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Wednesday, 28 March 2012

Return of capital in the first month

The sub-prime crash of 2008 generated a lot of very interesting economic analysis. One of the lines that stayed with me is that while wheelers and dealers managed to make money shorting a falling market, for most regular savers the focus shifted from return on capital to return of capital.

Thus the rather remarkable fact that when Standard & Poors downgraded the USA, US government bonds became more popular. The thinking is this: if the US got downgraded the world economy is screwed. If the world economy is screwed businesses, banks and so on might go bust, land might plummet in value. But the US government will still pay back its lenders most of what they lend as long as money is still in operation. So the response to the US being rated less worth investing in is that people invested in the US!

That tells us a lot about deflationary economies, economies that are crashing.

The Diablo 3 economy will be born crashing. Day 1 there will be thousands, even millions of pounds, of real money chasing a negligible quantity of goods and gold. I'll probably stick up all my gold on the RMAH at level 10 if I get in right at the start - there will be some people who will pay £50 for a little boost at the start.

From that point it will head very quickly towards its equilibrium point. I think the economy will be balanced by very expensive repair bills and will eventually be mildly deflationary not strongly deflationary. But it will start off strongly deflationary.

So where do you keep your in-game assets to achieve return of capital? That 20 dps sword that will seem amazing on Day 1 and be worth £20 will be worth pennies by the end of the week. 1 million gold, worth a very significant amount on Day 1 will be something we farm in an hour once we're running around easimode Hell with a level 60 in 900% gold find gear.

Here's some ideas:

1) Invest it. Getting ahead of the pack with your artisans could allow you to practically mint money. It's probably best to just concentrate on one. I'm going to be focused on my Jeweler and my friend Wazzer is doing the smith.

2) Gems. Gems never become not valuable. Even at level 60 a chipped gem puts you that little bit closer to an upgrade. It's not like a level 10 sword that's only useful for alts and newbies once the main part of the player base has gone past it.

3) Pages of training. I think these will go UP in the first month. Competition for these will intensify as people close in on Rank 10 artisan.

4)  Undiscovered marvels. Currently on the Beta AHs the worst affixes are Attacker Takes Damage and Health Regeneration. Usually people salvage this gear as junk, sometimes they put it up for some trivial price (and it almost certainly returns unsold).

However when the game goes live there's a very specific point at which those mods become valuable to a small group of players. At level 45 the Witch Doctors get Fierce Loyalty. So suddenly these junk mods become very useful to those WDs who like summoning.

Now I think summoning will be pretty strong and that Fierce Loyalty builds like this one will gain in traction. So this gear will suddenly become much more expensive as people realise that it's not junk after all and it will rise in price.

Another example is real dps v apparent dps. Once players get more experienced they'll realise a 280 dps weapon with + Int (or whatever your dps stat is), + Crit chance, + Crit damage is far better than a 300 dps weapon that lacks any such dps-boosting stats that aren't factored in. I explained about buyer psychology yesterday.

I'm sure there are other examples of gear that people will think is rubbish early on but then realise is good once they get more experienced at the game. High level Vit gear will go up if people discover they can't survive Inferno without it.

5) Store it as real money or the equivalent. Either cash out or you can leave it there as Blizzbucks or whatever the currency is. (thanks to Loque for reminding me of this option, I'd meant to put it in but forgot).


  1. The first 24-48 hours will be crucial for those players who want to make some real money. I will follow your path: level up to 10-15 and grind gold as fast as I can, focusing on good/fast farming spots. I am not interested in rushing to 60, because I don't want to burn the content.

    I'm not sure if I will level any artisan though. As said above, I feel that "pure gold grinding" will be the most profitable way to raise some money for a whil (1-2 days, maybe a little more).

    As soon as people will be dinging 60 (I guess less than a week) we will have a massive flood of gold on the AH. At that point the "pure grind" method will be less lucrative. That's when I'll start playing with my own peace and have fun.

    Let's cross our fingers and keep in touch as soon as the clock hits 00:01 ;-)

    p.s. I forgot to ask will you play on US or EU servers? DarthSolo will be on US side :|

  2. EU to start with. At some point I'll make a US character too.

  3. Can you play on both servers? I was under the impression that when you choose a side (EU/US) you have to stick with it. You also need to consider the $ = € conversion when cashing out to your bank account (from PayPal).

    1. It's unclear.

      Possibly the character limit will be 10 on the region you pick. Possibly it will be 10 per region. I've seen Blizzard give hints that could mean either.

      If it's the second in due course I'd like 10 level 60s on each of the three regions eventually. Leveling is fun!

  4. I thought accounts were region locked for D3, but I could be wrong. Either way you could buy another account and use that. I'll be playing US side.

    What will you be doing with the initial gold you grind Loque?, since you said you aren't going to level an artisan, I am guessing you are just going to sell it for real money. With all the early gold sinks that would be pretty profitable depending on how much more gold you are bringing in compared to a "normal" play-style.

    Does anyone know how fast the gold drops scale up in NM and Hell? Is it a linear progression as you level or does it rise more exponentially?

  5. @ Degrin

    Exactly, I'll just grind and sell every gold coin on the RMAH. there will eb a lot of players trying to hit level 60 as soon as possible and they will need gold for everything: gear, merchants, bag space, repairing costs, etc. I think that "selling gold" will be the most profitable way for the first week, more or less.

    1. Ah, I meant to add that as a return of capital option. I'll edit the post and add it in.

      It is of course one of the best options for return of capital.

  6. Do Gems count as a magical items? In other words...are they affected by magic find? Anyone know?

    1. So there is no real strategy to farming Gems per se. It seems more of a service business. You collect patterns, then buy gems, combine them, and sell for a profit. I think it would be cool if they added a small percentage to get a high quality proc for combining gems. Maybe getting 2 for 1 deal at a 2% chance or something like that.