Chapter 15

Hydrogenium

After introducing Irilion, Entropy added a series of updates designed to encourage players to visit the second continent. The first was a group of NPCs that he called guild NPCs. They were announced in January 2006 but added as part of the new features for c2. A guild NPC functioned in almost exactly the same way as a regular NPC—it worked as a shop that would buy and sell items—but this NPC would be controlled by a guild. The guild NPC was also similar to a trade bot. It could only sell what the owner gave it to sell, and the gold from every sale would go to the guild. There were three main differences between a trade bot and a guild NPC:

• A guild NPC had a warehouse-like amount of storage.
• It could not advertise for itself.
• It was paid for with gold coins instead of real dollars.

Overall, these features were nice, but the most attractive benefit was that all of the guild NPCs would be in Irilion. RICH needed to have one.

The guild NPCs were put up for auction. Whichever guild placed the final bid would pay the monthly rent of their winning bid. After an intense contest, RICH won the bid for a new female guild NPC named Dacia, with a rental rate of 35,000 gold coins per month. Dacia would become a new base of operations for RICH, and the guild’s only major entry to c2.

Dacia was more than a guild shop. She also replaced Richery’s previous role as guild storage, something the guild had been missing since Richery became the guild’s trade bot. She could hold an almost unlimited amount of items that guild members could store and share with each other. She could keep the guild’s gold, materials, and finished products all in one place. Her shop helped the guild become more organized, and my involvement was no longer necessary. Dacia could keep everything that I might have held for the guild, and the Guild Council members—the only other players who had access to Dacia’s warehouse—were all smart enough to run the guild without me. I didn’t even need to make any decisions. My only role, at this point, was to be the one who takes the credit for the RICH guild’s reputation. It was time to consider leaving the game. I would be graduating from high school soon and giving up video games to focus on college.

As I prepared for my exit from the game, I made a statement in the EL forums, posted on April 27, 2006, announcing my retirement and calling myself the master of the EL economy.1 Then I moved on to securing the internal stability of the guild. Since the only people who actually wanted to be the guild master were not a good fit, I decided to set Richery as the guild master. I split each guild leader’s responsibility. The guild was big enough to run by committee, and Richery could serve as the administrator bot that enabled the guild to vote on what to do. I hoped that it would relax any tension about who held which powers.

While this transition was in progress, Entropy introduced another new feature. It was a new metal ore that he called hydrogenium ore. The new metal ore used steel two-edged swords to harvest (each sword was destroyed while harvesting for a chance to get one ore). It was located in an area somewhere in c2 that required passing through a lava field on a narrow path where other players could attack. It would be used to produce hydrogenium bars, which were metal bars made for manufacturing special new swords. Entropy’s reasons for creating these conditions were theoretically valid (Privantu 2006):

1. To reduce the oversupply of steel two-edged swords.
2. To prevent players from mass producing hydrogenium bars. This was intended to set a minimum price for the new weapons and armors by keeping them rare.
3. To make harvesting more dangerous.
4. To encourage players to visit Irilion.
5. To encourage the merchant guilds and the fighting guilds to work together.

These brand-new items, announced on May 14, 2006, coincided with the RICH guild’s restructuring. I saw it as an opportunity to unify the guild; one more major project to set the new leadership’s standards. And when the plans for producing these new swords were ready, I left the game for what I thought would be forever.2 As I was on my way out, I made some suggestions for balancing the game’s economy, but I could not offer any quick fixes. Then I left for college.

The Economics (Principal/Agent Problem)

Dacia was a mark of the progress that RICH made. The guild had grown from struggling to secure an initial 30,000 gold coin investment to easily renting a warehouse-like storage for 35,000 gold coins every month. It went from one highly qualified guild leader to more than 25, with a peak membership of more than 200 members.3 The guild was embedded into the game’s markets, development team, and even its moderation team.4 As an economic summary:

1. RICH found a way to get cheaper labor.
2. This cheaper labor created economies of scale for the guild.
3. The economies of scale were an advantage that led to monopoly market power.
4. RICH used its market power for predatory pricing and regulatory capture.

This complete combination is unlikely to be found in a modern business, but it was a common feature of the Gilded Age of the Robber Barons in the late 1800s and early 1900s, before the spread of labor protection and antitrust enforcement. Modern monopolies usually come from different sources and rarely use predatory pricing, but regulatory capture continues to be a serious issue.

Moving on from what RICH became, considering the potential challenges involved when founders retire from the companies that they built, what happens when the guild master leaves? There were RICH guild members who lusted after the guild’s wealth, but I rejected their offers to take over as guild master. Not only were they not capable, they were also not trustworthy. It was a dilemma that economists call the principal/agent problem. This is what happens when there is someone who makes decisions on behalf of other people, but also has powerful incentives to put their own interests first. In the real world, this would be a corporate management team in charge of shareholders’ money. There are many examples from the 2008 financial crisis of bank managers making bad loans; they got paid to make the loans without any questions about the quality of the loans (Lewis 2010). In RICH, it was the Guild Council controlling the guild’s assets. I had to choose a new leader with enough reputational capital to be respected by the guild members, and enough human capital to keep track of the guild’s operations. None of my top choices had enough time to run the guild (they all had real jobs with demanding schedules), but trollson became the temporary guild master until Richery’s administrator code could be finished.

The new hydrogenium materials were an interesting experiment for Entropy and a big risk for RICH. They were primarily intended to prop up the market for steel two-edged swords. It was a creative way of adding a potential price control without using an NPC. Instead of simply setting a price floor, Entropy was adding to the demand for steel two-edged swords. And when demand goes up, price goes up. So, while the idea was weird, it was an economically sound strategy for that particular market. The question was: When the supply of steel two-edged swords is completely transformed into a supply for hydrogenium, what happens to the market for hydrogenium? This is what is called a second-order effect. The direct, first-order effect would be fewer steel two-edged swords. What comes next is the second-order effect, which will be fully explained in the next chapter.

For RICH and the other producers, the race to hydrogenium was a gold rush. Whoever got there first would own the initial market and get the highest profits (they would have the first-mover advantage); anyone coming later would be left with whatever they could get as the prices settled into a lower level. I believed that RICH had the best ability to be the first one to the market, but I only stayed long enough to help develop the plan. Everything else would be left to the players I trusted and the process I had proven.

1See Appendix A for a review of the responses to my retirement.

2When I left EL in 2006, I was listed as the 10th highest level manufacturer (trollson was ranked 9th and eventually rose to 8th), 37th in crafting (SiKiK was 30th and eventually rose to 8th, passing DrMabuse on the way up), and 18th in summoning. No other player made the top 50 in all three of those skills. I was also ranked 58 in harvesting, 152 in alchemy, 190 in potions, and 133 overall (a high ranking for a character that did not work on fighting skills). I had no desire to chase numbers on a leaderboard, but the continued rise of trollson and SiKiK is more evidence that the RICH methods could be successful without my direction.

3I began purging inactive members after RICH became the largest guild in the game. Excluding this practice makes the real number of total members nearly impossible to count, and the archived record has a gap of more than 4 months during this time period.

4Although none of the moderators openly favored RICH, the moderators who were former RICH members often gently advised the guild to back off when a harsh punishment was being considered.