Making gold: A frame of mind?

[Unholyshaman]

So while I was working on my http://www.mmowned.com/forums/wow-gu...hievement.html I came across a very nifty blog / community called Saate: Warcraft with an Obsessive Twist which features many extremely helpful and well thought-out guides.

So I would now like to bring to your attention one of Saate's gold making guides (the original guide can be found here My warcraft gold making guide | Warcraft with an Obsessive Twist )

[NOTE:] I did not write this guide my self, you can find the original link above
[WARNING:] Long read, but worth it. May be common sense to some but it has a very unique approach to making gold - a more economic approach.

Table of Contents

1. [TLDR Version]
2. [Opportunity Cost]
3. [Applying Opportunity Cost]
4. [Dealing with Competition]
5. [Self-assessment and Scalability]
6. [Price Checks]
7. [Further Reading & External Links]

TLDR Version – If nothing else, take this away

If your eyes glazed over a few lines into this guide and you’re pretty confused by the stuff in here it’s not the end of the world. Different people enjoy different things and you might just be looking to make enough gold to cover your day-to-day expenses like repairs, flasks and enchants. I’ll try to provide a few simple, succinct pieces of advice here for you to take away.

DO:

• Learn who in your guild has all the enchants/patterns/cuts you regularly need. Become best friends with all of them.
• Pick a series of dailies, like the argent tournament ones, and get in a routine where you do them every day.
• Set yourself a minimum gold limit like 500g and in your head tell yourself thats the same as 0g. Even if you’re saving for something expensive keep the limit in mind. If the item you want costs 2000g then make yourself get to 2500g before you buy it. There’s nothing that says ’scrub’ more than having to borrow money off people to repair during a run.

DON’T:

• Don’t vendor your greens just because you’re lazy. Make a level 1 alt and keep sending them there. Once in a while get a friend to DE them for you and hit up the auction house. This doesnt just apply to WOTLK greens but all of them. People levelling enchanting are going to need the low level dust too. Did you know a level 58 green weapon can DE into 3 x [Greater Eternal Essence] which still sell for up to 12g each?
• Don’t be an unthinking consumer. The people who beg for repair money and loans are like this because as soon as they get to a certain point, like 1k or 2k, they go into ’shopping’ mode and actively seek something to spend it on. Set your goal and DON’T deviate from it by spending your gold on crap.
• Don’t use time as an excuse. SO SO SO often I hear people give the weak excuse of ‘well I don’t get as much time to play as you’ when they’re defending their begging. You know what? It’s about thinking and being smart with your time, not brute forcing it with /played time.

Opportunity Cost

Ever bought a slightly overpriced item on the auction house because you thought to yourself ‘Stuff it, can’t be bothered waiting for them to be cheaper’? I know I’ve done it from time to time buying gems/leg armor kits for brand new gear I’d just gotten from raids that night.

Ever been questing or levelling a trade skill and needed a particular low level item from the AH? You look it up and the only one there is way overpriced at 50g but you buy it anyway to get it over and done with?

Believe it or not you’re applying a judgement based on something called Opportunity Cost. Boiled down you’re deciding by asking yourself “How long would it take me to go and farm that item myself, and could I earn more gold doing something else in the same amount of time?”.

Too many times I see stuff like this:



In his infinite wisdom, Killapwn is correct in that he probably CAN farm up 5 of those in an hour easily but in doing so he would not be saving gold if he can earn more than 250g doing ANYTHING ELSE in that same hour. For some bizarre reason people fail to grasp the simple notion that even if you farm something yourself it STILL COSTS YOU TIME! Could you have farmed cloth, greens, essences or something else with that time? how much would they have sold for? THAT is how much your decision to farm something for ‘free’ costs you.

To help demonstrate what I mean check this diagram out. Let’s look at things from Killapwn’s perspective – if he wants the Golden Pearls but thinks 250g is a ripoff he can make the decision to go farm them himself or do other things:



So based upon the decision tree above the COST of choosing a particular path is what you could have gotten by taking a different one. Farming the pearls himself? Net result is 250g, but could have made more profitable use of the hour by farming essences. Doing BG’s for an hour? Net result is it cost him 250g if he’d farmed pearls instead or 390g if he’s farmed essences instead. Starting to make a little sense?

Did you know that, because of this same principal, how much a level 80 character earns an hour has a direct effect on how much a level 10 character can earn an hour? Allow me to elaborate with an example:

A miner earns 500g per hour mining ore in Northrend. He decides he wants to drop his second profession, alchemy, and pick up engineering instead. He wants to level up engineering as fast as possible and has saved plenty of the higher level ores. He soon realises that he needs a bunch of the lower level ores too and instead of farming it checks the Auction House out. He’s shocked to see that copper bars are going for 30g/stack which he thinks is ridiculous.

Is he better off farming the ore himself in newbie areas or buying it from the Auction House?

At 500g/hour mining in Northrend that works out to be 8g33s per minute of time invested. Using that as a rough guide he will need to be able to farm enough copper to make a stack in 3½ minutes to make it worth doing. That’s not even counting the time spent to get out to the newbie area and to smelt it afterwards. That 30g/stack is starting to look very reasonable don’t you think?

That’s the resounding principal around opportunity cost and why its so important to factor in to your assessments. Don’t just think about how much gold you could save by going and doing it yourself – think about how much gold you could be making doing something else with that time.


How much DO you make an hour?

One of the first things you should figure out is what your hourly rate is. Whatever your current method of farming is – be it instance runs, cloth farming, mining, herbing, skinning or just grinding – use a timer and try to get a rough idea of the time you’re investing. If you’re lazy and it’s something fairly consistant (like farming eternals in Wintergrasp) you can just do it for 15 minutes and multiply that to get your number.Find out where your happy medium is and do what you enjoy doing most.

Once you have your hourly rate you can begin to investigate alternatives by spending time doing other things and then comparing their respective returns. Remember as well that there are many other factors that you should take into account when comparing hourly returns. These factors include things like the reliability of the drop (drop rate), market interest (how fast it will sell) and what other random stuff you get at the same spot (cloth, mining/herb nodes, greens, blues, recipes etc).



Having a clear idea of how much you can make an hour is a big help when it comes to figuring out stuff like if its worth paying 900g for that whelpling pet you’ve been desperately trying to get. You can do some calculations to figure out if its worth spending your time farming for that whelpling directly or if you should just buy it from the AH.


Applying Opportunity Cost (PEOPLE PAY FOR PROCESS!)

One of the wonderful things about understanding opportunity cost is recognising that you can use it to influence other people’s decisions. Why do people spend money on meals at restaurants when you can buy the raw materials at a fraction of the cost? Why do people pay money to have professionals cut their hair?

Quite simply because it involves a process! Someone has taken the raw material and put it through a process that you dont have either the expertise or time to otherwise put it through yourself. On a smaller scale this is also true in the World of Warcraft. On the Shadowsong Server I made tens of thousands of gold by buying raw Mongoose materials from the auction house and then selling the enchants for 300-350g each. I made 150g+ profit for every enchant for doing nothing other than putting them through a process.

Think about the big selling items in your profession and have a look in your auction house. Whatever it is you can bet there’s a competitive market for it – usually the higher the server/faction population the more competition there. Look up all the materials involved in crafting that particular item and compare their cost to the price of the item. That should give you some idea of the margins involved.

Whats your profession materials tree? Start to think about down-the-line stuff in the field you’re using. As an example the chart below is the kind of thing I had in my head back when selling Mongoose enchants on Shadowsong. I didn’t think just about the materials I needed for the enchant I thought about the materials that made the materials as well. Then I also thought about the materials that made the materials that made the mat….well you get the idea



Don’t just buy what you need, buy what you WILL need! Especially when you’re seeing low market variables. For example if I saw 20 stacks of arcane dust on the AH one day that were pretty cheap due to lots of competition I’d buy every single stack even though I wasnt going to use them for a while. This is something that will usually naturally occur as your own confidence in a particular model builds. You start thinking not just about the sale right now, or the sale tomorrow, but about the sales in weeks to come.

You should adapt this same methodology to your auctioneering with your own profession’s ‘buzz items’. Always keep in mind and recognise that people apply opportunity cost to assessments all the time without realising it. Begin to assess market and discover where the best margins and fastest profits are. You might be able to make 500g profit from selling an engineers chopper but its no good if there’s only enough market interest for you to sell one per month.

You don’t need to just stick to your own professions either. If you can see that, for example, a particular tailoring spellthread looks profitable at the moment then gather the materials for 10 of them and ask a friend to craft them for you. I can look up mats for something, buy them from the auction house, get someone else to craft it and then make a 100g profit after selling it. That’s not too bad eh?


Dealing with Competition

I wanted to take a minute to briefly discuss the competition you’ll come across and the different methods (if any) you have to contend with them. For the most part I find that volume, volume, volume is the best approach though. When I was selling my mongoose enchants I was largely unchallenged towards the end. This was because whenever I noticed someone undercutting me I’d double or triple how many I had listed and massively undercut them.

I was still making a small profit on each sale and after a while my competitors went away. In fact if you have a look at the mongoose profits chart below you’ll notice that over time my profits kept going up because there was less and less competition.



I guess it’s probably due to my professions (JC and Enchanting) but on entry I tend to not participate so much in markets where there’s a large (ie 5-10) number of individual regular competitors. I think it’s because the more competitors I have the faster I’m going to be undercut and the longer it’ll take to drive them away. If there’s a softer market to be had I’ll seek it out and take that option instead.

Certain circumstances might change this for you. If you’re on a medium-low population server and can post/re-post auctions at odd hours you gain a huge advantage over the regulars because they’re all asleep and your auctions get hours of exposure before anyone thinks to undercut. As an Australian playing on the US-Shadowsong medium population server this was ideal for me. Since I transferred to Aman’thul which is set to Australian times and is full-population I’ve had to seek out more lucrative markets.

Here’s a few tips:

• In a small/niche market if you don’t know who your competitors are then you’re already losing. Keep a close eye on what names are regularly undercutting you. Add them to your friends list so you know when they’re back at the AH. If they’re a bank alt then find out who their main is and add THEM to your friends list too. Research and find out what timezone they play in and work against that when you’re undercutting and relisting your auctions.
• Different people react to competition in different ways. Some people will just keep relisting their item at exactly the same price and won’t even check to see if they’re being undercut. Some people will do exactly the opposite and take it personally, making it their life’s mission to beat you. Either way you should try to use any reaction to your advantage and if you start getting hate mail from them even better! Send it to Gevlon and point them to his site
• Decide how low you’ll go profit-wise to push your competitors out. The main thing is to recognise when you can afford to take a loss and when it’s just not worth it. Sometimes its WORTH not making any money to get them off balance.

Self-assessment and Scalability (MORE MORE MORE!)

So the title of this section is really about doing two things: looking at what you’re currently doing to make gold and asking yourself ‘what can I do to make more?’. Sometimes you simply can’t make more of whatever it is you sell because there’s not enough demand for it. Maybe there’s heavy AH deposit costs on what you sell and its not viable for you to do so.

If you can’t scale up operations for a specific ‘cash cow’ item then find other items to sell at the same time. Don’t just rely on a specific source but actively seek out other ones to supplement your income.

Market Fluctuations

About a week before patch 3.2 came out I spent 1400g on 20 x [Abyss Crystal] which was an absolute bargain at the time. Fortunately I resold them all for 97g before the patch hit and their prices fell through the floor. You need to learn to analyse patch notes and almost use them as ’stock tips’ to decide what to invest in before a major patch hits. The more obscure and subtle the change you can find is the more you’ll stand to profit.

Back in mid-2006 when patch 1.12 was on the PTR I noticed that among other documented changes they were adding the first soul shard bags to the game. The recipe was a random boss drop in Molten Core and chief among the ingredients was 20 x Felcloth which up until then had been relatively useless. I bought up bigtime and was getting pieces for less than a gold each. When the patch hit I was able to resell it at a 1500-2000% markup and make a good deal of gold for my efforts.

My best advice here is to not choose obvious stuff as you’ll have so much competition that it just degrades into undercutting wars straight off the bat. A recent example I can think of, at least on Shadowsong, was the Orphans Week world event and chocolate cakes. Just about everyone thought they’d be clever by making these and listing them in the AH. What started out as someones ‘master plan’ with cakes listed for 70g/each basically devolved into a charity event with cakes dropping down to about 10g a piece. Now if you’d been collecting cheap mats for a few months prior to the event then 8g profit per cake might have been palatable (pardon the pun!) but I’d wager the sales were much more of a spur-of-the-moment opportunist thing.


Price Check in Aisle Five!



One common mistake amongst people trying to make gold is relying only on the auctioneer mod. While it’s great to give you a rough idea how much random blues are worth when you find them its not ideal when you’re trying to feel out new markets. I use a few sites to ‘triangulate’ and get a proper feel for how much a drop is worth. They all have firefox search plugins so its nice and easy to get results quickly.
Search :: World of Warcraft :: Allakhazam.com

Allakhazam is the price checker I’ve used the longest, simply because it’s been around longer than the other two. Make sure you click the ‘details’ next to the first price you get for full info. I tend to use prices from here most but usually calibrate based on what the other two give me.
AuctioneerDb

A relative newcomer to the scene but with the ability to check cross-server prices its a great guideline and easy to use.
Wowhead: You'll be saying 'Wow' every time.

I’m not sure how long ago they started indexing prices and as far as accuracy the prices you get tend to be quite a bit lower than the other two sites will provide you. It’s usually the one I use to get the ‘lowest’ price in the triangulation


Further Reading

It pays to read up on this stuff. Here are links to the sites I regularly read for the latest in developments and chat on gold making:

• Greedy goblin – One of my favourites. If you want some good examples on what not to do check out his ‘Morons of the Week’ posts every Saturday.
• Just My Two Copper - A World of Warcraft Economic Blog – Markco posts a lot of tips for those who are into farming. People write in to him with the latest tips on places to go for the best farming. It’s pretty good to keep an eye on for ideas.
• One Copper
• WoWenomics
• Phase 3: Profit!

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I hope this guide has at least some use to someone out there, perhaps a renewed interest in making gold, or an inspiration to write your own guide etc.

[connoromg]

Ive read the majority of this gud job thxs for contribution probs read the rest later thxs +reppz

[Killalots]

No Cookies.

[Doctah Doom]

I know ya didn't write this, but thanks very much for bringing it to my attention +rapez

[Saate]

Thanks for the referrals, Unholy I think one of the things I was happiest with in writing this guide were how the diagrams, charts and tables helped illustrate my points. Not sure if its my forum settings but I'm not seeing them come through in your revision so maybe it'd be better to summarise and link straight to the site? Not sure here.

In the next week I'm planning to update the guide with a 'talkthrough' youtube clip of me talking people through each of the items in the guide and going into my philosophy on some of the stuff a bit more. Stay tuned ^^

[Unholyshaman]

Aah hey Saate, which links aren't working? I will do my best to fix them.

[Saate]

Was mainly just referring to the pictures/diagrams being missing. They're pretty handy in helping to explain some of the concepts like opportunity cost. Know what I mean?

[Unholyshaman]

hmm odd, they are linked to your site, for example

http://www.saate.net/wp-content/uploads/2009/09/MongooseChain.png

[jpte]

To bad pics not showing ;( Would have been nice, Ill just read it on Saates website instead.

[Unholyshaman]

Are the pics really not showing for any of you guys? O.o

[jpte]

Working now!

[amalgam]

Pictures are missing now. No idea what's up.

Gret guide, though as far as frame of mind is concerned.

[Unholyshaman]

What I like about this guide is that is isn't one of those:
Step 1) Post in Trade "WTB Blood Garnet - 2g each"
Step 2) Get a JC friend to cut it into a Bold Blood Garnet
Step 3) Sell it for 4g each
Step 4) 2g profit!
You get the idea, it doesn't tell you exactly what you must do, it gives you ideas, techniques and theories that will last and you will be able to apply to any situation.
It is like the old give a man a fish and he will be fed for a day, teach a man to fish and he will have food for the rest of his life, kind of thing.

[[Ichigo]]

Gz on elite unholy. Nice guide

[ruoko]

Nice guide