Improving the World Through Discrimination

Identity politics in practice.

In my previous blog, I discussed my ambivalent feelings about the #metoo movement, and now it appears that the world is conspiring to throw another perplexing tangle into my brain, the issue of implementing discriminatory policies for the social good.

This issue has come up a lot for me recently. It started with the proposed Bill C-25, specifically PART XIV.‍1 172.1, Disclosure Relating to Diversity. This law proposes that businesses be required on an annual basis to disclose diversity-related personal information about directors and senior managers. It continued with Canada’s recent Gender Equity budget, focused to a huge degree on identity politics. And then this week, Google has faced lawsuits for implementing systemic discrimination against white and Asian applicants in their hiring processes.

When an issue hits again and again, it gets my thoughts churning.

My biases

I really struggle with this issue because there’s certainly been historically bias against minorities and women in most aspects of western culture. I also think that discrimination exists today, though clearly not as much in the past. What I’m confused about is the degree to which discrimination exists today and the right way to tackle the issue.

The issue is complicated by the fact that I’m a white male. Thus, I have an emotional reaction to policies that will discriminate against whites and males, likely very similar to the emotional reaction a black woman might have against policies that discriminate against blacks and females. Thus, it’s hard for me to separate the logic of my analysis from my emotional knee jerk reactions.

I also believe that there’s something to be said for the expression, “When you’re accustomed to privilege, equality feels like oppression.” It’s a brilliant saying because it really gets to the emotional heart of the challenge of righting disparity. At the same time, I find it dangerous, because it can be misused to dismiss real concerns. Oppression also feels like oppression.

So, that’s why this topic is challenging to me—it’s hard to define the problem, it’s hard to separate reasoning from emotion, and it’s hard to find solutions. Of course, that’s also why it’s an interesting topic to discuss.

Over the line

To me, Bill-C25 is a huge problem, because I believe it is wrong for corporations to be collecting information about their employees’ gender, ethnicity, and sexuality, and even more wrong for them to publish it. People should have the right to control the disclosure of their own personal information. It shocks me that people who in the last century saw attempted genocides in Germany, Bosnia, Cambodia, Rwanda, Burundi, and Iraq think it’s a good idea to create huge public databases that identify people by ethnicity, highlighting the most successful members of each ethnic group.

The Liberals don’t want these databases so that they can persecute minorities, but it seems clear to me that in this world, weird stuff happens. Donald Trump got elected in the USA. Who’s to say that something equally strange couldn’t happen in Canada? And if it does, I think it’s a bad idea to have a ready-made list of leaders in ethnic communities that a racist Prime Minister might want to persecute.

To stop political horrors from happening, you want it to be difficult for governments to do horrible things. You want people to be able to hide, to fight back. So, there’s value in not creating governmental infrastructure to make persecution easy.

Discrimination for good

The more challenging issue for me is deliberately implementing discriminatory systems to put white males at a disadvantage relative to other people. I have so many different perspectives on this one.

First, if women or ethnic groups are at a disadvantage as a result of their gender or ethnicity, that’s a big problem for me, and a problem that should be addressed. However, the evidence of that discrimination doesn’t seem particularly solid. For instance, there was an Australian study showed that gender and ethnic-identification information was stripped from resumes, males were actually more likely to be short-listed for jobs. Similar blind-hiring results have been found in Canada as well, supporting the surprising idea that hiring practices discriminate against men.

The gender pay gap data is also difficult to interpret, partly because the numbers are very political and because it seems like it’s almost impossible to get an apples to apples comparison. I think there’s a pay gap, but I’d be hard pressed to find evidence that actually proves it conclusively.

My second thought is that implementing systemic discrimination against another gender or ethnic group seems like a terrible solution. Because then you’ve implement systematic discrimination against a group based on their gender or ethnicity.

It’s not that the proposed cure would be worse than the disease, but rather than the proposed cure is the disease. If I abhor the idea of people of one gender being discriminated against, I’m not sure why I shouldn’t also abhor the idea of people of another gender being discriminated against.

Intellectual honesty

The other big problem with this effort to improve equality though discrimination is that it doesn’t seem to be intellectually honest because governments appear to be focused only on correcting injustices that affect women and minorities, not others.

For instance, more women than men have been going to university, to the extent that in Canada in 2009, 34% of women aged 25 to 34 had a bachelors’ degree, while only 26% of men did—a 31% difference. Since then, the ratios have become even more skewed. Yet there hasn’t been a high-profile push to get more men into university, or determine why Canada’s education system is failing males.

Similarly, one often hears about how the gender gap in science and engineering needs to be addressed, but it’s very rare that one hears about how problematic it is that there are so few men in nursing. In the US, fewer than 10% of nurses are male, and I imagine the statistics aren’t that different in Canada. I’m not sure why it’s more important that women work in construction jobs than men work in nursing jobs, but based on the latest federal budget, the Liberals seem to believe this is the case.

The injustice of the justice system is even more of a concern. Men face significantly higher conviction rates than women. What’s more, a recent American study shows that men on average face 63% longer prison terms than women (from memory, a Canadian study discovered a similar difference). While people are (rightly) outraged about the statistics when it comes to the conviction rates and sentences for aboriginals, they largely don’t seem to care about bias against men.

Now, I don’t know if other factors explain these discrepancy—men are generally bigger and stronger than women, so one could expect them on average to do more harm than a women when committing, for instance, assault. The greater damage they cause might factor into sentences. But even so, such big unexplained differences in conviction rates and sentences is worrisome.

My bottom line

To be clear, my argument isn’t that the government shouldn’t attempt to correct injustices. Rather, some governments’ tendencies to focus on particular injustices and ignoring others makes me wonder whether the goal of such governments is to actually reduce inequality, or to pander to their base. And that makes me even more skeptical of policies that attempt to reduce discrimination by implementing systemic discrimination.

Today in Canada, female government employees outnumber male employees by about 70%. More than just about any other employment statistic, that particular ratio is under the government’s control. Thus, if the government is sincere in its belief that diversity is good, gender inequalities need to be addressed, and discriminatory policies are the best way to address them, then I would expect them to implement policies to discriminate against women in government hiring until this inequality is corrected. But I suspect they won’t, which makes me cynical when they suggest this approach in other areas.

Thus, while I’m concerned gender and ethnic inequalities, I’ll remain nervous about policies that attempt to solve the problem by judging people not by the content of their character, but rather the color of their skin. And remain frustrated while I continue to seek just ways to address discrimination.


Where’s the Balance in #MeToo?

Patrick Brown leaving Queen's Park

I think the #MeToo movement is a net positive—I think it’s good that women are feeling more comfortable about speaking out about sexual assaults by people in positions of power. I want people to feel like they can talk about abuse, and that when they do, to know that they will be taken seriously, with consequences to the abusers.

But at the same time, I’m wary of witch hunts. The challenge is that an allegation seems like it’s enough to destroy careers, and it seems to be difficult to find a balance between justice and mob rule. Thus, I’m confused about how, over the long term, #MeToo should all shake out.

Guilty because accused

I’d say that it’s almost certainly true that, overall, the media and the people are on the side of women who speak out on this topic, so I won’t speak too much about that except to say that we should take all allegations of sexual assaults seriously.

But the more interesting side to look at now is whether it’s fair and reasonable that mere allegations should ruin people’s careers? Margaret Atwood penned a good essay on this subject talking about how problematic a “guilty because accused” attitude is.

I think Atwood raises valid points, to the extent that I’m uncomfortable with Justin Trudeau’s argument that it is “essential” that women be believed when they raise allegations. To me, that seems dangerously close to the “guilty because accused” line.

The other side

To me, it’s reasonable to say that most women who accuse people of sexual assault are truthfully expressing their view of the situation. But there are two big problems with taking that stance and continuing on to the natural conclusion of “therefore the accused is guilty”.

First, perspectives of the same event can be different, and there’s no reason why one individual’s perspective should be given more weight than another. Being uncomfortable with a sexual advance doesn’t imply that the sexual advance was necessarily inappropriate in any way.

A large percentage of romance movies have an attractive man persistently stalk and harass a woman until she falls in love with him, while many thrillers have an ugly man stalk and harass a woman until she’s eventually forced to kill him. The main difference between these two types of movies seems to be the lighting, the music, and the attractiveness of the man (i.e. differing perspectives). One could argue that in both situations the man is in the wrong, but society don’t actually seem to believe this because it comes up again and again in the most beloved romances.

The second issue is false accusations. I think the vast majority of accusations are true (and, in particular, accurately portray the woman’s perspective), but I don’t believe that all accusations are true. And ruining someone’s career over a false accusation is really bad. I don’t think it’s reasonable toss the falsely accused in a “collateral damage” bucket to be ignored simply because most accusations are true. To do so would be akin to saying school children being murdered every few days by the rare psycho is acceptable collateral damage in return for gun rights.

More than an academic argument

And I think that this argument is more than just a theoretical argument. I certainly have a very negative impression of Jian Ghomeshi, and he lost his career and several years of his life to sexual harassment charges, yet he was acquitted of all charges. What it just that he lost his career? I’m not sure.

Patrick Brown is even more extreme. Within five hours of sexual assault allegations, he was made to resign as leader of the Ontario Conservative Party. Yet the worst accusation—that he was propositioning a minor—has turned out to be false. The less serious accusation was that he invited an intern to his bedroom, but took her home when she said she didn’t want to do anything. Then, he occasionally made sexual comments to her afterward. To me, the only problem there is the alleged sexual comments afterward. Mostly, it sounds like Brown was guilty of being an awkward guy who made women feel uncomfortable.

But in this case, the accusations were enough for Brown to lose his position as the future Premier of Ontario (according to polls). There was no court, no hearing. Just a career instantly cut short.

So where’s the balance?

Maybe it’s unavoidable that people who chose jobs where they’re in the public eye can be brought down in hours by an unproved allegation. If I could arrange the world in any way I liked, I would still have no idea how to create a system that both allowed the concerns of women to be taken seriously without destroying the lives and careers of the accused based only on allegations. Even so, a swing toward “guilty because accused” doesn’t sit well with me.

Thoughts on Nassar

Emily Morales hugged after testifying.

The thing that really hit home with me was this list. It’s the list of the women and girls who testified in court about being sexually assaulted by US Gymnastics doctor, Larry Nassar. 156 victims spoke. I’m pretty good with numbers, but I find that seeing the names right there in black and white hits harder than the number alone. These are people. They are more than just statistics—they’re humans who were hurt by this man when they were children.

What’s more, this isn’t even the list of Nassar’s victims. This guy worked with the national team starting over 30 years ago, with the earliest allegation going back to 1994. Other people who were molested decided not to testify.

Was the list of women who decided not to testify larger or smaller than the list of women testifying? I don’t know, but 30 years is a long time, and I can imagine a lot of women might not have wanted to think back such events. It wouldn’t surprise me if fewer than half the women he assaulted decided not to appear in court.

The sickness

The thing that makes me really queasy about this case isn’t actually Nassar himself. A certain segment of the population has no scruples. To get what they want, they won’t hesitate to harm others. People like Nassar exist and will always exist. I expect the Nassars.

The bigger issue for me is the infrastructure that rose up to protect this guy. Numerous complaints surfaced over the years. The first arose in 1997 and the complaints continued for twenty years. Girls complained to their coaches. They complained to officials at Michigan State University where Nassar worked. They complained to their parents. They complained to doctors.

But it didn’t matter. The people who could have prevented this decided not to help. Maybe they didn’t care. Maybe they didn’t want to get involved. Maybe it seemed like too much work to accuse a national and university team doctor. Maybe they were worried about their own reputation, that they didn’t prevent the assaults or act on them sooner. Or maybe they didn’t want their university’s reputation sullied with a sexual assault scandal. Or maybe they just didn’t believe the girls, or didn’t believe them enough to actually investigate.

Maybe it was all these things.

The denial and cover up went to extreme levels. Several times, girls who accused him of molestation were forced to apologize to him. Even in 2016, when Nassar was arrested, MSU coach Kathie Klages asked her team to sign a card to let Nassar know that her team was thinking of him.

That’s the thing that makes me sick, that the whole system was corrupt, allowing this girls to be assaulted for years. Years.

The challenge of gymnastics

Yet, in a way, maybe we should expect this outcome from high-level gymnastics.

For as long as I can remember, I’ve been hearing stories about coaches who—at minimum—mentally abuse girls in order to create champions. As long as these girls win, the coaches get a free pass. They’re called unconventional or strict, or admired for encouraging the girls to work hard. And if girls disagree with the coaches’ methods, they’ll be accused of having a bad attitude.

What’s more, at the top levels, you constantly hear stories about the physical toll gymnastics takes on girls. These athletes are working long hours as a child at a physically-demanding job with a diet optimized not for health, but for gymnastics, and there are consequences to that. Girls frequently face delayed puberty, or growth issues, or even have their hair fall out.

Acceptable costs

But society considers developmental issues an acceptable cost. Medals are more important than anything, and certainly more important than the welfare of children. Gymnasts or parents who aren’t comfortable with paying those costs will likely be weeded out of the programs. Successful coaches will have already trained themselves to ignore the complaints of the kids, to look beyond any physical damage the kids might be suffering and focus on the gold.

So, maybe we should look upon high-level gymnastics as an institutionalized grooming program. Girls are encouraged to take whatever the authority throws at them without complaint. They are trained to accept a loss of control over their own bodies, ignoring any negative physical consequences. When you add to that the evidence that complaints by the girls are ignored or minimized, it starts to look like pedophile’s dream.

It makes me wonder if Nassar deliberately chose a career working with gymnasts because the system is all but deliberately designed to cater to his particularly type of perversions. And, if that’s the case, is it also possible that Larry Nassar and the 156 testifying women are only the tip of the iceberg?

The bottom line

When this news first broke, I found it surprising that there weren’t more cases of sexual assaults coming out of gymnastics, but I think I understand it now. It’s not because the assaults aren’t happening. It’s because up until this week, nobody in a position of authority cared enough to stop the sexual abuse of these children.

Cryptocurrency Mining Results

A comic about cryptomining.

At the start of a new year, I typically look through our investments, calculate annual returns, and figure out our general financial situation. Back in October, I mentioned that I started mining zcash, a cryptocurrency (like bitcoin). So, this year, I looked at how much money we made from crypto.

The system

I’m using an EVGA 1070 graphics card for mining. Though the 1070 chipset has been out for a while, my 1070 is quite a good card. Until Nvidia released their new GPU last month, the 1070 chipset was Nvidia’s second best consumer video card chipset, just behind the 1080. My card is powerful enough to do virtual reality, one of the most computationally taxing tasks the typical person would want a graphics card to do.

So, when I mine cryptocurrency, I’m using one of the best graphics cards available. I haven’t actually tried cryptocurrency mining on my CPU on this machine. But if I did, it wouldn’t surprise me if the graphics card produced 100 times more currency than the CPU.

This would be true partly because the graphics card is powerful, and partly because graphics cards generally are optimized to do mathematical computations quickly in parallel. So if I wanted to multiply 100 numbers in my CPU, I might need to do 100 operations, while on the graphics card it could do it in one operation. Since cryptocurrency mining is essentially doing a bunch of math, graphics cards mine much faster than CPUs.

Effectively, this means that there’s no point in mining with my CPU, only the graphics card.

The results

I’ve been mining probably 98% of the time on this computer. I shut down my miner when playing certain games or using spreadsheets, since it can impact the performance of those applications. I’ve also had late-night Windows updates cause reboots that terminate my the miner.

Nevertheless, over the 3+ months, I’ve mined about 0.6 of a zcash coin. Back when I started, zcash was trading in the $250 range (all currencies in US dollars). So, my mining would have generated about $150.

However, cryptocurrencies fluctuate quite a bit. I’ve been holding onto zcash rather than following my initial plan to convert it to ethereum, and zcash has risen to $700. So, at this point I’ve made about $420. When I looked at it over the weekend, zcash was above $900, so yesterday, I was at about $550.

Of course, from this revenue, it’s necessary to deduct the cost of electricity. Unfortunately, without equipment, it’s difficult to determine the amount of electricity my computer uses. What’s more, before I was mining, I’d typically leave my computer on all day, only shutting down at night. So, even if I did keep track of the exact amount of electricity my computer uses, it would be tricky to determine the increase in my computer’s electricity usage as a result of mining.

What I do know, however, is that my electricity bill actually fell year over year over those months. I don’t know exactly why. It might be weather-related, or my perhaps my new computer is actually more efficient than my old computer at using electricity, or perhaps our usage patterns have just changed. Regardless, it’s clear that mining didn’t cause a massive increase in our electric bill.

The bottom line

One other interesting thing to note is that you can buy my 1070 graphics card for about $540. So, if I had decided to buy two graphics cards with my computer, I would be close to paying off the second graphics card after only three months. Thus, I think it’s perfectly reasonable to buy a graphics card today and hope to pay it off in under 6 months just by mining cryptocurrency. There’s a large degree of speculation in doing that—if cryptocurrencies crash, you might not be able to make enough to pay for the card. But if you want a good graphics card anyway, this is a good way to get one.

Besides, mining crypto is fun.

Spoiler-Free Thoughts On The Last Jedi

Finn and Captain Phasma battle

I went to the The Last Jedi with my family over the weekend, and we all thoroughly enjoyed it. To me, this Star Wars has a slightly different feel than the other Star Wars movies, while still being Star Wars.

The same old

Ever since the first Star Wars, iconic imagery have been a core part of Star Wars. I’m thinking here about Luke staring into the binary sunset on Tatooine in the first movies, or the relentless march of the AT-AT walkers in The Empire Strikes Back. To me, such images are a core component of the Star Wars experience, as central as the characters or the score. This movie doesn’t let us down in that respect. That shouldn’t be a surprise—some of the images in the trailer were gorgeous—but it’s nevertheless worth noting.

The score is solid, while not breathtaking. I didn’t notice many new iconic melodies akin to The Imperial March, the Skywalker Theme, or The Duel of the Fates but many of the old melodies were reused. It also wouldn’t surprise me if, being absorbed in the action, I missed new musical themes. (And I don’t think that’s a bad thing.) In any case, the music certainly added to the movie, and didn’t distract.

The technology was mostly the same as the familiar old movies as well. BB-8, while not identical to R2-D2, is very similar, playing almost the same role. The First Order Tie Fighters are very similar to the Imperial Tie fighters, though in this movie the First Order technology simply seems far more menacing. I suspect that this is because computer-generated images have improved the ability to illustrate space combat, which benefits this movie greatly.

What’s different

Maybe it’s just that the old movies are so familiar, but I feel like The Last Jedi simply has more depth than previous movies. It starts with the characters. With the exception of Anakin/Vader, most of the characters from the previous movies don’t have much depth. Han shifting from being a selfish smuggler to a big-picture rebel is about the largest change that the characters in the old movies make, and that shift doesn’t come with a lot of soul-searching.

In contrast, the characters in this movie are far more well-developed. Each character has internal conflicts that are fleshed in realistic ways that alter the course of the movie. Kylo Ren is particularly noteworthy. While in the first movie, he was a bit too much “emo whiny kid”, he is much better developed in this movie, and is probably the most compelling character. Just as important, the chemistry between him and Rey is solid, adding to the movie.
Even beyond the characters, this movies feels like it has more levels. In the past, the Star Wars universe has been black and white—you’re either on the dark side or the light side. Of course, that dichotomy remains today, but this movie adds layers. In the real world, it is never as simple as dark/light, but rather different perspectives in shades of gray, and this movie steps in that direction. Thus, while the movie remains “beleaguered good guys fight the fascists”, the movie becomes much more than that, and that’s a welcome change.

My bottom line

To me, this movie is one of this best of the franchise. It’s hard to match Star Wars and The Empire Strikes Back, but The Last Jedi is only slightly below those, better than my fourth favorite movie, Revenge of the Sith. I think it will hold up over time, becoming one of the classics in the series, possibly heralding the beginning of new subtlety and depth in the Star Wars franchise.

The Best Free-To-Play Models

Get out your credit card

In my last blog, I discussed different ways software companies generate revenue and the recent rise of virtual goods purchases. In general, I like the free-to-play model—it’s great to be able to play a game and never spend a penny on it. But software companies adopting strategy need to be careful, there are good and bad ways to implement this model.

The best in-game purchases

The ideal way to implement in-game purchases is to have them not impact the game play at all, but rather be limited to superficial changes to the appearance of the game (i.e. skins). Players don’t want to look like the generic characters in the game and are often willing to pay to add a hat or a brightly colored vest. This sort of model is a win for everyone—the software company gets revenue, the people who want customized appearances can get their wish, and the people who just want to play a free game don’t need to spend a penny. Thus, I view this model as ideal.

An alternative to this model that is almost as good is the “free to play for a limited time” model. With this monetization strategy, the user can play the game a limited number of times each day for free. If they want to play more frequently than that, they have to pay. Thus, the game play isn’t affected, only the duration of play. This model has the nice feature that the better, more addictive the game, the more likely users will be willing to pay to play more. Thus, good games make more money, and bad games don’t.

Pay-to-win model

Less ideal is the revenue model where the gameplay changes based on whether or not the users have spent money. Thus, the player can pay for better characters, better weapons, and other in-game advantages. These advantages can be extreme, so that it’s literally impossible for a free-to-play player to compete against a player who spends money. In that case, the game become pay-to-win.

While Electronic Arts (Nasdaq: EA) has focused on this model recently, there are major problems with it. The most obvious one is that the game will be less fun if players can’t compete without spending money. Even for players willing to pay, there’s no challenge in obliterating every opponent, which makes the game less fun. And it’s certainly less fun for the free to play player being obliterated by people who simply have big wallets.

What’s more, the game manufacturer will face the constant temptation to inflate the power of new additions to the game and a reluctance to weaken (nerf) overpowered items. New, powerful items encourage people to spend money to get them. If those powerful items are nerfed after people have bought them, then the customer will feel jilted. Thus, you often get into a situation where the game becomes unbalanced, where skill doesn’t matter, but just possession of the magical item. And, if the game manufacturer isn’t willing to nerf the overpowered item, there’s no easy way to correct the imbalance.

When players realize that the gaming company doesn’t actually care about balance, it disincentivizes them to play the game or to purchase the “latest, greatest item”. After all, why would I spend time today trying to improve my account if anything I do is likely to become worthless when the gaming company capriciously introduces a magic “kill everything so I win” wand tomorrow? Why would I buy that magic wand if, a week later, a new “kill everything faster your stupid old wand” wand is likely to be introduced into the game?

Teaching the next generation

In fact, the problems are even worse than that, in that many of these games have added a random component to the acquisitions of paid content. Thus, instead of buying the wand, the player might actually be buying a loot box that has a tiny chance of containing the wand, but a big chance of containing some item that isn’t nearly as useful.

So, since many of these games are targeted toward kids, these games are teaching our kids to gamble—to put up real money for a small chance at getting a good item. And when I say small, I mean tiny—people have said they’ve spent a thousand dollars buying loot boxes to try to get the Millenium Falcon in Star Wars Galaxy of Heroes, and haven’t got it. Thus, these games are essentially selling kids lottery tickets.

The best way to implement pay to win

Despite the many downsides, pay-to-win isn’t necessarily the death of a game, and can be implemented in a reasonable way. All the game needs are ridiculous prices.

If the magical blasting wand costs $10,000, then only people who are willing to pay $10,000 for a virtual item will actually have the wand—a very low proportion of people who will be playing the game. The game will partition into two classes of players—those who have the wand, and those who don’t. Assuming that the ranking system is good (i.e. people only compete against people in the game of similar power), the free-to-play players will make up the vast majority players, and they’ll be able to ignore the people who are willing to dump those levels of cash into the game.

My bottom line

Though I’d like to believe that pay-to-win video game manufacturers will settle on this approach, striving to maintain balance for the long-term health of the game, I suspect that this mostly won’t be the case. Instead, I think gaming companies will focus on extracting the most cash they can from their customers.

To that end, gaming companies, like casinos, will have teams of psychologists trying to find the best way to turn people in compulsive gambling addicts. They’ll look for ways to increase the addictiveness of the game and add even more gambling until regulations are passed to restrict their ability to do so.

The Latest Video Game Controversy

Battlefront II promotions at a gaming convention

Video games have evolved greatly since I was a kid back in the 1980s. But even more noteworthy is the evolution of the business model around video games, and that is what’s recently led to one of the biggest video game controversies of all time.

The original model

The obvious way to make money from a video game is to sell it, and that’s how it worked for decades. The company would create a video game, put it in a box, and ship it to electronics stores. The consumer would come in, buy the video game for, say $50, install it on their computer, and play the game as much as they wanted.

This is the typical software model, and compared to other businesses, this is a fantastic way to make money because the marginal cost of an additional sale is negligible. You’ve put a bunch of effort into creating the game, but once you’ve created software, the cost of manufacturing the box and the CD for delivering the game is almost zero. So, if you have a big hit, your video game company ends up with super-high margins.

The problem with this model—if you’re a video game manufacturer—is that you aren’t making enough money and you have no recurring income. If you want to make more money, you have to create a new game, and attempt to sell it to consumers all over again. You have to find new customers for every sale.

Strategies to avoid this problem

There are a several of ways to avoid this problem. One is to sell the same game with slight differences year after year. Electronic Arts (Nasdaq: EA) is the master of this strategy with its sports franchise, creating a new version of its game every year. What’s more, since many of these games are multiplayer, old versions of the game are rendered obsolete as the player base migrates to the latest version. Thus, though the game play evolves slowly, customers still have significant incentive to upgrade every year.

The second way to avoid this problem is to not sell the game, but rather sell monthly subscriptions to the game. This method is popular with massively multiplayer online (MMO) games like World of Warcraft. In such games, a massive world fantasy world is created, and, for a monthly subscription fee, players can adventure in that world with their online friends for as long as they want. Thus, the software provider gets an ongoing revenue stream from the monthly subscriptions.

The third strategy to avoid this problem is to not sell games or subscriptions, but rather sell virtual goods within the game. The software provider gives their software away for free, but charges for skins (different character appearances), weapons, abilities, or characters in the game. Essentially, the software developer is selling nothing physical, but deliberately engineering a “rarity” into the game, and then charging its users if they want access to that “rare” item.

And I use rare in quotations, because it’s not really rare. These are all virtual goods. The software company can create as many items as they want out of thin air. It’s only rare because the software company chooses to only give those items to people who pay.

If the items that can be purchased are extremely good relative to other items in the game, then the game becomes know as “pay to win”. Essentially, you can’t become a top player without spending large amounts of money. For instance, in a first-person shooter game game, maybe the company sells an automatic machine gun for $100 when everyone else only has revolvers, and the machine gun does fifteen times the damage of any other weapon. Realistically, you can’t be competitive in the game without owning a machine gun.

The seeds of a customer revolt

The interesting thing about these “virtual goods” games is that they often make huge amounts of money, particularly in the mobile universe. If you look at the top ten games that earn the most on both Android and iOS, most use this “virtual goods” model.

One of the most popular games right now, another Electronics Arts game, is called Star Wars Galaxy of Heroes (SWGOH). In SWGOH, you do battles with a team of Star Wars characters, and as a reward, receive “shards” of other Star Wars characters. When you have enough shards, you can unlock a character and use him or her in your future battles. Of course, if you’re an impatient type, you can also spend money to buy shards, essentially buying characters.

To further improve the economics of the business model, SWGOH has special events that unlock super-powerful characters. These events only come along a few times a year, and require certain prerequisite characters to participate. So, while it might take months to unlock a character, Electronic Arts will give perhaps a week’s notice of a special event that requires certain prerequisites. So, people who want the super-powerful character will have no option except to spend large amounts of money to obtain the prerequisite characters before the event vanishes for months.

This model has proven very lucrative for SWGOH to the extent that Electronic Arts isn’t really even trying to sell to the people who are willing to spend less than $100 on virtual goods in the game. Instead, they’re targeting people who will spend thousands. Based on the math of how much characters cost and how quickly they appear in the game, it’s very clear that some people are spending over ten thousand dollars to get virtual characters in the game. I suspect there may be people who have dropped over a hundred thousand dollars on the game.

Electronic Arts’ mistake

Electronic Arts has another Star Wars game that mostly uses the old “sell the software and play as much as you want” sales model, a first-person shooter called Star Wars Battlefront. I imagine Electronic Arts looked at the in-game purchases an SWGOH, and decided that they wanted some of those sweet in-game purchases in Battlefront II.

So, while charging $80 upfront for the game, they decided to lock the iconic characters such as Darth Vader and Luke Skywalker. To unlock anything other than the most generic of characters, you needed to either play the game for a long time—I’ve seen estimates of 4,500 hours to unlock all the characters—or pay about $2,100 to EA.

Thus, EA wants their customers to pay $80 for a game, but then not actually deliver the game they promised with all the cool Star Wars characters. Instead, they want to force their customers to pay large sums to actually unlock the key content.

This decision led to an uprising among gamers. When EA attempted to defend its decision, it claimed that it wanted players to have a sense of pride and accomplishment when they unlocked the top characters. That comment has received the most downvotes of any comment on Reddit.

Players know why EA crippled their own game, and it wasn’t to create a sense of pride and accomplishment. If EA truly thought the sense of pride and accomplishment coming from unlocking characters was important, they certainly wouldn’t allow people to unlock character simply by spending money. Where’s the pride and accomplishment in that?

The comment was so widely derided that now the phrase “feel as sense of pride and accomplishment” has become a euphemism for gaming companies deciding to screw over their customers to get money. “Pride and accomplishment” now means “pull out your wallet”.

The short term consequences

Amid the uproar and pre-order cancellations, Electronic Arts finally took a small step backward, deciding to eliminate in-game purchases temporarily. But, it’s pretty clear in their blog entry about the change that while they are desperately looking for a way to appease their customers in the short term (because if people don’t pony up the $80 for the game, EA won’t make anything from it), they have every intention of bringing back in-game purchases when things have calmed down.

After all, to Electronic Arts, it’s not about ethics or honesty. It’s about money.

My bottom line

To me, this evolution is good and bad. I like games that are free-to-play because I’m cheap. I won’t spend money on a game if I don’t need to, and, if the game can’t be enjoyable without spending money, I just won’t play it.

On the other hand, I’m not a fan of the idea of charging people for a game, giving them broken content, and then forcing them to pay even more to get the game they were promised in the first place. To me, that is fraud.

Though I suspect that Electronic Arts will never see a problem with the business model, I still find the occasional reason for optimism. One gaming company has recently abandoned the free to play model because they have ethical concerns about it. I find their rational behind that decision fascinating.