The Dangers of Limiting Downsides

Whenever you limit the downsides of something, you also limit the upside

From the ages of 7-12 I played this MMORPG called Runescape. Set in a fantasy medieval world you developed your character’s skills, completed quests and traded items with other players.

Part of the game was the vibrant in-game economy where you could be a coal miner, or a lobster fisherman in Karamja or a merchant in Varrock City.  It was an amazing world and my first introduction to the concept of an economy with independent actors.

The economy was based on players trading items and game currency. Trading was peer to peer, which meant that often you spent minutes in a town square constantly shouting out what you were buying/selling, at what price. It was an open outcry marketplace. 

One downside of peer to peer trading was the possibility of being scammed. Just like in real life, scams fell into different categories. One common scam involved 2 scammers where 1 scammer would advertise selling an extremely overpriced item whilst the 2nd scammer (often standing on the other side of the market) would advertise buying the same item at an even higher price. The player seeing the opportunity for a quick profit would want to buy the overpriced item and sell it to the 2nd scammer. After the 1st scammer sold the item, both scammers would log off, leaving the player having overpaid for a useless item.

In 2009, Runescape switched from peer to peer trading to the Grand Exchange where players had to trade against a central marketplace. This was done for a number of reasons but it also helped remove the main channel by which players could be scammed. This was a great win for player experience inside Runescape. Being scammed and losing your items or money was never fun, and by removing the major avenue by which players get scammed – this would improve the game play.

However on the other hand, by removing the possibility of being scammed, the developers of Runescape prevented many players from ever learning about the hallmarks of a scam:

  • when a deal seems too good to be true
  • that feeling of ‘I need this deal to go through at all costs’ (artificial time scarcity)
  • possibility of a shill or a 2 person scam

Runescape was also a way for these lessons to happen in a safe and relatively low cost environment.

Takeaway

Whenever we come upon a problem, it’s easy to spot a potential hazard, risk or danger that we would prefer not to have. It’s much harder to see the ways in which we are also limiting the upside, by eliminating that risk from occurring.

  • Safety legislation for construction – also slow down production and increase cost
  • Overly cautious FDA regulation which has slowed down new drug approvals and increased average cost of development to $1B per new drug approved)
  • Cleaner homes and hygiene practices could be leading to higher levels of allergies because children are less exposed to microbes at an early age which limits the proper development of their immune systems
  • The US military budgeting and acquisition process was built around the predictability and compliance has slowed time to market and increased costs
  • Zoning and development restrictions in urban centres have drastically increased the cost of housing (renting and buying). The most drastic example of this is San Francisco.