On Taxing Robots

Bill Gates posing with two robots

A few weeks ago, Bill Gates suggested robots that take human jobs should be taxed. His reasoning is the government taxes humans who do a particular job, so why shouldn’t you also tax the robot that replaces the human in that job? Enacting such a tax would not only ensure the government retains its tax base, but also slow the adoption of robotics, allowing people time to adapt to the changing world.

Of course, many people have disagreed with Gates’ idea, going so far as to call the founder of one of the most influential tech companies in the world a Luddite. But, I think it’s an interesting idea, worthy of discussion

The problem

Bill Gates is trying to solve one of the biggest problems of the twenty-first century, the displacement of human labor by automation. The problem is that automation results in gross inequality in society.  The manufacturers—the wealthy who own the businesses who replace human labor with robots—will benefit from the robotic revolution. They will be able to produce their goods at a much lower price, leading to increased profits.

The workers will benefit from lower prices on goods, but only if they actually have money to buy the goods. If they don’t have a job and are unable to find a job because their skills are obsolete in a robot economy, then this automation revolution is terrible for them. What’s more, there are likely to be a lot of displaced workers and relatively few robot-owners, so you end up with a society in which there are a bunch of poor people and a few really wealthy people.

This result isn’t good for anyone, since, once inequality becomes great enough and the poor realize the system is fixed against them, the poor are likely to rise up and destroy the system. I think we’re seeing some of that anger over inequality with the rise of Trump, and, if he doesn’t address the issues, then things could easily escalate in unpredictable ways.

Superficially, taxing robots would solve many of these problems. Replacing humans with robots would be less compelling, which would slow the drive to automation. People would still be displaced, but fewer people would be displaced each year, allowing people more time to adjust to these changes. What’s more, the government wouldn’t lose the tax revenue from the displaced workers, since they’d get it from robots instead.

The problems

Larry Summers has criticized the proposal, asking why Gates would tax in ways that reduce the size of the pie rather than distributing it differently. In a way, the “reduce the size of the pie” argument is silly, since all taxation does this. Too often, people who make this argument will only complain about the pie shrinking rather than actually proposing ways to redistribute it. From my perspective, if they aren’t willing to suggest reasonable ways to redistribute the pie, their “reduce the size of the pie” isn’t actually a serious argument, but rather an attempt to avoid arguments about pie redistribution entirely.

To me, the biggest problem with Gates’ proposal is that it’s impractical. Which labor-saving devices are robots? Is a stapler? What about a photocopier that staples? What about a photocopier that adjusts toner usage to increase contrast to improve the legibility of my document? What about a computer that allows me to copy a large chunk of text from one area to another? Or one that fixes typos when I do that cut and paste? What about one that paraphrases the text when I cut and paste? What about one that writes the text for me?

Thus, figuring out what qualifies as a robot is problematic. I imagine that if such a law were passed, an industry would arise that promised to de-roboticize your robots from a tax perspective (at least that would create jobs for humans). Depending on how tax law was worded, we could end up with people who look over the results of robots simply to rebrand robotic production into human production.

What’s more, if you add a robot tax, it could drive away business. As production has shifted internationally from countries with expensive workers to low cost workers, I imagine production by robots would shift from countries with high-cost, high-tax robots to low-cost robots. Thus, you’d lose the jobs of not just the factory-line workers, but also the people watch over and maintain the robots.

So, though Gates’ proposal has intellectual appeal, I don’t think it is feasible.

So what do you do?

Perhaps taxation of companies is one (relatively-unsatisfying) answer. When companies lower their costs—such as through automation—it increases their profits, and the tax system already has a way to ensure profits are taxed. Perhaps this tax could be increased on robot-producing and robot-maintaining companies. Of course, this would also result in such companies relocating to more tax-friendly locales, but that’s a general problem with taxation. To take care of such problems, the tax system is needs to be revamped.

Taxing the robot-providers and robot users still doesn’t solve the problem of displaced workers. This is where something like a guaranteed minimum income would potentially fit in. If a displaced worker doesn’t actually have to worry about starving to death or dying because they can’t afford hospital bills, then losing their job to automation isn’t nearly as big a problem as it would be otherwise. A guaranteed income would ensure workers have time and resources to retrain. There will still be some people left out in the cold by automation, but the consequences of being made obsolete would be far less severe.

Virtual Reality is Real

Shoot the gun and block with the shield

My first experience with virtual reality was in 1993. The computer science department at UBC did an open house, and one of the displays in the Graphics Lab was a simple virtual reality simulator.  The viewer wore glasses with lenses that alternately turned opaque and transparent in each eye. The computer flashed two different views, one for the left eye, and one for the right. A stick connected the viewer’s head to the top of the monitor, so that the computer could sense where the viewer’s head was, and adjust the image accordingly.

It wasn’t the most amazing thing ever, but it certainly worked. As a viewer, I could see a three-dimensional image on the screen that changed in a realistic way when I moved my head. Of course, that a stick needed to be attached to your head was a big weakness, severely limiting the practical applications of the technology. But what do you expect?  It was 1993.

Now it’s almost twenty-five years later, and I’m pleased to say that virtual reality is now real—and I experienced it for myself over the weekend.

The return of the video game arcade

In the last year, several virtual reality technologies have arisen—the Occulus Rift, Playstation VR, and the HTC Vive. With prices in the $1000 range, these technologies are actually targeted at (relatively wealthy) consumers. However, some entrepreneurs have decided to buy fifteen or twenty of these devices, and open virtual reality arcades where consumers pay $10-20 an hour to play virtual reality video games. I went to one of these arcades that is using the HTC Vive technology.

Vive virtual reality requires a PC, a virtual reality headset, earphones, and two handheld controllers. The controllers are like a gun with a touchpad on the grip and buttons on the side, allowing interactions like firing a gun, squeezing a cylinder, and selecting from a touchpad menu. Though there was a learning curve to the system, it wasn’t that difficult to understand the basics.

Most importantly, it works—the experience was almost completely immersive. While the image seemed slightly blurry for the first ten seconds, I didn’t even notice it after that.

I mostly played a game called Space Pirate Trainer. In it, you are standing on a platform with a gun and a shield, while spherical robots fly around you. Your goal is to shoot the robots before they shoot you. To avoid their gunfire, you can either block with your shield or dodge. As you’d expect for this sort of game, you also have a variety of weapons with different effects, from Gatling guns to lasers to guided missiles.

It really did feel like I was fighting off a robotic horde. I’m pretty sure others felt that way too. There was also a two-player zombie game, where you work together to defend your stronghold against a wave of zombies. When people were playing that game, it wasn’t that unusual to hear them screaming as a zombie snuck up behind then. What’s more players who warned each other about zombies approaching them from their blind side had a considerable advantage. It was literally like two people in a realistic-looking world, fighting off zombies.

So it’s done, right?

All that said, while it does work, the virtual reality problem isn’t solved yet because you still have the stick connected to your head (figuratively). You have to stay inside a relatively small area (say a 100 square foot square). This isn’t a problem for these games, because the system displays a grid so you know exactly how close you are to a wall, and that works well. If you see a virtual reality wall, you can reach out and touch the real wall, and it will be where you expect it to be.

However, the small playing area severely limits potential games. Sure, you can design interesting games where the player has to stay in a ten by ten square, but that limitation excludes a huge swath of world exploration games. You can’t create Skyrim in virtual reality today. There is some room for creativity—in one game, you can teleport from place to place instead of walking. But that game dynamic would almost certainly not been in that game without the real-world mobility restriction.

It also make me wonder whether there will be a bunch of wheelchair games coming out—if you make moving around world connected to hand movement rather than leg movement, then this problem goes away. And wheelchairs are the most common real-world example today where movement is tied to the hands rather than the legs.

The arcade business

Though the virtual reality is cool, I think virtual reality arcades will be a tough business. I’m not sure why someone would start one of these virtual reality arcades—within years, consumers will have their own VR systems which will make these arcades obsolete. The people creating these arcades should really study history to determine why traditional video game arcades became obsolete, and figure out what they should do to avoid what looks like a nearly inevitable decline in their business. To make this business viable, they need to be creating experiences that can’t be reproduced in the home, and they don’t seem to be doing that.

Multiplayer games may extend the runway of these arcades, since it might be too expensive for people to purchase multiple systems and network latency may limit remote communication between systems over the Internet. But I can’t imagine network latency will be a problem for long. Maybe the niche for VR arcades is solving the mobility issue by creating big enough rooms that player mobility is far less of a problem. But in cities with high real-estate prices, it seems hard to do that in an economic way if you’re only allowing one player to be in each huge room.  (And multiple players in each huge room is problematic as real-world interactions between players can be dangerous.)

So, I’m not sold on the arcade business, so I’d be interested in hearing if these entrepreneurs have some way of making their business model sustainable.

The bottom line

While virtual reality arcades might not be here to stay, virtual reality is. This technology works, and works well. I imagine within the next five years or so, I’ll probably own one of these systems for myself.

The Influence of Foreign Money in Vancouver

The Vancouver housing bubble shows extreme growth in housing prices.

For years, the Chinese have been blamed for inflating the Vancouver housing bubble, increasing the price of real estate beyond the reach of many locals. The theory is that the Chinese make money in China through licit or illicit means, and then illegally launder it by buying Vancouver real estate. (I use the words “illegally launder” because China has currency controls. Anyone transferring enough money out of China to buy a house in Vancouver has almost certainly violated these Chinese laws.)

Historically, I’ve always discounted the “the Chinese caused the housing bubble” theory. Though there are a fair number of ethnic Chinese in Vancouver—roughly 28% of the population according to recent Statistics Canada data—that doesn’t imply that ethnic-Chinese real estate purchasers are foreigners or using foreign money to buy.  Instead, it might mean that the people buying houses are Canadians who happen to have a ethnic Chinese ancestry, and are buying—just like many non-ethnic Chinese Canadians—because interest rates are super low, and they view Vancouver real estate as a “can’t lose” investment.

However, I’ve recently changed my tune. I now think Chinese money is a significant driver of the Vancouver housing bubble.

Why the change?

As a Canadian, I’m almost instinctively averse to blaming a particular group for bad things. I don’t believe I’m any more racist than the average Canadian, and I don’t want to espouse racist views. However, I also think that ignoring data and eschewing analysis for fear of being perceived as racist is short-sighted. Evidence should determine policy, and we shouldn’t allow the fear of being branded a racist constrain our analysis.

So, there’s a couple of data points that I find convincing. The first is that in the west-side of Vancouver (i.e. the really expensive side where the median detached home is typically in the $3-3.5M range), a huge percentage of buyers are of Chinese ancestry. One study indicated that 70% of the homebuyers’ names were Chinese, and 36% were homemakers and students.

Now that doesn’t mean that these were foreign purchasers. They could be ethnic Chinese Canadians. But it seems unlikely. For one, how can a homemaker or student with no income afford at $3M dollar home? The most likely explanation is that they’re getting money from elsewhere.

The problem with suggesting the money isn’t foreign

What’s more, if these buyers mostly are Canadians, that actually suggests a bigger problem than the housing bubble. To buy a $3M home, you need a massive income, like half a million dollars a year. The median family income in Vancouver is about $75K. So, if you’re saying that all these ethnic-Chinese purchasers are Canadian, you’re essentially saying that ethnic-Chinese Canadians are making five or six times more money than other Canadians.

If that’s the case, we really need to be asking how our systems are failing the non-ethnic Chinese Canadians who cannot afford these dwellings. Are we discriminating against the non-Chinese? Should we institute taxes on those of Chinese ancestry (or give money to everyone else) to level the playing field?

Of course not. It seems extremely unlikely that ethnic-Chinese Canadians have some huge economic advantage over others in Canada, or that Canada has massive systemic discrimination against the non-Chinese. A far simpler explanation is that foreigners and foreign money are behind most of the purchases in the west side, which is why so many purchasers are ethnic Chinese. To not believe that, one has to go through considerable contortions.

The second data point

The second data point suggesting foreign money is a major cause behind the housing bubble is the impact of the 15% foreign buyer’s tax. Christy Clark, in response to complaints from her top donors (condo developers), recently rolled back this tax only six months after it was implemented, making it so that people who have a work permit in Canada won’t have to pay. (This largely eliminates the tax, as people don’t actually have to work or pay taxes in order to get a work permit. Working or not, I imagine pretty well every foreign buyer will spend a couple of hours getting a work permit if they can save $500K on their $3.5M west side house purchase by doing so.)

Regardless, it was interesting seeing the impact of this tax. Essentially, it killed the market for single family homes in Vancouver. In contrast the condo market is still extremely strong (and was even before Christy Clark decided to further subsidize her developer friends by creating interest free loans to first time buyers who buy condos). Condos, of course, are the only thing most people who earn their money locally can afford to purchase.

Thus, to me, the single family home transactions plummeting at the same time as the foreign buyer’s tax was implemented while rest of the market remained hot suggests that foreign buyers with foreign money were likely behind a huge portion of single family dwelling purchases in Vancouver. If the single family dwelling market were driven by local money, I’d expect it to be as hot as the condo market as locals sell their condos in order to upgrade to houses. But it isn’t. It’s dead.

Thus, this data point further reinforces the first data point that a large percentage of the people buying single family homes in Vancouver are foreigners using foreign money.

My bottom line

Consequently, I believe foreign money and foreign buyers are a significant force behind the Vancouver housing bubble. While it is possible to contort yourself in order to avoid the conclusion that foreign money is a major factor, to do so would be intellectually dishonest, ignoring the simplest, most-likely-to-be-true explanations because they are politically unpalatable. (And, if evidence comes to light that indicates that these conclusions are wrong, I’ll change my beliefs.)

Of course, if Chinese money is a major factor behind the Vancouver real estate bubble, the natural question is, “what should be done, if anything?” To me, that’s a far more challenging question, one I may take up on a future blog if I can think of some good answers.

The Chance to Vote FOR Someone

A photoshop of Jonina and a whiteboard

The next British Columbia provincial election is happening in May. This election is particularly interesting for me because one of my friends, Jonina Campbell, is the Green Party’s candidate to be the MLA for New Westminster.  On Saturday, I attended a dinner/fundraiser she put on. It was the first time I’ve attended a political event in the 20 years, and I was impressed.

My connection to Jonina

I first met Jonina in 1998 when I joined her ultimate team, Apocalypse Cow.  That team played a lot of ultimate, but did just as much socializing.  Something like five marriages resulted from that team, including mine.

Members of Apocalypse Cow even tended to live in similar areas. At one point, Jonina and her husband actually lived in the same apartment building as us. In a way, our lifestyle was sort of like Friends, but with a larger, less sexy cast, fewer coffee shops, and a geekier vibe.

We used to visit Jonina and her husband every Wednesday night to watch The West Wing, probably my favorite American TV show. When the World Trade Center fell, I saw it from Jonina’s living room and heard Jonina’s horrified gasp. My wife actually went into labour at Jonina’s house the night before my son was born.

Will Jonina be a good MLA?

Thus, I know Jonina fairly well. She’s bright and thoughtful, but almost ridiculously extroverted and charming. She has integrity—she’s clearly not in politics for her own ego or enrichment, but rather because she wants to effect positive change in the world. She has empathy and compassion, but is grounded enough to make the hard decisions when necessary. And she’s insanely energetic.

When I think about the people I know well, there’s actually many I wouldn’t vote for simply because they wouldn’t be that good at the job, would have terrible ideas, or would be in politics for the wrong reasons.

But I consider Jonina to be an ideal MLA. Her combination of honesty, brains, compassion, and energy is really rare, and I think it will result in her being extremely effective as an MLA. It’s fascinating listening to her perspectives on education, formed based on her experiences as a parent, a teacher, and the Chair of the New Westminster school board.

“The chance to vote for someone.”

That said, I was initially skeptical when I found out she was running for the Green Party, simply because I think BC will benefit from Jonina sitting as an MLA, but—in its entire history—the Green Party has only won one seat in the Legislature. So, running as a Green Party candidate seemed like a hard path to becoming an MLA.

But the fundraiser this weekend convinced me, for several reasons. Andrew Weaver, the party leader spoke, and he raised a very good point—the Greens actually give the electorate the chance to vote for someone, rather than against someone.

This simple statement resonated with me, because I feel like provincially, my entire adult life, I have been voting against parties. Christy Clark’s Liberals are actually conservatives. To me, they seem to be corrupt, pandering to their biggest donors, real estate developers. They don’t seem to care about public education and are actually underfunding schools to the extent that students take days off because the government isn’t providing enough money to keep the schools open. They don’t seem to care about sustainability or the long term future of BC, but rather making money for their friends. They only started pretending to care about affordable housing when it became the issue most important to voters, ahead of even the economy. So, I’m not a fan of the Liberals.

What about the other guys?

Thus, the NDP has frequently been my “not the Liberals” choice, but only because they seem to be the lesser of two evils. In the last election, they didn’t focus on communicating their plans. Instead, they said “we’re not the Liberals” so much that I’m pretty sure they were considering changing their name to the NTL. That’s not to say there isn’t something to that argument. They might not fund public education, but at least they wouldn’t view it the way Clark seems to, as nothing but a cost center. They probably wouldn’t put real estate developers ahead of their constituents to the extent that the Liberals do. But voting for the NTL party is distasteful.

What’s more, the NDP seem as beholden to their union donors as the Liberals are to their real estate developers. I’m not only scared of the NDP crashing the economy but also making extreme pro-business decisions to reassure people who are concerned about them crashing the economy. (In fact, in this respect, I think the NDP has an insurmountable brand problem.) So, maybe I’d vote for the NDP, but not because they convinced me that they were the right party to lead.

The appeal of the Greens

The Green Party, in contrast, seems far less ideologically-based than either the Liberals or NDP. I expected it to be the party of hippies, but it seems to actually be the party of evidence-based reasoning. Weaver is a climatologist and several of the party’s candidates have Ph.Ds, and the crowd at the event seemed bright and thoughtful. I had conversations at my table about sustainable logging practices, the statistical analysis of demographic data, the tech environment in BC versus Silicon Valley, and the long-term consequences of self-driving cars.

If you look at the Green Party’s policies, you’ll see that they’re focused not on what ideology demands, but what actually works—what the evidence suggests results in happy people and successful societies. Thus, they’re looking at community building, preventative medicine, education, integrated healthcare, and pushing decision making down into communities. Sure, there is some ideological stuff (e.g. opposing trophy hunting), but mostly the Green Party seems to be about practical evidence-based solutions that work over the long term.

My bottom line

Thus, Andrew Weaver is right—the Green Party is a party that you can actually get excited about. Politics has been becoming increasingly polarized, with people fighting about whether our society should be based on left or right ideology. In contrast, the Green Party seems to be saying, “Who care’s whether something is left or right? The only questions that matter are does it work, and is it sustainable?”

To me, that’s a refreshing change. It cuts to the heart of the issue, and provides an alternative to the horrible “if you like it, I must oppose it” war that politics is mired in today.

The Normalization of Biometric Data Collection

Biometric data gathering is an advance on using a star.

Every grade seven student in my children’s school does a two-week Quebec exchange and hosts a student from Quebec in return. This is my kid’s year, so, in preparation for hosting, I authorized a criminal records check. I’ve done this before—it’s pretty standard for activities like coaching kids.

However, this time was different. Apparently, the rules have changed, and now they want the process to include a fingerprint check, for me and other fathers, because “my name and/or gender and/or birthday” matches someone with a pardoned or suspended sexual offence. I’ve never been accused of any criminal act, let alone arrested. But to me, this sort of biometric collection is problematic.

My problem with their reasoning

The biggest is with this check is that it normalizes the collection of biometric data. The “and/or” in the above statement is disturbing, because it justifies the collection of data from pretty well everyone (though I imagine they’re mostly doing it for men). I mean, one way that clause can be interpreted is that someone matching my gender has offended.  That would mean they could request fingerprints from anyone, since at least one male and one female in the country is guilty of a sexual offence.

Suppose, on the other hand, the match is on gender and birthday. The letter actually suggests this might be the case—it says that criminals might change their name (but not their birthday?) to circumvent a criminal records check.

Is that criteria any less broad?

Not much. In 1997-1998, between the adult and youth courts, there were about 4,400 convictions for sexual offences, or about 2,200 a year. Suppose we assume a third of these are repeat offenders, leaving about 1,500 distinct offenders each year.  If you assume the typical sexual offender is between 10 and 60 years (borne out by the data here), then we’re talking about a 50 year time range, a period with 75,000 unique convicted sexual offenders and with about 18,262 potential birth dates.

The math is hard, but with these numbers, I imagine over 80%-90% of potential birth dates have at least one sexual offender. In other words, if the government is identifying people by “gender and birth date”, their filter is almost no more limiting than simply identifying people by gender.

So, what this letter is actually saying is, “You are male. Therefore we will fingerprint you to make sure you’re not a sexual offender.” I don’t think that’s cool.

Who cares?

The typical counter arguments to my point of view are, “if you’re not a criminal, why would you care? Wouldn’t you want the people your kids are visiting to be fingerprinted?”

If 40% of the population were sexual predators, I might say “yes”.  But if you compare the 75,000 sexual offenders with the 30.25 million population of Canada in 1998, we’re talking about 0.025% of the population. The probability of my kid being abused by someone who would be caught by this sort of check is tiny.

Thus, my answer is “no”, because I think the normalization of biometric collection (i.e. saying “the government should be able to uniquely identify every individual simply by how they look”) is worse than the problem it’s trying to address.

The primary issue with the collection of biometric identification data the government of today isn’t necessarily the government of tomorrow. Though I might believe that the government today is trustworthy to collect my biometric data, that doesn’t mean the government in 30 years will be.

Often, when governments decide to do nasty things like persecute a sub-group or commit genocide, they start by putting considerable effort toward identifying the individuals that they see as undesirables. Then, they pass laws to make the lives of those undesirables uncomfortable. The easier it is for them to identify the undesirables, the easier it is to persecute them, and the more difficult it is for the undesirables to have any hope of resisting them. And, of course, resistance would actually be illegal, since the government is the one making the laws.

Some history

Take, for example, the government that was democratically-elected in Germany in 1932. In 1935, they passed the Nuremberg Laws to deny Jews the right to German citizenship (and therefore their ability to vote, own businesses, or work in government-regulated professions like teaching) and made it illegal for Jews and Germans to marry.  They also seized money Jews stored in banks and took their assets if they tried to emigrate. Any Jew who tried to resist these laws was, of course, a criminal.

One problem for the German government was identifying who was actually Jewish. Thus, they passed laws making it illegal for Jews to change their names. They also required Jews to hold Jewish identification cards with a copy of their fingerprints. Finally, Jews were required to wear a Star of David on their clothing, and buildings where a Jew was present were required to hang a similar star on the front door. It was very important for the government to easily be able to identify the Jews, since without that, it would be much harder for them to enact their long-term plans.

How much easier would it have been for that government to pursue that path if it already possessed a ready-made database of the fingerprints of everyone in the country? How happy would they have been if, instead of just fingerprints, they had biometric data including facial measurements on everyone, and were able to feed every camera in the country into computers that could pinpoint the location of anyone they wanted based on how they look? They would have been delighted, I imagine.

It would be almost impossible for any undesirable to have any hope of escaping persecution. (Well, maybe I should use the word “prosecution”, since we’re talking about Jews violating the laws enacted by the government. I supposed both words apply in such situations.)

My conclusion

Thus, I think the collection of biometric data is terrible. It makes it easy for bad governments to do horrible things to the people it doesn’t like, and makes it almost impossible for the persecuted to defend themselves, let alone fight back.

Thus, my problem with this casual fingerprinting is that it’s normalizing the collection of biometric data, basically saying, “the government deserves to be able to uniquely identify you in order for you to participate in normal, day-to-day events in our society.”  Taking fingerprints today is a step toward taking facial measurements tomorrow.

I don’t want this to be the norm. I don’t want it to be easy for a government to identify the portion of the population they want to persecute. I want it to be really hard, so that the persecuted individuals have time to fight back or run away, so that the electorate has enough time to see its mistake and correct it. If the government has good biometric data, collected over the course of years, nobody will have that time.

What I’m doing

Thus, I’m not submitting my fingerprints. Instead, I’ll be booted out of the house for the duration of the exchange student’s stay. After all, being assumed to be a sexual predator in this sort of scenario is one of the costs of being male. But at least I can take solace in the fact that the world still favors my gender overall.

The Most Important Properties of a Video Game

An example of a farm in Stardew Valley

Recently, I’ve been playing Stardew Valley.  Like Minecraft, this game is unusual in that it was created not by the typical team of programmers, but rather by a single individual. Four years ago, the creator of Stardew Valley graduated from college, but couldn’t find a programming job. So, instead of working at Starbucks, he decided to live off the kindness of his girlfriend and create his own game to sell on Steam for a sub-$20 price.

The outcome for him must have surpassed his wildest expectations. Since the game came out last year, estimates are that it’s made over $40 million.  That would be a so-so result for a company spending $15 million just to create the game, but remember, this is one guy, not a gaming company. He doesn’t need to pay a portion of that money to anyone else. It all goes to him.  (Which results in my wife asking me, “Hey, haven’t you spent about 4 years writing books? How’s that going?”)

It’s noteworthy that this one fellow created everything in the game—the design, the code, the graphics, and even the music. The result is a farming game that looks like something created in the late 1980s. As you can see above, the graphics are vivid and bright, but pixilated, like the game was designed for a bulky 640×480 CRT monitor. In a way, Stardew Valley proves that the thing that matters in games isn’t the flashy graphics that are used to sell every new video game console. Rather it’s the game play.

So the success of Stardew Valley has got me thinking about what makes a game compelling.  A few things immediately spring to mind.

Small victories

In general, I think for a game to be compelling initially, it has to have a lot of small and medium victories, akin to a slot machine giving out a lot of small payouts. In Tetris, the small victories are whenever you finish a line or a level. In Candy Crush, they are when you create or use a special candy, or when you finish a level.  In Call of Duty, it’s when you shoot someone or win a game.  In Starcraft, it’s when you build a particular building or unlock a new capability.  In Civilization, it’s researching a particular technology, building a wonder, or capturing a city.

These small victories both give player a feeling of success, and—because they’re small—encourage the player to keep playing another few minutes so they can achieve the next small victory.

Drudgery eliminated by “cool” expanded abilities

The second thing that makes a game appealing is when each victory gives the player expanded abilities, often eliminating annoyances that are artificially built into the game itself. For instance, in most farming games, you need to water crops or wait for the crops to grow. There’s no programmatic “need” that requires the player to click all over the screen to water their beets or have a real-time delay between when the pumpkins are planted and when they grow.  However, this artificial constraint ensures that a reward for a small victory will have significant value to the player. If the reward is a automatic sprinkler, so the player doesn’t have to waste time walking all over the screen to water plants with a watering can, then that sprinkler has real value in eliminating the artificial drudgery of manual watering.

The interesting thing about this sort of reward is that you wouldn’t think that building drudgery into a game is a good idea. Why would someone want to play a game if it’s drudgery? However, in this case it works, because that drudgery provides the player with the incentive to look for rewards that will eliminate their suffering. (Yes, they could just stop playing the game, but if they only need a small victory to eliminate that suffering, why wouldn’t they do that instead? The sunk costs of quitting would be high.)

Requiring resource allocation decisions (that often don’t matter)

Finally, most good games require the constant allocation of resources, forcing the player to prioritize one path over the other. At the same time, often, these decisions don’t matter that much, in the sense that the player can often “win” by multiple paths, and often can’t “lose” by choosing the wrong path. Instead, the winning conditions will be different and the results will look different (e.g. lots of cows instead of wheat in farming games, a big army instead of a bunch of museums in Civilization).  But, when it comes down to it, you’re allocating resources to solve small problems, and, through solving those problems, you’ll hit a victory almost regardless of how you allocate those resources because almost all reasonable paths lead to victory.

Of course, that isn’t true for all games. Tetris has no equivalent to a resourcing decision. In Civilization, if you completely ignore your army, Attila, Shaka, or Genghis will raze all your cities and you will lose. But it often seems to be true—even in Civilization, a minimal army is often sufficient to keep others at bay long enough to loot the archeological treasures of other civilizations.

And, though it seems strange, “resourcing decisions that don’t matter” is a feature, not a bug. It allows the player to focus on the aspects of the game that they like, ignore the rest, and still end up victorious. In effect, the player is customizing their gaming experience in favor of the type of game play they prefer. Some people like to be snipers, some people like the big explosions resulting from rockets and grenades, and some people just like to shoot people with a big gun. Call of Duty is open to all these types of game play.

The bottom line

To me, in combination these features make games compelling, leading to the “one more turn” aspect that keeps gamers playing until 3:00 AM on a weeknight. It would be interesting compiling a list of key features, and then deliberately designing games around those principles. (In fact, I imagine thoughtful gaming companies are already doing this.)

Should Becoming a Millionaire Be the Goal?

Financial tradeoffs in life

In my last blog, I talked about how easy it is to become a millionaire through compounding. If you believe that wealth is an end unto itself, then that is a perfectly worthwhile goal. Most people make money by selling stuff to other people, so almost all advertising is focused on telling the audience that they don’t have enough, that they need to keep accumulating and buying. The “become a millionaire” idea fits nicely into that high-consuming lifestyle.

However, studies seem to indicate that in itself, wealth doesn’t provide that much happiness. That’s not to say that a rich person isn’t on average happier than someone living in a cockroach-infested apartment, but rather than the difference in their degree of happiness usually  isn’t that large.

We also know that happiness tends to result from experiences and friends rather than a big house or a nice car. Thus, a smart strategy, if you want to lead a happy life, might be to focus less on accumulating stuff, and more on creating experiences with friends.  The problem with that idea, however, is that work takes up so much time every week, getting in the way of vacationing and playing with friends. Darn.

One possible answer

One solution to this conundrum is, instead of focusing on building wealth, focus on becoming financially independent. One the surface, these two things seem similar, but they really aren’t.

Having wealth means you have a lot of money relative to other people. Financial independence means that you can live the lifestyle you want without working.

This distinction has some interesting implications. If you’re wealthy, but spend a huge amount every year, you might not actually be financially independent. In contrast, if you have modest savings, but don’t spend much at all, you might be financially independent. Thus, for financial independence, spending matters as much as savings.

This has some interesting implications when you combine it with the observations that happiness is derived from experiences and work is getting in the way of having those experiences. It means that many people may increase their happiness by cutting expenses and increasing savings to reach financial independence early, so as to have time to collect experiences.

Financial independence through extreme savings

In another blog, I discussed the idea of “safe withdrawal rates”, the amount of money you have in order to be financially independent today. Research says that, if you can survive on about 4% of your savings, you are financially independent—you can retire today, and your savings will almost certainly last you the rest of your life (even taking into account inflation). Personally, I prefer a number between 2.5%-3.5% just to be conservative, but 4% is what the experts say.

This leads to some interesting savings math. Like, let’s assume you start with nothing, but you’re going to invest part of your salary at a return of 10%.  How many years do you have to work before you are financially independent, assuming a 3.5% safe withdrawal rate?

The answer depends only on how much of your salary you are saving. If you do the traditional 10% rate that I mentioned in my previous blog, it’ll take you 34 years. But if you double your savings rate to 20%, it’ll take you only 26 years.

But suppose you get extreme with your savings. Then you can become financially independent really quickly. In my last blog, I talked about how, in university, I was spending about $9,000 a year, but then I got a job where I was making $57,000 a year, or about $47,000 after tax. Suppose I had kept up the same expenses I had in university, and saved the rest, about 80% of my income. My time to financial independence? Roughly six years.

Time until financial independence

The key is that when you increase your savings rate, you aren’t only increasing the amount you’re investing. You’re also decreasing your spending rate, which means your nest egg doesn’t needed to be nearly as large for you to be financially independent.

In other words, if I were saving 80% of my $57,000 salary, I would only need an income of $9,000 a year to be financially independent. At a 3.5% safe withdrawal rate, I’d only need $257K in assets to generate that income. If I were saving 10%, that would mean I was spending about $50,000. I’d need $1.4M in assets to generate that $50,000 income.

With these assumptions, you can create a pretty table that shows how many years you have to work before you reach financial independence at different savings rates, assuming a 3.5% safe withdrawal rate.

Savings Rate

7% Rate of Return 10% Rate of Return

10%

43 years

34 years

20%

32 years 26 years

30%

25 years 21 years

40%

20 years 17 years
50% 16 years

14 years

60% 12 years

11 years

70% 9 years

8 years

80% 6 years

6 years

The bottom line

This approach certainly isn’t for everyone, but, if you value your time far more than you’d value a nice car or a huge house, then it might be a good option for you. If the happiness studies are correct, I suspect most people could live a happier life by taking this sort of approach instead of working for long hours for years in order to maximize their ability to spend.