December 9, 2005

EverQuest For Capitalism

Hatched by Dafydd

I thought at first this was a typical New York Times gag article... like their articles rewriting urban legends, their left-wing polemics dessed up as news stories, or anything about an Al Gore comeback. But after reading to the end, I realized that it's actually rather profound. But as usual, the MSM grabs the pointy end of the sword, rather than the hilt.

Ogre to Slay? Outsource It to Chinese
by David Barboza
Published: December 9, 2005

FUZHOU, China - One of China's newest factories operates here in the basement of an old warehouse. Posters of World of Warcraft and Magic Land hang above a corps of young people glued to their computer screens, pounding away at their keyboards in the latest hustle for money.

Workers have strict quotas and are supervised by bosses who equip them with computers, software and Internet connections to thrash online trolls, gnomes and ogres.

The people working at this clandestine locale are "gold farmers." Every day, in 12-hour shifts, they "play" computer games by killing onscreen monsters and winning battles, harvesting artificial gold coins and other virtual goods as rewards that, as it turns out, can be transformed into real cash.

That is because, from Seoul to San Francisco, affluent online gamers who lack the time and patience to work their way up to the higher levels of gamedom are willing to pay the young Chinese here to play the early rounds for them.

Despite the viewing-with-alarm, what the Times has stumbled upon is capitalism in its purest form: a niche whereby the young unemployed in a developing country can make a few bucks, new entrepeneurs can start businesses, and the well-off can pay for goods or services behind the back of a Communist country determined to clamp down on the industry (in between machine-gunning rioters, of course -- tip of the hat to Hugh Hewitt). And we may be witnessing the birth of a virtual monetary exchange -- in the form of computer-game "gold" or "character levels." Capitalism is out of control... it's just busting out all over.

No wonder the New York Times views with alarm!

The market-based origin of the practice is easy to grasp: there are games called "massively multiplayer online games" (MPOGs), in which hundreds of thousands or even millions of players all over the world sign up, develop characters or "avatars," and play in the same virtual universe, interacting with each other and with in-game characters in various ways. As a character survives encounters with virtual danger -- fighting trolls or evil wizards in a fantasy game, engaging in aerial combat against the Nazis in a World War II game, etc. -- and achieves certain goals, it gains in power and abilities, often quantized by moving up to higher "levels."

The problem for many is that it can take a long time to work a character up to a very high level, and many experienced gamers find the early stages of a character's development tedious; they just don't have the time to play a character up to the level where gameplay becomes interesting to them.

Enter the free market. Unemployed Chinese youths have nothing but time; if they weren't just hanging in Beijing or Shanghai, they would be slaving away on their family farms, performing backbreaking labor for basically just room and board, since Communist policies prevent those small family farms from being profitable. Having so much time on their hands, many spend their small amount of money in internet cafes playing these MPOGs; and many have gotten very good at them.

So all of a sudden, people all over the world (not just in China) began to recognize that there was a demand for high-level MPOG characters and a ready supply of talent to create such characters... the perfect spark-and-tinder combination to produce a market:

The Internet is now filled with classified advertisements from small companies - many of them here in China - auctioning for real money their powerful figures, called avatars. These ventures join individual gamers who started marketing such virtual weapons and wares a few years ago to help support their hobby.

"I'm selling an account with a level-60 Shaman," says one ad from a player code-named Silver Fire, who uses QQ, the popular Chinese instant messaging service here in China. "If you want to know more details, let's chat on QQ."

The trend of outsourcing the lower levels of MPOGs began with individual "consultants," but it's starting to grow into actual small businesses:

That has spawned the creation of hundreds - perhaps thousands - of online gaming factories here in China. By some estimates, there are well over 100,000 young people working in China as full-time gamers, toiling away in dark Internet cafes, abandoned warehouses, small offices and private homes....

Now there are factories all over China. In central Henan Province, one factory has 300 computers. At another factory in western Gansu Province, the workers log up to 18 hours a day.

The operators are mostly young men like Luo Gang, a 28-year-old college graduate who borrowed $25,000 from his father to start an Internet cafe that morphed into a gold farm on the outskirts of Chongqing in central China.

Mr. Luo has 23 workers, who each earn about $75 a month.

"If they didn't work here they'd probably be working as waiters in hot pot restaurants," he said, "or go back to help their parents farm the land - or more likely, hang out on the streets with no job at all."

The Times thinks this is terrible, of course; they fret that wealthy gamers are just oppressing the poor again...

"They're exploiting the wage difference between the U.S. and China for unskilled labor," says Edward Castronova, a professor of telecommunications at Indiana University and the author of "Synthetic Worlds," a study of the economy of online games. "The cost of someone's time is much bigger in America than in China."

But I say hallelujah -- 100,000 poor Chinese youths have jobs, when they would otherwise be hanging out on street corners and committing impulse-crimes. It's a small number in a nation of 1.3 billion people, but it's growing; and other industries are spawning in its wake: now a virtual contracting market is forming around the core market of "gold farmers":

Other start-up companies are also rushing in, acting as international brokers to match buyers and sellers in different countries, and contracting out business to Chinese gold-farming factories.

"We're like a stock exchange. You can buy and sell with us," says Alan Qiu, a founder of the Shanghai-based "We farm out the different jobs. Some people say, 'I want to get from Level 1 to 60,' so we find someone to do that."

The game companies and some old-school gamers are upset, rightly noting that the existence of so many "farmed" high-level avatars will change the game universe. But this is an inevitable result of the phenomenon of the MPOG itself: by throwing a single game open to such a vast army of players, you guarantee that gamers -- and gameplay -- will follow a statistical model. Bell-Curve city... the virtual universe will begin to respond to the same universal market forces as the real universe outside. In fact, in this case, they're inextricably intertwined: the demand for high-level characters causes the real universe to spawn mercenary players who create an artificial bump of powerful avatars.

Some companies have realized that they may as well play King Canute, ordering the waves in and out, as stand against this tide of capitalism (actually, I'm being unfair to King Canute, who knew very well he couldn't command the tides; he was demonstrating the folly of some of his flatterers); MPOG companies themselves have jumped into the fray, hoping to provide a branded alternative to the Chinese and other foreign markets:

Sony Online Entertainment, the creator of EverQuest, a popular medieval war and fantasy game, recently created Station Exchange. Sony calls the site an alternative to "crooked sellers in unsanctioned auctions."

Note that, because of Red Chinese animosity towards and overregulation of small business, most of these gamer "sweatshops" don't register with the government, don't pay taxes, and don't abide by all the various laws designed to stifle innovation. The "gold farms" are illegal... which is probably the only reason they can make a profit in a country like China. China attempts to crack down -- finding such "gold farm" factories and shutting them down as quickly as they can... which is much slower than new ones are created.

The market continues to grow and will doubtless spawn other industries. What interests me most is the possibility that the fictional "currency" of MPOGs (gold pieces, for example) may eventually work its way into actual currency exchanges. If pricing becomes very reliable, so that $10 of real money buys you a predictable amount of gold pieces in EverQuest, then it may make sense to simply trade EverQuest "money" as a real commodity. I picture commodity trading in magic swords, armor, and even high-level elves -- derivatives on dwarfs -- Hobbit hedge funds! (Actually, I don't play EverQuest or any other MPOG, so I don't know if they use the copyrighted term "Hobbit.")

"What we're seeing here is the emergence of virtual currencies and virtual economies," says Peter Ludlow, a longtime gamer and a professor of philosophy at the University of Michigan, Ann Arbor. "People are making real money here, so these games are becoming like real economies."

But let us not be bad winners. Let's console those at the New York Times and other MSM organs who never fail to find the dark cloud behind every economic silver lining. The free market is proving damnably tough to control... even in a Communist dictatorship like Red China.

To paraphrase George R. Stewart, men may go and come, but Capitalism abides.

Hatched by Dafydd on this day, December 9, 2005, at the time of 3:46 PM

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The following hissed in response by: Towering Barbarian

Feh. Lameness**3! I'm glad that the impulse to cheat is benefitting people with a good work ethic but I still consider this as being on the same level as buying term papers instead of writing them yourself.

The above hissed in response by: Towering Barbarian [TypeKey Profile Page] at December 9, 2005 9:04 PM

The following hissed in response by: NewEnglandDevil

A couple years ago, a friend of mine was between jobs as an accountant. He played an MPOG (Ascheron's Call) for cash. He was pulling in about $1,000/month (untaxed) plus unemployment (in Arizona, this was low comparatively). Because he had to pay COBRA (health insurance) he wasn't seeing quite as much cash on hand, but he limited himself to playing 8 hours a day with standard breaks (2 fifteens and a half) and had plenty of money to pay his bills (house payment, utilities, etc.), worked out of his home, picked his own hours, etc. He sold his aquired items on ebay.

Of course, as the article intimates, his job was eventually outsourced to people who were willing to charge less for the same items, and my buddy had to renew his job search in ernest.


The above hissed in response by: NewEnglandDevil [TypeKey Profile Page] at December 12, 2005 12:30 PM

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