Episode Transcript
<cite>Phil:</cite>
<time>0:00</time>
<p>So I'm trying a new setup. I have this analog, set up with a USB thing. Maji? I don't know, it's a converter.</p>
<cite>Eric:</cite>
<time>0:06</time>
<p>Does that have like, knobs</p>
<cite>Phil:</cite>
<time>0:06</time>
<p>yeah, it has kns on it.</p>
<cite>Chris:</cite>
<time>0:07</time>
<p>You seem like an analog person. You, you certainly. You have a record player, Phil</p>
<cite>Phil:</cite>
<time>0:12</time>
<p>I'm one of those guys who has finals but doesn't have a vinyl player.</p>
<cite>Eric:</cite>
<time>0:17</time>
<p>Oh.</p>
<cite>Phil:</cite>
<time>0:19</time>
<p>It hurts. It hurts to be one of them. I almost thought about getting rid of the vinyl just to avoid that categorization.</p>
<cite>Eric:</cite>
<time>0:25</time>
<p>the fact of the matter is record players are clunky and terrible ux</p>
<cite>Phil:</cite>
<time>0:30</time>
<p>the disc every three minutes.</p>
<cite>Eric:</cite>
<time>0:32</time>
<p>it's so short too. it's not like, oh, you put on an hour long playlist and you switch it later. Right. It's like a few minutes and it's done</p>
<cite>Phil:</cite>
<time>0:39</time>
<p>it's kinda like going back and playing World, world of Warcraft Classic. I immediately want the next version of this</p>
<cite>Chris:</cite>
<time>0:44</time>
<p>The analogy to this is complaining that you have to like eat a nice meal with a knife of fork. I just wanna shove the whole thing in my mouth. Why do I have to use the knife and fork? because you're at a restaurant, you monster</p>
<cite>Eric:</cite>
<time>0:56</time>
<p>I don't, I don't use knives. When do you ever use a knife in dining? I just, I don't just want one utensil and I wanna shovel it in, you know?</p>
<cite>Chris:</cite>
<time>1:02</time>
<p>ves and fork Knife and fork. Oh my God.</p>
<time>1:04</time>
<p>Let's start with utility. I don't understand what it even means. Anybody has some kind usuals in their head that they're calibrated. There's hardly anything that hasn't been used for money. In fact, there may be a fundamental problem in modeling.</p>
<cite>Phil:</cite>
<time>1:22</time>
<p>I have an announcement. I bought a URL with these other two wonderful gentlemen called Game Economist cast.com, which, I I should have bought before this cast. Maybe someone was gonna raise the price on me, who knows. But unfortunately, or fortunately, we now own that url. We were gonna be doing fan mail, I really wanna see if we can get some hate mail. I'm excited about the first piece of hate mail we can get. So send us a message with any feedback, questions, comments, concerns. We'll probably do an episode about all the feedback. We'll gather some up. It is gonna be mail. Game economists cast.com, and I will have a link to that in the show notes but I would say other than that, Let's dive into what we've been playing this week.</p>
<time>2:02</time>
<p>Got a selection of good things on sales. Stranger</p>
<cite>Eric:</cite>
<time>2:06</time>
<p>so I've been playing space warlord, organ trading simulator,</p>
<cite>Chris:</cite>
<time>2:10</time>
<p>so</p>
<cite>Eric:</cite>
<time>2:11</time>
<p>it's a game where you, you buy and sell organs to like clients who request</p>
<cite>Phil:</cite>
<time>2:15</time>
<p>oh, this sounds like That's one way to</p>
<cite>Eric:</cite>
<time>2:18</time>
<p>it's like a very anti-capitalist like game, but, you know, cause obviously, you know, they're criticizing</p>
<cite>Chris:</cite>
<time>2:23</time>
<p>you, paid money for this game. You paid money to play this</p>
<cite>Phil:</cite>
<time>2:27</time>
<p>pro, pro being able to sell your kidney. Yeah. Let's go for it.</p>
<cite>Eric:</cite>
<time>2:31</time>
<p>you're like, yeah, let's trade organs. Yeah. I mean, no, it's fun. You know, it is a market and stuff, but, yeah, I don't, I recommend checking out. It's, it's very stylized,</p>
<cite>Phil:</cite>
<time>2:39</time>
<p>How about, How about, we close with what we've been playing? Cause I didn't really do that.</p>
<cite>Eric:</cite>
<time>2:44</time>
<p>Oh. But yeah, the one thing I wanted to add was like, you know, sometimes, like let's say you want to buy a brain, but there's no brains on the market, right? It's very illiquid. And so when you see a brain show up, you get really excited and you're like, oh, like there's my chance. Right? And that's an example of the market being inefficient, making the game part more fun.</p>
<cite>Phil:</cite>
<time>2:59</time>
<p>though? Like, wouldn't they be, why shouldn't they be, shouldn't, shouldn't they reaching equilibrium and more brands should enter the market unless they're like fundamentally expensive for some reason. Oh, interesting. Okay. So</p>
<cite>Eric:</cite>
<time>3:09</time>
<p>Oh, it's a, it's a single player game. Yeah,</p>
<cite>Phil:</cite>
<time>3:11</time>
<p>Okay.</p>
<cite>Chris:</cite>
<time>3:14</time>
<p>there's a board game where the goal is to crash the price of a stock that's a gameplay mechanic where like you're actually trying to break the game. and I wanna say it's Stock Trader or something like that. It's a classic board game, whenever we're doing like balancing, it's perfectly balanced math equations, but it's the game design and the actual creativity is what's gonna make that math equation. Sometimes there are going to be surpluses and sometimes there are going to be, shortages. And that's because of variable gameplay and players interacting with the environment. Where it's this, this imperfect thing. it appears to be wrong, but it's actually what's fun. it's fun that there can be surpluses in Evon or, shortages in Evon line, and you can, sell your supply at a huge profit.</p>
<cite>Eric:</cite>
<time>3:55</time>
<p>Phil, what? You got a game for us?</p>
<cite>Phil:</cite>
<time>3:56</time>
<p>actually cookie run, which is a very interesting game. It is builder elements. That's usually the twist. You collect gingerbread cookies. This game has done crazy business in China. It appears to be doing pretty good business in North America, and it started kind of the usual slew of articles about why it's successful. A lot of people have credited its extensive live operations. They have a interesting BTS tie in the musical band from Korea right now, and they've also commented on their voice lines that many of the characters have, despite the fact that we have research saying a lot of people don't use audio in mobile based games. But I've been trying to get into it and really just understand more about what makes this game tick. And to be honest with you, it feels. Confusing to me. You know, it's just, it's really hard to tribute causation in about why they're successful. And I think in many cases I'd really just pin this one on a, I think a really compelling art style. You know, I'm not convinced that the economic side of this game itself any favors. The idea that I'm going in and that I'm harvesting resources and harvesting those resources let me build more and more kind of cookies. I mean, that relationship is there in the economy, but it's an incredibly long supply chain. So me initially planting resources and eventually the final output, if you were to draw a flow chart being an upgraded cookie, it's a very extensive production line. And so that introduces a lot of really micromanagement onto the player. And I just ask what this really brings to the experience. And I think in many ways, I'd actually like to see character collectors move away from more hard. Economy management elements, and actually more towards character management and going more in depth with my characters. And so there are a lot of ways to win. You can win because of things. And to me, I just really think about the power that art per install. And I also think about a team that can clearly output a lot of content, and that might have been enough for this game to win. So, you know, I'm gonna ride this one into the sunset. I do I just don't having, you know, I don't love logging in 10 times a day to collect resources because ultimately I'm there for the cookies. I'm not there for the, uh, the snacks, so to speak.</p>
<cite>Chris:</cite>
<time>5:59</time>
<p>They need to, they need to understand what it is that,, is their product, just like doo lingo did and give it to</p>
<cite>Phil:</cite>
<time>6:04</time>
<p>I Any or those as we learned in the first episode, band from your house? Vort.</p>
<cite>Chris:</cite>
<time>6:11</time>
<p>I wanna make it. clear, I, I live with my,, wife and separately from my parents, so they no longer dominate my, my game consumption. No more Yugo cards will be burned or Pokemon cards.</p>
<cite>Phil:</cite>
<time>6:22</time>
<p>Hard are the cards, man.</p>
<cite>Chris:</cite>
<time>6:23</time>
<p>I'm pretty sure Harry Potter is like somewhere over there. But anyway, I've been playing, so I was playing a game called Loot River, which is, it's, it's available on Game Pass right now. And that's probably where I'm gonna go with this, but it's available on Game Pass. It's, it's a rogue, very similar to, I, I would liken it, to games that are popular on the marketplace right now. it's a worse version of, Hades. So it's very similar to Hades, super in. Interesting. it has this cool platforming mechanic where you use the right stick to move platforms that your player stands on, and the left stick is used to move around the map. I ended up just not enjoying it as much as Hades. I don't have a lot of,, huge criticism. I think that the, like the economies in these types of games are very much here's a random probability that this thing is gonna drop, and it, has this really cool interaction. These games to me are much more about like the game design than the actual game economics. As long as you've got that,, those probabilities properly balanced, you're giving the players the right amount of cake at the right time. I wasn't hooked by it. I think I played it for three hours and I was just like floating around on these things and just stopped. It brought up this interesting point. I've been playing a lot of single player games with my game pass. and I played them for like two, three hours and I put'em away. I'm curious, do you think that with a subscription model you would play games for shorter? I'll play 20 games, but I only played'em for an hour, which I don't like.</p>
<cite>Eric:</cite>
<time>7:40</time>
<p>Yeah, I mean a hundred percent right. That's how the incentives have shifted. I don't mind it too much cuz often the first level is like where the best content is packed in.</p>
<cite>Phil:</cite>
<time>7:49</time>
<p>The network, and the network is the subscription fee. And so once you're in there, it's a free to, you're free to play economic supply. Just kind of in thinking about like my transaction costs. But again, like to me, when you start to think about engaging in a subscription service, you know, it's I'm only gonna engage in multiple pieces of content if, you know, I don't have a main game I'm playing right now. Again, games eat up a lot of your time. Most people aren't playing more than one game. You really have to like consume one game, consume the next game, consume the next This is why I'll argue when I eventually And speaking of consuming multiple pieces of content, we have three wonderful articles this week to talk about. It's all original content. I never thought I would see the day, not like those other podcasts that cover three articles. We have three original articles or original content to cover. I will be taking a look at Netflix's announcement that they are making a single player what appears to be a single player AAA shooter. Netflix, what are you doing? You used to be in mobile, you're making these rather strange mobile games. You're going to AAA gaming. What could be the theory behind this? Let's talk about that. Chris, what are you gonna be talking about this week?</p>
<cite>Chris:</cite>
<time>8:57</time>
<p>I haven't decided if I, am interested in actually trying to publish this article, but I'm gonna be talking about at least the idea of an article about duo lingo. it's kind of a little bit, I think off, maybe off the beaten path for this, type of, you know, game economist. But duo lingo is a game, even though it's a learning app, it is a game, and they have monetization. So we are certainly gonna talk about it. So I'm excited</p>
<cite>Phil:</cite>
<time>9:18</time>
<p>And Eric,</p>
<cite>Eric:</cite>
<time>9:18</time>
<p>I wrote a bit on, market games and what makes a market. game fun. I've been thinking a lot about like, these web three games and, there's this very basic tagline People use that are oh, you gotta make a fun game before you add tokens to it. It's like that there's gotta be more to it than that,</p>
<cite>Phil:</cite>
<time>9:32</time>
<p>think This is a super interesting question. People will acknowledge in crypto that you get a free marketplace or a free market based game with any crypto project cuz prices float. But it seems like there are varying degrees of fun that is to actually.</p>
<cite>Eric:</cite>
<time>9:47</time>
<p>Definitely</p>
<cite>Phil:</cite>
<time>9:49</time>
<p>So Netflix announced that they are going to be pursuing a aaa, what appears to be shooter from a job description they posted on their career website. It is a product director that they're hiring, which suggests perhaps some sort of live service component. And so I think the big mystery has been what is Netflix doing in games? Why are they even starting this to begin with? It feels like it has been a score strategy for many of these studios or publishers or tech companies that get involved in this don't seem to really go anywhere. What could they be doing? And I think the story for that is pretty simple. As they've rented out of people that can subscribe to Netflix. And so if you're a company, you really to be able to, to justify your share price and they're, you're trading at a healthy EBITDA margin. So the market really believes that they have a lot of growth left in them. When you're starting to return declining growth numbers quarter over quarter, it appears as though your growth is slowing down. So again, remember, your growth is still going up, the absolute number is going up. You're making more money, but at the end of the day, you're priced at hitting a certain growth rate. So they've really been trying to figure out how they can grow. Again. Games seem like a huge growth opportunity. Why not get involved? And so they started with some interesting experiments. They didn't spin up any expensive first party studios. They bought small narrative based studios and they made what was a very strange collection of games that you could access on the app store. They were only for the app store. You could not play them on your TV through your subscription, but you would still have to go to an app store page. And this was because of some very strange rules Apple has with allowing app stores within app stores. Facebook did a little bit of this. Netflix had to use a different strategy. They still appear to have a special relationship. They got a special deal. You still have these separate listings on the app store, store page to be able to download Netflix's games, but it's not an inconvenient ux. I just argue for any subscription based company is that you have a certain set of incentives, and incentives helps dictate the type of content that you should go after. When you're thinking about a live service video game, there's a certain type of infrastructure, I would say institution that's incentivized by free to play that says certain things about how you should develop the game and how you should think about retention. And it seems like single player games. make more sense for subscription service. What I mean by that is that single player games have a much shorter lifespan. So they might go for six months rather than 12 months. In terms of user engagement, it's more expensive to make single player content. People consume that content at a much faster rate because there's no replayability. You can play Marvel Snap for hundreds of hours. It's a little bit more tricky to play. Let's say call duty single player for a hundred hours. The diminishing marginal return curve for a single player game is just much, much deeper. When you think about a subscription service, What you're really trying to do is you're trying to spread your cost. Things that are expensive get diffused across a large number of people. So even if something's$300 million, when I spread that out across, millions and millions and millions of subscribers, it may only be 50 cents for that month that they're paying as an implicit tax. When you kind of think about fitting games into that model, you can think of it like any other piece of content. If it's a single player game, all those live service advantages go away. There's a very simple equation for them, which is the equation they have for any piece of content. What is the incremental value a game will drive in retention saved. or months saved relative to the counterfactual, multiplied by the price. That is ultimately the LTV of their games division.</p>
<cite>Eric:</cite>
<time>13:13</time>
<p>Well, I mean, if you look at other subscription based games, they're pretty much all MMOs, and maybe that just grew out of you need live recurring revenue to maintain these MMOs. But, that seems to run counter to what you were saying about. You know, single player games with front loaded value are ideal for a subscription service. On the flip side. Media content like TV shows is exactly that front loaded value. And, maybe the subscription service lets them, you know, utilize that long tail better.</p>
<cite>Chris:</cite>
<time>13:39</time>
<p>From the MMO side. I, I don't know if that's a good comparison because Netflix, I, I see this as more like the, the model is very similar to Xbox. What's their, what's their subscription model? Game Pass? Yeah. I, I was actually just talking to somebody on Twitter about this, this last week, is, I find myself go churning through a lot of single player games with Game Pass. I've never had,, but with a subscription model, like a subscription mmo, I don't think that you can compare the two. So I think like, subscription is different than streaming. and I think we're talking about, probably, we're talking about like streaming games, as opposed to subscription.</p>
<cite>Phil:</cite>
<time>14:13</time>
<p>I would think about subscriptions across three different models. I would say one is actually like Xbox Live, so it's the ability to even play online games, a platform wide subscription. the category that you're talking about, Eric, when we talk about like game specific subscriptions get their own category, right? So I only get access to World of Warcraft, and so then there's this other almost like content subscription, which is to me where I put things like Xbox Game Pass. I would put the Origin service from EA there, and I'm sure there's a Apple arcade I think would go there for me.</p>
<cite>Chris:</cite>
<time>14:42</time>
<p>So, so in term, going back to like the marginal costs, I see the, the advantage of Xbox's model and, and somebody, correct me if I'm wrong, but they don't just have Xbox or Microsoft titles in their subscription model, whereas Netflix is coming at this and they're saying, we're gonna offer all of our different games for a price. And typically what's been done in the industry is we are gonna make one product and we're gonna keep it up, and we're gonna, it's gonna be a live, a live game, and we're gonna update it every once in a while. That's much cheaper than having to churn through new titles the same way that they have to do with movies and TV shows. I feel like they're gonna find themselves in the same position that they're in now, where they're basically just having to produce immense amounts of content, in order to satisfy, in order to, you know, maintain retention. Without kind of that, I don't know, that scale that Microsoft is taking advantage of right now.</p>
<cite>Eric:</cite>
<time>15:31</time>
<p>On the decision to go into games. I think it makes a lot of sense for two observations. One is, the closest substitute to Netflix, at least historically, has been video games, if you look in like 2019 or something, you know, they were talking about, hey, our biggest competitor is actually Fortnite. Fortnite is what is taking people away from Netflix. obviously that's changed. Disney plus, HBO Max paramount Plus, et cetera. but, All these streaming services launching are driving up costs for video content. that's why Netflix is losing so much content. These other platforms are bidding it away from them, but they're also all, losing money. Netflix is the only one that's profitable and so, in the, their strategies, like, look, we're gonna hold out Disney Plus is gonna collapse financially or whatever, and then, we'll get the cheap video. content again. But in the meantime, what are some other content we can put on that's not video? Well, there's games we know, it's a closeups too. that might be the thinking behind it.</p>
<cite>Phil:</cite>
<time>16:20</time>
<p>do you think it is a close substitute games and let's say linear forms of content like Netflix? Are you really making opportunity coist,, choices between those?</p>
<cite>Chris:</cite>
<time>16:28</time>
<p>I</p>
<cite>Eric:</cite>
<time>16:29</time>
<p>so, so back in, I mean, they're not as close as, TV and TV or games and games, But I think outside those categories, I, think they're the closest, on League of Legends. We ran this survey that was like, what else do you do in your free time The number one thing was watch tv.</p>
<cite>Chris:</cite>
<time>16:43</time>
<p>But, but that could be just as true if there were compliments, right? I personally see them as compliments, right? I, I have some allocation of time each day towards leisure, and I'm going to couple, you know, I don't personally feel good, and I know this is very much, subjective, to my personal experience. But I don't feel good watching three hours of television in a row. But if I do an hour of tv, go do something else, an hour of video games. I like the variety. I like the complementary of the different hobbies that I have. and, and the same goes in my opinion, the same goes for all types of media that we, that we play with essentially. So I really don't see them as substitutes. when I'm in the mood for a movie, I'm in the mood for a movie. I'm not in the mood for a video game. like not the same way that food,, different foods can be substitutes for one another.</p>
<cite>Phil:</cite>
<time>17:28</time>
<p>would you explain then like increasing share of time that gaming has captured? Because they are taking it away from other things. Like we have a time use survey that we get every single year, and we see gaming go up and up and up and up, seem to be eating a lot of things, but it feels like they're moving up the menu. What is the explanation for that? Is it just more captivating?</p>
<cite>Chris:</cite>
<time>17:46</time>
<p>I think on the last episode we talked about free to play introducing a whole new audience. I really just think it's growth. I don't know if it's preferences changing or compliments, dominating substitutes or something like that. I think it's just, growth. I think that the, the entire world is now seeing, oh, these aren't just for kids, or, oh, these aren't just for nerds. These are for everybody.</p>
<cite>Eric:</cite>
<time>18:05</time>
<p>So if there are compliments, then as Fortnite grows in popularity, we should also see increased Netflix consumption.</p>
<cite>Chris:</cite>
<time>18:12</time>
<p>Yeah, I see what you're saying.</p>
<cite>Eric:</cite>
<time>18:14</time>
<p>I mean, Netflix explicitly said, they're like, oh, we're losing users to Fortnite.</p>
<cite>Phil:</cite>
<time>18:18</time>
<p>Or did Reed Hastings say like that's what, that's what he feels like is his biggest competition is Fortnite. Cause he, he views the good that they're competing over as time, which is zero sum. And so, there's clearly a trade off. He would argue between those two things. But if I were to look at Fortnite and hbo, though, at a very high level, they're both growing right?</p>
<cite>Chris:</cite>
<time>18:37</time>
<p>Eric, your comment definitely like has me, reeling. I'm like, wait, how can I say that? They're compliments if, you can not do both at the same time, which we usually think of compliments as I consume this and that.</p>
<cite>Eric:</cite>
<time>18:49</time>
<p>I do think mobile games might compliment TV cuz people play while they watch that kind of thing</p>
<cite>Phil:</cite>
<time>18:53</time>
<p>Do you feel like that's a large share of playtime? I'm, I've always been curious about that as a vacation games.</p>
<cite>Eric:</cite>
<time>18:59</time>
<p>There's this great, polygon video about multimedia usage people who play games while watching TV or listen to podcasts while playing game, and, yeah, apparently it's like a pretty big thing nowadays.</p>
<cite>Phil:</cite>
<time>19:08</time>
<p>All right, Chris, what's up with Duolingo.</p>
<cite>Chris:</cite>
<time>19:10</time>
<p>I'll give you guys a rundown of like the dual lingo app, and then their monetization technique and maybe a teeny bit of a critique, of mine. And then we can probably get into a conversation about monetization and,, and education apps and even comparing monetization and education apps to that of classic, free to play mobile apps. So, dual lingo, they have a web, interface, but I would say the vast majority of their users use the phone app. It's this language learning app, that takes you through a series of units going from, very basic language usage, like readings or questions all the way up to very complicated units about politics, and religion and stuff like that. Duo lingo in it of itself is pretty phenomenal. You take away the monetization, you take away the gamification, and you just look at the actual lessons themselves. They're very short, I wanna say, 15 ish questions,, depending on the type of lesson. And they're very poppy. there's a lot of color, there's a lot of noise, sound effects. It's just this very engaging learning experience. and they have multiple forms of learning. So,, sometimes you'll talk into your phone in the language you're learning. Sometimes you'll do a listening exercise. Just a huge variety of awesome, learning techniques in this app. But obviously,, we're game economists, we're interested in monetization, we're interested in gameplay mechanics, that could be, basically gameplay mechanics that are gonna incentivize players to stick around. How can duo lingo with this really cool, learning software encourage players to stick around because learning, and this is something that I I kind of, have hinted at learning is not naturally fun. It's not like playing a video game. It's not like sitting in front of a tv. and there's some psychology work out there that I, that I think is convinces me to say, pretty confidently that learning is not all that fun. I wanna say like dual lingo from what I understand, has very good retention, all things considered. After you get a three day streak, you get a, a little notification that says only 33% of players get a three day streak. And if that's a streak, we can assume that the retention is higher than 33% probably. so I think this is actually pretty impressive, for a learning app to have that high of retention. I've worked with companies that other types of learning or mindfulness apps, that are not,, very fun to do. and they have abysmal, retention rates, just terrible people download it, open it up, close it out, I think just in and of itself, the gameplay is fun. the lessons are. What they've done is they've developed an experience points system where you get experience points for completing lessons. And around this system they've built out a huge, I mean all things considered a pretty big economy in that you can use these experience points to accomplish quests. You can use these experience points to compete in a weekly competition. and then on top of that, you can get access to as you level up, as you get through the content, you get access to cool different types of challenges. Some of those challenges can be improved using the hard currency of the game. And these are gems. They're not going to give you access to better content. They're just going to in increase the amount of time you can play per day. They're going to increase how pleasant some of the challenges are, or make the challenges easier in a, in a sense. They're never, however, these gyms, this monetization is never going to impact the quality of the education that you're receiving and it's never going to impact how far you can go in that educational path. And I think that's kind of the crux of my argument against their monetization strategy, I think. we could not begrudge them to try to monetize that super high quality content. For example, they just released a new type of content called Stories where players were able to participate in like this storyline and it's interactive. I think that's a phenomenal learning strategy and they should monetize it, but it's</p>
<cite>Phil:</cite>
<time>22:51</time>
<p>so you're telling me Do Lingo is going towards narrative based gameplay</p>
<cite>Chris:</cite>
<time>22:55</time>
<p>narrative gate based, education, Phillip,</p>
<cite>Phil:</cite>
<time>22:57</time>
<p>star in a Spanish love song? Can I do</p>
<cite>Chris:</cite>
<time>23:00</time>
<p>you certainly can. I don't have a ton of experience with them cuz they just came out and they don't have stories for Polish yet. So just heads up duo lingo, add stories for Polish. but there's like a cast, a duo lingo cast that you kind of like follow along. I don't think any of their names are Philip, but.</p>
<cite>Phil:</cite>
<time>23:16</time>
<p>92 1? Oh, there's like a cast I can follow in different languages. Is there like a Portuguese 92? Oh,</p>
<cite>Chris:</cite>
<time>23:22</time>
<p>No, it's the same cast across all, all they, they have their personalities. But I mean, the, the point is this is so engaging</p>
<cite>Phil:</cite>
<time>23:29</time>
<p>Why can't I buy characters?</p>
<cite>Chris:</cite>
<time>23:33</time>
<p>we won't even, we won't even get into that, right? we won't even get into, all of the different monetization they could. I'm just thinking, one of the way, one of the things they monetize are is the amount of time, if you can mistake, you have, you lose a health and if you lose all your health, then you can't practice anymore unless you refill your health bar. And in order to do that, you have to use gyms. And gyms are purchasable. So that's like the one mechanic. But in my opinion, health is something that induces retention. You're putting the retention inducing mechanic behind the pay gate. I kind of have this belief that they could do better. that all said their philosophy is, Free education for all. it's very much the Wikipedia model where it's if you want to like, donate to us, give us some money so that we can provide this service to you guys, that's very much their, their optics. all the power to them. they probably are not interested in our greedy monetization</p>
<cite>Phil:</cite>
<time>24:25</time>
<p>Well, I mean, I feel like we could always wrap it in an effective altruism argument. You know, it may not be these days, but you could argue that like, if they well, they can best support their mission. Uh,</p>
<cite>Chris:</cite>
<time>24:35</time>
<p>Yeah. And the whole reason I got excited is cuz they've recently, done this, very much gamified everything. and I think it's the reigning example of a great educational game and I don't know what experience with education games you guys have, but I don't think many people have much experience with education games. And I think it's because they're done poorly. And I think Duo Lingo does an amazing job.</p>
<cite>Eric:</cite>
<time>24:55</time>
<p>having played it for about 10 minutes the other day, I was like, this is actually very compelling. this is the best execution of gamification I've seen, like ever. cuz you know, you hear about it, they're like, oh, like you complete your sprinkles, you get a sticker and then if you get 10 stickers, you get a gold star or whatever. And that stuff never really jives, but, they did a great job. The polish, the all the sort of different psychology tricks. compare yourself to other people, set goals for yourself and see if you hit your own goals. failure and success feedback. Right. It's all done</p>
<cite>Chris:</cite>
<time>25:23</time>
<p>they have some clever, incentive of mechanisms where, you basically, you do a wager, I think I'm gonna last, 50 days of a streak. And they reward you. They compensate you for that. They're like, if you last the 50 days, we'll give you more than if you were to only do the seven day challenge. So I think it's a really an interesting like waiting of people's incentives there.</p>
<cite>Phil:</cite>
<time>25:42</time>
<p>effective gamification, it's always about, well, well what is At some point you have to ask that you know, where is But that I found to be really compelling in games, whether or not it's necessary in games, it's very well executed in games, which is how we're able to draw strong cause effect relationships for the player that we're very able to establish do X you get Y. And we're very good at making sure that the carrot with which we're rewarding you for the action is very closely inserted after the reward and that you can't miss it. It's, it's kind of like if you took Pavlos Dog, you know, the one, the one who was sweating and like, you know, it's, that experiment. I feel like we've optimized that, that stuff on crack</p>
<cite>Eric:</cite>
<time>26:21</time>
<p>yeah, to that point, right? Traditional language learning. Like imagine you're studying Spanish for a trip to Spain, You're studying for months before you get any reward, before you get any oh, I actually ordered at a restaurant using Spanish. Whereas this, like immediately after you learn it, you execute it, you get a little ding and a little, little XP points.</p>
<cite>Chris:</cite>
<time>26:37</time>
<p>I mean it feels great if every single time you engage in an educational activity, you got an a back on an assignment, then it wouldn't be so unpleasant. But the problem is those rewards are so far and few between. it makes it very difficult. It's a cake eating problem. Again,</p>
<cite>Phil:</cite>
<time>26:53</time>
<p>little bit, what if they added a social layer? You know, why am I not having a cohort of people I'm learning with? Why isn't there some sort of clan system?</p>
<cite>Chris:</cite>
<time>27:03</time>
<p>I think there may be, I know you can make friends, there's a, a competition, like a literal, like realtime competition who</p>
<cite>Phil:</cite>
<time>27:10</time>
<p>Uh, I know, to be honest with you, a male, I do gear towards competition. Like I find competition to be really interesting. I find it to be compelling. You know, I'm I'm compete on my language skills. I wanna be able to order a latte. Um, giving that to me, but the French Canadians will gimme the latte. But yeah, like, I want more social, I want competition. I want all these layers.</p>
<cite>Chris:</cite>
<time>27:30</time>
<p>That's so, so interesting. I feel like I differ because I've always shied away from time to challenges. I talked about this, I think last week in the discussion about, marble Snap where the non-op to, verse a bot. I hate that I have to verse a human, even though they suck, like the other people are terrible at, the current level that I'm at. But, it's still just that stress that kills me. So it's really interesting because I'm thinking about one of my, thoughts was that they should stop trying to monetize these very stressful activities. But it sounds like you're saying they should add them. Do you think there's a monetization,</p>
<cite>Phil:</cite>
<time>28:04</time>
<p>Ah, I think the hooks are easy. I think the hooks are make a ranked mode, you can charge them for some level of vertical progression, like you could build lifelines in. We think about like any game show that incorporates knowledge. I feel like that's the perfect template for do lingo to build competitions around. I don't think this would be a big, big stretch, but it's, you know, you think of this small app. It's just interesting how they've grown in various places.</p>
<cite>Chris:</cite>
<time>28:25</time>
<p>so going back to the competition real quick, the huge problem here is that, unlike with traditional games or trivia with language, it's very easy to cheat, I'm never gonna compete with my wife who is a fluent Polish speaker because I'm a Polish learner,, so she comes in, if there's the wrong incentives for somebody to come in who has that language, they could come in, rank all the way up, win, all the challenges or something like that. I think there's kind of a, there is a moral, not a moral hazard, but a moral kind of an issue there. No</p>
<cite>Eric:</cite>
<time>28:57</time>
<p>In a do lingo. I'm gonna crush some nubes with my polish.</p>
<cite>Phil:</cite>
<time>29:03</time>
<p>Well, Chet mechanism in a game like that?</p>
<cite>Eric:</cite>
<time>29:07</time>
<p>You think you remove the reward incentive, so it's purely intrinsic while you're talking to</p>
<cite>Chris:</cite>
<time>29:12</time>
<p>Then just crazy people are like,, oh, oh, just, have a community, just have like a chatting one on one in Polish.</p>
<cite>Eric:</cite>
<time>29:18</time>
<p>I could see like doing a skit where you're the barista and I'm ordering a coffee and we have to do that whole scene in Polish,</p>
<cite>Chris:</cite>
<time>29:24</time>
<p>Yeah. Yeah.</p>
<cite>Phil:</cite>
<time>29:25</time>
<p>At</p>
<cite>Eric:</cite>
<time>29:27</time>
<p>One, one thing you mentioned about like the Wikipedia model, so to speak, or different ways of monetizing free to play or freemium, is interesting where like they did not degrade the quality of the education at all they didn't put any of that behind paywalls. Whereas other thing, freemium things like Spotify I think is a great example where they purposefully degrade the free experience. They could play music on demand, but they don't let you choose, they insert ads, you know, they used to insert their own Spotify ads cuz they didn't have enough ad providers, just to make the experience worse for free users. You know, obviously that a clear barrier and that gets people to pay to, reduce that friction. But there's the other approach of I'm gonna make the highest quality thing the value capture will not be as high, chris, you said you love this app and you haven't spent a dime you clearly would've been willing to spend more and they clearly failed to capture that, but they would rather. Get as many people as much value as possible and with a smaller capture rate.</p>
<cite>Chris:</cite>
<time>30:18</time>
<p>If they were to make the free to play experience slightly worse, and decrease the price, I think that is where you start to get this. You, you have to explore the marginal revenue from that.</p>
<cite>Phil:</cite>
<time>30:28</time>
<p>I will say that I believe I've encountered ads in doling. That also changes the institutional incentives because now you also have a stronger incentive, I believe, to maximize in retention because your non-payers provide you a stream of benefits. You get an ads ltv.</p>
<cite>Chris:</cite>
<time>30:44</time>
<p>There, definitely are ads, inserted at the end of each lesson. They're very short, like five seconds. and you can, you can x out of them. what an interesting mechanic they do have is that you can watch ads to get gems. You watch this 32nd ad or something, you get quite a substantial number of gems, which I think is really funny because they're basically saying, do this work for us. Do this unpleasant thing, and we're gonna give you some of our in-game currency. And I wonder how that looks from the advertiser's perspective. if I was an advertiser, I wouldn't like my ad to be put behind this mechanic that basically says go do this unpleasant thing and we'll reward you for it. maybe it's not an unpleasant thing, but that's how I would see it as an advertiser. I'm almost surprised they haven't gotten some pushback from that, but that's probably a common problem across all, free to play. I'm assuming Candy Crush has that same problem. do they have a mechanic where you can watch, ads in Candy Crush?</p>
<cite>Phil:</cite>
<time>31:32</time>
<p>rewarded video, which is you doing those things. And sometimes they're even in that you would go out and, for example, sign up for Netflix trial and then you'd return to the game and you would get a certain amount of currency for doing that. Almost like ad quests, those paid quite a bit of money if you get certain people to do various activities and they are priced marginally, which is also interesting. So Netflix might be worth more or they'll pay more to have you sign up for a trial than say, downloading the latest Zenga match three.</p>
<cite>Chris:</cite>
<time>32:01</time>
<p>We're not experts on the dual lingo, economy, but do you think that there's something to be learned here, by a health app? Does this type of strategy work when you're talking about literal work, go work out, go for a walk, go meditate, like you said, Eric, you go to the shop and you order something in Spanish or in French, that's a huge reward. The, the cake or, or I guess the reward it's an even longer, kind of road to get to the reward with exercise or health related things. Sometimes you never even see the reward if it's, just lowering your salt intake or something.</p>
<cite>Phil:</cite>
<time>32:34</time>
<p>but I think there's an answer yes here, which to me is really just thinking about Pokemon Go.</p>
<cite>Chris:</cite>
<time>32:40</time>
<p>Hmm.</p>
<cite>Phil:</cite>
<time>32:40</time>
<p>Go, got people to walk and it got people to walk because the marginal benefit of walking was greater than the marginal cost. Which sounds like a dumb answer. I feel like that's how you start all good ones in econ. And so what was the marginal benefit that went up? Well, if I go to place X, they have a monopoly on a certain type of Pokemon that I couldn't otherwise access. And so therefore I wanna walk and I want to get it. And I want to get it because it's value to me. And it has value to me because I'm a part of this community, which I gain social status or standing by having the Pokemon. And so that to me We've seen that crypto game step in. I don't If you watch the Step in Economy, uh, walk to Earn Baby we've move, move all your monies to walk, to earn. Uh, I don't know. Or if you</p>
<cite>Eric:</cite>
<time>33:24</time>
<p>I mean, there's a couple different fitness models so step in's thing was like, you pay money ahead of time to buy into the system, and then as you exercise more, you earn more money back. and it's like handcuffs or, you're committing I'm gonna put a hundred dollars into the system and if I run every day, I can earn 150, but if I don't, then I lose money. Maybe handcuffing yourself to this thing, like you said, the marginal benefit of running goes up. You earn$3 every day you run or whatever. and that might be able to push people over that motivational edge. I'm thinking other fitness apps, there's like narrative ones. there's one called Zombie Run where there's this story about zombies chasing you when that's your motivation to run. and then there's also like fitness games like Peloton or like We Fit, all those like Nintendo fitness games where it's literally a game where to fight monsters you have to exercise.</p>
<cite>Chris:</cite>
<time>34:09</time>
<p>It's almost sounding like the fitness apps have an easier way to, they, they have a way out. They can trick people. Dual lingo can't trick people. You can't trick people into learning. You can trick them into moving</p>
<cite>Phil:</cite>
<time>34:21</time>
<p>The opposite of your point, Chris. I actually think it's the language apps which have a better time and the fitness apps that have a worse time or a bigger challenge to overcome is that you can't offer vertical progression in these apps that isn't real, right? So vertical progression do lingo is learning the language, right? That's how you become more You have a greater command of the language and you can't deliver that on a set schedule like you can in Clash Rail. Like you can guarantee a relationship between the time that you invest and your outcome. I can guarantee that I cannot do that in a learning based app. There's too many exogenous variables. The speed at which you can learn, maybe your preexisting aptitude, all of these different things. And so when I think about a health app, you also can't fake that, right? Like people actually need to go out if they're gonna become more powerful if like Pokemon Go, a function of how much you're willing to walk. If you're someone, by the way, who's disabled, Pokemon Go becomes a really different. Much harder to enjoy experience. Right? Like, Like that's, that's another thing recognize, um, is that there, incentives out of this too.</p>
<cite>Chris:</cite>
<time>35:23</time>
<p>Hmm.</p>
<cite>Eric:</cite>
<time>35:23</time>
<p>Yeah, there are a bunch of people running Android emulators to spoof Pokemon Go and step in actually to farm them. The reward is so valuable. It seems like these things for some whatever reason are more fractionalized like a, a fragmented, like the fitness market. If you want cycle, you have pean, if you want exercise at home, you have the Nintendo Switch or whatever. Whereas it seems like language is much more monolithic. Like you wanna learn French. It's not like there's 30. Branches of like progression in French. And maybe that's why dual lingo going for the full quality, like you said, the Wikipedia model of we're gonna make the best product possible and cuz no other language app is even close to how good they are. whereas fitness seems much more fragmented maybe cuz people wanna exercise in different ways.</p>
<cite>Phil:</cite>
<time>36:03</time>
<p>Good. We're thinking about it wrong. Everyone thinks it's an investment. Good. Maybe, maybe exercise is a consumption good. I mean that's, that's one of the things I've started to consider even with diets. Maybe they're just all consumption goods. Maybe this is entertainment for some people.</p>
<cite>Chris:</cite>
<time>36:16</time>
<p>I, I don't know. I, I, I, I think the point is to turn it into something that feels like a consumption good. But it is, it's ultimately a co Like these things are all coming at a cost of the person, the only reason that a person would go to one of these apps is somebody who loves working out. It doesn't need a, an app to convince them to work out. So for them, it's not an investment problem. It's not a cost to them. Whereas the person who does download the app, the fact that they selected into that, they, these is a specific selected group who, in my opinion, do have a cost for that. And so we're offsetting that cost with fun, like you said, marginal benefit, out does the marginal cost.</p>
<cite>Phil:</cite>
<time>36:57</time>
<p>I think so.</p>
<cite>Chris:</cite>
<time>36:58</time>
<p>right. Huh? There we go. I don't know who we're sending this petition to. Same with the dual lingo stuff. I don't think they care about our, monetization</p>
<cite>Phil:</cite>
<time>37:08</time>
<p>we or no, A G E A, the American Game Economist Association. We demand to be taken</p>
<cite>Eric:</cite>
<time>37:15</time>
<p>How, how would you design a fitness app in the style of dual and go.</p>
<cite>Chris:</cite>
<time>37:18</time>
<p>If you were to try to like analogize the two, Doo lingo offers a variety of fun interactions in order to do the same thing with a fitness app. It couldn't be a running app or a biking app. It would have to be like, in my opinion, Exercise, it's more fun than others. So on a stair stepper machine that's not fun. Walking up a mountain is a lot more fun. It would have to somehow allow for this, or at least encourage this variety of, fun activities to me, like the core of Duo lingo is just gamifying the actual learning experience. It is fun to participate in their learning exercises. They add a whole bunch of other stuff on top of it, monetization, gamification, rewards and incentives. but to me, the core of what makes dual lingo, dual lingo is the fun of the actual activity. So it just be a matter of, every day you get a new quest like, hey, go, go hike up a hill, go, bike around, which is extremely costly and almost impossible to actually execute.</p>
<cite>Phil:</cite>
<time>38:16</time>
<p>very price theory perspective. I guess if we're gonna, if we're gonna start to divide ourselves into schools, which I'm happy to do, by the way, uh,</p>
<cite>Chris:</cite>
<time>38:24</time>
<p>talked about it.</p>
<cite>Phil:</cite>
<time>38:25</time>
<p>divide ourselves I would say I come from very, Price theory perspective on this one. To me, I think exercise naturally lends itself because there is vertical progression. Like when you think about weightlifting, the way you learn to lift more weights is progressive overload. So every week you're increasing weights by very small percentage, and that's how you learn to lift big weights. This is something like I've done for a really long time. I've lifted, so this is how you do it. And so, pairs perfectly with thinking about games. And I have a weightlifting app right now that does this automatically for me, I think it, it feels like a game to me. it feels like, first of all, I'm progressing. That's really important to me. Like if I stop progressing, that would significantly affect my retention rate for lifting weights. I do this because I continue to get stronger. At least I fooled myself into thinking. So, but I, I just, I, to me, what I would love to see them is they don't really remind you, to your point, Eric, through the UX, that you're getting better. They don't really have a, I think cause and effect loop that is compelling in the way that games have made it. Like there's no cool animation like a badge or award I get when I hit a new weight or a personal best. There's no social club that reinforces this. There's no social hierarchy. It's really just a question of me looking at a line graph and, and at least feeling a little bit stronger every week.</p>
<cite>Eric:</cite>
<time>39:37</time>
<p>The things that have worked the best on me are like Pokemon Go or Ring Fit Adventure, where the actual act of exercising is directly tied to a game experience. Imagine you're at the gym and every time you complete a set of reps, someone blows an air horn, right? would that make you lift more? Like, probably. We talked about dual lingo, just the feedback and the positive. You know, it's not that the language itself is part of a game where you're trying to collect all the Pokemon by speaking French, It's the feedback around it.</p>
<cite>Phil:</cite>
<time>40:02</time>
<p>Fitness?</p>
<cite>Eric:</cite>
<time>40:04</time>
<p>it's just a little voice in your ear that says, good job. I, I, that's like a personal trainer, right? Like, I guess that's</p>
<cite>Phil:</cite>
<time>40:09</time>
<p>Avir a virtual personal trainer, uh,</p>
<cite>Chris:</cite>
<time>40:13</time>
<p>I'm like questioning what is a game? What is gamification? A trainer, a personal trainer's, not a gamification. dare you say that? There's no, there's no way</p>
<cite>Eric:</cite>
<time>40:22</time>
<p>no, they're your dungeon master. You know, they're the ones setting the goals and.</p>
<cite>Phil:</cite>
<time>40:27</time>
<p>They're building institutional incentives.</p>
<cite>Chris:</cite>
<time>40:30</time>
<p>No, that's economics. It's not games as game economists. We need to remember to separate out the economics of the game sometimes. But to further my point, do we take gamification too far? My wife is a teacher and, sometimes she feels they're trying to gamify stuff that just should not be gamified and it almost gets in the way of the actual objective. and I wonder, is it gamified, weightlifting app just getting in the way? To me there's There's gamification and then there's, I don't know, like noise.</p>
<cite>Eric:</cite>
<time>40:59</time>
<p>where does your wife think, gamification of education is going too far?</p>
<cite>Chris:</cite>
<time>41:03</time>
<p>She's not here, so she, she can't say yell at me, but she loves gamification, in the classroom. I think she thinks it's really important. but she's also of that old school, thought that, learning should be intrinsic. You should just want to learn. And, I think that's really true.</p>
<cite>Phil:</cite>
<time>41:19</time>
<p>have believed that before I was forced to go through general education requirements. You make me sit in physics, physics again, or like horticulture, I'm gonna</p>
<cite>Chris:</cite>
<time>41:31</time>
<p>yeah. But obviously she wouldn't say that out loud because she understands it's an ideal, right? ideally everybody has this intrinsic desire to, to learn. That said, there's this issue where, you need a balance, You have a distribution of different types of kids in the classroom and you want to. Help each one of them. So you want to have a curriculum that, okay, this part of the curriculum is gonna help these guys. This part of the curriculum is gonna help those girls. This goes back to actually our point, Phil, before Eric got on that we were talking about, about, designing a game system that, caters to multiple different groups. That one game system doesn't have to cater to everybody. It might cater to just one person. So you have to design a curriculum, very much with this game design concept in mind, where everybody in the classroom at least gets something. The problem with gamification, and this is the same, the same issue when anything, takes over, in the educational pedagogy where everybody gets excited and it's the hot thing. Gamification can get in the way of learning for some of those kids if it makes up 90% of the curriculum.</p>
<cite>Phil:</cite>
<time>42:33</time>
<p>on the game rather than the knowledge that would result in overall less learning?</p>
<cite>Chris:</cite>
<time>42:38</time>
<p>So the, the idea would be that, there's a time and a place for these games and, at a certain point, there are, there maybe 20% of the classroom would be better off if we had just started to focus on a worksheet as opposed to keeping doing this gamification. Yeah,</p>
<cite>Eric:</cite>
<time>42:54</time>
<p>I mean, that just sounds like poor execution to</p>
<cite>Chris:</cite>
<time>42:56</time>
<p>hey, whoa, whoa, whoa. let's be clear. You're talking about the state of Indiana, uh, you know, education or whatever,</p>
<cite>Phil:</cite>
<time>43:03</time>
<p>strange that like when I go into classroom, I've been in classrooms, you know, it's a very negative experience. there isn't a lot have. Like there isn't ability to like, make a lot of trade offs. You know, it's, there's a lot of I guess the strategy, I guess is to acquire that knowledge, but I feel like the, the way in which I acquire it and like how I do it is never very</p>
<cite>Chris:</cite>
<time>43:23</time>
<p>it's a degenerative equilibrium.</p>
<cite>Eric:</cite>
<time>43:25</time>
<p>Also, I think the scope of what counts as gamification, is already present even before the last decade, like grades, that's gamification, Having tests where everyone has to sit in a constrained environment and do this thing, and you get feedback on whether you did well or not, that's, is that not gamification? Is that not a point score?</p>
<cite>Phil:</cite>
<time>43:43</time>
<p>And point, Eric, from centuries beforehand, most people would literally just show up and there'd be one exam at the end of the semester and it would, they would just be asked questions. It was very much like a PhD defenses done, but with less preparation, like the whole idea of testing and grades and all this new stuff. Like it's been ramping up, not ramping down, but started at zero.</p>
<cite>Chris:</cite>
<time>44:01</time>
<p>I, will say, I think it's at the best, if we want to try to force our profession onto this poor, field we could call it economic reification or, or like incentivization. I don't know if I would go as far as to say it's gamification. I don't want us to confuse incentives, creating incentives for people and gamification,</p>
<cite>Phil:</cite>
<time>44:21</time>
<p>uh, is it thesis.</p>
<cite>Eric:</cite>
<time>44:22</time>
<p>this, this,</p>
<cite>Phil:</cite>
<time>44:24</time>
<p>It's and philosophy ships, one old ship and one new ship. And so what you do is you remove the plank from the old ship and that you exchange it with the plank from the new ship. And you keep repeating this process. And the question is, is when does the new ship become the old ship? And when does the old ship become the new ship? And so I pose that same question to you, Chris. When we're talking about gamification, what is the plank that makes something go from just a normal technology app with incentives to a game?</p>
<cite>Chris:</cite>
<time>44:51</time>
<p>I wish I had a very quick, super clever response. Let me think about it.</p>
<cite>Eric:</cite>
<time>44:56</time>
<p>I'm gonna jump in here. I think this is a logical fallacy. I think this is the, like the mountain. how many grains of stand do you need to make a mountain or a mound? And you can't say, okay, this is exactly, this is the plank that changed the ship Ofthe, right? This is the exact number of grains of sand. You can tell that this is games and this is incentives without having a hard</p>
<cite>Phil:</cite>
<time>45:16</time>
<p>So that it's our intuition, like we just know out when feels, that feels like an intellectual justification a cop out.</p>
<cite>Eric:</cite>
<time>45:24</time>
<p>Yeah, that's true. But I don't know. I mean, language is, you know, what is</p>
<cite>Phil:</cite>
<time>45:28</time>
<p>No, I, I don't, I don't actually you, Eric, though. Like to that point more seriously, language is a which we source, I would say almost like, you know, if you choose to reuse you choose to reuse a word, like if we all choose to say that Everest, Mount Everest is a mountain, like we're coming on an agreed upon of that, which is to me economically sound for us to do. I think you're right,</p>
<cite>Eric:</cite>
<time>45:49</time>
<p>let's take a vote. How, how many of us think grades are gamification?</p>
<cite>Phil:</cite>
<time>45:52</time>
<p>hand,</p>
<cite>Eric:</cite>
<time>45:53</time>
<p>All right, So grades are not ga, the social definition of</p>
<cite>Phil:</cite>
<time>45:57</time>
<p>So, so, but, but tell say grades?</p>
<cite>Eric:</cite>
<time>46:01</time>
<p>You know, it's a point system. It's feedback. this isn't as big in Western culture, but in Asian culture, like all the scores are posted, there's a big high score list, and all the kids look at it and say, oh, Johnny got the highest score. Good job. Is that not like a high score list on an arcade cabinet?</p>
<cite>Phil:</cite>
<time>46:13</time>
<p>let's take it Let's say if you to go up to the professor and the professor tells you whether or not you did good or whether or not you did bad, is that a game?</p>
<cite>Eric:</cite>
<time>46:22</time>
<p>I think so. so what is a game, a game is something where you have an objective and you're making decisions to achieve that objective.</p>
<cite>Chris:</cite>
<time>46:29</time>
<p>So the definition of an economic game from the economic literature is, you know, you have a, an incentive structure and you have constraints. And the players need to make decisions within that, within that game. And the game is the set of constraints and the set of incentives. That's the game. And then the strategies that come out of it are the results of the game. Under that definition, I think everything could be considered a game.</p>
<cite>Eric:</cite>
<time>46:51</time>
<p>I, I think having an objective in making decisions pretty much describes everything you do in life. So,</p>
<cite>Chris:</cite>
<time>46:55</time>
<p>Yeah. And that's</p>
<cite>Eric:</cite>
<time>46:56</time>
<p>I think the big part of games for me is the artificial nature of the goals. for example, if you're weightlifting, you're just like, wanna get stronger. okay, that's just weightlifting. But if you're weightlifting, you're like, oh, I want to get to 300 pounds by this date and every five pounds I increase, I'm gonna reward myself with this. You're creating artificial goals and rewards and incentives, to, propel you along.</p>
<cite>Chris:</cite>
<time>47:17</time>
<p>so gamification is the introduction of artificial goals that are not necessary for the system to work, whereas, the difference between a gamification and something just being definitionally a game.</p>
<cite>Phil:</cite>
<time>47:30</time>
<p>auxiliary goals</p>
<cite>Chris:</cite>
<time>47:32</time>
<p>Yeah. So with with grades, you need the grade you, we can't evaluate you without the grade. However, having a fun assignment, that's gamification. The grade is not gamification.</p>
<cite>Phil:</cite>
<time>47:43</time>
<p>go edit the Stanford dictionary philosophy? Anyone? All right. Let's move on to article number three, Eric. It makes a fun market</p>
<cite>Eric:</cite>
<time>47:52</time>
<p>yeah, so the basic question is what makes a market game fun? There's a lot of markets in games like World of Warcraft or a lot of MMOs? Have markets in them and people like to participate in them, despite the fact that their payout per time is clearly lower than minimum wage I spent five hours trading on the wow auction house I made equivalent of five U s D, right? But more and more we're seeing markets and games both emergent from these massively multiplier games, as well as obviously Web three games are really pushing the market angle. and I think the important question is like, what makes a market fun to participate in? Because you see people participating in markets where it's clearly not just they're earning more for their effort in this market, there's something about it that's emotionally, satisfying, right? There's some artificial part of it that is compelling. I kind tried to break it down into a few components. One is people are clearly more willing to participate in markets where the things being traded are things they care about. Whether it's a meme stock, like Game Stop, whether it's betting on sports, whether it's trading, vintage wines on some of these,, wine trading sites. for some reason people like to trade in things that they care about. and my hypothesis here is that. It's because doing the research on the market is something they're already doing for fun, If you're a sports fan, you already know oh, the cowboys are up and the buffalo bills are down and you can make betting decisions based on that information. and if whereas, you know, researching like the EBITDA or like looking at the earning reports of some obscure company you've never heard of, That's not exactly fun. I think there's a, there's a Robin Hood ad that captures the spirit really well, where it shows a grocery store clerk restocking shelves and they're like noticing oh, these granola bars keep running out. This brand of kombucha keeps running out. And they go on Robin Hood and make some day trades based on that information, The idea is everyone has some kind of hyper local information that they,, specialize in and,, let's find a market where you can take advantage of that.</p>
<cite>Phil:</cite>
<time>49:35</time>
<p>dispersion of localized knowledge. I incredible, right?</p>
<cite>Eric:</cite>
<time>49:39</time>
<p>Yeah. Yeah, and we're seeing more and more of these masterworks as a thing where you can trade, fine art and fractional ownership of a Banksy or a Monet painting. there's Stock X, which lets you trade rare sneakers, and you never actually buy the sneakers. It just says, in a warehouse somewhere, you own the sneaker and you sell it to someone else and they own the sneaker.</p>
<cite>Chris:</cite>
<time>49:57</time>
<p>They thinking about doing something like that for magic gathering cards? I'm almost certain, not that this is a magic ga, I was about to drop names, but presumably our listeners don't know, like professional magic players. But anyway, they started to do this with.They started to do this with Magic cards and, they do the same thing. They financialize magic cards and it's just this is such an inconvenient thing to store and to bet on, but you're right. It's it's fun. I'm doing it anyway. It's</p>
<cite>Eric:</cite>
<time>50:24</time>
<p>Yeah. I remember I had a friend who like at one point was decided I'm gonna corner the, I think blue red storm is gonna be hot next season and I'm gonna corner the market on steam vents. Steam vents is a blue red land that's like critical for these storm decks, And he tried to buy up all the steam vents he could on uh, uh, these magic sites. It, it didn't work. I think he lost a bunch of money, but but it was fun, right? Yeah, it was fun. That's the important part. For some reason he would rather participate in this market than the stock market,</p>
<cite>Chris:</cite>
<time>50:49</time>
<p>mm-hmm.</p>
<cite>Eric:</cite>
<time>50:50</time>
<p>All right. Yeah. So, so that's number one, the process of researching before you make your trade is fun. So number two is after you've made your bet, your wager, your position, the process by which the information is revealed is also fun. So this is like you take a, you know, a short position on a stock and you watch and you're watching the stock price and you're hoping it goes down, Or you bet on a sports game and you're watching the sports game unfold. and people like watching the information unfold, even if there's,, watching the sports game isn't gonna help you win, right? But it's fun to watch it unfold. Betting on political races is also another thing, People check the news every day after the election happens to see what updates have, where you could just tune out for a week, come back a week later and see the results. No difference in your outcomes.</p>
<cite>Phil:</cite>
<time>51:32</time>
<p>racing game. The outcome is already determined ahead of time, but people love watching the fucking horses race</p>
<cite>Eric:</cite>
<time>51:39</time>
<p>Yeah, absolutely. Yeah. Or, uh, auto battler is another great example, You watch your two little armies fight but watching that and that's part of the entertainment and having your wager or your, position makes watching the outcome so much more exciting. So I think that's an important component that some markets do really well, like sports betting and others probably not so well. If you make some trades on the wow auction house, how long, before you realize whether your trade was good or bad, And to the game and the feedback point, you want that quick feedback to know, oh, I made this bet. It was a good bet, I made this bet it was a bad bet. The longer delay between the action and the, feedback, the less, compelling the game loop is. that's number two. And then the third one I touched on was, a big part of these competitive games is the skill curve. As you improve in skill, you get better and you win more, and that makes you feel satisfied about your improvement and continue improving your own skill, Competitive games are all about this, whether it's chess, poker, smash brothers, StarCraft, whatever. but the problem in financial markets is that the skill curve is super lopsided, where the very, very best traders are profiting and almost everyone else is like losing to the s and p 500. What if you could have skill-based matchmaking, or at least some way to dampen this skill difference between the best and the worst traders? Competitive games do this with matchmaking,, ELO systems and whatnot to put, two bad players can play against each other and a bad player can still win 50% of the time, whereas a bad player in the stock market loses every time, it's like a battle royale, where a hundred players are thrown in and there's no skill, best matchmaking. So that one,, pro player wins every single time and everyone else has a miserable time. so I think to achieve this, there's a few tactics. One is to shake the box and just. Basically create a new game. Every time you create a new game, a new set of rules, a new set of game mechanics. the skilled spread is dampened, Cause the, the super expert players, their skill capital is decay. and so that gives newer players a chance at winning. I think going to smaller niche markets also like the fewer players there are, just the spread between the best and worst trader is smaller. Just having the assets be something that's complex and intangible, that's harder to assess, means that, these like algorithmic traders or quants, can't just solve some equation and say okay, this is the winning formula. and so something like, for example, the art market trends, is Banksy gonna rise or fall in prominence, That's something that you can't quantify nearly as easily. but if you're,, an art history student and you're in the high art scene, maybe you have a sense of the trends better.</p>
<cite>Chris:</cite>
<time>54:03</time>
<p>Yeah. This is incredible. I had never really, really thought about this. One of the, one of the things I noticed is not on here, and I'm curious what you think about it, is the actual financial impact, like markets are all about money, whether it's virtual money or real money. Why isn't that in your framework stakes. Yeah, financial stakes,</p>
<cite>Eric:</cite>
<time>54:21</time>
<p>that's a good point. Let's see, how would I incorporate that? So I think the kind of assumption here is that people are participating in these fun markets for more than just the financial stakes. Their financial profitability is a mo factor and it like adds to it, but their enjoyment is more than just the financial</p>
<cite>Phil:</cite>
<time>54:37</time>
<p>constant. Let's just hold that constant and assume that away.</p>
<cite>Chris:</cite>
<time>54:42</time>
<p>Because if we do that, then play to earn, markets are much, probably much more boring than non play to earn markets.</p>
<cite>Eric:</cite>
<time>54:50</time>
<p>Like you're saying, remove the financial</p>
<cite>Chris:</cite>
<time>54:51</time>
<p>If we, If we, assume away the financial component, the assets in PLA games not quite as fun, the outcome revelation, I</p>
<cite>Eric:</cite>
<time>55:00</time>
<p>so I, I think the, the financial component's important. I guess the, the comparison is not like financial to no financial. It's I'm placing a hundred dollars bet in Axe, or I'm placing a hundred dollars bet in the</p>
<cite>Phil:</cite>
<time>55:09</time>
<p>I don't, that can always be a I don't always want high stakes. Like if I wanted high stakes, I would be in a casino. I don't want that. I want, I want it to be in a context of the game, not in the context of real life. That's what FIFA or,</p>
<cite>Eric:</cite>
<time>55:22</time>
<p>Hmm.</p>
<cite>Phil:</cite>
<time>55:23</time>
<p>They have an open auction house.</p>
<cite>Chris:</cite>
<time>55:24</time>
<p>So is the value, is the, is the financial risk reducing the fun of a market in games?</p>
<cite>Eric:</cite>
<time>55:32</time>
<p>I think so. Yeah. I think some people are not willing to participate in the game if the risk is too high.</p>
<cite>Chris:</cite>
<time>55:38</time>
<p>I completely agree.</p>
<cite>Eric:</cite>
<time>55:39</time>
<p>on the flip side, if the financial involvement is zero, then</p>
<cite>Chris:</cite>
<time>55:43</time>
<p>Yeah.</p>
<cite>Eric:</cite>
<time>55:43</time>
<p>competitive equilibrium like this, the, the na equilibrium strategy is totally different because, you know, no. Right. Having some potential for financial gain means forces people to behave in a competitive, optimizing way.</p>
<cite>Chris:</cite>
<time>55:54</time>
<p>That is kind of the incredible thing about video games and why I've, since I was an undergrad, I've, since I was like tw, I don't know, 19, I've thought that video games are such a powerful tool that economists could use to study economic behavior because they allow you to study. These equilibria that would not be observable equilibria that come out with no financial stakes. Whereas in the, experimental setting in economics, in academia, you would have to spend a couple thousand dollars paying the players, incentivizing them to do your task. It's fascinating that we can get people to participate in these, optimizing behaviors that match up with that match up with those behaviors we see in real life without any financial stakes whatsoever.</p>
<cite>Phil:</cite>
<time>56:35</time>
<p>there's a perfect example of what you're highlighting here, Eric. Um, and it goes back to sports and if I were to pick a game that I would show for in terms of web three, a crypto game, that's made me believe or it's so rare, the soccer game that also has expanded to Major League baseball and the nba. You go out and buy players that are real world players and you're put into a particular league so they achieve your skill curve, objection or recommendation. And that you want to be against people who have a similar skill and the cards or NFTs of the players that you own will gain experience points if you win, if they win a match, a real world match. So again, it has that reveal, which I thought was so fascinating is now that I have this crazy incentive to tune into a football match because I could go up in my league standings, my players could get better, the ones I choose to field. And so like that makes me so much more engrossed in game than I could ever imagine. It makes it that more consequential, you know, in case my anxiety level interesting. Right, and they're fun assets, right? soccer players. an intrinsic relationship with them and I think, you know, back to the gamification point, if we're supposed to tie things together, you know, I ask sometimes IFRA game, right? It has persistence, it has this, so it's, you know, a fantasy sport is traditionally you enter you draft players from the league of other players, other competing players, you'll, you'll draft from a common pool and there's no persistence and persistence of players having vertical progression. You might acquire even more points if your card's a certain level. Do you see like a fantasy sport with game elements? Oh, let's football manager, like, that's like a successful series on steam. Do you think of that as kind of like the perfection of this? Like is there a perfect out here that you're</p>
<cite>Eric:</cite>
<time>58:15</time>
<p>Sports betting keeps or fantasy sports keeps showing up in, in every single category I've outlined. I They're one of the standout examples. So they're probably the best. the matchmaking problem is the main issue, but to your points, a lot of fantasy sports leagues create ways to match, make. Another way is often self sorting based on stake size. The people who wanna put up a thousand dollars, those are the best players. People who only wanna put dime$5 are like much lower skill and they self sort. I think sports betting is probably the best example.</p>
<cite>Phil:</cite>
<time>58:43</time>
<p>free writing on the most knowledgeable people. Like, especially if it's no no like moving or aiming. Then they're I could just copy someone's portfolio. Right.</p>
<cite>Eric:</cite>
<time>58:53</time>
<p>Yeah, that's a good point. I hadn't thought about that. That's kinda like, card games where people just net deck, they just find the top players decks and run them.</p>
<cite>Phil:</cite>
<time>59:00</time>
<p>cuz there's, there's like less the theory crafting.</p>
<cite>Eric:</cite>
<time>59:04</time>
<p>that the shaking up the box, right, changing the rules, creating new balance patches or whatever helps that, the best decks from the last month aren't good anymore. I think adding an execution component, so maybe the market itself could be more let's say there's some auction mechanism with a real time component where you have to make live decisions. In card games they call this piloting, Where it's, you can't just copy the good deck, you also have to pilot it effectively. and I think most markets, here's actually an interesting point. As an economist, when I say what is a well designed market, what are some attributes of a good market? What would you say?</p>
<cite>Phil:</cite>
<time>59:32</time>
<p>As an economist, I'd say maybe some some, some way to reach equal. Actually, I'd say it's the efficient, it's the rate at which the market can efficiently incorporate information into prices. If I wanna get more technical, like that to me is what ultimately a market does.</p>
<cite>Eric:</cite>
<time>59:47</time>
<p>All right. It's efficient, it's stable, it's liquid. one thing I wanna add is a strategy proof, Are making a simple decision based on their preferences. They're not having to think about what all the other actors are doing. on the flip side, I think a good game has the opposite attributes where you want the players to be thinking about what other people are doing. You want their decision to be complex. You want the assets to be difficult to evaluate.</p>
<cite>Chris:</cite>
<time>1:00:09</time>
<p>So in a, in a market, like in a, in a double auction market, for example, you're, as an agent, your strategy is completely based on your own personal information. You're not reacting to another person's actions. What I think is really interesting, with blockchain technologies, you could track someone, you could technically track someone's actions on the blockchain and you could follow their actions. Does this introduce a layer, a strategy layer or, there, there's a, there's actual term for it. As a really good trader, I have to careful because when I post that trade, somebody's gonna follow my action. And now we're actually talking about, a nash equilibrium where I have to think about what you're doing because you know you're gonna react to what I'm doing. whereas in a normal. With, limited information about what other actors are doing. There's no way, there's no point in a double auction mechanism. I should emphasize this obviously goes away when we start to talk about second price auction or something like that. There's like a strategy that gets introduced when I can now track other people's actions.</p>
<cite>Phil:</cite>
<time>1:01:03</time>
<p>at the gym. I was just like, man, the weird shit that pops in which is something that players have to solve. It's a puzzle. It's actually ultimately content. When there's disequilibrium, and I ultimately think about it, it's like, it's like you're playing a guitar and your guitar, you have different strings. And as an economy designer, it's almost as if you're trying to play a song by causing all these various equilibriums. And so if you can make all of those disequilibriums together, almost like in a concert, you know, then, then you're, you're making something beautiful. Right? But you can also make really bad Like you can make cards that are overpowered. I mean, I always go to Tcgs because it feels like. It exemplifies these problems on you know, it just, it's really about core Twitch gameplay. So, yeah, I don't know. I think you're right on the disagree that's not something you traditionally want but it is content, right? Even in a market, I guess it's content, Like now people have to master happens when there are meme stocks. What happens when people will make wild? And we call it irrational bets. I mean, what's, what's the famous quote? The market can stay liquid longer than you can stay rational or something along those lines.</p>
<cite>Eric:</cite>
<time>1:02:04</time>
<p>Yeah, the market can stay irrational longer</p>
<cite>Phil:</cite>
<time>1:02:06</time>
<p>thank you. thank you. And so, like, that's to me is almost expensive but in a game that's content.</p>
<cite>Eric:</cite>
<time>1:02:14</time>
<p>Yeah. It's a news story. Everyone's talking about it. the discords blowing up, you know?</p>
<cite>Phil:</cite>
<time>1:02:20</time>
<p>Economist and the can we survive another week? looking forward to some hate mail. All right, that's it guys. Uh,</p>
<time>1:02:31</time>
<p>We should teach this to our children. Economics. Economic is major, major, major, major. Everyone has to major in economics,</p>
