In Search of Fortune: Opportunity Cost

Opportunity cost

Welcome to ‘In Search of Fortune’, a new monthly series where I discuss my gold goals and in-game money making strategies.

So many times I’ve been told by friends about how their farm is “free”. I specifically remember early on in the World of Warcraft Cataclysm expansion, I was making money hand over fist by buying all the herbs on the AH and crafting Darkmoon cards… then eventually buying all the cards to make all of the decks. Ignoring the fact that I was making more gold overall, he insisted that his farming ore was at least as good because it didn’t cost him anything. His logic was that I had to spend gold to make my gold, whereas farming is didn’t cost any and therefore was as good.. However, I explained that my gold making took 15 minutes a day and he needed to farm ore a several hours per week to even come close to the amount of gold made.

This was when I first told him about opportunity cost:

The money or other benefits lost when pursuing a particular course of action instead of a mutually-exclusive alternative:

Examples: For those not involved in gold making in video games, I tend to explain opportunity cost in terms of lunch. If you can only have one thing for lunch, and someone proposes getting either burgers or burritos, if you pick burgers, the opportunity cost was the burrito that you’re not eating. One of the most important opportunity costs is time. Since time is money limited, with the exceptions of what a person can do while multi-tasking, the opportunity cost of any activity is the other activities you might have done instead. If I spend an hour at the gym, I’m not spending that hour playing video games. If I spend an hour playing video games, it costs me an hour of getting fit.

Back to Gold Making: In early Cataclysm, it would take me 15 minutes a day (under 2 hours per week) to earn say, 5k gold (I don’t remember the exact numbers). Meanwhile, my friend would farm for 6+ hours per week to earn 5k gold. We made a similar amount of gold, but it cost 4 more hours to do it. His opportunity cost from that farm relative to my crafting was 4 hours per week that he wasn’t doing something else – such as actually playing the game.

So What’s the Point?: Well, this is something I consider when I’m planning how to spend my time. It’s also why gold per hour is so important – because doing something that is less gold per hour than something else is actually costing you gold. If you were trying to get the brutosaur (or whatever new Shadowlands gold sink or other money-making goal you have), then the most efficient use of your time would be the best path to do it. Flipping on the AH tends to be more gold per hour than farming, once you’re able to get TSM set up and figure out your servers economy. With the new expansion coming up soon, finding the most effective strategy for making gold can drastically change how much you’re able to making early on when the prices are so high. Crafting tends to be higher gold per hour than farming as well, as long as the crafted items sell quickly and there is enough margin between the cost of materials and the cost of the items.

In early Shadowlands, maybe farming ore will net you 20k gold per hour, maybe you could spend another 5 minutes and turn that ore into crafted gear and make 40k gold in your hour and 5 minutes… but if you can just buy the ore for 20k, spend 5 minutes crafting it into gear and sell that for a total of 40k (20k profit), you’re now making 20k in 5 minutes which is 240k per hour. So, instead of farming, you buy ore, smelt, craft, post until the market is acceptably saturated, and perhaps make 5-10x more money for the same time invested. It’s important to note that sometimes the raw materials farm is actually more effective if there’s no margin between the materials and the crafted item. If 20k worth of ore only crafts an item worth 20k, then buying ore/crafting/selling/ doesn’t work for a profit.

Summary: Opportunity cost is the benefit you don’t get because you chose a different path. When making gold, consider the most efficient use of your time, not necessarily just the thing that makes the most gold. Because, while this column is about gold making, remember – while your doing you’re gold farm or AH flip, you’re not playing some other aspect of the game. Is the gold you made worth the mythic+ you didn’t run? This is why I’ll often run old raids for transmog and gold, despite the gold per hour being incredibly low, because I gain something in addition to the gold. Consider the opportunity cost when you evaluate how you’re spending your time and decide if there’s something you value more than you could be doing with it.

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