Yesterday's post seems to have been a wee bit controversial and I am honestly thrilled with all of the comments and feedback - even if a lot of it is disagreeing with me. Based on the comments I believe that perhaps parts of my arguments were misunderstood (yesterdays post could have been written in a clearer way) and I would like to clear that up before I get into why I am stockpiling Pyrite Ore.
There are a lot of people who believe I am arguing that one can NEVER make a prediction. This is not true. I believe that predictions can safely be made when we have an abundance of data. I have no problem predicting that the sun will come up tomorrow because we understand why the phenomenon occurs and have billions and billions of data points in the past indicating that the sun will rise tomorrow. When it comes to things like Pyrite Ore, however, I believe we often ignore the fact that we actually have almost no data. Vanilla Wow + two previous expansions isn't exactly a bountiful font of information. What factors does Blizzard look at when deciding how to release epic gems? How high is releasing them on Blizzards priority list? Do they plan well in advance how they will be released or is it a decision they take closer to patch release? Are they looking at any other changes that could change the gem market? etc. Basically we know jack. Despite this we all WANT to make predictions because making a prediction about what will happen is convenient for us. So we come up with a prediction using our complete lack of information and say something like, "Stockpiling Pyrite ore is medium risk". We ignore the fact that we have NO IDEA how accurate our prediction is. We assume that because we have a mathematical model it is reasonably accurate but we have absolutely no way of knowing if our model accounts for everything that needs to be accounted for. Because of this I think we are better off just acknowledging that we don't know what the risk of stockpiling Pyrite Ore is. It could be low, medium, or high - no one knows.
Another thing that I should have done a better job explaining in my first post is that while Black Swans appear to be unlikely before they occur after they occur they appear pretty obvious. In other words Black Swans aren't necessarily low probability events - they often just APPEAR to be improbable due to a lack of data when people are making predictions. Take 9/11 as an example. If on September 10th you had told people that planes would fly into the Twin Towers most people would have said that you were alarmist and nothing like that would ever happen. Looking back on the event, however, we realize that Al-Qaeda had targeted the towers before, had planned another attack involving multiple aircraft, assassinated Massoud in Afghanistan, etc. All of these events were indicators that something like 9/11 would happen - but we didn't realize/know that until after the event. In the same way there are numerous possible Black Swans that could greatly effect the risk involved in stocking Pyrite. Right now these possible events all appear to have a low likelihood of occurring - but we don't know if this is because they actually have a low likelihood of occurring or because we aren't looking at/don't have all the necessary information.
Okay. Now that that is out of the way I would like to talk about why I have decided that I am going to stockpile Pyrite Ore. I am not recommending anyone else does the same (you should make your own decision) but my thought process might be of interest. I don't believe I have any idea if stockpiling is low, medium, or high risk. While talking with Catharsis, however, he made an excellent point that has nothing to do with risk. He simply stated that stockpiling Pyrite is the only endeavor that he can currently think of in which he can possibly make tons of money very quickly and since he wants to make a shitton of gold he is going to stockpile. I can't argue with this and it is also why I plan to stockpile Pyrite. I don't know if it is a high or low risk endeavor - I just know that it is feasible and it is the only feasible strategy that I can think of that has such a hig possible pay off.
Now I am also helped in my decision by the law of diminishing returns. While I usually hate this law's attempts to place a limit on how much gold I make in this instance I am using the law to my advantage. I have decided that because there is relatively little meaningful difference in whether I have 100k, 250k, 500k, or 1,000k gold I am alright to risk quite a large chunk. Whether I have 500k or 100k I can still afford to equip multiple toons with mounts, epics, etc. So while I want to have a few million gold I have also come to the realization that I am okay with any 6 digit figure. Because of this I don't have a problem risking gold on Pyrite Ore. If I lose my entire investment I will still be able to buy what I want and will be able to grow my money back. If my investment pays off I get incredibly rich. Both are okay with me.
So because I can't think of a better way to make a lot of gold quickly and I am okay with losing a large chunk of my gold I have decided that I am going to spend up to 1/7th of my liquid gold on Pyrite Ore or buy 1,500 stacks - which ever comes first. I am not setting a minimum price point (although I would like to buy around 6g and below) but I obviously want to buy as much Pyrite as possible while spending as little gold as possible. Even if I end up spending 1/7 of my gold on Pyrite and I end up losing 100% of my investment I will still have well over 100k - so I feel fine with this level of investment in the market.
So what about you guys? Are there any other potential huge money makers coming up that you can think of? Are you planning on stockpiling Pyrite? Still think I am crazy?
On another note I will be leaving for the airport to fly back to Bangkok in about 5 hours so this is my last post for a few days. This means that I won't be posting here for a few days and if I haven't responded to your comment on yesterdays post and/or I don't respond to your comment on this post - don't feel left out. I am probably in a plane over the Pacific and I promise I will respond to the comments in a few days when I land and get unpacked.
Thursday, March 31, 2011
Wednesday, March 30, 2011
Well the last few days I have been thinking a LOT about Pyrite Ore and my decision to not stock up on it (contrary to the advice of pretty much every other gold blogger). I started to think about it when I first read an excellent post from Alto on the subject, I then had a great discussion with Catharsis both during and after last weeks JMTC weekly meeting, then I read another top notch post from Bones at Xander's Gold Mine. All of them are bullish on the market and I have to say Catharsis has a plan that I still think has a whif of genius of it. When I read their posts and talked with them I was amazed with how much thought they had put into their decision. They all had excellent points and when reading their posts / talking to them I got the feeling that I had made a mistake and missed the boat. After thinking about the subject nearly constantly over the last few days I have come to three conclusions.
- All three of them are EXTREMELY smart and I would talk to any of them at any time about ways to make gold.
- All three of them have the risk side of their equation totally wrong.
- I am going to start purchasing and stocking up on Pyrite Ore.
With regards to point one you simply need to read their posts and listen to last week's JMTC meeting. The discussion I had with Catharsis after the meeting isn't on the recording but I recommend any of you who are able to to attend the next meeting and question him in detail about his plans (Note: I will not be at this week's meeting as I will be on a plane back to Bangkok - I am guessing that Catharsis will be there but I am by no means sure on this). All three of them have great insights and you should with out a doubt listen to what they have to say. Point two is actually going to be the main thrust of today's post and point three I will talk about tomorrow.
So - back to point two. While they are all super smart and have put tons of thought into their decision all three have incorrectly calculated the risk. All three of them (actually every gold blogger who has written on Pyrite Ore to my knowledge) has basically calculated for two outcomes.
- "Best" Case scenario - Epic gems are prospectable from Pyrite ore and huge profits ensue.
- "Worst" case scenario - Epic gems are found in some other way and they are forced to try to get back as much of their money as possible.
The problem is that none of them have calculated for Black Swans. For those that don't know, the term black swan was introduced by Nassim Nicholas Taleb in his book of the same name and refers to a highly improbable event that has huge consequences (if you haven't read his book I can't recommend it enough. Seriously. Stop reading this post - buy his book on Amazon and then continue reading this post.). Now events like 9/11 and the sudden collapse of the housing market in the U.S. are both examples of Black Swan events in recent memory. While both were considered extremely unlikely both did occur and have had HUGE effects throughout the world. Because Black Swan events are so unlikely they are basically impossible to predict - meaning that the future is also impossible to predict - and predictions are basically useless. In other words - after much thought - I now believe that the calculations all three have used to justify buying and holding Pyrite Ore are basically useless. They make us feel that we have made the correct decision and provide a sense of security - but the sense of security is a false one. To illustrate my point let me present some possible Black Swan events that could happen and totally destroy their calculations in the process:
- Blizzard switches the vendor prices for blue and green cataclysm gems so that blue gems now vendor for more than green gems.
- Blizzard decides to copy Rift and allow all characters to have three professions (as opposed to 2).
- The proposed guild transfers interfere with character realm transfers (this applies to Catharsis).
- When the patch comes out it temporarily breaks World of Warcraft for you and you aren't able to log in for a few days and/or weeks (this actually happened to me - and many other players - during Glyphmas)
- Blizzard changes the prospect rates for ores
- Epic gems are prospectable from Pyrite - BUT the patch also causes a glitch that makes Pyrite spawn like mad (anyone remember the recent Whiptail spawn rate?)
All of these events could happen. And this is by no means a full list of all potential Black Swan events that would effect their strategy and/or calculations. The list of potential events is basically endless and can not be calculated. This means that the future can not be predicted. Period. Any time someone says that they have calculated the risk for a future event simply is not correct. The future may - or may not - correspond to the mathematical models we use to predict the future potential outcomes of events. So when someone tells you that you should be able to make your investment back even if epic gems do not prospect from Pyrite because their calculation says so - remember that this is simply a guess. A guess. It might turn out to be true or it might not. You might be able to get your investment back - or you could lose the entire amount.
Ever since homo-sapiens first used language there has probably been someone who claimed they could predict their future. They just needed to look at the stars, watch how some birds flew, read your palm, look at some animal entrails, use a crystal ball, come up with a mathematical formula, etc. The simple fact is that we do not know what the future holds. Epic gems may prospect from Pyrite Ore, or epic gems may not be introduced in Cataclysm, or the game may glitch and remove all the Pyrite Ore you saved up from your bank, or Epic gems may come from a new type of ore, etc. We should stop trying to fool ourselves and admit that we do not know what the future holds for Cataclysm.
What do you think? Am I crazy? Do you have a model that can actually predict the future with a provable success rate? If so sound of below. Either way come back tomorrow to see why even though I believe all of the above I have now decided that I will be stockpiling Pyrite Ore.
Monday, March 28, 2011
This is my post to this month's JMTC Blogging Carnival. The question is, "How would you make gold if you had low capital?" I'm going to go ahead and divide the question into three sub questions though in order to make it easier to answer. I think it is better to ask, "How would I make gold if I had low capital AND:
- I was below level 85
- I was level 85 with no maxed professions
- I was level 85 (or 75 depending on the professions) with two maxed professions
I think the answer really varies with the situation but the above subcategories should give enough variety in the answers that one of them should be able to get you gold quickly. So for the answers to the questions...
1) How would I make gold if I had low capital and I was below level 85?
This is a pretty easy one. First download and install Gathermate2, and RecipeProfit (also don't forget to get the Gathermate 2 data). This will show icons on your minimap whenever you are near a vendor that sells recipies on a spawn timer. Then everytime you go into a town or city make sure to check all of the vendors and buy any recipe you can. List these recipies on the Auction House to start some money coming in.
Second - drop whatever professions you have and pick up mining and herbalism - even if you are already a decently high level and have invested in other professions. The fact is that what ever professions you have aren't making you money (hence your low capital) so drop them. You can pick them up later when you have some money and can max them out so you will actually be able to get some recipes that make decent money.
Once you have both mining and herbalism level them up. Take some time out from your normal leveling and get both skills to a level where you have the skill to mine and gather herbs in your current leveling area. Sell EVERYTHING you gather on the Auction House. While you are selling on the Auction House you want to look to see if you can reset the market for any of the herbs and minerals you are selling (pay special attention to gold and silver ore). To know if the market can be reset simply see if any of the minerals or herbs are selling below their normal value. If they are - and you have the money - buy them up and relist them. Herbs and minerals sell quickly so you don't have to worry too much about getting stuck with them. Once you have a bit of money you can also start to do resale searches of the Auction House. Continue gathering and selling ore and herbs, resetting the prices on items you list when possible, selling rare vendor recipies, and doing resale searches until you hit level 85. At this point you should have a nice little nest egg - unless you have a massive spending problem.
2) How would I make gold if I had low capital and I was level 85 with no maxed professions?
First if I were in this situation I would do all of the above suggestions. Get Gathermate2 and RecipeProfit, pick up herbalism and mining, sell herbs and minerals on the Auction House, reset markets when possible, and sell rare vendor items. In addition, however, you need to seriously look at your spending. If you are level 85 and have no capital you are spending too much. Period. Questing and loot alone at this point should give you a little something to spend. If you don't have it - you need to stop purchasing items. What I would recommend is set a time period where you will buy nothing for your character besides food and repairs unless you are investing in making gold (In other words buying a weapon to relist on the Auction House is fine while buying a weapon to equip isn't). Even just a week of this would work wonders. During this time continue to quest and/or run instances, loot mobs, gather ore and herbs, etc. Once your self imposed spending ban is done with you should find that you have quite a bit of gold to spend on your character AND to continue your gold making business.
3) How would I make gold if I had low capital and I was level 85 with no maxed professions?
The answer to this one really depends on the professions but I will provide some guidelines.
If you have 1 or 2 gathering professions and you do farm a bit then your problem is in spending. You need to seriously look at what you spend your gold on. Give your self a spending gold ban (only buy food and repair items for your toon) for a little while. Do some farming, sell your goods on the Auction House and start to resell items from the Auction House. This should give you a bit of money with which you can either change professions (see here and here for my profession choosing advice) or simply to continue to farm and resell items.
If you have 1 or 2 converting or crafting professions you still need to give yourself a spending ban. While on your ban you need to figure out what items you can make and sell on the Auction House for a profit. This will depend on your professions and your server so I can't give you an exact answer on what to craft in this post but there are a few places you can go for help.
Check out the archives for this blog and the other blogs on my blogroll to find some tips for your professions.
Check out the Undermine Journal (U.S. realms only) to get information on the pricing and market size of both crafted items and materials.
Attend one of the weekly teamspeak meetings held by JMTC and ask your question there.
Head over to the WoWgoldmaking Reddit and post your professions and server and ask for some input on good items to craft for profit.
If you want a bit of extended help you can also hire a coach from JMTC to give more detailed and personalized assistance.
I hope this helps and have fun getting your starting capital and making gold forever afterwards!