Although my day job is in an unrelated area, I consider myself a little bit of economics nerd - I read a little (or maybe way, way) more news than I should, double majored in econ, and am obsessed with optimization. Today I'm going to try something new that will hopefully become a series of blog entries - we'll introduce a basic economic concept, and then apply it to Splinterlands.
Our very first topic is opportunity cost. Opportunity cost is a simple idea, but can drastically change the way in which you make your resource allocation decisions and help you to maximize your profits.
When I took my first economics class opportunity cost is the single biggest concept that I took away from it - it impacted my day to day decision making, changed the way I thought about choices, and made me significantly better at board and video games. My hope is that I can share a little bit of that with some of my readers today!
(Here comes my very first attempt at a custom header from Canva, any feedback or advice would be very welcome - feel free to drop a comment below!)
What is Opportunity Cost?
You may have heard of the saying "There is no such thing as free lunch". This is referring directly to the idea of opportunity cost. Here's an example to illustrate the idea: let's say that someone offers you a sandwich for no charge. Hurray! You got that sandwich for free, right? Okay, okay...anyone who remembers taking school courses recently will tell you that the answer to these sorts of questions is NO, but why?
If you accept (and presumably eat) that sandwich for lunch then you gain the sandwich without paying anything. However, by doing so you also forgo eating something else for lunch. Maybe you could have had a food which you enjoyed more. Maybe you could have tried something new and interesting. Maybe you could have participated in a research study about lunch foods and gotten paid to do so. You get the idea - the opportunity cost is everything that you are giving up from alternatives that you could have done instead.
This is a huge idea, because it is important to realize that whenever you make a decision, the impact is not limited to the explicit cost that you pay for it. There are also invisible opportunity costs that represent other things that you could have been doing with the resources, time, money, or energy that you spent in the process of making that choice.
How does this apply to Splinterlands?
Splinterlands is a game where resource allocation is (nearly) everything. The game economy is based on limited resources which you need to utilize in order to increase your income. This makes it important to realize what you are paying in order to do everything - explicit costs as well as opportunity costs. Next, I'll be listing a few examples of things that you may consider while making Splinterlands decisions.
I would like to emphasize here that all of the following examples are actions that you very likely will want to do at some point and you should! Just be aware of the true cost of doing so - whenever you're doing something with your time or resources, take a second to think about what else you could be doing if you didn't take that particular action.
Opening a pack? You just gave up 300 daily airdrop points, as well as the option to resell the pack to someone else in the future. Playing ranked matches on the ladder? You could have been making an income from renting out your collection instead, or you could have used the DEC you spent on rentals for more cards or SPS airdrops. Spending time watching your favorite streamer? You could have spent that time learning how to play more optimally or writing up a blog post!
So What? (or, "Why should we care and what can we do about this?)
Depending on your personality, keeping track of those opportunity costs may quickly become exhausting. In other words, tracking opportunity cost also has an opportunity cost...go figure. My advice is to do it as much as you can enjoy it, but if you realize at some point that it is costing your sanity in order to do so, then don't worry about it - after all, if you aren't having fun then there really isn't much point. Just picking one of your options and not looking back is perfectly fine.
You can probably guess that running your account and making decisions in a way which will maximize your value in the long run will require optimizing your decisions by taking opportunity costs into account. By starting to practice doing that today you should set yourself on the path to earning better gains, winning more, or at least getting some practice in analyzing the choices you make. And who knows, you may even find out that you like it!
Hopefully this article either introduced you to the concept of opportunity cost or provided a nice refresher. Have any suggestions for subjects of future articles, or thought of any details that I may have left out of this one? Feel free to leave a comment below.
Thank you so much for reading all the way to the end. Interested in seeing some more of my writing in the future? Be sure to give me a follow! In the meantime, if you'd like to see some of my recent posts:
- Splinterlands Resolutions for the New Year - Laying out some of my goals for 2022.
- Nostalgia Ain't What it Used to Be: Using Spineback Turtle in Battle! - My entry into last week's battle challenge, a matchup featuring Spineback Turtle.
- My 2021 in Splinterlands: A Retrospective - A look back at how 2021 went for me in Splinterlands.
Thinking about giving Splinterlands a try but haven't signed up yet? Feel free to use my referral link: https://splinterlands.com?ref=bteim, and be sure to reach out to me if you have any questions!