Claire's Random Thoughts

This post was inspired by Tony H’s “Everything I Know About Business I Learned From Poker” article.

When I first started using the internet regularly, my favorite site was neopets. According to the records I just looked up, I first started playing on September 24, 2000, when I was not even 12 years old. Little did I know, “business” in the Neopian world was actually very similar to online business, and my “wasted” hours on neopets may have actually inspired me to start my online business I have been conducting since I turned 18 and was legally allowed to sell on the internet. My online business is quite simple, I simply sell things (profitably of course) on ebay, amazon, half.com, or in some cases, craigslist

By the way, my username on neopets was the least creative possible: claire_chiang

When I first signed up for neopets, I just explored the site and their neopian world. After a certain point, I became so obsessed that I often dreamt about it as if it were real. I think my interest in becoming rich in neopoints, the currency in neopets, sparked my continual interest in the game. The main reason I wanted to play was because getting rich in neopoints, even though that meant nothing in real life, gave me the upmost satisfaction a kid could feel.

What I learned:

1. Buy things on sale, sell them in your shop for more
Simple, isn’t it? I constantly looked for items in the shops that the neopets site put items in, and I bought merchandise cheaply and sold it in my small personal shop for more.
Now, I look for big discounts online that I find on forums specifically designated for users to post good deals, and I buy stuff, receive it, and sell it for more on ebay/amazon/half.com

2. Discount cards (or coupons) are your friends
Neopets used to have a system with discount cards, but I think it was discontinued a few years ago. They would simply give the user a certain flat percentage off all merchandise bought at in site-generated shops. The less I pay for merchandise, the more of a profit I make selling it, right?
Now I use online coupon codes heavily to make good deals even slicker.

3. Sometimes it’s appropriate and in your best interest to haggle
In the neopets shops, you were allowed to haggle to get better prices, which again meant higher profits (or just simply lower prices if I actually wanted the items I was purchasing)
Of course I wouldn’t do this at a major retailer, but haggling is a must with street vendors or in some cases, small privately owned stores. Ok, maybe this isn’t really that relevant to my online buying/selling business, but it’s still a good example in how to save money applied from neopets.

4. When selling things in the marketplace, price your goods to be slightly cheaper than the next lowest price so that your items sell right away
In neopets, I learned that items in my shop would sell almost instantly if I priced everything 1 neopoint cheaper than the next cheapest in the shop wizard. The shop wizard is basically a search function to search all the user-operated shops to compare prices and list them in ascending order. Making everything 1NP cheaper is a great strategy, unless the next lowest price is significantly lower than all the other prices. If that’s the case, then buy the significantly lower priced one and sell both of them for 1NP lower than the next price.
In real online business on Amazon or Half.com, I basically do the same thing, except I list everything for 1 cent cheaper instead of 1 NP. That way my inventory typically turns over at a very high speed, and I don’t have to worry about running out of space to keep my stock, nor do I have to worry about items that depreciate over time.

5. Don’t just make money from operating, also invest your money properly or find a high interest liquid bank account.
In neopets, there was a stock market as well as different types of bank accounts. I always made sure to open the bank account with the best interest possible and to collect my interest every day. I also did a little day trading or short term stock investing, but that’s optional for the risk averse.
When I run my online business with high cash flow, I make sure to never let money sit in a low or zero yield checking account. Instead, I signed up for the paypal money market fund to earn interest while money is in my paypal account, and I always have my sales deposited into high yield money market checking accounts or higher rate savings accounts. I might do another post on my banking structure later, so if you are interested, keep posted.
In our current economic state, investing is probably optional. However, it will be an option I will definitely go for in the future if and when the economy stabilizes.

6. When you get ahold of a limited edition or rare item, hold onto it. It will probably appreciate more than cash at its current value will.
Some items in neopets were issued at one point and never given out or sold again, so they naturally appreciated in value over time. When these items were issued and I held onto them for several months, they typically became very valuable. Examples include paintbrushes and job coupons.

7. You can sell stuff that you got for free
That’s right. There were a few daily opportunities to get free stuff just by visiting a place and clicking, such as omelettes, jelly, and the tombola. If I was lucky, I sometimes got valuable items from the daily freebies that I was then able to turn around and sell for a good amount of neopoints.
Opportunities like this may be harder to find in real life, but when one presents itself, I never refuse. Some argue that it’s unethical to sell things that one obtains for free, but I respectfully disagree. If a transaction can be agreed upon, it means both parties involved are satisfied and feel as if they will have more to gain from completing the transaction than not completing it. So, as long as there is somebody willing to buy the item you are selling, it doesn’t matter how much you paid for it.

So there I have it. Neopets was not a complete waste of my life during my middle school and early high school years. Although it was a highly addictive and arguably unhealthy hobby, it was a good model of the real online business world that inspired me to start trying to make a profit online.

I always had an interest in poker since the day I learned how to play it. Even though I’m not of casino gambling age, it has always been a medium of adrenaline rush unlike any other for me. It’s amazing how much the game can relate to the business world. Maybe if I play poker more often, I can also become a more successful businessperson. After all, if a CEO says that “everything he knows about business he learned from poker,” poker skills may be even more important than I thought they were.

EVALUATING MARKET OPPORTUNITIES

• Table selection is the most important decision you can make.
• It’s okay to switch tables if you discover it’s too hard to win at your table.
• If there are too many competitors (some irrational or inexperienced), even if you’re the best it’s a lot harder to win.

MARKETING AND BRANDING

• Act weak when strong, act strong when weak. Know when to bluff.
• Your “brand” is important.
• Help shape the stories that people are telling about you.

FINANCIALS

• Always be prepared for the worst possible scenario.
• The guy who wins the most hands is not the guy who makes the most money in the long run.
• The guy who never loses a hand is not the guy who makes the most money in the long run.
• Go for positive expected value, not what’s least risky.
• Make sure your bankroll is large enough for the game you’re playing and the risks you’re taking.
• Play only with what you can afford to lose.
• Remember it’s a long term game. You will win or lose individual sessions, but it’s what happens in the long term that matters.

STRATEGY

• Don’t play games that you don’t understand, even if you see lots of other people making money from them.
• Figure out the game when the stakes aren’t high.
• Don’t cheat. Cheaters never win in the long run.
• Stick to your principles.
• You need to adjust your style of play throughout the night as the dynamics of the game change. Be flexible.
• Be patient and think long term.
• The players with the most stamina and focus usually win.
• Differentiate yourself. Do the opposite of what the rest of the table is doing.
• Hope is not a good plan.
• Don’t let yourself go “on tilt”. It’s much more cost effective to take a break, walk around, or leave the game for the night.

CONTINUAL LEARNING

• Educate yourself. Read books and learn from others who have done it before.
• Learn by doing. Theory is nice, but nothing replaces actual experience.
• Learn by surrounding yourself with talented players.
• Just because you win a hand doesn’t mean you’re good and you don’t have more learning to do. You might have just gotten lucky.
• Don’t be afraid to ask for advice.

CULTURE

• You’ve gotta love the game. To become really good, you need to live it and sleep it.
• Don’t be cocky. Don’t be flashy. There’s always someone better than you.
• Be nice and make friends. It’s a small community.
• Share what you’ve learned with others.
• Look for opportunities beyond just the game you sat down to play. You never know who you’re going to meet, including new friends for life or new business contacts.
• Have fun. The game is a lot more enjoyable when you’re trying to do more than just make money.

This was originally posted on Zappos Blog by CEO Tony H. He’s working on a book about the business and poker concept. When it comes out, it might be one of the few books I pick up.

When I see a deal good enough for me to profit from, I simply can’t resist. This mess started with this thread.

Seems like a good deal, right? Buy the Canon SD1100 camera which is a very popular and easily resellable model for $89.99 plus shipping and ebay it for $150+, even a better deal if you buy two, because shipping is the same price. So guess what? I bought two.

A few days later, I got a call from Chase (I used my Chase card to pay for this purchase) with a potential fraud alert. They had me verify a charge from “an electronics store”, so since I remembered that I ordered my two Canon SD1100 cameras, I verified the charge. Obviously, a company should be held suspicious if even credit card companies know that they may be fraudulent. I briefly considered this when I got the phone call, but I still wanted to trust Conns and hoped to received my package soon.

For those of you who don’t know, I buy and sell a lot of things on the internet to make a little money that I treat as my allowance. I ordered two Canon SD1100 cameras online about a week ago for a great price and have been waiting on them for over a week so I could have inventory to sell. Today, a FedEx package that I had been anticipating for about a week arrived on my front porch. I was momentarily excited when it came, because I was running low on inventory, and it would be a great replenishment.

I was expecting two Canon SD1100’s, because they were what I ordered. Simple, isn’t it? To my dismay, I opened the package to find two unfamiliar looking boxes (yes, I know how Canon boxes look like by now). It turns out that I somehow received two worthless Samsung BL1050 cameras. Obviously, the initial excitement quickly faded away. You know what was even more ridiculous? The enclosed note it came with. So, they finally admitted that they didn’t send me the products I ordered. If you’re out of the damn item I ordered, let me know and give me the opportunity to cancel my order before you substitute whatever piece of shit you could find! I find it almost hilarious how they tried to convince me that their replacement could possibly be better than the camera I ordered. If so, then why is the retail price only half of that of the Canon SD1100? Maybe because there is absolutely no contest in image quality? One’s a well known camera brand name while the other’s just some regular electronics manufacturer? Seriously, Conns. If you don’t want to honor your sale price for the product you were advertising as “on sale” for $89.99, the right thing for you to do would be to simply cancel the order. You clearly had no intentions of selling me the camera I ordered if you just baited and switched. Calling the Samsung BL1050 an “upgrade” from a Canon SD1100 is just absolutely ludicrous. It’s like buying a Ferrari and receiving a Mustang as an “upgrade”.

On top of everything else, I’m personally insulted that someone would think I’m stupid enough to accept the evidently inferior cameras as an “upgrade”.

Maybe if a company names itself “Conns” it should hint that they’re con-artists. I have officially first-handedly experience the bait and switch scam. I guess when you buy and sell as many things as I do on the internet, it’s only inevitable that you will get scammed every once in a while. That’s what credit card buyer protection is for, I guess.

I’m really tempted to send some crappier $30 digital camera and write a note saying “Sorry, but the camera you sent me was not the one I wanted, so I’m returning one that’s an upgrade over the one you sent me.” Unfortunately, I still value my refund, so this plan will not take effect.

Anyway, as the note instructed me to do if I didn’t want to accept my “upgrade”, I sent the cameras back using the provided shipping label. Honestly, it wouldn’t surprise me if later they pretend that they didn’t receive the cameras I sent back, in which I will have to dispute the charge with the credit card company. Maybe it won’t be so difficult, considering they already recognized the charge as potentially fraudulent earlier and even had to call me about it. Obviously, this company’s already somewhat blacklisted in Chase’s database of merchants.

Bottom line: Don’t order from Conns when they have anything “on sale”. In fact, boycott their B&M stores too, because a company like them doesn’t deserve your business.

The lost money fallacy is often also known as the sunken cost fallacy. When we spend money on something we own, natural human psychology produces the desire for us to keep it or put more money into it when it is most cost efficient to let it go. The bottom line is, no matter how much you paid for something, it is worth whatever it is worth at its present state. The money you put into your investment or purchase that has been lost will not be recovered simply because you’re making desperate attempts to keep the investment or product afloat. The price you originally paid for it should not affect your decision in what to do with it. Take a look at the examples below, and see how you would act if you were in these situations.

Example 1:
In the current economic state with declining securities, such as stocks, housing values, and commodities, we are often hesitant in selling our losing securities. People often irrationally hold onto their losing stocks that are currently trading at less than they paid for, because they don’t want to lose the money they originally invested. This causes them to lose more money on their bad investments as the stocks continue to decline.

Example 2:
You buy a show ticket on impulse thinking you got a good deal, but later you decide that you really don’t want to watch it anymore after you find you don’t have the least bit of interest in what it’s about. Natural human psychology will cause you to spend time watching the show anyway, just because you paid for it. You end up watching the show wasting valuable time and needing to endure watching a show that you would really prefer not to see.

In example 1, if you would not buy the stock at its current market price and state, then you should sell it regardless of how much you paid for it. Holding onto the stock when you don’t think it will be a good investment will only lead to greater losses.

In example 2, it would be most efficient if you didn’t watch a show that you wouldn’t enjoy, because you could spend that time and energy doing something else. The fact that you already paid for the show will not make it any more enjoyable for you. Give the ticket away and find something better to do with your time.

Remember that money already spent and lost should not affect your financial decisions. It’s just gone.

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100.
If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that’s what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. “Since you are all such good customers”, he said, “I’m going to reduce the cost of your daily beer by $20″. Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free.
But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his “fair share?”

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay…And so:

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

“I only got a dollar out of the $20,” declared the sixth man. He pointed to the tenth man, “but he got $10!”

“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar, too.
It’s unfair that he got ten times more than I!”

“That’s true!!” shouted the seventh man. “Why should he get $10 back when I got only two? The wealthy get all the breaks!”

“Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor!”

So, the nine men surrounded the tenth and beat him up.

The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore.
In fact, they might start drinking overseas where the atmosphere is somewhat friendlier. From Mike (Corporation and the wealthy are already doing this!)

David R. Kamerschen, Ph.D.
Professor of Economics, University of Georgia
Oh, and I originally found this on Billy’s facebook note.