Goblin mindset: First and second order effects

Second order effects is a concept that has been incredibly trending with some thinkers lately, and it’s one that can be very useful when looking at goldmaking, particularly when something changes in the game. 

First order, the obvious change

The first order change is typically viewed as the obvious direct effect of something. For instance if the drop rate for an item is nerfed we expect the quantity available to fall and thus the price to rise. 

This is the first order effect of the change. 

Second order effects, the indirect changes

Second, or even higher, order effects would be the effects that happen as a result of the first order effect. Let’s say the item that had a drastically decreased drop rate was Tidespray Linen. As tidespray linen got more expensive Tidespray Linen farming may become more lucrative, or it may stay the same. 

With the increased price people would look to other sources for expulsom and enchanting materials. Demand for leather or Monelite Ore would go up if they became cheaper in terms of the bracer shuffle. The price for these items could then increase as well. 

Crafted goods that relied on cheap Tidespray Linen would probably increase in price as well such as enchants or Sinister Combatant gear.

Identifying second order effects

Obviously the further we get from the Linen the smaller the effect gets. Some of what I described here is probably third or even higher order effects. At this point you will also typically have a huge number of variables that impact the market and predicting effects accurately will be even harder. 

The point is to consider what the next step is. In goldmaking you can do this by considering questions like: 

Which items rely on the item being changed to be crafted?
What other items might players buy in stead?
What items will players not buy anymore?
What farms will players change to focus on?

All of these questions will of course also help you get better at identifying potential markets, while this isn’t an exhaustive list, it will give you an idea of what you are looking for

Always consider any changes to the game in how they will shape player behaviour, and don’t stop thinking once you hit the first obvious insight. Getting the second order effect right will generally give a MUCH larger advantage than getting the first order effect right. 

Take it one step further

Always try to take your thinking one step further.

And then what happens? is a useful tool. Obviously you will get different answers than me most of the time as we view the game differently, but that isn’t really the point. The point it to train your ability to think further about what players will be doing and how behaviour changes as the game does.

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