In the name of the game: Runescape PAYERS come LAST ?

10th December 2007 was a very sad day for me. It marked the beginning of the end of the last three years of my life. I have been playing Runescape ("RS") - for almost 3 years (which translates to a total of USD 180 in subscription fees). I am not embarassed to admit that the sole reason I got hooked to this game is its proximate simulation of the real world's economy. You may ask what is so real about an online game: RS has a whole economy on its own, very much like any country's economy. Every player has to work on their skills to level and in the course of it, obtain armors, rare items and gold points (or GP, the RS currency) as rewards for killing monster or other players. Arguably, the fastest way to make GP is through merchanting.

There are two kinds of merchants. The first kind makes items to sell to other players for GP. The second one buys items from players to resell them to other players. The latter is similar to retailers who purchase items in bulk from wholesalers and selling to consumers. I belong to the wholesaler category because I have quite respectable levels for all skills offered by RS. My main customers are the lower level middle man. I often advertise my items in the official RS market forums and it has proved itself to be an efficient way of selling my items for several years. With the GP I earn, I am able to buy other items which I need to increase my levels to make more money. I usually buy bow strings, pure ess and more recently, I spent millions of GP on seeds to help me increase my farming skill.

Multi-player, not solitaire.

My cousin and uncle are RS members too (thanks to my cousin, who got my uncle hooked to this game). Their levels are considerably lower level than mine, hence, I give them items or GP to help them level their skills. There have been times when I have had to give them a full new set of armor when they lose their old one after being killed by a monster or another player. Family aside, I have also been practising giving away gifts to my player friends (whom I met in RS) for their birthdays and around the holidays. The gifts which I get from them in return will very much depend on their level ---the higher the level, the more generous the gifts.

Helping friends and family is unfair trading?

There are over a few dozen articles written on the RS economy. There are rare items which RS does not produce anymore (such as santa / party hats) but remains tradeable among players. These items are considered extremely rare, very much like a Da Vinci painting. Authors of those articles speculate how high it could go in a couple of years time as the value prior to the updates were 40 million gp each. There are also numerous websites that post and update current market value of tradeable items. This is how BIG the Runescape economy is. These articles are not only well written, but they are even comparable to major financial and stock market articles. This in itself reinforces the reality that an online game is capable of mimicing close proximate simulation of a real world economy! And like any real world economy, you can find the good, the bad and yes, even the ugly players in this game. Many a player got scammed or cheated, as have I. But I find this part of the learning curve, and harmless for anyone to learn our lessons. If there was a safe place for naive children to learn a lesson, this game would have been it.

Because of this, RS economy attracted a lot gold farmers and real world traders. These are the people who would either spend all their time to make GP by developing "bots" or programmes which continuosly mine, fish, chop wood etc to make the GP by selling these items to other players. Thereafter, they sell the GP to other players in exchange for REAL money - USD, Euros, Yen, you name it. They also create their own websites, or even sell them on eBay. They are the BAD guys and no reasonable player would disagree that they have to be eliminated.

However, based on the recent posts in Jagex forums, the players differ from Jagex in respect of the means to achieve that objective.

The death of a free economy?

On 10th December, Jagex (the company that developed and owns RS) updated the game by removing "unbalanced trade" i.e you cannot give away items or gp without getting equivalent value of item/gp in return (with +/- 3,000gp). A decent full armor (barrows) would cost between 2.5mil gp to 10 mil gp. 3,000 gp in RS world is so small that a player will not even bother to stoop/click to pick em off the ground. That is not all as Jagex has also removed the wildy - which is the only place where players can kill other players and keep whatever items the dead player has on them. And how do they keep tab of the "fair" price? They invented the Grand Exchange ("GE") where all prices are intitially fixed by Jagex and subsequently will be based on supply and demand of players. After several weeks, the prices are still way out of line compare to pre-GE days, and a lot of items have less than 50% of their original value. Before the 10th Dec update, players had a choice as to whether to use GE to trade, if they don't like the prices there, they can still trade off GE. Now, players can't do that anymore. With the 3,000 gp margin per trade, there is no point in doing that anymore. You have to make 333.33 trades in order to earn 1 mil GP of margin - no reasonable player would do that. According to Jagex, this will eliminate RWTs.

Was it necessary for Jagex to take such a drastic step? Do they not know that by removing these 2 features, they change the whole game? It is similar to a buyer going to a shop to buy a Motorola V8 mobile phone and the shopowner tells you to buy a Nokia instead because they don't have Motorola in stock. I am not saying that Nokia is in any way inferior to Motorola, it is just not the same. People who like Motorola phones will not buy Nokia and vice versa. They are 2 different types of consumers. In other words, the existing RS players will hate the updates and Jagex will have to wait for "new" subscribers to get hooked enough to subscribe (and pay for) the "new" game. There is a high likelihood that Jagex will lose a lot of revenue for the next few months (if not years) and it will take them a long time to build the customer base that they currently enjoy.

Their say.

Jagex has posted their reasons on their site. It appears to me that Jagex's concern is the additional USD 40 million that they would NOT have made by 2010 because the gold sellers didn't give them a cut. The question is where do the players stand? Jagex keep saying it is for the best and that they have tried all means to minimise any adverse effect the updates have on players. Have they really? Jagex said they have consulted professionals and after almost 2 years, Jagex claimed that this is the ONLY solution to RWTs. From what I can read, teenagers and kids have, through their various posts in the forums, came up with far more decent ideas than what Jagex and their competent team have implemented. Based on my rough estimation, Jagex would have at least a subscription base of 1 million players, who will religously pay USD 5 per month - that is USD 60 mil p.a. Jagex should focus on what they have now instead of making the war against RWTs their ONLY priority, and not at the expense of their paying players.

Our say.

As there are so many posts in Jagex forums offering suggestions and solutions to the RWT problems without having these recent updates (and I sincerely hope Jagex reads them), I will not repeat them here. What I will write about is my prediction of what would these updates do and whether it will wipe out RWTs in total (as claimed by Jagex):

1) After the GE update, prices of items have fallen drastically compared to pre-GE days - a lot of items are trading below 50%. Given that it is no longer possible to trade outside of the GE system, everyone would have to dump their items in GE for sale, which will depress the prices even more. If the prices fall to 10% of their original value, the purchasing power of 100,000 gp would be equivalent to 1 mil gp prior to the update (there is no inflation in RS:)). As such, one would have to trade 33.33 times only (100,000 gp)to get gp equivalent to the purchasing power of the current 1 mil gp. Instead of just having 1 character trading 1 mil gp (or in the future 100,000 gp), RWTs will create 34 accounts to do simultaneous trades with the buyer. And because each RWTs will have to create 34 accounts for each player (according to Jagex, these are normally non-paying members), Jagex will have a hard time trying to monitor RWTs. And because each trade involve such a small amount (cannot exceed 3,000 gp), it will make it even HARDER for Jagex to prove that these trades are in fact conducted by RWTs.

2) Instead of selling gp, RWTs will probably be thinking of selling accounts, which presumably will fetch a higher value since it comes with pre-existing level of skills, in addition to the gp in its account. As Jagex do not require owner's identity to be verified when the account is created, technically, the RWTs could transfer the account without Jagex even being aware of it (especially for RWTs who paid for the initial subscription in cash).

3) Majority of the existing paying members are into merchanting and pking (by the way, pkers are usually the consumers of items). In addition, majority of the players are adults, and some even have the whole family playing (grandparents, parents, uncles, cousins, brothers and sisters). These players are not into playing a safe and lame game. They know that it is just a game and whatever they gain or lose in the game makes the game intriguing. With the recent updates, Jagex will lose a lot of these existing players and it may take months (if not years) for them to replace the current number of players they are about to lose. Drawing on my earlier analogy of mobile phones, Jagex has basically changed the game from a Motorola phone to a Nokia phone and hence, need to recruit "Nokia" players from scratch - which is not a very wise thing to do.

Instead of dealing with the security issues that RWTs post, Jagex chose to see this as a game content issue. The former is what a competent businessman will see, and the latter, well, is what a programmer would see. I hope Jagex would be bought over by a competent businessman rather than to see an excellent online game being ruined by its creator.

"Is it Legally Permissible ?"

Have you ever wondered what are the most frequently asked questions posed to any corporate legal counsel? It would probably be "can we do this?" It's not that they are asking you what they cannot do but rather what they CAN do.

Most corporate counsels do not have the opportunity to go into "cant's" simply because the client normally wants a "Yes, you can" solution to the query at hand. However, lawyers are normally prudent enough to cover their back sides by responding in such a manner that does not imply they are suggesting any particular course of action, but rather, is a mere expression of their legal opinion as to whether that particular course of action is "legally permissible", based on the facts and circumstances.

Most corporate counsels that I have spoken to express their concerns on not being given the opportunity to articulate the boundaries of the legality of certain actions. Management is usually too impatient to listen to the "DON'Ts". The irony of the situation, as expressed by certain corporate counsels, is that one wouldn't thoroughly understand the "DOs" unless one is able to comprehend the "DON'Ts".

Imagine, if you ask for direction to get from Point A to Point B, instead of having the patience to listen to the basis on which a particular route is recommended, management would simply like to know which is the fastest, cheapest and best route to take from Point A to B. The suggested route is based upon particular set of information and facts. If those information or facts vary, so will the preferred route. Most management that I have seen or read about, would blindly follow the suggested route from Point A to B, without considering whether circumstances have changed. And if something goes wrong, you know whose fault that will be.

We don't have to look far. Arthur Andersen is a classic example. When the partner shredded those incriminating emails and documents, he defended himself by saying that he did so upon the legal advice of the firm's legal counsel. The legal counsel, whom has, prior to that, sent a general email to everyone in the firm, reminding them to comply with the documentation policy. That email was not a specific legal advice rendered to that particular partner. In fact, if one were to read their documentation policy, I believe it will not say "destroy documents if you know they are incriminating...before they are discovered".

Can one destroy those emails and documents? If this question were to be asked, the answer will vary depending on how much facts the legal counsel knows. One of my friend who happens to be a corporate counsel bestowed upon me his wisdom, "If someone ask me that question and I have to be polite in my response, without probing for additional information, I would simply respond that it is legally permissible to do so if......" According to him, some management would seek further clarification and ask "what if the situation is like this". Others would merely be satisfied with the answer and interpret it to their own liking (by coincidence or otherwise, the interpretation will usually assist their situation).

Non-Compliance

It is amusing to find that some corporations put in place policies for the sake of having those policies, without any intention to comply with them. The reason is public perception. Those corporations want to be perceived as doing the "right" thing.

My personal view is that those corporations will be "better off" if they do not have those policies. The reason being if the management themselves do not comply with the policies, it will be prima facie evidence of negligence (or even wilful misconduct) on their part. It will be so much easier for any claimant (usually shareholders or creditors) to prove their case against individuals whom have corporate governance responsibilities.

What's worse is that these corporations will normally publicise that they have put in place super duper policies and processes to ensure compliance OR to implement various policies which are inconsistent with each other. For e.g, one policy will say that the management and employees of the company shall not expose the company to "unacceptable risks". The words "unacceptable risks" have not been defined in the policies. However, there is another set of policies that say in the case of global contracting (i.e master contracts signed with the head office of client that bind the whole world), all risk management policies are not applicable and the company is free to accept unlimited liability etc. By virtue of this, it would appear that exposing the company to unlimited liability claims is NOT an unacceptable risk. If this is the case, then what the hell is unacceptable risk???

I am not sure whether the senior management around the world have actually considered the implications of implementing the various policies but it sure make the senior management look explicitly incompetent by putting in place such inconsistent policies. The funny thing is, it never crossed their minds until I brought up the inconsistency and highlight the fact that risk management department will lose its credibility trying to enforce the "thou shall not expose company to unacceptable risks" policy.

I just had a discussion with my boss this morning about non-compliance with one of the policy which our company has implemented. Fortunately or unfortunately, I am the compliance officer for that particular policy. And the person who breached the policy is.....my boss. How do one tell one's boss that he/she should comply with the rules that he/she had put in place? Well, what I did was to inform my boss that there has been a non-compliance of that policy and that is because the staff has escalated the matter directly to him without complying with the process/protocol that has been put in place. As this has happened numerous time, I told him that it appears that the company is comfortable with that "process". Hence, it will make sense to change the policy so that the management/staff will not be in breach of the policy - i.e the matter should be escalated to him and it will be up to him as to whether he wants to delegate the matter to me, rather than the other way round. He thought about it and insist that the policy stay as it is without any changes and that he will reinforce the policy by raising the matter at senior management meetings followed by emails. He does not want to take on the responsibility of ensuring compliance although he doesn't mind the power of letting me know that I am merely as important as he wants me to be. I really have no issue with it. In fact, I would be more than happy to be relieved of that responsibility (and not to mention, workload). For some reason, reverse psychology always work.

What can I say..... I love my job :)

Corporate Turkey Governance

News headline - Revenue Up by X%! EPS 1 cent above analysts' expectation, so on and so forth. Most (if not all) corporate executives' income are tied to how well the company's stocks perform. As one can imagine, there is tremendous pressure from shareholders to outperform previous years' revenue or profit - and when financial shenanigans are busted, the shareholders blame management executives for misleading (or defrauding) the shareholders, especially minority shareholders.

I personally feel that the shareholders are partially to be blamed (if not fully). If the company reports better revenue or profit, the management must therefore be doing their job and hence, rewarded accordingly. No shareholder will value an executive telling the truth that the company is making losses. Are you kidding? The share price will plummet. I still remember about 10 years ago, there was a Canadian company which claimed that it has stumbled upon a gold mine (literally) in Indonesia, in fact, the largest gold mine in the world. Shares were trading under 50 cents before that but shot up to over 200 dollars in a matter of months. Then, things turned bad, one of its engineer was murdered in Indonesia and in fact, there were only minimal gold to be found. Every insider sold their shares before the news got out. Let's see, if the management had come clean much earlier, by explaining they had made an honest mistake and none of them sold their shares before the news were published - would that have made any difference? Seriously - think about it - what would have been different?

The truth is the minority shareholders will still suffer as much loss. The only difference is the insider trader wouldn't have made the monies they did and would have suffer the same losses as the minority shareholders.

Let's face it - playing the stock market is like playing the musical chairs, you hope that either the music won't stop or that you will have a chair to sit on when it stop. How can the minority shareholders then blame the corporate executives for allowing the music to play a little longer? In fact, the minority shareholders ENCOURAGED the executives to do everything within their power to prolong the music. This is what I call Corporate Turkey Governance.

What happens if the executives who are responsible for false/misleading financial reporting do not have enough money to repay the shareholders after the civil proceedings? Thank god there are deep pocket auditors :)

Shy Turkeys.....

Every Head of Department in a corporation should be given a Human Resource Handbook or Human Resource FAQ that provide some guidance on "How to Handle Delinquent Employees", especially "what you should NOT do". Not many people are aware of the principle of condonation. Even with the highly publicised Enron's story on how Andrew Fastow became the CFO of Enron, I am surprised to see many corporate leaders did not learn from the mistakes of Ken Lay or Jeff Skilling.

Here's the story...Eddy is the Head of Department of our local unit of a multinational corporation. He has been working in the same company for over 30 years. He is seen to be a great leader by many other high power executives in the company. However, he has several huge flaws, which I consider them to be fatal, if left uncontrolled. One of it is the inability to handle and manage delinquent employees under his charge.

One of his employee, Arthur, has been working in the company for the past 15 years. Intelligent, swarve, highly qualified professional, groomed by Eddy personally. Arthur has the ability to exploit just about anyone's weakness. He knows that Eddy has a huge ego (then again, which corporate leader doesn't). Arthur will use every opportunity he has to fan and feed Eddy's ego. In a few years, Arthur is one of Eddy's trusted lieutenant, so much so that Eddy will refuse to see or acknowledge Arthur's flaws. He has been warned by various executives in the company about Arthur's integrity but refused to acknowledge them. He would brush them off as people who are jealous of Arthur's position.

Sometime last June, the CEO, Keith, discovered that Arthur has requested for a huge amount of unjustifiable advance. He asked the Finance to conduct an investigation on all expense claims made by Arthur. Finance reported that Arthur has made few hundred outstation mileage claims in the past 2 years, all of which were unsupported by any document. Keith directed Finance to pass the report to Eddy for his further action.

For the sake of complying with Keith's order, Eddy passed the report to Arthur and asked him to submit a written explanation, to which Arthur did, on the next day. His explanation was basically the senior management of clients are aware of the trips he made and that the clients have all paid the bills without raising any issue. Eddy then passed Arthur's reply and Finance report to Arthur's 3 immediate supervisors and instructed them to speak to Arthur. Why couldn't he speak to Arthur directly? Is it because he is not the confrontational type?

Anyways, the 3 supervisors did not really do anything about it. About 10 months later, Eddy proposed Arthur to be promoted to be the Head of a new department. What??? Keith remembered the issue about his claims and confronted Eddy about it. Keith put Arthur's promotion on hold until Eddy close the loop on that. So what did Eddy? he passed the file to the HR department and instructed Finance to work with HR to get to the bottom of this. No, Eddy doesn't want to get his hands dirty.

After 2 more months of investigation (that is 1 year after Eddy was instructed to deal with this), the company found that Arthur has made few hundred fictitious mileage claims amounting to a few hundred thousand dollars, purporting to be expenses incurred in the course of work, when in fact he had not made any of those trips. Phew! Isn't the company lucky to have someone like Keith? Imagine, had Keith not confronted Eddy, one day, this crook, Arthur, may even be the CFO or even CEO of the company.....and it will be Enron or Tyco all over again.

Arthur has been sacked just a few days ago. When Eddy passed the letter of termination to Arthur, Eddy said it wasn't his decision. Of course not! If he is capable of making difficult decision, Arthur wouldn't have been able to gone this far. Apparently, Eddy knew that Arthur has been siphoning off monies as far as back in 2001! When HR insisted on reprimanding Arthur, not only that he did not reprimand Arthur, he had given Arthur assurance that the incident will not have any impact on his future in the company.

Question is, why is Eddy still around? Shouldn't he be removed from his position as he has proven himself to be an incompetent leader? Last I heard, he was still thinking of competing for the CEO position when Keith retires next year. God bless the company!

Turkeys can't fly.....

My definition of Corporate Turkeys? These are the people who cause the downfall of great corporations such as Enron, Arthur Andersen, Tyco, WorldCom etc. They are financial shenanigans - financial parasites. These "Turkeys" think they can fly like eagles and if they tell themselves enough number of times, they will not only convince themselves but also the public at large.

No, they are not stupid...most of them are sophisticated and well-educated business men who are blinded by money and lost their way. Corporate Turkeys are people who are smart enough to manipulate rules in their favour but foolish enough not to figure out what those rules are for.

Here is my theory. Corporate scandals nowadays are, by far, more juicy than any other stories. Sex sells but in my view, not as much as books on finance, day-traders, fund managers, stock speculation and books like "How I make a Million Dollars in the stock market". Disagree? Walk into any medium to large size bookstores and you will see what are the featured books. And because of this heighten public interests in personal finance (i.e how to retire rich), it is so much easier for fund managers to lure unsophisticated people on the street into the stock market dungeon. When all these monies keep pouring into the stock market, bubble will burst, which invariably lead to corporate scandals being discovered.

You see, it is always easier to spend other people's money than your own. If one owns 100% of the company, every cent that you spend literally comes from your own pocket. When one owns only 30% or less of the company, every dollar you spend, 70 cents or more belong to other people. It is only human for most Corporate Turkeys to have this mentality. Because of this mentality, Corporate Turkeys believe that they have god's given right to abuse every ounce of their corporate power. It is just too tempting for Corporate Turkeys.....Corporate Turkeys can't resist putting other people's money into their pockets - the easy way.