Key to Success #2: Opportunity Cost

Hey long time no see! I've taken a break from wow for the time being to focus on university but that doesn't mean I can't still provide some useful gold making tips while I'm away from the game (they'll just be a little bit more general).

So anyway on with the post:

Opportunity Cost?

The Skinny

Nothing is free. Every action you make in-game or out has an inherent cost attached whether it be time or money or whatever. Opportunity cost is basically what your resources could be doing instead of their current use. Using the pic on the right, the opportunity cost of going into door A is missing out on whatever's behind door B. In wow terms, a common misconception is that anything you farm personally is 'free' but this couldn't be further from the truth. If you farm 2 stacks of ore in 20 minutes sure you may have made 80g but that 80g has cost you 20 minutes that could be spent elsewhere. If you had instead used that 20 minutes to buy herbs, mill them and sell the inks for 200g profit then the opportunity cost of farming is the difference between the two: 200g - 80g = 120g.

It may seem like a fairly simplistic concept but it really is that simple. What it boils down to is ensuring that you spend your time on the most profitable activities possible. What those activities are depends on your tradeskills, market knowledge and server but with a little research and trial it is fairly easy to work out.

Where else it's important

Not only is opportunity cost important in terms of your precious time, it is also critical to consider when stockpiling as well. Whenever you buy a large amount of an item to put away for a future where it will be worth more you should consider other potential uses for the gold you spent. When you invest in the future that gold is tied up indefinitely until you sell the stockpile and cant be put to any more productive uses.

For example: if you buy 10,000g worth of ore today and sell it for 30,000g in three months you've made a 20k profit, not bad. However if you instead used that original 10k to buy items cheap on the weekends and then resell them for more midweek your 10k could be constantly growing and working for you as you can then reinvest larger and larger sums.

This is particularly important for those who don't have a massive bankroll as investing a high proportion of your total gold in stockpiling can be extremely counterproductive. As the old saying goes "it takes money to make money" and a 1,000g profit tomorrow that you can reinvest and continue to grow is worth so much more than a 20,000g profit in 3 months that is useless in the meantime.

My parting thoughts

The most important part of this theory is the fact that there is no universal solution; the most effective money making scheme for one player usually wont be the best for another. Working out what you are best at and cutting down on the less productive activities is the key to maximising your profit.