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Gold Capped: Take the Mysterious Fortune Card house advantage

Every week, WoW Insider brings you Gold Capped, in which Basil "Euripides" Berntsen aims to show you how to make money on the auction house, and Insider Trader, which is all about professions. For Gold Capped's inside line on making money in game, check in here every Thursday, and email Basil with your comments, questions or hate mail! This week's gold blogosphere post is Anaalius's Darkmoon deck report.

There's a craze in /trade. People are advertising Mysterious Fortune Cards that can be flipped to rarely turn into a Fortune Card that vendors for 5,000g. Like lambs to the slaughter, enough people head to the AH and buy a few that it's become a serious moneymaker for scribes. I use the expression "lambs to the slaughter" mostly in jest.

... Mostly?

Yeah, mostly. There's a few things people should know before buying one of these:
  • The mats are a single Blackfallow Ink and paper. Milling a 100g stack of Cinderbloom gets you five Blackfallow Ink on average, meaning the cost of these bad boys can not be more than about 20g, assuming you vendor all the Inferno Ink you're also getting.
  • That rare epic card that people link is really rare. I've seen parses (from Touchofidiocy on the JMTC forums) that have collected data from over 1,500 flipped cards and not seen a single 1,000 or 5,000 gold reward.
Typically, these cards sell day and night, for ridiculous profit margins. People will often buy my stock and ask me if I could sell them more.

Gambling: A tax on people who can't do math

The honest, factual truth is that if you are gambling, someone is making money off you. The amount they make is called the "house advantage" (or expected value) and is usually expressed as a percentage. So for blackjack with eight decks, assuming the player is playing perfectly, the house advantage is 0.66%. Roulette has a 5.26% house advantage. What this means is that every time you make a bet, you are, in the long run, going to get your money back minus the house advantage. You will win some and lose some, but when all's said and done, you're most likely to leave with less than you walked in with. Anything else would be unprofitable for the house.

This reasoning is lost on most people, and I get that. Lotteries and casinos are incredibly popular in real life, and the average person you stop and ask holding a lottery ticket would tell you that they don't trust the stock market, which has shown a 10% average yearly yield, including during the Great Depression. People are irrational, and that's normal.

The house advantage for the Mysterious Fortune Card is 98%.

I suspect part of the demand for these is that people just don't know what the odds are. No amount of irrationality and endorphine reinforcement of risk-taking can justify a 2% average return. Another part of it is probably curiosity, and there are at least some cooks buying these and not flipping them. As it becomes more and more clear how low the return on these actually is, fewer people will buy them.

So should you sell them?

In a word, yes. If you have the ability to sell these, there's absolutely no reason not to. Morally, there are two ways of looking at situations like this.

The first one, which many auction house affectionados ascribe to, is "buyer beware." If it's really such a bad decision to buy something, it's up to the buyers to protect themselves. Sellers have to trust in the invisible hand of the market to weed out bad deals and assume that since we can't force people to do what's best for them, it's not immoral to offer them a bad deal.

I've been tempted by this logic in certain ways, but it doesn't always cut it for me. My own little tempest in a teapot has always been the old trick of selling single arrows for the price of a stack (happily laid to rest in the history books of badly designed user interfaces). I described the practice as "morally equivalent to taking mats to enchant a piece of gear and not doing the promised enchant." While the Mysterious Fortune Card market is different in that there's no badly designed AH interface sorting stacks stupidly, there's still an expectation of better odds than are being delivered. If someone asks me whether they should buy these, I'll say no every time.

The second way of looking at this is "the end justifies the means." Whether I feel like I'm ripping someone off when I make a sale or not, they're going to buy it anyway unless someone sets them straight. I'd rather that money land in my wallet than my competitor's. I don't link the 5,000g card in trade chat, but I mass produce cards and undercut on the AH heavily. I'm still making money, but it's at the expense of the inscription competition, who will have that much less capital to reinvest in getting more efficient Darkmoon decks. This opens me up to even more productivity as my competition becomes my biggest customer when they decide to try and fix prices on the fortune cards. Every time one of them buys my entire posted stock, trying to drive the price higher, I pull another 200 inks from the bank, craft, and relist. This is profitable for me and unprofitable for them.

The end result is that no scribe can prevent people from throwing their money out the window. All they can do for now is prevent their competition from getting ahead by adding to the supply. Eventually, either people will figure out how terrible a deal these cards are, or Blizzard will step in somehow. Or nothing will change, and we'll all keep making money hand over fist.

Maximize your profits with more advice from Gold Capped, plus the author's Call to Auction podcast. Do you have questions about selling, reselling and building your financial empire on the auction house? Basil is taking your questions at basil@wow.com.

Filed under: Economy, Gold Capped

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