve selling directly to a vendor, that time can easily eat up 10-15 minutes per every hour of activity.  That 300g/hour endeavour just got nerfed into 225g/hour.

Thinking of some gold-making activities as cost-free.  True, selling a tradeskill in trade chat (barking) does not require an investment in mats, so you’re not putting any capital at risk.  However, there IS a cost to these activities.  Time spent barking and providing services could be spent some other way.  There is always the opportunity cost.  An hour spent barking is an hour that could be spent doing something more lucrative.

On the other hand, if you have to sit around Dalaran for some reason (waiting on a guildie or on some kind of appointment/timer, for instance), then barking may be a way of turning what would otherwise be wasted time, into some gold.

What do you think?

-WoWMidas

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