When I was in school for Wildlife Management, we learned pretty much the same thing about hunting. More money gets made by, outfitting companies, tour guides and local communities by having a lottery style big game hunt than an open season. It attracts a few people who are willing to spend upwards of $20000 just to shoot one animal as opposed to many hunters coming in and not spending as much overall. It also tends to be better for the survival of the population as a whole though it does tend to lead to an overall weakening of the population though as only the biggest and strongest animals, that should be breeding, get removed.
I don't understand I think that's my highest rated comment on HN. I gotta admit I wrote it before I actually read the article. I really thought it was going to be about whale watching. I've been trying to figure out if there's some kind of brilliant metaphor in that comment but honestly I can't see one now that I've actually read it.
That's the delight of HN: It's your highest rated comment because it teaches us something about the world we didn't know. It's interesting, if unexpected.
Game industry calls people who spend a lot of money on games "whales". I guess it is because whales are supposed to have a lot of meat. None of people who use it knows a lot about biology and whale is likely the only big animal that can be eaten they know.
No it comes from Whaling, as in hunting whales for their spermaceti which was used as a fuel and to make many products. Whale meat is actually not usually sold by whalers. Not a lot of good methods for preserving meat in the 19th C on a boat.
Whaling is compared to businesses that rely on a small number of big spenders to be profitable because whaling is a similar high risk high reward business, compared to fishing. Whaling is even more dangerous than fishing, requires being at sea for a month at a time... if you fail to catch a whale, no one on the ship gets paid. Whalers were paid in equity. A lowly deckhand would make a very small amount compared to a spearman who killed a whale or the captain, but there were rewards for spotting the whale and even the deckhand would probably make enough money to take off work for a while before having to return to sea.
The metaphor is more about how types of fish are distributed in the vast 'sea' of gamers. Most of them are small fish, so they don't pay anything or very little for your game. There's also the term dolphins, for people that pay medium-sized amounts or regularly and then whales for people that pour big amounts of money into your game (and like the headline mentions, these can be ridiculous sums).
I understand the metaphor in the article. I just don't understand why my comment that actually has nothing at all to do with the article just keeps on getting upvotes. The article makes sense, my comment after reading it makes none. I thought maybe I'd lucked out and came up with something that somehow was actually related in someway but no it's really not applicable. It really confused me at first when I read down and people were talking about the economy and 99%vs1% below in an article I thought was about literal whales.
Here's how your comment made sense to me even though I had read the article and understood that it's not talking about literal "whales":
You mention few customers bringing in the major share of the revenue, and that's exactly what the article linked is about.
I'd imagine whales as slang and whaling metaphors have existed for quite some time. There's the expression "a whale of a tale".
I think for gaming it relates more closely to fishing and whaling, and how fishing is perceived. You're not hunting fish, you're fishing. I know poker uses both fish and whales as slang. If you rely on a couple big customers or players then you're waiting for that one big catch most of the time. Whales weren't just caught for their edible meat, and the other products such as oil were likely more important in the past.
I came to the article to find out how whale watching tour companies were making most of their money from a few customers. This likely comes from growing up in the pacific north West of North America. It wasn’t until Zynga was mentioned that I caught on.
> ..though it does tend to lead to an overall weakening of the population though as only the biggest and strongest animals, that should be breeding, get removed.
This is true only if it is presumed that the hunter is absolutely proficient.
I mention this because it would be reasonable to assume, based on "survival of the fittest" ideology, that an in-proficient selection-by-omission process would play a role in breeding more evasive and/or fiercer competitors.
> "But Zynga’s big spenders really live up to their reputations. Customers in the top 20 percent spent an average of $571 in 2016, and customers in the top 1 percent spent more than $4,000 each! (This means, at Zynga, WI80=30x and WI99=49x.)"
I don't play Farmville and maybe I just don't get it, but I can't imagine normal people spending that kind of money on an online game (even if they are rich), unless there's some kind of addiction involved.
If someone told me that the top 1% of slot machine players (by amount spent) spent an average of $4,000 each per year, I wouldn't say "boy, they must be loaded to be able to afford that kind of cash", I would say "I think they have a gambling problem and many of them are probably spending money they can't afford."
Zynga isn't necessarily responsible for their users financial decisions, but it's kind of a different situation if they're catering to the elite vs exploiting psychology to extract money from people who make make poor financial decisions. I don't know anything about Zynga's practices and don't have an opinion one way or another, but I found the dollar amounts kind of surprising and potentially alarming.
It's not hard to imagine spending that kind of money. Lots of people spend comparable amounts on alcohol, sporting events, concerts, tools, car mods, computers, collectables, board games, clothes, jewelry, gambling, whatever.
> exploiting psychology to extract money from people who make make poor financial decisions.
I've no love for Zynga and their shitty practices, but you could make the same criticism of people who have children. People will spend whatever they've got to be happy. $4000 per year is not an alarming amount unless you're ruining lives to pay it.
I think the games in question are actually the opposite of that: they are played by millions and millions of people, often for free, but financed by a small, rich minority. It is super aggressive price discrimination, which actually benefits the 99%—we get something cheaper (or even free with F2P games) because other people are willing to pay so much.
In a very real sense, the F2P business model only really works if the game is popular amount non-paying customers—otherwise, what would motivate whales to get into it in the first place? A whale-based system pretty much guarantees a product that's as widely accessible as possible.
Of course, it has its own massive ethical issues; I am no fan of the practice. (Not least because the people spending the most money aren't always the ones who can afford to spend that much!) But it does neatly invert the dynamic and uses the top 1% of spenders to finance something primarily enjoyed by the 99% who spend little to nothing.
I'm not at all convinced of this. Considering that much the properties of the game that land such whales are based on triggering addictive behavior, it seems much more likely that the whales' income profile is similar to that of a lotto ticker purchaser in the US: relatively poor people.
Poor people would hit their limits very fast. Many F2P games make elements that would involve repeated infusions of items that cost $30-$100 a pop over time. A lot of those games have no real upper limit to the power or time savings you can get; there's never a sense of the game being done.
But for a richer person, 3k a year is what they give to their kids for christmas in gifts.
Do you believe that poor people are significantly more susceptible to triggering addictive behavior? I think a simpler explanation for why poor people play the lottery is that they see it as a way out of being poor.
I don't think the argument is to reverse the original statement (the original statement being something like "the top spenders must be wealthy", the reversal being something like "the top spenders must be poor"). Rather, the argument is that knowing there are people spending a lot of money tells you nothing about the income level of those people. They might be someone who's independently wealthy and using money they won't miss, or might be someone who's quite poor who's damaging their life in other ways to obtain the money. The argument is you don't know which from the facts given. All you know is there are people who spend $X on it.
That said, I don't think income level has anything to do with it. There are poorer people who shouldn't waste money to play the lottery or gamble in casinos, but do it anyway. There are also wealthier people who shouldn't waste money to play the markets, or other "casino/lottery for rich people" things, but do it anyway. It's just that our society is mostly oriented to treat the poorer people as compulsive gamblers -- which is treated as a moral failing -- and the wealthier people as "serial investors" or other terms which carry a more positive connotation.
Clash of Clans used to have an enormous Arabic contingent with the high-end upgrades.
I once calculated what it took to have a fully upgraded base within a week (New Level 11--if I remember correctly ...) and it was something like over a million dollars.
And there were multiple fully upgraded bases within a week. Now that's a whale. o_O!
I'm not sure about Clash but there are often game mechanics that kick in to heavily multiply your rewards. Spending $X gets you Y in game value but spending $2X gets you 5Y. And then it can compound with follow up offers targeted at the player/whale which may not be generally available.
So I don't doubt your figures but there's probably a "one week whale" trajectory that's built into it to give quick gratification for something like $250,000. Still seems outrageous but they can discount digital goods differently than retailers can.
One thing he mentioned is that what those whales do is "buy the server," literally buy the top spots in any competitive aspect through spending so much cash that the ante to get into it excludes everyone else. I think at that level everyone else really doesn't matter; it's a spending contest versus the other whales for status.
What happens is that eventually the ante gets so high that the other whales look for a new game or new server to fight over.
It is almost some sort of 'most dangerous game' situation, where rich people are paying tons of money to be able to destroy regular folks at these games.
Although in reality, I bet the big spenders are not super wealthy. They probably spend way more than they can afford.
Most people don't mind the elites having tons of money, which is one of the reasons why they do.
There is not a ton of outrage about inequality. Orthodox capitalism would say its just.
But, capitalism is to serve the well being of society, not the other way around, and it is possible to preserve the idea of a person compensated according to their contribution/work while maintaining a certain level of fairness for all.
That fairness can be measured by the inequality/wealth gap. Its been growing worldwide since 1980, except for Russia, nowhere faster than in the US. This is not a political argument its a fact.
Also, much of the political debate falls short. Its already accepted that govt should redistribute, to compensate for capital inherent advantage over labor, after all the us income tax is a progressive tax.
For instance, taxing incomes higher than cap gains results in increased inequality. Sure you can argue that's a hypothesis, but as far as hypotheses go, it doesn't boggle the mind.
Whats the plan? Lower corp rates, leave middle income rates essentially unchanged. Add in the new economy where people are less needed. Expect more inequality for the time being.
Btw, UBI is a lousy approach to solve this. You don't compensate people to not work. That brings inflation which is very bad. You correct for the imbalances of the rich feeding off the lower income groups in the tax code.
Interestingly, the IRS has a WI80 of 22.6, higher than all the industry averages listed in the article except gaming: the 1% pays 50% of the income taxes, and the top 20% pays 85% [1]
What do you conclude from that, and what do you conclude from studying, say, 1950, when the top federal income tax rate was over 90%?
My point in asking is this: quoting statistics such as the above is often a 'push poll' type situation, trying to suggest a particular conclusion, often by idealogues.
Interpreting that information requires a whole lot of other information and the conclusions to be drawn are not what one might initially assume.
> This is one thing I'm terrified of going forward: industries being built by the 1% for the 1% and to Hell what the rest of us proles want.
That's an interesting hidden pitfall of increasing income inequality and wealth concentration. Companies like Coca Cola got huge because their target market was basically every American - rich or poor. If income inequality continues to rise a more profitable strategy might be selling very expensive beverages to the wealthy instead, leaving the poor underserved. This is already happening with prestige, "health" beverages like cold-pressed juice and Kombucha.
In my opinion a person can work hard and make money in the millions in a lifetime. That can be done by penny pinching and good old fashioned hard work and bootstraps.
But a billion dollars? Ten billion? You can't get there without stepping on someones neck. The fact we even have elites means someone's getting screwed.
How exactly did, say, J. K. Rowling (wrote Harry Potter) or Notch (created Minecraft) step on someone's neck?
You can become a billionaire by producing something that tens of millions of people appreciate (and by being extremely lucky I guess).
Elites existing are not a sign of people getting screwed. The poor being so worse off they literally cannot afford food, on the other hand, _is_ a sign of people getting screwed.
I'm not making the argument that the economy is a zero sum game. I'm saying we don't allocate wealth properly. My concept of the "elite" is based on them having so much more than the poor. With more equal income distribution there would be no "elites". Of course there will always be people with more and less but that doesn't mean we need the elite for the economy to work or that its healthy to load so much of our collective wealth to the top.
For example: good for Rowling but why aren't more authors able to make a living writing?
In my opinion the fact that it's possible to win the economic lottery like Rowling or Notch is a symptom of a greater problem.
I think that "information cascades" is the concept you're looking for.
J.K. Rowling made hundreds of millions because hundreds of millions of people bought her book. Why did hundreds of millions of people buy her book while most authors struggle to get tens of thousands? Mostly because people recommended it to their friends, and their kids all passed it around school, and news stories got written about it, and major motion pictures came out, and it became a cultural phenomena where Harry Potter references snuck into every corner of life.
Look at any other billionaire and you see a similar story. Minecraft got huge because everyone was like "Yeah, I totally wasted a week playing Minecraft. No regrets" and so everyone checked it out. Facebook got huge because everyone was like "Are you on Facebook? Here, I'll friend you." Ditto LinkedIn and Whatsapp and every other social network. Uber got there because at parties people would casually say "Oh, I'll just Uber home." Google got big because people would be like "Just fucking Google it" instead of telling you the information.
Basically, when you can get your customers to do your marketing for you, you rapidly expand into the whole set of potential customers, which numbers in the billions. Provide just $1 of value to them and you're a billionaire. Most business owners and employees, by contrast, are forced to explain why it's worth giving money to them, which is a process that doesn't scale. Then you're forced to only deal with customers who will pay you more than it costs to convince them to fork over that money.
The way you can break this cycle and eliminate this inequality is to convince people to make their own damn consumption decisions and ignore what their friends say. Good luck on that.
I don’t have a problem with this cycle. I just don’t think everyone wins when someone wins this lottery. Some people receive far more reward than others even though they were all involved.
This doesn’t mean J.K. Rowling wrote a bad book or doesn’t deserve the money. That is a apparently very distracting example that misses the actual point.
I’m saying that when a person makes billions (read: lots) of dollars in a society that has people starving to death or otherwise unable to meet their basic needs then there is some exploitation happening somewhere. The economic rewards of that work are larger than the individuals contribution, someone is getting screwed.
Yep, exactly. Virality as we think of it on the Internet is just a specific form of information cascade, along with word of mouth advertising, financial bubbles, fashion, social proof, populist movements, etc.
Because their books don't address a wide enough audience? You can write an amazing horror thriller book about zombies, but the total addressable audience will be smaller than a well written fantasy book that can be read by someone ranging from 13 to 75.
As an example: artists often have this feeling that they need to stay "pure" to their air to make it. Yet, the best artists that often "make it" are actually businesspeople first and artists second. They will think about creating art that can and will sell.
Second to this is the fact that money generally ends up making more money. If I have $10m in the bank (a small amount of money in the grand scheme of things and looking at how much money goes around in the world), then on average, if invested properly, this should generate you about $1m in capital gains per year. Most people don't spend a million a year.
Add to that any income you might be making from whatever you're doing (entrepreneurial stuff, etc) and it's generally very hard to drop out of the elite once you're there.
You're simultaneously missing and making my point.
Sure Rowling wrote a great book and the economic gods smiled on her and we got a new pop culture staple. But what about the authors of other books that are similar but made orders of magnitude less money? Does it make sense that there is such a gap? Is everyone involved being fairly compensated? Even the people running the printing presses and delivering the books?
Is it beneficial that "money makes money" without the promised trickle down effects to the middle class? Why is it possible to make a million dollars in a year with 10 million (10%!) but not just as easy to make say $100.00 with $1000.00? If $10,000,000.00 is such a small sum why will the overwhelming majority of people never see that amount of money in their lifetimes?
Yes it is hard to drop out of the elite, because they're keeping the wealth, they can't even help it. This is the neck stepping I referred to.
On the first matter. Yes, it makes perfect sense. Her books are superb, and very well written. The story flows great. She is an excellent writer _AND_ great at marketing.
Nothing ever stands alone and you generally need help from other people to achieve things. Her story is rags to riches -- if she can do it, literally anyone can do it. Was luck involved? Of course, to some extent. But hang out with the right people and you would be surprised at how much is possible in life. There is a reason why success often seems contagious.
On the second part: it's an effect from a capitalistic society. In fact, you can easily achieve the same returns (even higher) with lower capital. It's just that the outcome matters less: you can't live off of $100.
Have an open mind. $10m is literally one good idea away. Invested in Bitcoin in 2011? There you go. Made a great app in 2007? Maybe not $10m, but at least a few. Etc. Opportunities pop up all over the place -- most people are just not looking and too busy working a job and living life.
Literally everyone can make millions, IF that is what they desire and want to achieve in life. You just have to work towards it. Is it easy? Hell no. Should it be easy? Hell no.
Last: the elite isn't really keeping the wealth. They obviously won't just give it to you, but there are plenty of opportunities for people with good ideas but no money to team up with people who do have the money, and make something happen. And most will gladly share the gain.
Yes it is possible for anyone* to be a JK Rowling. It's not possible for everyone to be a JK Rowling. That is my point.
In order to create a system where it's possible to become a billionaire by writing a book we also create a system where a lot of people can't become millionaires by doing essentially the same thing.
I'm speaking philosophically here, you're describing our current civilization.
* a specific subset of all people who posses the correct personal traits and opportunities.
"It's not possible for everyone to be a JK Rowling. That is my point."
So?
"In order to create a system where it's possible to become a billionaire by writing a book we also create a system where a lot of people can't become millionaires by doing essentially the same thing."
But they are not doing the same thing.
They also write, yes, but not so good. Or maybe also good, but not what the masses wants.
And that's the other point, the masses decided to buy it - so the masses decided to make Rowling a star and rich.
Where is the problem? That not everyone can have big fame and big success? Well, that's the nature of things.
It only gets problematic if the elite use their power to bend the rules of the game, so that not those who deserve it (those who create big value) get successful and rewarded, but those of other traits ... so the game should still be fair. But I think we made progress with that. Some decades ago, it mattered much more, where you came from (nobleman) than today.
He's basically pointing out that JK Rowling's success partly benefited from a feedback loop. For example, once everybody was talking about it, free publicity.
If somebody else had all the same skills and wrote another book that was just as good, there probably still wouldn't really be room for both of them. Only one series can be the pop culture youth fiction darling at a time.
Now you're back to the article! JK Rowling's success story is singular because the masses don't have oodles of disposable income. This is why companies are finding niches where they can earn income from "whales" rather than having to score the masses lottery.
JK Rowling's success story is singular because the masses don't have oodles of disposable income
Hardly, she could still be a huge success story if she split that pie of disposable income halfway with another author who was her equal- but public attention doesn't really work like that, is the problem.
But targeting whales to avoid the masses lottery, yes, I'm with you & the article there.
Her books are not that good; she's much closer to Dan Brown in terms of her success than people would think. The right product at the right time, quality is not paramount. Same as the Hunger Games, or Twilight, or Goosebumps.
If it were quality, Diane Duane or many, many other skilled writers would see success.
> But hang out with the right people and you would be surprised at how much is possible in life. There is a reason why success often seems contagious.
This has the potential to paint the wrong picture as is. The wrong picture being that growth breeds connections to successful people -> breed success -> breed wealth.
Another way to view it is, connections to successful people breed growth -> breed success -> breed wealth. This way "lucky" connections only aid in developing a better product, and not in practicing unfair marketing for existing products.
Sorry for picking out such aminor point but I think you are overestimating capital gains. Or at least I would be very interested on how to achieve capital gains of 10%.
But wealth isn't really "allocated". To use the previous examples of Rowling and Notch, no one allocated millions of consumers to buy their product. Millions of individuals decided to freely spend their own money on Harry Potter and Minecraft.
>For example: good for Rowling but why aren't more authors able to make a living writing?
Because consumers don't like them as much. The market increasingly is a winner take all, moving away from the 20%-80% split. How many books did you buy this year? How many were from indie/unknown authors?
You're missing the forest for the trees. We provide huge rewards to a small number of people but why? Yes, consumers don't like them as much but if that means some people starve and others make billions maybe that's a problem with our socioeconomic system?
Problem relative to what other system. As far as systems that exist, Democratic capitalism with a social safety net has produced less starvation per capita than any other socioeconomic system that has actually existed. Most stories of people attempting to implement a hand-wavey utopia have results where the human dead measure in millions. At this point theoretical Utopia's meet the standard of extraordinary claims, and consequently they require extraordinary evidence. How does this alternate system of yours work? Can people read what they want to read? Can people work where they want to work? Do companies get revenues based on how successful their products are? If all three of those things are true your premise is basically violated as far as I can tell. I don't like breaking any of those 3 things as I see the first 2 as fundamental rights and the third as the main successful way to reward creating actual value for real humans.
Democracy contains a fundamental assumption that society is continually evolving. You're putting a lot of words in my mouth here. I don't think our current system is perfect, that does not mean I want to institute a dystopian centrally managed society. It means I understand the basic concepts of democracy, and nuance.
I don't think our current levels of wealth inequality are healthy or sustainable. Personally I'd like to see a wealth tax where you pay for the portion of the national economy you hold.
Because this matches their usefulness - in services that scale to a huge audience, the less-than-the-best aren't useful much.
Assuming that I'm going to read 50 books of a certain niche genre that has 5000 writers worldwide, the best 50 writers in that niche have a significant economic value (and thus deserve huge rewards, because we want them to continue writing) the next 50 have some value, and the remaining 4900 writers in that niche are useless, they can do it as a hobby if they want but we're not going to support them much - we don't need their writing, because someone else can do it better. Why would I ever want to read the 101st (according to my preferences) best book if I'll never get the time to read the 100 books that I'd like more than that? It might as well have never been written as far as I care.
This is the inevitable result of abundance, of having more choices than you'd possibly need. Think about this from the perspective of food - if you want an apple, and are walking by a tree that has a hundred apples of various ripeness. The few most ripe apples are useful - you pick one of them; if you want a second one or have a friend with you, then you might want a few more... but the 90% that aren't as attractive have zero value if the tree has more apples than anyone could ever want to consume. And this is the case for writing; there's more fiction writing than anyone might ever be able to read, thus you're inevitably reading just a small fraction of it, and if something's good but worse than the many alternatives, then it's worthless.
The same applies in any industry that scales. I want to watch a top-10 footballer, but the top 10000th is useless to watch (although they're really good, they're among the best 0.1% of the millions of soccer players worldwide); the same goes for music, software, all kinds of creative works.
You are way down the rabbit hole of the JK Rowling example here and have completely missed the overall point. My argument is that the difference between the books you want to read and the rest is smaller than the economic outcomes would lead us to believe.
To make this even more clear, economic gain is disproportionately allocated to a few individuals at the expense of all other participants. It stops being a meritocracy and becomes a lottery for the producers funded by the capitalists at the expense of all other participants.
>We provide huge rewards to a small number of people but why?
Thats what I asked you. How many indie authors have you supported by buying their books and spreading the wealth. Or do you have a better way to spread the wealth apart from the government taking it by force from whatever class it deems as enemies of the people this week?
Well I don't know about J.K. Rowling but Notch kind of stepped on all the players that supported the game during alpha when he sold it to Microsoft. When I purchased the game back at alpha 0.5 or something, I was paying for any future uprades and such according to the user agreement I accepted. Once Microsoft bought it and rewrote it, that agreement no longer applies to these new supported versions of the game, only the Java version. It is what it is but it does irk me a bit to have to pay again for something I bought with the understanding that I was paying for all future upgrades.
Ya I looked into them a bit and couldn't really be bothered. I also don't have a windows computer or any modern consoles so I'm stuck on the Java one either way. The whole thing just seems like a sneaky way to make more money off of it ans have tighter control over the community.
Most billionaires are neither Notch nor JKR. Those are certainly distant outliers. Most billionaires started with huge advantages conferred at birth and/or required large organizations of under-compensated people to get their billions.
It's probably not a popular opinion, but what is undercompensation? If I can employ 10,000 people at $X to achieve goal Y, and those 10,000 people are fine with said agreement and willing to work at said rate, then I am not undercompensating them. Then you are paying them market rate.
Now, this might not be much above minimum wage and it might seem outrageously cheap. But you're not undercompensating them if you can find the people.
The argument comes down to the fact that the market is organized by and for the owners of capital, and that is largely a group you are born into. If you don't control capital, you participate in the market as a commodity.
Functionally, we've got a two-tiered system, and transitioning between those tiers is quite difficult.
Most of us here on hn are at least very expensive commodities, which isn't quite the same as being a capital owner, but it's a lot more comfortable and a lot more free than being an inexpensive commodity, the leasing of which often cannot cover operating expenses.
I personally have spent some time operating as a small time owner of capital... and I should write more about that; Experimentally, I personally am better off as an expensive commodity, precisely because it's quite difficult to make that jump from commodity to capitalist. I wasn't good enough to make it. I can see how if I were a little smarter, a lot more disciplined, if I had more luck or sense, I might have made the jump. but I'm... not average in a whole lot of ways. The average person is going to have a much harder time of it than I did.
This is a great insight and I completely agree about the two class system that capitalism creates. I think capitalist vs commodity is a much more clear framing of my perception of our system than millionaire vs billionaire.
Do you think it is a reality of capitalism that there be these two classes? Certainly capitalists must exist in capitalism but is it possible for us all to be capitalists? I see no reason why not. Can one be both a capitalist and a commodity?
You could argue that all are capitalists, it's just that some of us only own significant capital in the form of our own bodies and minds. My point is just that the game is very different if the 'means of production' you control are something other than your own body and mind.
It is only possible for us all to be capitalists (in the sense that is meaningful to me - that your income comes from the return on capital) in a world where the work is done by robots, or by people do the work for fun or adventure... because, you see, someone needs to do the actual work that keeps things running.
"But you're not undercompensating them if you can find the people."
That statement ignores so much of reality today that it isn't really applicable. It ignores the fact that people must work in order to survive, and as such, the employer holds most of the power in that relationship.
I think that's a bit of an oversimplification. It may be possible to find people willing to do that work at that price because those people are desperate. This type of thinking is why market forces alone cannot sustain a middle class.
Market rate == value, not fair or unfair compensation (from the wager earner perspective).
If the value generated from work is less than minimum wage, it may not be that fair to the business, but usually those types of unfair scenarios are corrected.
Fairness in compensation for an individual revolves around a livable wage. Of course, “livable” is highly debatable. Should livable compensation be enough to be able to save? Does it include being able to afford a home in a safe neighborhood? What is safe?
Bot won jackpot in largely winner takes all industry. There cant be possibly thousands Rowling or Notches worldwide. There can be three at a time in each category. And most often, there is none. Both were good I what they did. In both cases, there were plenty of writers or devs that were good, worked hard, created something good and did not won that jackpot.
Neither of them influences politics enough to be considered elite in the parent meaning. Both are just someome with a lot of money and a little influence. They don't fund think-tanks to push for favorable tax policy nor know how to do it nor have enough money to do it.
This is very similar to mineral mining in the physical world: a small number of people create immense wealth while leaving huge costs of environmental destruction to the rest of us.
> On the one hand, if those scraps are enough to live on (and educate my children and so on), it's fine with me because it's enough.
That's a pretty sad state of affairs though. Constant "revenue optimization" means it's almost guaranteed that scraps will be less as time goes by. I mean, rich folks can always want more, no?
The issue isn't with "we have scraps" but the 1% focusing on the 1% and that if you don't have an economic voice, you will eventually lose all of your remaining scraps and your rights (e.g. Native Americans, Palestinians, etc).
Now you just have to add in privatized military and drone/AI based policing and it starts to look a lot like dystopia.
I doubt we will ever see productivity concentrated in the aristocrat class: people are too lazy, and after a couple of generations it falls down between either a society that encourages rent or a family that isn't rich anymore. However, if when you say "the economy becomes driven by the 1%" you mean "the economy reaches a point where it is funded entirely by the 1%," then I have an interesting thought experiment for you:
You may not know this, but I am the richest man in the world. All economic activity is technically mine, carried out by stewards of my capital. However, I have decided that the most humanitarian approach to this massive responsibility is to let things run their course - I am comfortable on a meager living, so I take no interest. It's not like someone is going to replace me: after all, everyone in the world simply manages my funds, and does their best to earn the right to manage more.
Now, my brother on the other hand - he's a notorious criminal. He owns nothing rightfully, but his famous heists have resulted in a 3% annual decrease in the value of every bank account in the world; and even worse, the multitude of shots fired in the ensuing high-speed chases have done the same to essentially every asset.
Congress has decided to close the loopholes my brother has been using to escape justice, but they're fine with me.
Why shouldn't the government lock up a criminal that does so much damage? And what does it have to do with you? Does it matter that he is your brother? Are we supposed to judge you by his actions? Are you saying we are lucky to have a benevolent dictator such as yourself?
I've essentially presented the argument that gets you from either historical materialism or utilitarianism to communism/socialism. Here's the rest, laid out more explicitly:
.1 If my brother and I were one person, it would go from illegal to legal but nobody's balance sheets would change.
.2A (use this one if you like historical materialism) Laws and ethical notions are constructed because of balance sheets. Why, then, don't we change the law so that the apparently arbitrary distinction goes away?
.2B (use this one if you like utilitarianism) There's no basis for law beyond utility, and it's obvious that both cases have the same result. Therefore, there's no basis for a legal distinction.
I've never figured how to get out of this argument, except by making private property a fundamental right. That sounds a lot like objectivism, though.
> If that's the case why would the 99% allow such an economy to be built?
Allow? I'm pretty sure they don't need to allow anything. Media is becoming more potent at manipulating public opinion and the politician with the most donations can afford the best media. Whether his/her actual policies are in the material interest of the 99% voter is irrelevant.
Just note how much of the most recent election hinged on social signifiers instead of economic policy.
As long as the rest of people are spending money, some part of the industry will still target them. In video games, for all the games that chase the whales, there are still many games that don't. As long as there is money to be made, someone will go chasing it. While I have concerns about chasing whales, this is not one of them.
Not too long ago there were casinos and gambling for whales, there were offline board/card games, there were video games.
Then Facebook with FarmVille (2011) came along, and introduced Free2Play aka Pay2Win to everyone. You had to spam friends (exponential scale) with requests to advance OR pay real money - this was for whales.
Since FarmVille (2011) we saw a whole sub-market of Free2Play (most are Pay2Win after a few hours) gambling games, that is based on gamification, gambling and other casino elements and relies on "addicted players" aka whales.
In 2017 this Free2Play crap swooped over to full prized boxed video games for PS4/XBox/Switch/PC. Bad greedy publisher like Warner Bros, Electronic Arts and Ubisoft risked bad PR and shy away decade long core gamers to earn more from 1% whales - Assassin's Creed Origins, Middle-earth: Shadow of War, Star Wars Battlefront 2, Need for Speed Payback - known for Free2Play/Pay2Win elements like microtransactions and loot boxes.
It saddens one, reading between the lines the PR news from Ubisoft yesterday, they are pushing back all three mayor releases a few months, because Assassin's Creed Origin was so successful - to add such Free2Play mechanics now also to Far Cry 5, The Crew 2 and other games?!
There are still several great publisher like Bethesda that release boxed games for 99% core gamers, with proper & great hours long single player gameplay, and NO greedy crap.
To be fair, this happened because games themselves couldn't raise their prices with the times. They've actually decreased in price from the SNES days; Final Fantasy 3 cost $80, for one. meanwhile the cost of everything has increased. Games can't work well at a base price of $100, so they try to pass the costs along piecemeal.
In reality games cost already $160 not $69!! Gold premium pre-order special edition version plus season pass or seperate DLCs means $160 or even more.
On top of $160 you really think it's fair that one should pay even more for microtransactions and lootboxes!? Only whales are happy with that. The big mass of gamers is getting angry and is looking for pitchforks.
There are publishers that release e.g. Witcher 3 with no DRM, and free DLCs for $60 and got very rich doing so. Or Grand Theft Auto V which is very successful already if you just count the singleplayer sales. It's all about the video game and its quality.
>Second Measure analyzes billions of credit card transactions to answer real-time questions about consumer behavior. Unless otherwise noted, the data below comes from our platform.
Last time Second Measure came up on HN (April 2016), someone replied that the underlying data came from Yodlee.[1] Is that still the case?
Also, if it's analyzing a subset of -- instead of the complete -- transaction logs from Visa/Mastercard/AMEX networks, is there any bias in the data because the samples are limited to users of the Yodlee platform?
> At giant retailers like Walmart, Target, and Amazon, the top 20 percent of spenders accounted for 65-70 percent of credit and debit card sales dollars in 2016. At all three, WI80=8-9x.
Some of these seems nothing more nor less than the unequal distribution of wealth in America.
What portion of total income, wealth, or spending to the top 20% of Americans in any of those categories have? About the same as the portion of Amazon sales from the top 20% of spenders, I wonder?
I'm not saying I'm not disturbed, but that part isn't about business models or plans, exactly.
On the other hand, the top 20% of Zynga spenders are probably more like the top spenders in a casino (and for pretty much the same addictive reasons), and not necessarily correlated to income.
It's an interesting observation that this pattern holds true in diverse companies/industries, but I'm not sure the reasons are related, or say much about business similarities.
> Likewise, at eyewear retailer Warby Parker (whose products have relatively low price variance), WI80 was only 3x.
Also, apparently no marketting has successfully convinced most glasses-wearers that they need more than at most 2 or 3 pairs of glasses at a time, regardless of if they can afford it! If the number of pairs of glasses you had was some kind of status symbol or something, I think there'd be more variance.
The online apps concentration of revenue gets even more extreme if you look at whales as a fraction of downloads rather than spending customers. Most popular games only have a small number of people who pay anything...ever. I'd be willing to bet money that most of Zynga's revenue comes from the top 1% of downloads.
Zynga have more or less admitted this in the past IIRC. No idea if this still exists, but they had at one point setup a ridiculous bank transfer payment program for the largest whales who were bulk buying in game purchases at the tens of thousands of dollars level - minimum $500 transaction to participate.
Reminds me of the old days of online poker. The regulars would sit around for hours just waiting for an unskilled opponent. They would almost never play each other.
Eventually the whale would leave and the game would instantly break. The ecosystem was so broken but sustained for a long period because so much money was being shovelled in.
At the most popular sites, at popular limits, during the peak years, there were plenty of poor players to go around. We had databases of player behaviors, and consulted them to find juicy games, but there was enough to go around that games didn't really break over losing a fish or two.
I do agree that the process you described occurred, basically whenever one of my above assumptions didn't hold - unpopular sites/high limits/post-boom.
I wouldn't consider "20 percent of customers were responsible for more than half the money raked in" as having "whales". At that point, you can usually still afford to lose one of your customers and survive. I've worked at companies where 1 out of their 15-20 clients is responsible for 25+% of revenue...THAT is having a whale.
If you do have a whale, then you've essentially just become a custom software/service firm for that "whale". From my experience working at companies that had a "whale", the business starts prioritizing the requests of that one "whale" over what's best for the product itself.
To blindly assume patterns such as "80/20" hold everywhere would be foolish - rather, it is better to empirically verify them first in each case (as done by the article). Further, I wonder what makes you think the writer is surprised in the least...
Enterprise sales value larger deal size, but fewer deals so this makes sense. Example is Dropbox vs Box, Github Enterprise vs Github, etc. And I agree with the 80/20 but it is contingent on the deal types that companies value.
One effect is derailing your product development. If you have one client bringing in millions of dollars a year, their feature requests, tweaks and bug fixes end up crowding out others. Features also end up getting shipped before they're ready, resulting in a shoddy product. Pressure to keep the client happy also results in promising unrealistic things, or letting the customer dictate the design. And they can hijack your support staff and developers to fix minor issues.
Another, less well known effect, is pressure on staff. This ranges from unrealistic workloads and deadlines causing stress at work, to outright harassment being ignored. If a client doesn't like someone who works for your company, your executives may decide that keeping the contract is worth more than the employee.
Whales can also get you through funding crunches and be the difference between staying afloat or collapsing.
They can also help you test your product in environments you could never afford to simulate on your own, weeding out strange bugs and one offs, and tweaking for performance. They can also be a great source of insight into how to improve the product for other users.
I worked at a really small development shop, I'd say about 25 employees. We also did optional hosting for sites we'd finished (mostly WordPress).
The hosting side of the business didn't even come close to paying for itself, except we ran one large company's e-learning platform which paid for the rest of the hosting operation.
This is exactly what NNT tries to explain in Blackswan with his argument against the bell curve (in favour of Power law) a bell curve or assumed normal distribution would put 99% of the consumer base with +-2 standard deviation which is not the case in reality
it's probably just a log normal distribution, meaning that the result is a product of normal factors, not a sum. Afaik this is one of the most used models in statistics, because the central limit theorem still applies, just with sums of logged random variables instead of just sums
most insightful and relevant: Stitch Fix topping out relative to other companies in the same industry because they don't really offer a "whale" option.
the takeaway for me: make a product level for the whale, even if it seems a waste of time, it could very well make or break my business.
> Blue Apron and Stitch Fix don’t match trends in their industries
Couple things which really jump out to me. I might be wrong but one of the article postulates is that whales tend to drive profitability. In which case what impact it might have on Blue Apron and Stitch Fix? Secondly, what are the chances of someone repeating and garnering some whales by actual marketing? That is - instead of trying to gauge customer behaviors why not gauge whale behavior and model the platform accordingly?
I've seen this at nonprofits I've worked for. 5% of donors account for 95% of revenues. Sometimes it's even more extreme. But I think that distribution is very, very typical. With the exception of immediate and broad causes (Obama campaign, Bernie campaign, Red Cross relief for whatever disaster), small donors are not what keeps a cause going. It's the people with serious money to give who form a relationship with the org that make the difference.
It took me way too long to figure out that the article isn't about literal whale watching. I was expecting something about a small number of customers spending large amounts of money to go on whale-watching cruises.
That was my impression from the headline, driven in part by a conversation earlier this week about many whale watching day cruises giving a free pass to come back if you don't actually see any whales.
The person I was talking with had gone on a cruise while traveling, got a pass, passed it to a coworker who was going to be in the same area, then it repeated at least two more times over the course of more than a year. One purchase, at least 4 trips.
My family has gone on three cruises now for the price of one. The company guarantees that we will see Orcas around the San Juan Islands in Washington State. We have seen seals and humpbacks but never Orcas. We go back every couple years, the last time we saw Orcas from the ferry to get to the tour boat but not on the cruise itself so we still have the tickets.
Normally I downvote the hell out of "I read it as 'aliens want to penetrate my anus", har har har!", but in this case I would side with the "kiss this guy" crowd because that is precisely what the title says, even though that's not what the article is about.
I, too, wondered and then thought, "meh, makes sense. I went on a whale watching tour once and don't have much desire to do it again. Ergo, someone is keeping those boats in the water, must be the 'whales' of whale watching tours." Hell, I'd go as far as to massage the data just so the pun would work.
When I go on a trip funded by my company, I make sure I spend the allowance in full. I travel business class and spend lavishly. Yes, lots of middle class might be in category of these whales occasionally.
