Further thoughts on the Massively Multiplayer Online Role Playing Game from Sony Online Entertainment

Vanguard has all of the previously mentioned features that make for good management training

Well, I have finally had the chance to explore Vanguard for a while. Vanguard is the new Massively Multiplayer Online Role Playing Game (MMORPG) from Sony Online Entertainment (SOE) that I had mentioned in a previous post. It is certainly not my intention to make this blog into a video game review and critique section, but since we have been discussing the use of MMORPGs as management training tools, I will diverge from the norm in this case and present a brief evaluation of Vanguard and how it stacks up against previous SOE games like Everquest (both 1 and 2) and World of Warcraft by Blizzard Entertainment.

Vanguard has all of the previously mentioned features that make for good management training. The guild structures are still in place. As was true of previous SOE games, the Player vs. Player (PvP) aspects of the game have been minimized although they are there for anyone who wants to make use of them. Special servers are set up for those gamers who want to test their mettle against real life opponents. But computer generated obstacles provide a more cooperative and less competitive environment which, for many business situations, is perhaps a more appropriate concentration.

Vanguard has a few issues associated with a newly released game…

Vanguard has a few issues associated with a newly released game, and although I was not intending to post an overall review of Vanguard, some of the difficulties should be noted. One particularly annoying problem is the occasional crash and/or suddenly poor performance. SOE does provide some easy methods for reporting bugs, and I have no doubt that they will be addressed as soon as possible. Another problem is one that strikes all MMORPGs that are at all popular and that is the inevitable real life companies and individuals that collect in game money and then sell it for real dollars. Although this is against the rules, it is very difficult to prevent and Vanguard is starting to see more of this activity.

The last minor issue and symptom of a relatively new game offering is that the servers are not very populated with players. This may or may not really be an issue from the standpoint of coordinated use of the game for management training. If one is using the existing public access environment and players to determine the quality of different players’ leadership abilities, then it is a problem. However, if the intent is to plant players in a training scenario or coordinate a training event then only intended players should populate the server anyway, and this becomes a non-issue.

Real time information and communication management is evident when the pressure is on…

As we said in previous discussions, there are two versions of leadership which can be examined in this type of gaming environment. Real time information and communication management is evident when the pressure is on and multiple channels of communication must be organized. This can be compared with a team which has already been given structure and is under fire, for instance, a sports team where the players are already signed up, the management is in place, and the timer is running. We know “Who is on first”, and it’s time to play. Let’s refer to this as “Management”.

The second type of leadership is the ability to organize the team in the first place. Leadership would be the formation of the guild in the game environment as opposed to Management, which is the use of the existing guild when the pressure is on to perform. Finding volunteers, determining the best use of their skills, and forming the structure of the team are different problems requiring a different set of skills. We can refer to this set of skills as “Leadership”. Getting people to follow the lead, to form the group, and to perform when required is the problem of Leadership.

…Vanguard has added another interesting little twist called “Diplomacy”

Vanguard has all the hooks to explore both Management, in raids and other group activities, and Leadership, in the formation of guilds and groups. But Vanguard has added another interesting little twist called “Diplomacy”.

It is a little unsettling to discuss Vanguard’s version of Diplomacy, because the actual techniques involved in the game’s version of Diplomacy have little if anything to do with the way things work in the real world, and I certainly don’t want someone reading this to think that I see political intrigue as similar to a “Tug of War” with a deck of picture cards as it is portrayed in Vanguard. We need to remember that it was not actually SOE’s intent to make a management training tool and in fact, this is clearly a game and nothing more at this level. But let’s look at it differently for a moment.

I am the founder of a non-profit organization…

I am the founder of a non-profit organization which has the goal of building a high school in my community. To accomplish this task, we needed to change the minds of the state legislators and have a moratorium on the creation of high school districts removed. After a couple of years, we were successful, and it is interesting to look at how it compares with SOE’s concept of Diplomacy. Although the give and take with the various politicians involved had no real similarity with the Vanguard version of Diplomacy, one thing was similar.

We needed to get a lot of people in the community to work together to make changes. This involved many seemingly trivial tasks like writing letters to congressmen and congresswomen, making phone calls, doing press releases, and soliciting community opinions. Many volunteers had to work together, some of whom would only marginally benefit from the results. In this way, Vanguard Diplomacy is similar to real life, but perhaps less like a business situation and more like the organization of a non-profit. To be effective at making city changes in the game, many people must coordinate their efforts. The more people cooperate, the easier it is to make changes happen, a lot like real life.

…Vanguard does offer the ability to change certain city characteristics if enough players cooperate

The actual task of playing the cards in Vanguard to influence non-player characters (NPCs) is as much an indication of a good real life diplomat as the ability to stuff a lot of real life envelopes might be. Neither a good picture card player in Vanguard nor a good envelope stuffer in real life is necessarily a good diplomat. But Vanguard does offer the ability to change certain city characteristics if enough players cooperate. Convincing people to cooperate in their letter writing efforts is just as relevant for making changes in real world cities as organizing players to play trivial card games is in changing Vanguard cities. It is the ability to get the crowd to come together that is common in both cases – Leadership.

The addition of Diplomacy is actually quite relevant to Leadership training. In some ways it offers a good twist to the guild structure in that the cooperation required for Diplomacy is short lived and requires less formal organization and communication than guild structures. It does not have any of the aspects useful for Management training (as we have defined it here as opposed to Leadership training). There really aren’t the time sensitive communication requirements of a big guild event, but getting cooperation from a group and working with people is and always will be the center of business coordination, leadership, and management.

Vanguard

If the intent is to use the game for management and leadership training and evaluation…

Player vs. player (PVP) video game content is a primary factor in the appeal of Massively Multiplayer Online Role Playing Games (MMORPG). Although computer generated sequences have a lot to offer, there seems to be nothing quite like blowing up someone who actually gets upset about it. A computer hardly ever curses at you for your excellent playing ability and, even if it does, it would be difficult to take it seriously--depending on whether your use of the video game is casual or as an important training tool. If the intent is to use the game for management and leadership training and evaluation, then the player vs. player content is probably not the strongest feature of the game.

One thing that has continuously come up in discussions regarding video gaming and its use in training or evaluating management is the balance between PVP content in the video game and player or group vs. computer generated situations. At first glance, the competitive nature of PVP would seem to be a natural reflection of real life management situations.

Historical situations like President Nixon and the Watergate scandal not withstanding…

Historical situations like President Nixon and the Watergate scandal not withstanding, of course, rarely are companies encouraged to break into the headquarters of a competitor in an effort to slash the competitor to ribbons with a sword, cast evil spells on them, or otherwise cause bodily harm. The analogy taken to the video game is not perfect in any case, but many people consider competition to be a fundamental part of business and leadership.

There are certainly plenty of readily available examples of business competition in everything from the Coke and Pepsi Wars to Donald Trump and his pitting of opposing factions in “The Apprentice”. Competition is a common occurrence stemming from more than one company thinking that they have a better solution to offer their customers. In some ways, competition validates a market. If it was such a good idea, wouldn’t other companies want to pursue it as well?

Although none of the MMORPG game creators are currently touting their games as incredible management and leadership training tools (though they should), it could hardly be a valid representation of true business situations if there were no competition among the players. Besting an opponent, however, is not the goal of business, only a side effect. As any first level marketing class will teach that the goal of business is to find a need a potential customer has and fill that need. Pricing is simply quantifying the severity of the need, and the customers’ ability and willingness to pay.

Truly successful companies don’t see any competition in the beginning stages of their development of a target market

One of the best strategy books that I have read is called “Blue Ocean Strategies” by W. Chan Kim. What made this book unusual was the perspective that competition in some ways represents a failure to define a unique market. Truly successful companies don’t see any competition in the beginning stages of their development of a target market.

In “Blue Ocean Strategies”, there are many examples of creating a market that didn’t exist. One example is the marketing strategy for [Yellowtail] wines. The Australian company did research to determine the primary reason that non-wine drinkers didn’t drink wine. Seeing that it wasn’t really a taste issue but rather an issue with the culture surrounding the wine industry, [Yellowtail] developed a solution to the problem, met a customer need, and created an entire market that didn’t exist. Rather than competing and taking market share, they created new markets (Blue Oceans).

One of my favorite examples of Blue Ocean Strategies is the use of a disk drive. Normally one associates a disk drive with a computer, hardly convenient to strap around your neck and go jogging. Although the technology has been around for many years now, an ingenious idea was to remove the disk drive from the computer, attach a battery, small screen, minimal software, and an amplifier and create the market that now is known as, iPod, IVideo, iPhone, and “iJustaboutanything”. This market didn’t even exist before this idea surfaced.

… the majority of jobs which will exist in 2030 don’t even exist today…

A common statistic quoted today is that the majority of jobs which will exist in 2030 don’t even exist today, and most of the jobs being performed today weren’t even there in 1950. True business success can be seen more through cooperation in creating new ideas than in competition taking market share.

So, let’s get back to the point. Video game content for the purpose of management and leadership training needs to be balanced between cooperation and competition. Although both have their places, competition should be a result, whereas cooperation should be a goal. World of Warcraft by Blizzard Entertainment has a great deal of focus on the competition, PVP side of gaming. They certainly have computer generated situations which encourage cooperation, but the primary appeal of the game still seems to be PVP.

I have just started exploring Vanguard…

There are other options available for training using MMORPG, such as the line Sony Online Entertainment (SOE) has created over the years. SOE has developed the Everquest and Everquest 2 series as well as a new venture into MMORPG called Vanguard. Both Everquest and Everquest2 are balanced more towards cooperation than competition since there has been very little support for PVP in the past.

I have just started exploring Vanguard and I am hoping to find a good balance between the two gaming styles. Although there is a lot to be said for breaking into the competitors stronghold and casting a high damage “nuke” spell on the whole gang, there is also a rewarding feeling from getting together with about 60 of your closest friends to plan, scheme, and do in that computer generated “mob”.

As I get more information on Vanguard, I will try to evaluate its potential as a management training tool. Of course, I expect to have a good bit of fun in the process of the “evaluation”. It’s a tough job. I have to spend hours on the computer talking with friends, laughing, planning, ultimately carrying out our well honed strategies, celebrating our victory, or commiserating in our defeat. Sometimes, the sessions go late into the night, but it is so important, I could hardly leave the work to someone else.

In search of management

Current management certainly feels that there is a significant issue in recruiting and training future management

As I spend more time looking at executive management training and evaluation solutions, I am continuously surprised by how little has been done in the realm of video and computer gaming to aid in this momentous problem. I spent a little time searching the internet and there is certainly no denying the size of the problem as seen by current managers. There is a plethora of available consultants who will help a company train its managers, evaluate managers and potential employees’ personalities, and consult with a company’s management on how to improve leadership qualities. Current management certainly feels that there is a significant issue in recruiting and training future management. The amount of money spent on training employees to become better leaders is staggering.

USA Today drew attention to the use of video games to train military personel. The connection here is rather obvious when it comes to controlling war machines. Video games are used to evaluate and train pilots, tank drivers, and even infantry. Video games can be found to teach people typing, foreign languages, and almost anything else that you can dream of learning. When you look for games on management, however, the mix is rather interesting. At first glance, there is the genre of management games which teach (or simulate) managing real estate, a theme park, or even a city. Most of these are not taken seriously, though there is a lot of valid research underlying the simulation engines in these games.

...leadership is one of the most sought, and richly rewarded, qualities among upper management professionals

Of the management games available, the more serious genre typically involves personal management or time management, but I have been unable to find a selection of games specifically advertised as training tools for leadership type management even though leadership is one of the most sought, and richly rewarded, qualities among upper management professionals. One reason for this is the idea that to train leadership, there must be someone available to follow. How can someone learn to lead if no one is following? Getting a bunch of computer sims or bots to do as you ask is more than a little contrived. It would seem the spectrum of human reactions to leaders is far to broad to effectively capture it with current simulation technology.

One place to find potential followers is in games which require group participation to be effective. As online games have matured, these types of games are more readily available, though none have been tapped as specifically intended to train leadership skills in potential managers. More’s the pity since it seems to be such a needed training tool.

...one quality that all leaders have in common is that people feel compelled to follow them

Many books have been written on leaders and the qualities that they may share. So far, it is almost impossible to find qualities that good leaders have in common since the qualities of the followers are as varied as the leaders. Although this observation may seem trite, one quality that all leaders have in common is that people feel compelled to follow them. It is possible to see that trait’s expression naturally occurring and generate an environment which will promote easy observation of that skill’s development using current online video gaming technology.

Games such as World of Warcraft, by Blizzard Entertainment, require the participation of the group. Certain people naturally gravitate to leadership positions to facility organization of these groups given their common goal of defeating some game obstacle. All of those people who have become leaders in the game share the same quality for which we are searching, the ability to inspire people to follow their direction. If we can facilitate the combination of that leadership skill and the desire to take that ability outside of the realm of World Of Warcraft, we could use the gaming environment to both entertain and promote leadership.

Both of us noted the parallel with which the games we had been playing mocked the reality of our management positions

My interest in the use of online video games for leadership training began with a conversation with a colleague a little more than a year ago. Both of us noted the parallel with which the games we had been playing mocked the reality of our management positions. Many of the same personality problems were common issues among the personnel we were charged with leading and the gamers with which we interacted in the evenings. The parallel was so striking, in fact, that my colleague had decided to write an application essay for Wharton Business School using the theme as his answer to an example of his leadership skills. I met him attending classes.

One of the best arguments that I have seen for playing management games comes from the web site of BREFI Group, a management consulting firm in the UK, "Classroom learning is just one of many methods to encourage learning and change. It is less suitable for people who prefer a more practical approach, and can rapidly lose impact on return to the work environment. Properly designed management games serve to break the link with the workplace and entrenched thinking habits long enough for new behaviorurs and thinking styles to be tried. Once a new behaviour has been experienced, the manager is on the way to a change in behaviour. Use of management games can encourage new, even novel, alternatives, coping mechanisms and models of thinking." There are existing games right now, like World of Warcraft, simply not identified as management training tools which allow leadership behavior to be experienced and retain that impact.

Housing lenders

Several months ago, I expressed my dissent against a particular Wall Street Journal article…

There have been a slew of articles in the Wall Street Journal and other news sources recently discussing the interplay between the residential housing market, the sub-prime lender difficulties, and the economy as a whole (“Dow Stumbles After CEO Predicts Bad Year Ahead” By Tom Petruno, Times Staff Writer, and many articles in the Wall Street Journal for Wednesday, March 14, especially in the Money and Investing section). Several months ago, I expressed my dissent against a particular Wall Street Journal article (see “Housing Response” in this blog and the Wall Street Journal Article on December 14, 2006 entitled “Housing, Auto Slumps May Defy Usual Role as Recession Harbingers) that gave the opinion that the difficulties in the housing market and the automobile manufacturing market were not harbingers of difficult times ahead. We are beginning to see that my insight may have been justified.

There are several factors that lead us to this point; and by looking at the causes, we can begin to anticipate when things might change. Of course, there are any number of other factors which may come into play, but most of the things that brought us to this point could have been (and were, in this blog) predicted a couple of months ago. The sequence of events basically flows thus; we have a long period of low interest rates resulting in lenders who have saturated the mortgage market and are looking for better returns. During that period, we have builders who are taking advantage of the low rates to invest in large projects and buyers who are also taking advantage of those low rates to buy the already available properties, driving the prices up, and making the builders’ prospects look even more attractive. As the prices are going up, speculators also enter the picture to help absorb some of the inventory.

Speculators are no longer buying, but builders are continuing to build…

In comes the interest rate increases to head off inflation. It doesn’t take very long before floating loan rates begin to increase the holding costs for the speculators who start to divest themselves of unoccupied properties. At about that time (fall of last year), housing projects started during the boom times are coming on line, adding to the inventory. Speculators are no longer buying, but builders are continuing to build, and the Wall Street Journal article mentioned above quotes other economic factors to point out that housing may not indicate troubles in the economy. That seemed a bit premature to me.

As the interest rates stayed high, and housing inventory was high, housing starts began to slow and marginal borrowers found that they could not easily sell houses to get out from under the untenable positions created by the loan payments. Many of these recent purchasers bought during the real estate boom and a good portion were likely employed by the construction sector, if not directly, then through suppliers to that market. As I pointed out in December, “When housing starts slow, eventually construction laborers lose their jobs.” As the construction sector retracts, suppliers to that sector also reduce their labor requirements.

Certainly the predictions discussed in this blog in December should lead any competent investor to avoid…

Well, hindsight is great, and in this case it is as I expected, though perhaps more focused specifically in the lending sector than anticipated. Certainly the predictions discussed in this blog in December should lead any competent investor to avoid the mortgage market. But where do we go from here? There are certainly some opportunities to be had in the mortgage sector now. The current reaction is a bit over the top, but it may take a week or so for the emotions to die down. It will be a while before the rest of the housing market recovers. I agree with Donald Tomnitz, CEO of builder D.R. Horton Inc., that “2007 is going to suck, all 12 months of the calendar year," for the construction industry as a whole, and it certainly wouldn’t hurt to wait that long if you are a conservative investor in real estate. The stock market woes will keep the speculators depressed for a while, but when the market goes down, investors look to other venues for havens and real estate is one appropriate choice.

Investors in real estate will help to prevent the housing prices from plummeting, but I would not expect those prices to increase for a while. There is still a good bit of unsold inventory. Add to that insecure speculators and average homeowners who are timid about upgrading to the next big house and we will probably see a couple of flat months for median housing prices, though we may see a slight increase over last year in the number of sales as desperate sellers offer better deals to those who got out at the right time. Foreclosures will add to the inventory for sale, keeping the housing starts numbers low and the construction industry somewhat depressed. We should see housing prices start to climb later in the year, but the construction industry as a whole will suffer a bit through the rest of 2007, as Mr. Tomnitz has said.

Well, it is comforting to know that the auto manufacturers and the housing market are still the harbingers that they have always been. All is still right with the world.

It was no surprise that it happened

Not to steal the thunder from Mr. Greenspan…

The markets’ slide that occurred on Tuesday has been a while in coming. It was no surprise that it happened, but the efficient market hypothesis makes it impossible to nail down the exact time. The Wall Street Journal reported the slide on the front page Wednesday with an article entitled “Markets’ Slide Spotlights Risks”. In this article, several points were made only a month after similar concerns were brought up in this very blog.

I have mentioned the pressure on the Chinese economy in several previous posts, stating that the Chinese government would sooner or later be forced to take action to slow the inflation pressures that were building due to the restrictive control the Chinese government exercises over the exchange value of its money (Chinese Currency and Inflation). Not to steal the thunder from Mr. Greenspan, but I have expressed concern over a looming recession in China in my December post, stating that I thought it unlikely that the current expansion could continue. According to this recent article, “…investors wanted to get out of the soaring market before the Chinese government made any moves to cool the markets…”

We should expect some increased level of risk

More to the point is the parallel that we have been discussing between the history of the U.S. and that of China with respect to the migration of a large portion of the population from agricultural based economy to manufacturing based economy. This period of time in the U.S. represented some of the most volatile times in the U.S. economy. Granted there are many reasons for this volatility, not all of which are present in China, but such a close parallel to an historic precedent shouldn’t be looked upon too lightly. We should expect some increased level of risk.

Even more to the point are the domestic components mentioned in the article. I spoke in the post “Response to Housing” that there was no reason to believe that the slump in housing and auto manufacturing, usually leading indicators for the economy as a whole, would not again be leading indicators. It would seem that the opinions expressed by the Fed are just now catching up. Orders for factory goods fell sharply in January, “…rais[ing] questions about the strength of capital spending which the Fed…has been counting on to offset the drag of a weak housing market.”

I am not very surprised in the reduction in consumer spending

Of course, the defaults in the sub-prime lending market are just now hitting the news. Let’s just revisit a quote from a previous post, “…as these laborers loose their income a few months later, they will begin to spend less.” I am not very surprised in the reduction in consumer spending. I mentioned before that the largest relevant moderator to the slowing economy would be change in the strength of the dollar also mentioned in the article.

So, hindsight is great, but what should we expect to happen now. I still believe that the strong housing market numbers for January do not show that the economy is out of the woods, or even that the housing market is out of the woods. As the default rate on the sub-prime mortgages continues to climb, and there are fewer lenders willing to bail out the affected (or should I say, afflicted) homeowners, these homes will be coming back on the market. We may see the number of home sales increase, but I don’t believe that we will see an increase in the median house prices for some time to come. I am anticipating a slow housing market until late spring. Beyond that, the outside forces begin to swamp the housing trends and it is difficult to predict, but I don’t see a sharp rise in home prices in the foreseeable future.

… I don’t believe that we have seen the last dip…

As for the stock markets, they usually lead the economy as a whole. China still has some issues to work through and the recent events have certainly indicated that the markets are more closely correlated than perhaps we would like. The recent drop in the Chinese stock market may make the Chinese government’s job a little easier. We can all hope that the landing is soft rather than hard, but I don’t believe that we have seen the last dip in the Chinese market or its overall economy. If no one makes rash decisions and panics, we should see a little stability on the way down, though.

In Massachusetts

… I don’t believe this bill is in everyone’s best interest

On Thursday, February 22, the Wall Street Journal published an article in the Marketplace section entitled “Bill Would Punish Retailers for Leaks of Personal Data” in which Joseph Pereira discussed the pros and cons of a bill under consideration in Massachusetts. The bill effectively offloads the responsibility for financial data security from the credit card companies to the retailers. I certainly understand the need for retailers to do their best to secure customer information, but I don’t believe this bill is in everyone’s best interest.

To be sure, the rate of identity theft is increasing at an alarmingly, and everything that we can reasonably do to curb this problem is something that we should consider, but retailers as a whole are not armed with the resources necessary to be even marginally effective in combating the issue. Certainly, large retail operations, such as Walmart and other behemoth retailers, have such a huge amount of information available that they make attractive targets. Consequently, if they spend even a little on a per customer basis, many effective techniques can be brought to bear to secure their data.

A small firm with a handful of employees can hardly afford effective security consultants…

On the other hand, many small retailers don’t have much in-house data security expertise. In the case of a small internet firm, any real attempts which would be effective at removing the security risk would be prohibitive on a per customer basis. A small firm with a handful of employees can hardly afford effective security consultants. As the Wall Street Journal article mentions, if the retailers take this responsibility and cost, it will simply be an addition to the cost already extracted from the patrons by the credit card companies, piling security costs on top of security costs.

The other effect to the economy was not mentioned in the article. This liability can be so great to many of the smaller retailers that it makes the acceptance of credit card and debit card payments no longer attractive. No doubt, this would be a boon to the internet payment companies, such as PayPal, who offer the only real alternative to internet payment methods. Smaller brick and mortar merchants would have to make other adjustments. The reduction in convenience and money velocity, although too small to notice at the national economic level, may still have a negative influence on smaller retailers.

Scrap the bill…

In the end, the potential in reduced usage of credit cards may be negative enough to warrant a close inspection of the situation by the banking industry. Already, cell phone payment methods and internet banking are threatening to take some of the credit card business away. Banks and credit card companies at least have economies of scale going for them in the battle. Perhaps ratcheting up those fees a little more and using the funds to consult with retailers on how best to secure their data would actually be cheaper for all concerned. Scrap the bill. I don’t think it will help and can only hurt the smaller retailers who don’t have in house IT departments.

WoW!

It is not a tremendous stretch of imagination to see that…

My previous entry on this blog brought forth a lot of interest, most of it focusing on the real-world practicality of using a game environment such as World of Warcraft (WoW) for the assessment or training of corporate leadership. There are only a few people with experience in both building guilds to achieve WoW objectives and recruiting teams to achieve business objectives, but those few will easily recognize the commonalities of the efforts. It is not a tremendous stretch of imagination to see that the relatively risk free environment of WoW can be used to prepare for similar business situations with real lives and money at risk.

Can leadership skills be developed in a WoW environment? Certainly examples can be found of good leadership and management skills in the players’ actions. Many times, guild leaders will turn over the reins of the guild during a raid to others in order to train them so that the guild can function more efficiently even if the leader can’t be present. The experience of trying to coordinate dozens of people and multiple lines of communication in a time pressure situation without making enemies of allies can be truly enlightening. Just as in an academic environment, there is no better arena in which to make mistakes, where there are no financial assets on the line.

Weaknesses in communication skills can become more evident when the pressure is intense…

Can leadership skills be assessed in a game environment? I believe that they can in several ways. Weaknesses in communication skills can become more evident when the pressure is intense. The ability to “think on your feet” and improvise has long been known to be a valuable skill for managers and sales staff alike. Problems requiring quick thinking are different than those requiring coordination, planning, and team building, but both are abundant in this game environment and translate directly into many business situations.

As is true with virtually any simulation or academic safe haven, one can spend all one’s time in the classroom and never take those skills into the real world. But suppose that a Massively Multiplayer Online Role Playing Game is approached as just that, a classroom for practicing communication and organization skills. It could be a valuable, effective, and fun way to learn just where those skills reach their limits.

The whole experience is not for the faint of heart…

WoW requires the cooperation of a small army of real life players to combat other guilds and computer generated monsters alike. Some of the competitions and tasks (called “quests”) can require days of in depth planning and coordination to prepare, no less intense than many high level sales efforts in traditional corporations.

Execution of these plans is often a demanding communication task including several levels of command hierarchy needed to implement both attack strategies and defensive positions involving dozens of players. Lines of communication can multifaceted involving auditory channels, with the latest web conferencing platforms, or text channels, with multiple threads and text windows all happening simultaneously. The whole experience is not for the faint of heart, but neither is the coordination of the legal department, sales department, contract negotiation team, and production lines in a fast paced corporate environment.

“Communication skills” and “Leadership skills”

Two broad categories of skills seem to form natural groupings in WoW that could be useful for assessing skills or developing them. Let’s call these categories “Communication skills” and “Leadership skills”. Communication skills are much faster to evaluate and easier to develop in WoW than leadership skills, just as they are in real world situations. Invariably, communication skills are a necessary prerequisite to leadership skills, though the reasons are not so obvious. There are far more people with communication skills, helpful in lower and middle management positions, than there are people with leadership skills seen in middle and upper management.

Leadership skills encompass both the knowledge of what character traits would be most useful to put together and the ability to recruit players and characters with those traits. In a business environment, this skill is the ability to build teams knowing both what skill and experience is required in each team member and what personality traits will build a compatible corporate culture. Leadership skills include not only the ability to identify people with the needed qualities, but to present them with a vision compelling and convincing enough that they desire to throw their lot in with the rest of the group and follow the direction of the leader. Leadership skills are more difficult and time consuming to assess, however, the act of assessing these skills can often develop them as well.

Even without standardizing modifications…

There are a couple of obstacles to using the game to evaluate management skills, one of which can be overcome easily by Blizzard making adjustments to the game on a specific server to allow the creation of a set of standardized characters. This would be helpful to minimize the effort required to make a situation repeatable for comparison between one approach and another. Even without standardizing modifications, using the game as it exists, it is usually possible to observe the different skill levels in potential management candidates, but standardization would allow a training regimen to be developed around a predictable game situation. The other obstacle is the acquisition of enough volunteers to give the practicing leaders someone to lead. This, too, is a solvable problem.

Management and Video Games

“World of Warcraft”

Good management is notoriously hard to find. Leadership skills seem to be either home-grown or a lucky random draw in the prospective employee interview lotto. Homegrown management skills suffer from a single point of view, that being whatever the prospect has already picked up in his or her present organization, right or wrong. And the interview lotto can produce managers that create disastrous results requiring an incredibly skilled manager to undo, precisely the thing being sought in the first place.

After a day of searching for that ever elusive skill, most recruiters don’t think to go home to a nice video game to relax, but maybe they should. If relaxing is not in the cards, at least it is a good place to find that next manager. Video games may not be the conventional hot bed of management recruiting unless a techno-geek is top of the search list and not all video games are appropriate to the search, but a certain class of games has a structure to it that not only could identify current leaders, but help train hopeful managers.

Although there are other games that fit the bill, two examples are “World of Warcraft” by Blizzard Entertainment, Inc and “EverQuest” (1 or 2) by Sony Online Entertainment. Both of these games require an online connection and to excel at either game requires interaction with dozens, if not hundreds, of other players. Reputations are made quickly and tend to be persistent, at the least following the character if not the player.

If this sounds vaguely like a group of employees…

These games have lots of things in common typical of many other video games, but the structure we are interested in is the “Guild”. For those readers who don’t have access to a techno friend (almost any adolescent male might do in a pinch), a guild is a collection of other online players who have agreed to cooperate for whatever reason to achieve a common goal. If this sounds vaguely like a group of employees who have agreed to cooperate (at the request of the boss) to achieve a common goal, then the point has not been lost.

This discussion was not intended to go into depth on the guild itself, but there are a few qualities that are interesting to note. Although guilds are often formed by real life friends, many guild members have never met the other members of their guilds. Very often, the guild leader has never seen a sizeable portion of those players who take his leadership. Guild leaders are not hired by the game manufacturer, but are players who have somehow inspired the other players (guild members) to grant them some level of authority and organize the team, exactly the qualities that might be desirable in a good manager.

One prospective employee that I wanted very badly was extremely upset…

When I was given charge of the hiring, firing, and management of a department and later a profit and loss (P&L) center, I made it a policy never to hire a manager at all. This is not to say that I had no management in the department, just that no one was ever hired with a management or leader title. One prospective employee that I wanted very badly was extremely upset that he was not being hired to be a project manager when he knew that we desperately needed one. He had been a very good one in his previous job. It said so on his resume. I offered him the money he asked for and every other desire he expressed, but if he was project leader potential, people would follow him regardless of the title he was carrying. The title would be a confirmation of the power he had and not the bestowment of that power. Not only did he rise to the occasion (he titled a Project Leader in six months), but there was no backlash at all from the other employees who were passed up for the job. Most of them were happy to work for the new recruit.

How to identify those vague qualities that get respect…

It’s never clear exactly what makes people follow the leadership of one person or another. There are volumes written on this very subject. How to identify those vague qualities that get respect and how to foster them is an important recruiting and management skill. Getting your entire staff to spend the week (or month) and all their spare time playing video games is probably not practical, but putting them in a situation without the conventional business structure, like a guild, to see who rallies support and bubbles up to the leadership roles might be instructional.

Perhaps the demonstration of those leadership skills by the online geeky gamers is not something to be lightly overlooked. Many of those guild leaders have figured out how to get the respect, adoration, and loyalty of, in some cases, hundreds of other players, who have voluntarily taken subservient roles to accomplish the will of the group. If employees follow their managers because it feels natural, as volunteers do, rather than because it has been dictated, the resulting efficiency can be truly amazing.

In response to the Wall Street Journal

...there may be reasons that the housing market has not yet hit bottom

On Monday, January 08, 2007 the Wall Street Journal published two related articles, both of which point out just how important timing can be to real estate investment. The first article, “Speculators Helped Fuel Florida’s Housing Boom” could be accused of stating the obvious, but buried in the article is the comparison of two investors. The first investor, Ms. Dresner, bought high and is now forced to sell low, but the fate of the second investor, Mr. Krecicki, has yet to be determined, but my money is on him. As Mr. Krecicki says, “Timing is everything.” And he believes that on many occasions, the time is now.

The second article, “Will Housing Finally Bloom In Spring?” gives evidence that there may be reasons that the housing market has not yet hit bottom, primarily that there are a great number of vacant houses on the market. The percentage of vacant houses is disturbing because sellers of vacant houses don’t need to find new accommodations and the ripple effect in the market stops with that sale. The relationship between these two articles is interesting and not presented in either article. A speculator would be selling a vacant house.

Given the choice of starting a new building, or going out of business and laying off employees...

Although the Wall Street Journal points out the fact that there were diminishing construction jobs in December, they were offset by an increase in service-sector jobs. This is the argument that the economy is not necessarily slowing, and then the comment comes that, “With so many empty home out there, one wonders why builders would bother breaking ground on any new ones.” Builders are builders; what else would a builder do? Given the choice of starting a new building, or going out of business and laying off employees or giving up sub-contractor contacts, starting a new building is the obvious choice assuming that the capital is available.

But these builders may not be as naïve as one would think. Mr. Krecicki is buying houses thinking that the market will eventually rebound. Builders starting new homes are not expecting to sell them in the next 6 months. A building takes a while to finish and timing is everything. The builders who are most hurt are those who have inventory coming on the market in the very near future while inventories and vacancy rates are still high.

I can’t help being reminded of the bank-run scene in “It’s a Wonderful Life”

With all the people selling and many investors over-extended, there are opportunities to be had if one is patient in flipping or turning the properties. If there is validity to the argument, and I am not convinced (see “Response to Housing”), that the economy won’t slow due to the slow down in construction, then even if we haven’t hit the bottom of the real estate market, prices will not drop much further. Certainly, the evidence used to argue against a slowing economy will help to mitigate falling prices, in any event. Perhaps it is the season, but I can’t help being reminded of the bank-run scene in “It’s a Wonderful Life”. George Bailey makes the insightful observation that, “Mr. Potter isn’t selling. Mr. Potter is buying!” It seems that Mr. Krecicki and I agree with Mr. Potter

China and Energy

China’s government is having a hard time regulating an economy…

The Wall Street Journal had two articles on December 27 about China and sections of its economy. One, entitled “China Urges Auto Makers to Limit Their Expansion”, addresses the tremendous rate at which China is manufacturing cars and, more importantly, the idea that new production capacity coming online might outstrip even the incredible demand. The second article, entitled “Illegal Power Plants, Coal Mines in China Pose Challenge for Beijing” discusses the hunger for energy that the Chinese economy is experiencing and how that demand creates incentives for local governments to rebel against Beijing’s direction.

The two articles imply a few things in common. China’s government is having a hard time regulating an economy that has averaged GDP growth of more than 10% for over two decades. As the population becomes wealthier, demand for goods increases. This is an obvious comment, but it’s only the first order effect. Once that demand is fulfilled, many of those goods require ongoing consumption of energy. New cars require petroleum products, air conditioners required electricity, not to mention that the production process itself requires energy. That might still be obvious, but that could be considered the second order effects.

The real issue is that the third order effects are very significant as well. As a country’s population becomes wealthier, and the income levels are sustained for a period of time, the residents may become more confident that it will continue. Savings levels decrease, increasing consumption, but allowing less money for industrial investment. The expectation from this is further inflationary pressure. If this pressure eventually releases by slowing the economy and the current investment levels cause capacity to indeed outstrip demand, a recession could easily result. (See Housing Starts).

…global energy production cannot possibly keep up

The two articles differ in a couple of their implications as well. Specifically, the article on energy brings a sobering thought to global energy production. As China’s people increase their need for ongoing energy consumption, global energy production can not possibly keep up. China could not consume at the rate Americans do because production levels could not be increased to those levels with any foreseeable technology. Sooner or later, that demand must have an impact on global energy prices. Western countries have no inalienable rights to energy. Eventually, the markets will determine who wants the energy more. Are the Chinese going to be willing to pay more than Westerners for their heat and their cars? But it doesn’t stop there. Who will be willing to pay for the energy of production and industry? This should be yet another inflationary pressure, but this one will not be localized to China.

It is possible that the Chinese government sees all of these things and is trying to reduce the rate of growth of auto manufacturing not because it is outstripping demand, but because of the implications if production capacity growth is not slowed. If China can reduce the growth, the price of cars will increase for Chinese, making sales growth slow. This would have the effect of slowing the growth in energy demands, pollution, and a major problem for the Chinese and many others, traffic.