Economic Lessons from a Video Game

cyan:wave2: Selling blue party hat for 57 bill

I have learnt a lot from games, and despite many believing they are a waste of time, games can provide a virtual paradigm for our real life interactions. Games are governed and played by humans, and therefore our interactions between one another will be similar, if not the same, despite the platform being ‘real’ or not.

RuneScape taught me a lot about economics, unknowingly of course. I remember visiting the Grand Exchange for the first time, witnessing a hub of people trading items for hours.

In game trading markets

The Grand Exchange was the centre for players to interact with one another. Using it was simple enough, however, mastering it was a feat. Trading and flipping was a skill, and just like the real world many get burnt attempting to chase that a green stack (over 10mill in game coins). The feeling of making a successful trade is undeniably real. When you wake up the next day to find that you have sold an expensive item is invigorating.

My time at the Grand Exchange taught me about market conditions. It taught me about how prices went up and down. I learnt market sentiment dictated prices, which seemed arbitrary at best. The Grand Exchange taught me that it was possible to turn a small amount of money into a large pot. How to negotiate prices and get the best deal. Importantly, it told me that losses are inevitable and markets are not always up. Market crashes happen, and they can leave your virtual portfolio in the dumpster.

The blue party hat is one of RuneScape’s most famed items. Tracking this item’s performance over RuneScape’s existence provides an informative, yet simple understanding of the fundamental factors that impact price action. The blue partyhat is worth upwards of 50 billion in game currency. This is equivalent to around $6000. That amount of money seems ridiculous, however understanding where its value stems provides useful insight to the value of many virtual and real items.

Factors that influence price

• Historic — the more intriguing the story, the more interest it garners
• Supply and rarity— because we want what we do not have
• Cosmetic — because we care about how we are perceived, in the digital and physical space

The rapid rise of the partyhat began in 2001 during an in game Christmas event. Players could freely get colours such as purple, white, red and yellow. This was the only time that this item could be obtained, and this brief window caused a fixed supply.

Over time, as the game grew, there was an increasing demand of this historic item. During its journey to the moon, the item survived crashes in price due instances where the item’s supply increased. Nevertheless, those who had this item expressed two things: 1) OG status, those early few players who had been around from the beginning and 2) Those with an exuberant amount of in game money to parade off to others.

Wearing one of these items in the game attracted attention from other players. It was like wearing a holy grail. It was to impress others and get that e-girl you’ve been asking out for months.

Ignorant Definition: E-Girl

E-girl = A girlfriend on a computer game that was most likely another middle age bearded man playing a female character. Achieving this was better than getting a real girlfriend. Believe me.

The party hat, but particularly the blue party hat is an item that is extremely difficult to obtain and because of this it has accrued a value that many in the gaming space deem as legendary. From an outsider looking in it all sounds bonkers, but as humans we find value in absolutely anything and everything.

As long as enough people believe in an item’s value, it will become valuable. Understanding value is something I continue to try and understand since I believe truly grasping the concept will give insight into why we buy things, and whether digital assets is something all of us will believe in.