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.