Analysis: 'Socially Awkward' - The Wheel of Fortune

[Continuing his eccentric series on social games, game designer Patrick Dugan predicts social games will "affect the world in similar ways that the emergence of credit and currency have, and on the time-scale of years rather than centuries". Here's Socially Awkward X.] Volatility is the enemy of the common person, and a friend only to sorcerers and option traders. Volatility makes the young vomit, the old arrest, and the middle-aged sweat. Volatility makes ancient civilizations plan out child sacrifices a generation in advance, and modern civilizations invent new derivatives contacts. And yet, the Wheel of Fortune does not quit, rolling us to heaven and crushing us to bits. Gettin' to be about that time again. A Bit Of Telescopic Madness I thought the world would get electromagnetically shocked by a comet on Tuesday. A 10-scale quake would register globally, EMP would melt-down grids, orders could go un-super-sized. My friend and I made a business plan for how to deal with that scenario. It involved crossing a desert, a river valley, caves, livestock, a car stocked with non-perishable food, and killing one out of 50 people we encounter - perhaps one out of 65 if we managed things well. The comet ended up disintegrating in its perihelion, and we just went camping instead, but a flaming fireball did kill a woman and destroy some houses outside Buenos Aires, of all places. I have to conclude that as long as the planet is not threatened by celestial forces vastly beyond our scope, we can work this out. Technology has been evolving at an accelerating pace since at least the last Ice Age. I leave it for the more esoterically minded to speculate about what technology was doing BEFORE the last Ice Age. The more spectacularly we have compounded our knowledge, the more wild our booms and busts. The time-frame for these cycles has also been telescopically compounding, shorter and shorter. In the year 2000, people almost went to infinity again, but ran into a detour. Now we're trying to do it again. We invent currency, let the animal spirits loose, force people to speculate in order to protect the purchasing power of their savings when governments and banks are always edging in with inflation, and then we complain when we have to deal with another great depression. The system is designed for this. I think we do this to ourselves because it gives us the illusion that at least now, we are the ones manically churning the wheel. So many stories I could tell you, people who had a million bucks and spent it off, suicides of the rich and famous, slow and steady progress into the middle class to marry the spoiled son of a rags-to-riches renegade. The killer real estate deal in the "safe" neighborhood across the street from where you happened to get robbed. And this is only the chaos that human beings manage on their own! Let's not forget floods, tsunamis, the magnetic reversal of the poles, orbital dislocations, meteor showers, and sun storms! Maybe our problem is an attitude problem; we're looking at chaos in the wrong way. I chose to live in Argentina because I figured its habitual crisis modality lends it a certain resiliency. Now I'm thinking they just like it. Everyone who has done well here saved up cash during the boom times and had the foresight to hoard it in anticipation of the next real estate buying opportunity. This is how people Edge each other out around here, whereas in the U.S., they sue each other for IP infringement. Boooooring. My theory is that people tend to do better the more they expose themselves to volatility, the more they make a friend of it. Los Angeles has consistently comfortable weather but is consistently a grime-fest, whereas the Bay Area has schizophrenic weather and is a pretty consistently nice place to live; the fortunes of Bay Area tech investing seem to be proving more durable than those of Hollywood. I try to embody this in how I live. I always wear flip-flops, because I’m hedged for whatever. Even in winter, in the Appalachian mountains, with snow on the ground, I toughed it out. Socially, I’m pushing myself into the 99th percentile of temperature volatility, right there with hobos living under bridges. This forces me to rely more on my own internal breath and movement to maintain comfortable body heat, and I extend that into my personal and professional life as well. I’ve been literally lifted up into the sky so my bank account could increase a hundred fold and metaphorically thrown against the pavement while my bank account went back to $11.54. But meanwhile, I haven’t been bound by a contract that, while promising me just enough money to live on the 30th of each month, constricts my ability to pursue new opportunities. So... About Games A lot of developers, especially the indies, look at the booms with disgust but still fear the busts. Social games, in particular, have elicited this feeling. Maybe the telescopic madness I described above has something to do with it. But if you look back at history, then you know we've played this game before. Remember when ninjas were big? Everything was ninjas: gaidens of ninjas, turtles of ninjas, cute ninjas, mystical ninjas. Then the market for ninjas crashed. No big deal, it was a frothy market and people should have known better. How about FMV games? How about the resurrection of FMV games in Final Fantasy VII clones? How about the stock chart of Final Fantasy IV? In the early '80s the Atari-based console market was growing rapidly but then experienced a crash. Those who moved to PC games found a strong market for complex strategy games, RPGs, and simulations. "Simulation Game" used to be a name for a genre. Then look what happened, the geeks inherited the earth. Goodbye, E.T. -- hello Sim City. A great flowering of creativity ensued, where creative, often independent developers made millions off of things nobody had ever imagined playing before. Then the Japanese invaded, successfully this time, with the NES.   The NES allowed developers to do games for a wider audience at a lower average cost to them. The market exploded. Nintendo sold over 100 million of those boxes. This was the mid-to-late '80s. They cleaned up. Ninja Gaiden 3, for me, represents the peak of the NES age. Because the story was way stupider than the first, the difficulty was caked thick. It was like its predecessors, but a little sloppier -- drunk with level design. Ninja Gaiden 2 had the best level design out of the trilogy. And now it's over. This cycle repeated every six or seven years. A lot happens to a child in seven years. A 6 year old playing A Link to the Past becomes a 13 year old playing Ocarina of Time, and meanwhile his parents get a divorce. The whole cycle begins anew. Somebody capitalizes on a distribution method; a few developers get in early, are the first to satisfy a significant audience expectation, and make a bundle. One year later a lot of investment is geared towards Christmas sales, this builds year after year until the quantity of new games and backlog of good existing titles is too large for the audience to absorb with a high enough cash return on new project investments. So, people have to be laid off. Investments are canceled, projects too, companies entirely. Savings are withdrawn from ATM machines and spent down. Mortgages are left unpaid. The colonization of time is threatened. Then somebody opens up a cool new genre and others try to improve on it, or a new platform comes out with some gimmick, or distribution becomes radically more efficient. The cycle starts again. FPS, Casual, Arcade, RPG -- Turn-based Strategy and Real-time Strategy. Fighting game franchises and then later, cross-over sequels. Marvel vs. Capcom, DC vs. Mortal Kombat. You're either The Beatles or The Rolling Stones - pick a side. Now let's go back in time. Mercenary Wars People used to be afraid of the uncertainty surrounding weather. It defined the fate of agricultural peoples. Before that, people were afraid of the uncertainty surrounding populations of large game. Wicked harvest festival; smoked steak sambas. Races against maggots and staring contests with winds. So, we invented trade, and with trade specialization, with that invention we invented invention, until the invention of currency so inventions themselves could be traded and specialized, mostly enriching lawyers. You think most of that $12 billion dollars that GOOG paid for MOT was in good will? The Medici in the fourteenth century founded an empire of fortunes spanning five generations, and at least that many bond-financed mercenary wars (sound familiar). They rose on currency trading for clients ranging from Venice to the Vatican. They survived exile, incarceration, defaults, and extreme luxury to come back into power and save Italy froma crisis, only to fall even harder into history's trash can. (This is the face I make when I design virtual currency mechanics.) The Rothschild's traded bonds and gold that financed the Napoleonic wars, nearly coming to bankruptcy on a gold trade gone bad. They went on to master the European banking system and amassed more than 1 trillion 2012 dollars, including stakeholdings in several central banks and the Bank of International Settlements. They managed to scheme a way for their progeny to be comfortably en-douched for several centuries. (This is the face I make when I play FarmVille and Adventure World) In the eighteenth century, a Scottish bastard with a Parisian address and an unlicensed wife by the name of John Law invented the credit-fueled stock market bubble and funded the founding of New Orleans. It all ended badly and fueled the momentum toward the eventual French Revolution!!! (I make this face when I do spreadsheet work.) What do all these guys have in common? That they profited at the expense of your ancestors? Yeah ok, but what do they really have in common? They were all pretty good social game designers. Social games are going to affect the world in similar ways that the emergence of credit and currency have, and on the time-scale of years rather than centuries. Nowadays, everyone has a computer in their pocket with multiple forms of multi-layered, real-time, spatially-oriented communication; the original wheel of fortune was rolled together back when the printing press was the foremost information technology. Some of the highest valued companies in the world are building central banks of attention. Google, Apple, and Facebook are the new big three; not Nintendo - Sega - Sony, or Nintendo - Microsoft - Sony. Why? Because the older companies don't really know who you are, but the new companies are trying their hardest to know more. It's the latest and greatest slicing and dicing of the oldest game underpinning society: pass the risk. Most people want to defer risk -- and by extension, responsibility -- to somebody else. They want the steady paycheck and the warm fire and the pot full of grain without having to worry about the weather, the roving bands of marauders, the comet of destruction, the will of the gods. Leave that to someone else. Those that assume the risk also assume the power. The result is a pyramid structure of people increasingly deferring risk off to a more sophisticated guardian higher in the structure, and at the very top there is one eye open to the horrifying reality that nobody is in control at all. Social games finely cut a deal between you, your cluster of friends, your cluster of neurons, and the cluster of bank accounts held between you all. The prime differential in exchange rates between your local currency and the virtual currency of choice lure a probability distribution of different spenders with different psychologies into different scales of transaction at different times, always luring for a repeat. The prices of all the items, their impact on your rate of progression, their loading of the dice, these are all fine deferments for you to have "fun" playing while the operators have fun raking. The cruelty of these mathematics is not new. In a society where almost everybody takes the short-volatility option, sitting tight and hoping for good times and then death before running out of cash, games provide a guaranteed-safe long-volatility option. At least, they used to, and perhaps will again; for now we have the opportunity to make gameplay out of people playing with virtual currency and splitting risk between each other. FREE gifts are great, but there's no transactional logic in that. One thing we're definitely going to see are more interesting forms of request-driven gameplay that involve multi-party pay-off matrices, and your trust with a specific player becomes a critical factor. Then we can look at granulating those risks a bit by making items probabilistically inclined, and then like, monetize the shit out of them. We saw this trend early in the cyclical process of social game's growth, the first wave was dominated by guaranteed payouts over fixed amounts of time, in early 2010 we saw sprinklings of probabilistic reward mechanisms that had people shaking down customers in Hotel City for those 5 percent of guests who would give you 500 coins for waking them up. Didn't make sense but brain don't care. It would also behoove the top line revenues of some crafty developers to use the premium currency as a betting medium to get more premium currency; some negative feedback loops would have to be employed to guarantee limited opportunity costs for the house. Skill-gaming, once a buzzword associated with matching Bejeweled scores against each other, can come back into vogue on mobile, where players can bet on their performance in brief competitive sets. But that's just warming up the entertainment applications of games. Chasing Ghosts The primary issue with gamification isn't that it's a charlatan invested cluster-fuck -- that's one of gamification's greatest charms! The issue is that it's business model is poor, trying to shake-down cash-rich, imagination-poor, hierarchical organizations to put the groove back into money. Nah nah nah, you gotta put the money back into the groove, design rich gameplay that stands on its own but happens to highlight transactions people can do with "real" money. Once you've got that flow going on, then you'll be able to substitute the credit of your virtual currency for the required liquidity provided by the fiat banking system, since typically what you'd end up with is people trading their time in performing some digitized service for a product, or simply trading products. I'm talking about real goods here, not just virtual ones. You'll make a spread on facilitating the transaction, which is a linear tariff on the system and thus more sustainable, and as long as you convert a fraction of your winnings back into national legal tender the Mafiosos that run the world's tax collection agencies will leave you alone. That's how we rock out the new economy. See, as information zooms around faster and faster, and people defer risk to each other, the boom/bust cycle gets faster, sure, but it also fractalizes more finely into new tangential boom opportunities. The purely entertainment-oriented, demographically narrow games of yore that ran in 6-7 year cycles are now going in only a few years. I'm going to rip off a market-timing graphic from David Edery since he has more money than I and can afford it (for now): Social games as we know them are already gearing up for their triumphant return AND splintering off the first phase of mobile-social, which will promptly in-turn splinter off these reality-integrated games I'm alluding to. The current frenzy in the Bay Area and elsewhere to invest in games and tech on sweetheart terms will pop when the wizards at the central banks slip up in their game of typing increasing billions into the system every week, but that game too will fracture. We're going to enter a multi-polar, neo-medieval geo-socio-political landscape, which conveniently aligns with some buzz-words for trendy new games. If you can, you should raise up cash on your balance sheet and hunker down to build out some cornerstones for the new economy while deflation or manic inflation rages around you. You can totally time the market, but that isn't the hard part; first you have to be able to time yourself. If you're so short-sighted that you think squeezing the whales is priority #1, and that these hyper-slanted revenue distributions are sustainable, that the naivety of people playing your generic game as their first big game experience, spending thousands in it, is a renewable resource, then I wish you better luck than Ahab and may your crew not go down with you. If you realize that yes, following trends is the "safest" way to profit, but you can shift your opportunity cost out of the trend and into new ones, that will open you up for the real big win. The real wealth is in higher levels of consciousness, and the real fortune is served on a spiral, not a wheel. Indie game developer Jason Rohrer wrote me an email a few weeks ago about a game design he shelved that was similar to a game design I shelved -- fate didn't serve either too well. The games had to do with burglary and the risk of other thieves pulling the rug out from under you to get you caught -- I think mine was more emphasized on multiplayer and his was more environmental. Then I started talking big about free-to-play games, and he gave some good counter-arguments for why it isn't a silver bullet. He closed by saying, and he won't let me quote him because he doesn't want to seem negative, that he's seen me chase casual games to skill-games to WiiWare games to social games to mobile-social, and that beneath all of that, amazing, genuine games are always making money. The biggest risk a game developer faces isn't that they miss the next big trend, or jump into a trend late enough to get bloody, it's that they are so distracted chasing the ghosts of a risk-shifting society that they never make a genuinely great game. As long as the Sun, the Moon and the Earth still spin, we can still get it right. [You can also read the rest of Dugan's series about Metal Gear Solid 2 predicting Facebook, the industry's Wall Street envy, the joy of vector meme, peripheral visions and dreams, metrics, F*book, mobile social local games, the return of skill games, and solipsocial games.]