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Wednesday, May 22, 2013

Corporate Economics and a Real World Solution Envisioned

"Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men." - Adam Smith, Chapter IX, p. 749, Book IV, The Wealth of Nations

Over on Inner Sanctum of the Ninveah, Kirith Kodachi fingers a long simmering issue for corporations everywhere. How do you fund the organization? It's a serious issue for many corporations and for the economy as a whole.

Kirith correctly points out that it is all too easy to create inflation in the economy. Economic management is a tricky balancing act made less easy by too many hands in the pot. New Eden's economy, for all it's vaunted similarities to the real world, is still a highly artificial economy. I count this problem with taxation as symptom of that larger malaise.

No doubt CCP could treat the symptom. One thing corporations do is earn profit. From that profit they pay bills, some of which are employee paychecks. I would not be opposed to a change in Eve Online where all ISK made by a corporation member goes to the corporation. A percentage of that gross profit would then go back to the employee as a wage, determined by the corporation and the member based on that members abilities and contributions. Call it reverse taxation if you like, most people just call it a paycheck.

If you don't like that model, you could use the American Medical Association model, or any other model used by organizations with large voluntary memberships. Let's say a person wants to be a member of Goonswarm. There are many benefits Goonswarm provides it's members. That's never been something anyone could deny, not even me. Goonswarm could (should) charge pilots to be members of such an organization, flat out, no tax system needed. If someone doesn't pay their dues, kick them and set them red. Confiscate all their assets first if you like. Either way, if they don't pay they don't play.

Those are just two off the console ideas. There are many hurdles to clear to implement either of those suggestions, I won't deny that. It's easy for me to sit here and throw out suggestions. That's not the point though. What I really want to get across is the current taxation model is the wrong model. When CCP sits down and looks at a major industry revamp, I want them to consider making the current corporate model parallel the real world. That's where we need to go to correct this issue.

It's been written many times that the Eve Economy is unlike any other MMORPG in that it works like a real economy. So should our corporations. When I go to work for HBHI and SYJ, everything I make should go to them and for that I should get a paycheck. That might include housing allowance (POS space) and health care (clone reimbursement.) When on official company business, I should get paid mileage (ship reimbursement.)

This is already done in SYJ to a large degree. The alliance, no, let's call it a mega-corporation, takes possession of all sleeper loot. That's the mega-corporation's gross profit. The mega-corporation then pays each participating pilot a share of that profit. That's our paycheck. We have insurance. It is a ship reimbursement fund, the ISK for which comes from PvP loot. If we lose a ship on a mega-corporation job the insurance kicks in. It works quite well and it is all handled by our mega-corporation leadership using financial books (spreadsheets!) done outside the Eve client.

It would be nice to see some controls built into Eve to make it possible within the client. Is it a lot to stick into the game? Yes, it is. Will Eve Online ever be exactly like RL? Probably not, but any move in that direction would be a good move in my opinion. The models already exist for all of it. CCP would have to invent nothing. They'd just need to insure the game follows the models already guiding stock exchanges throughout the world.

And that's something else I've been mumbling to myself about. I'd like to see a New Eden Stock Exchange. The NESE would allow corporations and mega-corporations to become publicly traded entities. Expand those "shares" listed on the corporation page. A pilot wouldn't have to be a member of Goonswarm to get a piece of the Goonswarm financial action so to speak. Goonswarm would benefit from cash inflow. They would pay dividends, make quarterly reports, and all those other things mega-corporations do. If they don't, investors will take their ISK elsewhere. Supply and demand would control this market just like it does the current commodities market in New Eden.

But let's forget about Goonswarm for a moment (yeah, I know, that's difficult, but do it anyway.) Let's talk about all those Indy Corporations who live, work, and die all over New Eden. They may be a high-sec corporation or a renter corporation out in null-sec. They may be into T3 manufacturing or drugs. It wouldn't matter. If you could invest your ISK into those companies based on projections of possible future profit, how cool would that be? Forget about station trading, the real money is in the stock market! Do you hear me Gevlon?

This is a sort of dream I have. CCP, when you get around to thinking about how industry and the markets should work at the end of your five-year vision, take a look at the London Stock Exchange, the NYSE and  the Tokyo Stock Exchange. Allow New Eden companies to work like RL companies. Let us leverage our assets off. Give us the opportunity to become the next IBM of Wetware Mainframes or the next Solyndra of Nanite production. Either way, it'll be because of our economic chops (or lack thereof.) Give us that and you truly will make gaming history.

Fly Careful


14 comments:

  1. Ahh... this is why I come to your page. I love to listen to your ideas about business and industry!

    With that being said, I have a counter point for you... a Publicly traded Corp would be a very interesting Idea, but the problem I foresee is that it would exponentially increase the difficulty of the top echelon members. For well established corps this wouldn't be a huge deal, as the top CEO's basically learn better business practices to stay in the Black. Smaller Corps would push really hard to level up for a chance at what would be perceived as easy capital, only to realize that trying to pay out return dividends would strangle them. Is this in line with the endless cliff learning curve of Eve, YES. Would it be a huge benefit to anyone but outsiders... Most likely not.
    Just my humble opinion.

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    1. You are correct, it would make Eve more difficult. But I think it is something younger players need not worry about and it'd give real challenge to older players. But yes, the learning cliff would become steeper. It's all good far as I'm concerned. ;-)

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  2. You need to read and then relate this to Ripard's Magic Box post...

    Fascinating Intricacy or Useless Complexity?

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    1. I swear I knew nothing about that post when I wrote this.

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    2. or perhaps an even older poast, one dating back to last year???
      http://carebearswithclaws.blogspot.com/2012/09/the-unincorporated-eve.html

      ;-)

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    3. Nope, missed that one too Hong. I can't read everything you know. I actually didn't know about Carebear with Claws until last month. It's now in my reading list, though I don't go back and read back posts usually. There is just not enough time in the day. Thanks for bringing this one to my attention. It was definitely worth the read!

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  3. There is a fundamental mistake in the above: there are NO benefits of joining Goonswarm in the economic sense. There is a reason why Goons are flying crap: they are poor as the dirt. They join Goons not for money but for fun. If you want to earn money, you do it solo, mostly in highsec.

    Since the Goon doesn't make a dime by being Goon, you can't really charge him for it. Try it and you'll have no Goons!

    In case of a wormhole corporation it's somewhat different as there is no NPC infrastructure in the wormhole, no stations and fixed gates, everything you use is player built. Also, wormholers at least make some (though not really good) money from sleepers. But still, the organization is mostly an entertainer and not an economic: you are paying them for the fleets they provide you and not for the income you make.

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    1. But could you make gobs of ISK playing the New Eden Stock Market should one come along?

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  4. AAAHHHHH I smells a ponzi with no legal recourse for the stupid who i swindle. NYSE and all others only work as an investment tool if the investor believes they will get their returns in hand. EVE does not give anything for free :) you will get robbed absolutely blind. But if you have the ISK i have a corp for you to invest in Mabrick :)

    Sly

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    1. And this differs from the real world how? Don't make me say Bernie Madoff. Damn, too late. The fact is, swindles happen all the time in the real world. It's all part of the great game no?

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  5. As a real life investor I can offer some input. An in game stock market would be too easy to manipulate for gain. While the real life stock market does have scams it is still restrained by SEC rulemaking and the threat of punishment. Without even basic controls it would be a total free for all where share value is meaningless. Instead of doing hundreds of man hours on an in game stock market, CCP could instead just install a roulette game or lottery and achieve the same result.

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    1. So you're advocating they revisit the Incarna update and walking in stations? *wink, wink*

      Thanks for your input. I am mostly certain this will never come to pass. But that doesn't mean I can't think about the "what ifs" of it. Cheers!

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  6. In the real world there are real consequences for lying on your public company. In Eve, I can put together a solid business plan, utilize my HS alt corp that has been executing said plan for over a year.

    After stuffing my pockets with investor capital, I could disband the corp and start up again with free funds.

    There is nothing tying my toons to the corp. There is no reason I cannot run for the hills with all my eve investor funds. In the real world, I end up in jail. This is why investing without collateral in eve is a huge gamble, unless you have another tie with the toon in question.

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    1. I am the anonymous poster above. What the system lacks is an ability to post collateral. Many in game loans are collateralized by the players. If there was a system to do this in the game, there would be a way to run more complex financial transactions such as banking, equity and debt investment as well as bonds. It seems like CCP might be able to do this through the contract system but without insight into how that system works who knows. I'd love to be involved in an effort to bring this to reality though.

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