Adults who spend thousands of dollars on iOS games

I’ve gotten a lot of great comments to my previous brief post on in-app purchases. Including a link to this recently published Wired article about adults who spend thousands of dollars playing iOS games.

Lee — who asked that we not share his full name, or any specific details about his line of work — is a single, 42-year-old businessman from California. He says that his annual income is “in the six figures.”

Lee says that spending money on games like Clash of Clans is actually saving him money in the long-run: Before he started gaming, he says he and a small group of friends would go out drinking, sometimes spending as much as $6,000 in a single night between them.

Lee stopped spending money on drinking roughly around the same time that he began playing Happy Kingdom, a Facebook game, with some friends. It was the first videogame he’d ever liked, and he became enraptured. He wound up spending nearly $5,000 in that game before trading it for Clash of Clans, but says that’s far less than what he would have otherwise spent on alcohol.

“I actually save money playing these games instead of going out and drinking,” he said.

You may never have heard of Clash of Clans, but it’s one of the highest-grossing games on the App Store thanks to players like Lee. …

Yep, I only first heard of Clash of Clans yesterday, because I discovered that it was the top-grossing game at the App Store, and I mentioned that in the previous blog post.

In addition to reading the Wired article, I also read through the comment thread, and the comments generally fall into two categories.

Category 1: People are crazy or addicted to be spending so much money on virtual crap.

Category 2: Spending a few thousand dollars playing an online game is no different than spending a few thousand dollars to go on a golf vacation. In fact, people will spend half a million dollars to join an exclusive private golf club, so how can we say that the guy spending $5,000 to play video games is addicted but that it’s perfectly sane for someone to spend $500,000 on golf?

But none of the comments anyone wrote were in my own third category. That is that our entire society and our entire economic system is based around people buying crap that they don’t need, but we are so used to it that we consider it normal and don’t even question it. There are loads of women in Manhattan who have closets full of $300 shoes, and this would seem like insane behavior to a woman in a poor country who can barely afford to feed her children, but it’s considered completely normal here.

It’s only when we see some guy dropping thousands of dollars on virtual soldiers that we begin to question the whole thing, and it’s only because he’s spending money for something that’s confusing to us. But I predict that this will be considered completely normal in another decade. If you remember back to the 1990s, people who spent hours a day surfing the web were considered to have an addiction problem, but today everyone spends hours a day surfing the web and it’s considered completely normal.

But should spending money on crap you don’t need be considered normal? I respect groups like the Amish who reject the materialism of modern society.

* * *

When someone spends a thousand dollars on virtual soldiers, it's a commercial transaction so it gets measured as a thousand dollar increase in GDP. But is a purchase like this really making our country wealthier?

If GDP were to measure stuff like quality time spent with family and ignore purchases of positional status-whoring goods, we might not be the world's richest country.

Comments

[BlogRaju]

Think about the fate of all those poor people making $300 shoes for ladies in Manhattan. Do you want those people to be unemployed? Buying crap we don't need provides jobs for destitute third-worlders.

Also, the app makers need jobs! Surely you don't want a bunch of unemployed app programmers. People are just paying for entertainment, which is quite normal.

[HS: The jobs are in third world countries in slave-labor-like conditions; often the workers are children. The people making money from the shoes are rich owners of fashion businesses in the U.S. and other developed nations.]

[Kurtosis]

you need to get acquainted with the Austrian School theory of value.

[Galvani's Frog Dance Theatre's Orchestra Conductor]

Virtual soldiers in a game is close to the exact opposite of a status-whoring good (status-reducing?).

As for the question of whether this really makes the country wealthier -- of course it does. Anything that reduces cash flow for Hollywood is a great societal benefit.

[Peter]

Men who spend thousands of dollars playing cartball are hoping to boost their status, so they can (a) close huge business deals and/or (b) nail hott chix.

Spending big money playing online games does not lead to either (a) or (b). In fact it makes (b) less likely.

[rightsaidfred]

"If GDP were to measure stuff like quality time spent with family and ignore purchases of positional status-whoring goods, we might not be the world's richest country."

You heretic.

I've talked to immigrants who make a similar point: much of what they have to buy in the US comes via community in their home country. There, they can have a wicked good party with donated booze, while their US counterpart has to spend $5000 for an equivalent good time.

[XVO]

I say yes it makes the country wealthier. He enjoys spending his money in this way and apparently he's spending time with "friends", so it's providing him with usefulness. Apparently he likes it so much he's stopped drinking as a result (he's going to have loads of fun when he figures out he can combine the two activities!)

It does raise some tricky philosophical questions about life. We've conquered all the survival challenges of life. The only thing left to do is keep ourselves occupied until we die.

It's usually nice to be alive and there is always something new happening.

[Drole Prole]

He may spend less on stuff now, but he pays for it in lowered social capital and increased loneliness.

[Steve G]

So how do you square this with zero marginal product workers. Creating and buying fake stuff employs lots of people. SInce technology has advanced so much lots of workers don't have anything real todo. Thus we make up fake things for them. Typical job of the future is playing a video game to collect in game property that will be sold to someone with more valuable time.

Not saying I like a world like this, but it is the one we create when we have to create make-work for low-IQ low-conscientiousness people.

Imagine a world where robots produce all material goods, there are even robot fine chefs, and doctors. The richest people are those who collect rents on natural resources, ie the inputs. After them it is the class of designers, of robots and objects they create, of foods etc... After that there is nothing..

Designers are self-motivated and very few folks have that motivation. Everyone else needs something todo, but almost no activity is anything other than transferring value from the resource owners, and that isn't necessarily bad. The problem with this world isn't that people consume too much... its that people have become bad, because they have never had to work, or wanted for anything in their lives. People are lazy and entitled, all time is spent on status competition, but status divorced from wealth is ends up as violence, think everyone acting ghetto.

[Drole Prole]

The more one is comfortable in one's skin and the more meaningful relationship one has, the less they will feel inclined towards spending money on stuff to fill the void. Lee could save money i innumerable other ways and wasting it on iOS games is not a wise alternative to wasting it on going out and drinking. He's just trading one vice for another. He needs to focus on cultivating and growing his social capital, lest he becomes a dog man and die alone.

[Lexus Liberal]

You join golf clubs to network or use it as a status symbol, conspicuous consumption is the name. You also get free amenities and rights with the membership, while with virtual gaming you might get carpal tunnel and less attention from women.

His dollars are paying for computer engineers to become skilled or experienced. Yet I would support the idea of more sin, entertainment or luxury tax instead of punishing frugality and planning by increasing capital gains tax and totally eliminating estate tax.

[Jake]

This stuff is actually not such a new phenomenon as you might think , it's just that now big companies have figured out how to make money from it.

In WoW there were always chinese "gold farmers" who would play the game for hours a day collecting gold and selling it for real $ to westerners.

In practically every MMO there is a similar thing, it just used to be frowned upon.

A friend of mine used to play a crappy online game for a few years. About 7 years later he bought himself a car by selling the account.

Perhaps your old idea about paying the unemployed to play video games might not be too far off the mark HS.

[Win my game]

I visited a colleague's house a few months ago and found out he and his family were huge gamers. I had no idea. He told me it's never a good idea to tell people you play these sophisticated games. Some of them are sophisticated; they take months to learn how to play. I also found out about the huge informal economies going on in some of these games. I'm shocked redistributors, rights allocators, social control oriented academics, and crony capitalists haven't latched onto this more than they have.

In the real world I can have someone make me a knife, it will cost me $120.00. In these games I can have someone make me a knife for the same price, but it remains in the game. However, if someone wants my virtual knife and is willing to pay for it, you can ask for credit based on US dollars in return. In turn that money can come out of the game into the real world. What I found interesting was there are coders who make a living selling virtual blacksmith services. In the real world they code, in the game they step back 1500 years and become a blacksmith. Some of these games also have banks, that compete. A depositor can place real credit based off of $100.00 US dollars into accounts and withdraw at a later time. People will deposit based off of security of the bank, interest rates (which are all over the board), location of the bank, etc.

These virtual economies are kind of like the old west, anything goes, mostly unregulated, and (somewhat) out of sight of the east coast elite. There is a huge potential to test a lot of social theories talked about on this blog that would never politically fly in the real world. The difference here is when a person dies, feels bad about losing, is shunned for being low status, it's only virtual, not real. In virtual reality a risky test can occur. If it fails, no harm no foul.

[not too late]

"When someone spends a thousand dollars on virtual soldiers, it's a commercial transaction so it gets measured as a thousand dollar increase in GDP. But is a purchase like this really making our country wealthier?"

Maybe those who write, sell the app and collect this guy's money use it to form a functioning family with kids and quality time. It could happen.

[asdf]

Here is a "value transference" definition for you. I will divide these into consumer and producer versions.

Consumer Value Transference

1) Factual Misrepresentation of Product/Service

A good example of this would be MBS that investment banks sold before the crash. They told people they had AAA risk profiles but they were in fact junk. This was a factual misrepresentation, people bought something different then what they thought they were buying. This is a common problem in the FIRE sector.

2) Impulse Manipulation

Lots of products are bad for people and don't actually make them happy in any time horizon beyond the immediate present. However, because people are just tool using apes they can be convinced to do anything if you assault their senses just the right way. A good example of this is gambling, drugs, etc. Most people have poor impulse control and can't handle these things.

3) Emotional Misrepresentation of Product/Service

If you watch a beer commercial it will show guys cracking open a beer and then tons of hot models in bikinis come hang out with them. In this case the company is selling the idea that buying beer isn't about the beer, but it will get you hot models. This is a misrepresentation that takes advantage of peoples emotions. It may seem silly, but if it didn't work the companies wouldn't keep running these ads.

In this case the product is what they say it is but it doesn't have some of the secondary effects that are claimed or implied be the salesmen.

4) Psychological Misrepresentation

This could go in with #3 but I will give it a separate category. Many people that don't fall for the direct approach of #3 will fall for the more subtle approach of #4. Here the product is sold not just as the product but also as a way to satisfy psychological needs. For instance, someone who wants to seem like a big shot will buy an expensive car. Some girl that wants to seem pretty will buy $300 shoes. They aren't really buying the product, they are buying substitutes for personal substance. This is a lot of what HS calls status whoring.

As far as how bad each of these are I'd say #1 is the worst and then on down the list. Things like #4 are harder to argue and proof (whereas one can prove MBS were a rip off). You've just got to use your intuition and traditional norms as a guide.

I think everyone used to understand this stuff but when the cold war got going we countered the communist propaganda (that all four of these dominate every single capitalist transaction and invalidate capitalism) with our own propaganda (that they don't exist at all and anytime someone voluntarily makes a transaction its a perfect reflection of true value).

Producer Value Transference

1) Lack of Competition

This can come about through old style natural monopolies, market failures (like asymmetric information or principle/agent problems) or government mandated monopolies/oligopolies (like patents, onerous regulations, or bailouts).

2) Bargaining Power

The most highly compensated members of a large company are its senior management, but its often rare that they produce that much value. They have simply won the politics game that categorizes large organizations. Tons of work has been done in this area and I don't think I need to go into it and will take the premise as given.

3) Misinformation About the Nature of Employment

A company will say X about what a job will be like but instead it's like Y. Usually X was better then Y. Since it is difficult and costly to constantly change jobs many employees simply accept this dishonesty begrudgingly, but its clear value has been transferred (if the employee knew the truth he would have demanded higher compensation).

---

Many people and products can be both value creators and value transferring. For instance, Bill Gates was probably a value creator when young and a value transferer when old. Buffet creates some value when he funds solid companies, but he also transferred plenty of value when he bailed out Goldmen after being told by the government that they had his back.

A product may in fact have genuine value, but also the person overcharges for it by playing on your emotions. Example: the product does have value as doing X, but you paid more then what X was worth because you thought it also did Y but it doesn't (the beer does get you drunk, but no women in bikinis show up).

Also, one man's value transference is another man's value creation. It's very hard to suss it all out because nearly every situation, product, service, contract, etc involves both. It used to be that people used their intuition and tradition to make educated guesses about this stuff, but now we have all manner of keyboard philosophers trying to put all sorts of aspie assumptions to it all.

[Nicolai Yezhov]

Buffet has never funded any company.

"It's very hard to suss it all out"

No, it's very easy.

Such is the free market that when there is no work work is found for some of the superfluous in value transference/make work.

Tax lawyering, diabetes type 2 doctoring, flipping burgers are all make work.

[The Secret of NAM]

Joke post, HS?

Are you not the same blogger who wants to tax people to pay others to sit at home playing fun video games for a living?

Is the problem here that there is not enough government coercion involved in the playing?

[The Secret of NAM]

HS,

>>>There are loads of women in Manhattan who have closets full of $300 shoes, and this would seem like insane behavior to a woman in a poor country who can barely afford to feed her children, but it’s considered completely normal here.

Don't you buy expensive camera gear even though no one will pay you for your output? Why ... does it please you? Are you insane to spend so much on something that is so irrelevant?

No, seriously, seek help. Only a crazy person would spend thousands on something purely for fun and pleasure.

[The Secret of NAM]

[HS: The jobs are in third world countries in slave-labor-like conditions; often the workers are children. The people making money from the shoes are rich owners of fashion businesses in the U.S. and other developed nations.]

The jobs are better than their alternatives. Please view one of the alternatives:

http://www.anewdaycambodia.org/info.htm

[The Secret of NAM]

Excessive payments in a market by some people subsidize cheap stuff for users of the same kind of product. This is how the outrageously expensive iPhone has lead to cheap Android phones. Airlines are a key example:
http://www.nytimes.com/2011/11/21/business/taking-first-class-coddling-above-and-beyond.html?_r=1&pagewanted=all
People like this guy are paying for others to enjoy the same products. Capitalism is awesome. It makes Guinea pigs of the wealthy.

[asdf]

The Secret of NAM,

HS probably does feel guilty about blowing his money on camera stuff instead of doing something better with it, but we are all sinners. HS has no family, no community, and beliefs in nothing but materialism so he doesn't really have any goals or charity to put his time and money towards.

Even then, he is paying for a real thing (the camera) which took skill and precision to make. My guess is the margin on his camera is much lower then the margin on the shoes (which is around $3 to make and sells for $300) so its mostly simply paying the cost to actually create the item (as opposed to paying for marketing hype).

"The jobs are better than their alternatives."

The alternative is that instead of paying $300 for shoes from which the third worlder gets $1/day the women could forgo the shoes and send the $300 to the third worlder so they could afford food and other essentials.

[Ale]

I think its analog to every other form of entertainment out there, does spending money on Movies, Books, Music increases wealth?

[Camlost]

WoW bores me - I'm making a few hundred dollars a month playing online poker and making a few select NFL bets. It probably equates to about 8-15$ per hour over the long run, depending on luck variables, but I can do the "work" anytime I want.

Siggie, stop turning charcoal into diamonds and loosen up a little... and stop being so cheap. You're a single, high-income male with no kids.

If I was up there in Manhattan I would take you out to the strip club for a night so you could smoke a cigar, do some shots, ogle some boobs and relax. I'm feeling like you've never had a day of fun in your life.

[The Secret of NAM]

asdf,

>>>The alternative is that instead of paying $300 for shoes from which the third worlder gets $1/day the women could forgo the shoes and send the $300 to the third worlder so they could afford food and other essentials.

http://www.csmonitor.com/Business/new-economy/2012/0510/As-Chinese-wages-rise-US-manufacturers-head-back-home

Chinese wages are rising quickly, making it profitable for some manufacturing to "return" to the US. Charity sucks and is hard to target. Economic growth means that workers have good enough alternatives that they can profitably refuse the sweatshop work that was better than any of their peasant choices, raising the cost of labor.

[jtollison78]

"When someone spends a thousand dollars on virtual soldiers, it's a commercial transaction so it gets measured as a thousand dollar increase in GDP. But is a purchase like this really making our country wealthier?" HS

Our economy doesn't make sense without growth, but growth can't continue in the physical dimension after 1-200 years of exponential population growth. We need to shuffle more of our economy into abstract spaces. Hopefully AI makes a huge dent in quality of life in the near future, but until then we need to juggle people's experience with these less productive outlets.

[The Secret of NAM]

>>>My guess is the margin on his camera is much lower then the margin on the shoes (which is around $3 to make and sells for $300) so its mostly simply paying the cost to actually create the item (as opposed to paying for marketing hype).

Doubt it. There are hundreds of shoe companies, and not everyone cares about brands. I've never seen any shoe made of high-quality leather, etc. that reflects your estimate.

A lot of money goes into researching the Nikes that people really want to look at and touch. These jobs are often done by Americans. R&D isn't free.

[jtollison78]

Also, wrt AI, we don't really have the social structure to allow AI to make large improvements to quality of life. I'm a big fan of a basic income guarantee, but your paying people to play WoW might be needed to solve idle hands.

[Half Canadian]

While people may not be insane for dropping $500,000 to join a country club, or $5,000 on apps, can we agree they are insane if they drop $500,000 to join a country club where they will play these types of games?

[Peter]

"If I was up there in Manhattan I would take you out to the strip club for a night so you could smoke a cigar, do some shots, ogle some boobs and relax."

I guarantee there is something you will NOT see in any strip club. God damn it.

[asdf]

The Secret of NAM,

Economic growth would be faster if you simply gave these people capital to build things to service their own needs rather then require them to build factories to produce cheap crap for you. The fact that this capital becomes obsolete as living standards rise shows just how wasteful the whole process is.

"Doubt it. There are hundreds of shoe companies, and not everyone cares about brands. I've never seen any shoe made of high-quality leather, etc. that reflects your estimate."

The $300 (and up) shoes these women are buying don't cost a lot of make. And believe me these women care about brand.

"A lot of money goes into researching the Nikes that people really want to look at and touch. These jobs are often done by Americans. R&D isn't free."

If I got to the thrift store it will be full of stuff that people wanted to look at and touch not to long ago. And in another few years they will want to do so again. Marketers create desire. They create fashion. What new becomes old and becomes new again. Being expensive gives something value in an of itself. Not because the thing is just inherently more pleasing, but because someone else can't have it.

[L]

Games are cheap and doesn't require burning a lot of fossil fuel doing it, except from the power plant producing the energy. In terms of return on investment, games are a good choice for people who don't have a lot of money to burn on entertainment. As energy become more expensive, travel, chasing women, buying booze, hotels are energy intensive and becoming more expensive. People in the third world don't have to worry about the high cost of living where they are, cheap living space in the United States involves a lot of unknown risk, unless you are already in a tight knit community. Gaming, is probably the only growth industry when resources become more scarce.

As far a luxury goods are concerned, peer pressure and the need to conform to your peer group plays a big role in what you ultimately decide to buy. At work, eating out at a kfc might be cheaper and save you money, but you miss out on the talking, chatter, office politics of joining your group at the restaurant they're eating in. We have our cars and toys, women have their shoes and clothes.

It's all about cost, I'm sure a lot of guys would much rather go out driving, drinking and having a good time with our buddies if it wasn't so cost prohibitive to do so on a regular basis. My friends who makes lots of money don't have the time to go out, and the guys who has the time don't make a lot of money.

[Secret of NAM]

asdf,

>>>Economic growth would be faster if you simply gave these people capital to build things to service their own needs rather then require them to build factories to produce cheap crap for you. The fact that this capital becomes obsolete as living standards rise shows just how wasteful the whole process is.

Where has this worked? Obviously, the communist countries were total poverty traps with their benevolently managed investment, so what country are you talking about where giving people a hunk of money or facilities for free has lead to wealth?

[alvarez80]

I think HS and GLP are going paleo-con on us . . .

[asdf]

Secret of NAM,

"Where has this worked?"

The Marshal Plan

[Conquistador]

Not a single reference to the obvious? 40 something, single, Asian, and into video games? He's a beta male. Probably gave up on women a long time ago and devoted himself to his studies and career hence the six figures. Dropping thousands on an outing is also very supplicating behavior. This is typical of guys who are insecure and crave the approval of others. I know guys like that who throw parties and lavish events but are incel.

[The Secret of NAM]

asdf,

The Marshall Plan was almost no money compared to GDP or the cost of reconstruction. Tiny sum. Look it up. If it was the Marshall Plan, don't you think it had more to do with exporting elements of US capitalism to western Europe (which prospered madly in comparison to Communist countries) than with a small amount of money?

[GMR]

I like playing iOS games, but man, I guess I just like cheap games. Got a Solitaire Pack for about $4 a few years ago. Has freecell, spider, and a bunch of others. Got Monopoly, but it was free for a day, and I got it when it was free. Have some Risk knock-off, that was $3. I've got a few others, either free or just a few bucks. If you add up all the money I've spent on iOS games, it'd be less than $20.

All apps I've bought are probably under $50. A few RSS readers, and I bought Keynote so I could review Powerpoints on the iPad. I've had the iPhone for four years, and got the first iPad a month after its release (it was paid for by my company).

[fresh off the boat brown]

"If I was up there in Manhattan I would take you out to the strip club for a night so you could smoke a cigar, do some shots, ogle some boobs and relax. I'm feeling like you've never had a day of fun in your life."

HS needs to get a woman. He'd have had much better luck if he had a close second gen Indian friend . His axiom-driven worldview/personality seems like that of many high IQ Tamil Brahmin women I know.

[Matt Strictland]

I find most of the recreational purchases people make marginal at best but I have an aesthetic streak.

However buying online crud really isn't that different than say going to see a movie or the aforementioned strip club. Its a ratio of of cash spent to time enjoyed.

A strip club is I'd guess $100 an hour (I don't go to these things) A cigar is about $20 an hour as is a CD or download

By comparison if you go drinking its about $10 an hour on the cheap. A movie new in theater is about $10 an hour as well.

A paperback book is about $1 an hour as is say a video game (including amortized console cost)

On-Line game expenses, well I don't know. Given the amount of time you use X purchases divided by its cost. Its probably not to bad for most players.

The actual best value I'd say is probably a book or CD you reuse or re-gift. This is why of course the maker of CD's (books less so) games and such are pushing disposable media. Its parasitic rent seeker value transference and its worst

[twain]

"When someone spends a thousand dollars on virtual soldiers, it's a commercial transaction so it gets measured as a thousand dollar increase in GDP. But is a purchase like this really making our country wealthier?"

You could say the same thing about playing golf.

GDP is a joke. Cars are a big waste of money, but every time we get a new car or get it repaired it raises the GDP, but it really is just running in circles.

We need to rethink the whole job/wage system.

[anon666]

"A strip club is I'd guess $100 an hour (I don't go to these things)"

In Portland, OR, a strip club doesn't cost any more than the drink that you buy there, and you can even order a club soda if you like. You are expected to tip at least $1 a song IF you sit at the stage. If you sit away from the stage, tips are not required at all. Private lap dances are $20 a song, but those are extra-curricular. Not sure about NYC.

[anon666]

"GDP is a joke. Cars are a big waste of money, but every time we get a new car or get it repaired it raises the GDP, but it really is just running in circles.""

Past a certain point, this is absolutely the case. I visited Poland during my last vacation, and although its GDP per capita is less than half that of ours (21K vs 48K), it hosts the exact same modern conveniences that we enjoy: high-speed internet, smartphones, indoor plumbing, electricity, functional roads and highways, airports, malls, restaurants and bars, etc. It also has a certain things that we don't, namely a far hotter female population where fatitude and frumpy clothing is notably absent. Also absent are dangerous slums. It was hard for me to assess what all this additional GDP per capita is actually buying us here in terms of quality of life. Past a point, the returns are marginal, and the figure doesn't factor in the value of having an attractive female populace, walkable and bikable cities, etc. When I look at a blog full of libertarian aspies laughing at lower European GDP, I can do nothing but laugh at either their virginity or fat ugly girlfriends/wives. Talking about lacking perspective.

[Black_Rose]

Are there also a similar population of Marxist-Leninist aspies? Why are most aspies libetarian?

[Drole Prole]

Are there also a similar population of Marxist-Leninist aspies? Why are most aspies libetarian?

Posted by: Black_Rose
_________________________
aspies lack empathy and tend to think other people's brains resemble theirs more so than in reality. furthermore, aspies tend to be lonely and have poor social connections, which tends to make them bitter and cynical about the world. this translates into having a worldview where 'fairness' can be derived by somehow leveling the economic and social playing field, which in theory would make the aspie more successful and powerful. since they lack empathy, they don't care if people die due to lack of health insurance. in their minds, if someone needlessly dies, too bad. to them, if someone suffers, it's their fault and they deserve to suffer. to them, it's just how the darwinian survival of the fittest game works.