Portal Shards? To Plant Or Not To Plant?

Portal Shards - To Plant Or Not?

One of the newest items added within WoW Patch 5.1 has been the addition of the ability to till and farm Portal Shards on your Sunsong Ranch.  These new Portal Shards take up a slot on your farm, thus preventing you from planting and growing an item that will be worth selling or using for cooking quests and dailies.  Are they really worth it?

HELL NO!  Portal Shards are the biggest pieces of shit introduced into WoW since...ever!

Why Portal Shards Suck Ass:

I can't think of a single reason anyone (with a brain) would waste a farm slot on a Portal Shard, other than the first one you get for free from the vendor's quest because you just tried it out to see what it did.  The portal shards are absolute garbage that actually cost you more than the 2-3 gold the seeds cost.  Understanding opportunity cost, shows us that it not only costs the price of the seed, but also the profit of the item you could have grown in that farm slot instead. 

Example:  A portal shard costs you 2 gold.  If Witchberries sell for 10 gold each, then growing a portal shard just cost you roughly 52 gold because you could have grown a witchberries plant instead.  Just using Witchberries as an example - something else may be a more profitable option on your server.

 That's just 1 sacrifice of wasting a Sunsong Ranch farm slot on growing a Portal Shard.  There are plenty more reasons not to grow Portal Shards.

1. Farm Only - Portal Shards can only be used from within your phased personal Sunsong Ranch Farm.  WTF?  That means you cannot carry them around with you and expect to use them while out adventuring. 
2. Random Portals - When grown on your farm, you get a random portal that leads to a specific major faction city.  Not only does this suck ass in general, you also have multiple bag slots wasted on the various different types of Portal Shards that only go to the single cities.
3. Not Even Needed - With Hearthstones at 15 minute cooldowns, is there even a need to Portal off of your Sunsong Ranch, especially when there is a flightmaster within Halfhill that is only a single flight away from the Vale of Eternal Blossoms capital cities that house all of the portals?
4. Using a portal off of your Farm saves what 10 seconds as opposed to hearthing to the capital city where your Hearth should be set anyway?

Since the Unstable Portal Shard Seeds can only be purchased at Revered reputation status with the Tiller's Union, you will already be level 90 and have access to your capital city within the Vale of Eternal Blossoms.   Within your capital city is a portal room with a portal to each major city for your faction.  Be smart and set your hearthstone to there.  If you are not level 90, then you can't grow Portal Shards and your alts that are camped at their own individual Sunsong Ranch won't have access to them anyways.

Overall these Portal Shards are nothing but absolute garbage with no reason ever to be planted.  I've seen images of farmers growing a full set of 16 Portal Shards and I've just got to laugh and ask myself if people really are that dumb or just that lazy?

Anyone actually have a legit reason for using these stupid things?

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Opportunity Cost of Free Items

Opportunity Cost of Free Goods

Yesterday's post - An Opportunity Cost Case Study - brought some good comments, but I want to bring one comment to the forefront.

"What if your opportunity cost however is free. Like let's say you get Hostess or someone to donate all the goods to you and then sell them for profit. Would it matter less if you sold them for a complete pittance of their actual value, or would you be justified since they were simply handed to you? 

This is the dilemma I recently faced. One of my competitors quit the game recently and gave out a lot of his stuff. He gave a large amount of gold and items to random people in trade for doing miscellaneous tasks, but to me he unloaded guild tab upon guild tab of old world items. (He hadn't playedsince cata came out so all the stuff normal people unloaded at the end of wrath he had stored up in excess) I passed on some of the items to others, used some for leveling my alt professions, and was then left with just unbelievable stacks of things that in small amounts are great sellers, but on my server (which is microscpically small) I was skeptical would ever be unloaded in any timely manner if I were to sell for some of the current prices.  

So, I thought to myself, does it really matter if I undercut everyone "normally and get full market price, or do I simply just want to unload some of it quickly. I chose the latter option and figured since it was technically free, that I could utilize the overinflated prices of what some sellers had the items going for, to kind of help sell mine. Like even if people did not need or want this item, it would show up on their add-ons as a must have for resale profit cuz mine were so far below the current selling price of others. 

I was right, a good portion was bought up by one of the other sellers, and I noticed some of the names who bought some were back up relisting them, but the amount of whispers I got from annoyed people was absolutely astounding. lol and I am still left with incredible amounts. There is probly 101 different ways I could unload some of the stuff other than selling the mats raw, I could have crafted things, or crafted and de'd and in the case of the cloth I did craft like a thousand bags and saved the rest as bolts. A lot of it simply came down to laziness on my part. 
Anyways, at the end of the day I started to wonder if I was being as bad as the people I always talk shit about, "but my mats were free cuz I farmed them!" I mean technically I would argue but mine truly were free, though the end result seemed to be kind of bad, because I left the market oversaturated on some things and am also still left with a large amount of overstock."

 -Skorpsy

Free Goods

 Let's start off by clearing something up first.  "I farmed it so it's free" is wrong because there is a serious time commitment involved in farming or grinding for items.  So when you are farming it's not free.  Farming costs you time.  Time that could be used making more gold elsewhere.

Goods that are gifted, donated, grandfathered, etc. are truly free goods.  They cost you nothing - no time commitment, no gold, no effort.  Therefore they are truly free goods.  They took a little of your time to collect, sort, and post but they are free.

How to price these truly free items is the dilemma as was mentioned in the comment.  Technically you can price them at whatever price you like, even deeply undercutting, because they will be pure profit.  You paid nothing, so any price will be profitable.  If you are deeply undercutting, then you are costing yourself the opportunity to make more gold on the items.  If you simply just want to turn these gifted items into gold, then feel free to post them for whatever price you want.

If some of the items that you received for truly free are also items you sell on a regular basis, then you really need to be careful.  If you flood the market with them and rampant undercutting ensues, you may crash your own market and could be costing yourself much more gold over the course of the devalued pricing period.  Remember to not flood a market and only post a few items at a time at a slightly under market value price, if you want to get a nice return without devaluing the items by flooding.

Who else wants to comment on the opportunity cost of free goods?

Opportunity Cost - IRL Case Study

Opportunity Cost Gone Wrong

A Case Study of Opportunity Cost In Real Life

I did a couple of posts on opportunity cost that both brought out some great discussion in the comments section of each post.  You can review those 2 posts on Opportunity Cost if you need to get caught up to speed.

Opportunity Cost - A Listener Question
Opportunity Cost Part 2

The Bake Sale
Shortly after I did those posts on opportunity cost, we started a fund raising bake sale at work.  Employees were to either bring in baked goods to sell to employees and customers or make a cash donation that would go towards the cancer charity that the proceeds would be going to.  It seemed like a good idea, but once I started to look into the costs and profits I soon began to question the thinking of the other participants.

The basic set-up was to have everything cost 50 cents each on the baked goods table and all money raise would go to the cancer charity. 

I began to look into the cost to create these baked goods as well as the portion sizes and return on investment.  This is where things were starting to not add up for me. 

Let's look at one example.  Someone baked brownies and brought them in for the charity sale.  The divided the large brownie into 9 pieces (twice the size the food label showed as appropriate portions) packaged them in some fancy baggies and added a pink bow to hold them closed.  Then they added a sticker with the price of 50 cents.  I instantly started to run some calculations in my head as I am also a cook and brownies are one of my specialties.

I thought, "If we are selling these at this low of a price for this portion, then couldn't we raise more money by just donating the money it cost to buy the ingredients and skip the bake sale all-together?"

Digging Deeper Into The Brownies

Dozen Eggs $1.19
Brownie Mix (boxed) $2.29
Vegetable Oil $1.29
Total out of pocket:  $4.77 plus tax = $4.80

Brownies Were Cut Into 9 Servings
Cost per serving = $0.53
(This doesn't even include the fancy baggies, pricing stickers, or pink bows that were used to decorate each serving)

The fact that you have a bit of oil left and 9-10 more eggs left over is irrelevant as we are looking at the cost you came out of pocket vs the donation amount earned.

So yeah, in this example it would have been better to just donate the $4.80 to the fund instead of wasting time and effort making brownies to sell at a cost less than it cost to craft.  Even if all 9 brownies sold, the total raised was only going to be $4.50.   To further compound the poor decision,  management was matching all funds raised with an exact amount.  So you cost yourself $4.80, but only raised $4.50 (if all sold).  So $.30 less when doubled makes $.60 you cost the fund raiser, when you could have just donated $5 and been much more efficient.

Not all the brownies sold.  So now you've really wasted your time and money.  The even crazier thing was the brownies were the closest priced item to breaking even.  Everything else was selling for 50 cents as well and the crafting cost on gooey butter cake and other fancier items is much higher than the cheap brownies.

Someone even went as far to buy a premade gooey butter cake, which costs around $8.  this cake was split into 9 pieces and sold for 50 cents apiece.  Really?  You cut a $8 cake to make $4.50?  Just donate the $8 you fool!  After the management doubles that donation its $16 vs the $9 if all the cake pieces sold.

Moral of the Story for WoW

When thinking about crafting your trade goods in World of Warcraft, always use your brain.  The basic formula to follow is this:

Sum of Parts > Crafted Good = Sell Parts
Sum of Parts < Crafted Good = Sell Crafted Goods

A wise goblin doesn't craft to lose money.  Crafting should only be done if you are adding value to the item and you can sell that item for more than the cost of the materials required.

PS:  What did I do for the fund raiser?  Well, I bought baked goods for stupid low prices and got food with my donation.  Like any good goblin, I got the most for my money.

Opportunity Cost Part 2

Opportunity Cost Part 2

Yesterday's post, Opportunity Cost and Farming - A Listener Question, had some great discussion.  Be sure to review that post and get caught up on the topic of Opportunity Cost.  Today I am continuing on the same topic as I received a lengthy email on the post.  Here is that email in its entirety.  I have included some comments in between the paragraphs in blue.  Those are my thoughts, not the readers.

"The idea that people shaving their profit or even undercutting to "below cost" is wrong is a bit hazy. For someone with infinite gold, playing the patience game and waiting a day, two days, a week to make max profit on one item is all well and good, but for those of us who are still small fish in the pond, nibbling off your prize meals is how we stay fed, get bigger."

Undercutting below cost is a poor business decision.  Your costs may be less than your competitors.  That's fine, but don't undercut the finished product lower than the cost of materials.  Just look at the current enchanting scroll market.  It is flooded with items posted for much less than the cost to craft.  Many people are just trying to dump scrolls they made just to level their enchanting.  Ok so maybe you are just trying to recoop a few coins you spent on leveling, or maybe your poorly planned leveling scheme costs you well more than it could have?

"In your example of the guy who undercut the 160g item to 120g with his farmed mats, yes, given the proper time he could move it at 200g, but he also probably farmed enough for a couple. So now that's 2 sales he's made, cash in hand to do more investing, while youre sitting on yours waiting for it to earn money. Is that lost opportunity cost for you? Is that why you call him stupid? Because you're mad he took your sale?"

Ok so you farmed enough materials to craft two.  So you craft those and sell them both undercost.  Congrats!  You just lost twice the profit margin you squandered away just because you can't wait a day or two.  If you keep the same pattern up, you aren't going to be getting very far with accumulating wealth.  And your competitor is probably the one who bought your 2 underpriced items and flipped them for profit because he has patience and you don't.

"Lets use a different part of your scenario. Sell the mats instead of crafting them. Well there's desperate undercutters there too (picked up 10 stacks of cinderbloom at 18g each!) So the guy looking to make a sale NOW sees the mats at that price, and snatches those up and crafts that 120g item instead. It seems to me that in every scenario discussed on gold making blogs, its all about getting cheap mats and crafting them into more profitable items, or using your considerable force of gold to buy all of those cheap mats and bully people into buying them from you at a premium. Both valid methods."

Um, you can't change the numbers around just to support your own argument.  Given the numbers I gave in the original post, selling materials was the obvious better choice.

"There's really a market beneath the market. There's the slow, plodding, sure thing sales that the journal shows us occur. And there's the deals and steals we talk about on the consortium forums. These are the sales people with less gold live off. Potential profit does not equal actual profit for most people.

Its the main reason i think the gem array is irritating on TUJ. you look at it and see "oh, delicate inferno rubies are selling for 169g. ...nope. Those 23 DIR have been sitting on the ah for 2 weeks at that price and some poor desperate schlub with no JC buddy bought one on Monday. Does that really make that the market value of that particular item?"

The market value at any given time is determined by what the current price is at that time.  Add-ons provide an average market value, but we all know that fluctuates daily, sometimes by the minute or hour.  I know the market value for Accurate Scope is around 3 gold, but I have still sold them for 250 gold.

"But i digress. Opportunity costs is a saloon door. Swings both ways. Its all in what style floats your boat."

Summary

In no way should you craft an item if you can sell the materials for more profit.  I'm going to stand behind that reasoning.  It is people that are hasty and don't want to wait that drive the prices down below cost.  If you are one of those people then you maybe shouldn't be crafting at all.  Just sell your raw materials.  You will probably get much faster results selling raw materials, since you have a mentality similar to that of gold farmers anyway.  Bots, farmers, Chinese farmers, etc. that move mass amounts of goods for prices under floor costs or deeply undercut just to make a sale.  Let me get one thing straight.  The point of crafting is to make a profit.  If you are crafting at a loss, then you shouldn't be crafting.  Go back to farming or doing dailies, but then again, you're probably the same guy that disenchants everything, even if the materials sell for less than the item you disenchanted.

Opportunity Cost and Farming - A Listener Question

Auction House Junkies Questions

Over at Auction House Junkies (The Cold's Gold Factory + Capped By Cata Joint Gold Making Podcast) we get a ton of great questions.  Some of the question are discussed live on the show by Wes and I, but others never make it live.  We have agreed to pull from these questions and answer them on our blogs.  General thinking is that if one person is asking about it, there are probably multiple others wondering the same thing.  If you questions doesn't happen to make it live on the show, be sure to watch both Cold's Gold Factory as well as Capped By Cata because your question may be answered on our blogs.  So here is the first AHJ submitted question I be will tackling here on my blog.

Hey guys,


How can I determine the value of my time in terms of gold when I usually farm my own crafting mats? I've read on blogs and heard on podcasts that many think that if they farm their own mats these mats are essentially free and have no cost associated with them. Since the time spent gathering these mats is worth something, how do I calculate that worth?

Keep up the good work and keep the podcasts coming.

Tali

Opportunity Cost
 
When I read this question I immediately think of the principle of opportunity cost.  Tali you are correct when you state that some players who farm or gather their own materials consider these items "free".  Opportunity cost comes in when creating items or selling products that contain these "free" farmed materials.  Some players will undercut auctions down to a low price that results in a completed product that sells for less than the sum of its parts.  Let's look at an example.
 
Crafted Item 1 is selling on the auction house for 200 gold
 
Crafted Item 1 requires:
10 of Material A, 1 of Material B, and 1 of Material C
 
Material A sells for 10 gold on the AH
Material B sells for 25 gold on the AH
Material C sells for 25 gold on the AH
 
So together it costs a player buying all of the materials off the Auction House 150 gold to craft it, which leaves a 50 gold profit minus AH listing and sales fees. 
(10x10) + 25 +25 = 150
200 sale - 150 cost = 50 gold profit
 
Now undercutting ensues on the auction house as there is now competition for the sales of Crafted Item 1.
 
The costs of Crafted Item 1 is now down to 160 gold.  In an attempt to get the sales by deep undercutting a foolish player may now list these items as 120 gold in order to steal all the sales away from the other sellers of Crafted Item 1.  They think this is a good idea, because they farmed the Material A themselves.  Their false logic tells them that they paid nothing for Material A and 50g total for Material B and Material C so listing at 120 gold is still a nice profit since they only spent 50 gold to make that 120 gold.
 
This is completely wrong.  Why?  Because they would have made more money selling the materials instead of using them to craft.  They could have sold 10 Material A for 10 gold each for a total of 100 gold pure profit from selling the Materials.
 
You never want to craft something if the value of the crafted item is less than the sum of the materials.  A current example:  If Darkmoon Faire cards are selling for 1000 gold each, then you better be getting over 8000 gold for your completed deck or trinket.  You wouldn't want to buy 8 Darkmoon Faire cards valued at 1000 gold each that combine to make a 5000 gold deck, would you?  You'd make more money selling the individuals.  Same applies to raw materials.
 
The real problem is when the players with this "I farmed it so it's free" mentality start to drive prices under material cost for the market as a whole.  That really gets your competition upset. 
 
Tali, as far as what value to place on farmed items, that's just usually determined by market value.  If the market value is not what you would like to get for your farmed items, then don't post.  Wait until the market value goes up (like selling during the week instead of the weekend) or find a more profitable use for your farmed materials.  A good example would be a miner who farmed thorium ore.  Your market value for thorium ore is probably not as valuable as the market for arcanite bars, which are crafted rather cheaply on most servers due to low priced arcane crystals.  Look for a higher profit use for your materials than just selling them raw, if that raw price is below what your expect to be compensated.
 
Anyone else care to weigh in on the topic?

Continue on to Opportunity Cost Part 2.