Adding Value

In Mario We Trust!

With all the economic strife in the world right now, it seems for most politicians and economists across Europe and beyond that the very basic principles of growth are being ignored in the pursuit of saving money.

Saving money is good. Making sure you’re on the right insurance premiums, making sure you’re on the right electricity tariffs, the right telephone and gas suppliers – there are ways to save money on the everyday essentials. But we’re talking in some cases a small portion of what we earn each year – usually a few percent here and there. Money still needs to be spent on our overheads – food, water, electricity. Countries are exactly the same, they need to pay wages in the public sectors and allow for costs in regeneration programs.

Nothing comes for free. Despite all the talk of austerity, as money is devalued, deficits look bigger than they are.

So take the games industry – not a cheap industry, granted. It has overheads much like any person, business or country. Wages need to be paid, insurance needs to be paid, they have to upgrade their technology at a rapid pace and often pay for engines, development kits and other tools and utilities essential for their day to day running.

The aim for most games being made isn’t to break even, but to add value in some way. Add value to their shares, or add value to their company portfolio, or simply to add value to their reserves. You can’t simply put something out there that is worth what you paid to make it – you have to add value. This is something any half-arsed shopkeeper will tell you. Buy in bulk at a low price, sell individually at a mark up and make money to pay your way.

The value of a game is no longer limited to just the software. Brands have value too – in terms of merchandising, movie rights, music and the cast and crew involved. It’s often very easy to see that a game has sold X amount of copies and go “Ooh, that’s terrible.” But there’s a lot more, and if a game becomes popular – that’s when you start adding value.

Angry Birds is probably one of the finest examples of this theory in the gamespace – it’s not just a monolith of an indie game, but its popularity has increased the earning potential of Rovio to levels that seem unbelievable at first. There is a cartoon series on the way, branded merchandise and talk of more games for more platforms. People want to buy goods based on Angry Birds, and those goods will be made to a point and sold at a profit too. It’s a cyclical thing.

Politicians are very good at hiding the truth from us that truthfully, the creation of actual goods value is dwindling in the West – but exploding in countries like India and China, where parts may be cheap to make but are sold at huge profit margins. The UK is a great case in point – we’re in a good position as money flows out of the EU and into London, one of the main financial capitals of the world. We’ll even see this year a regenerated London for the Olympic Games.

But take a tour of some areas of the country, like Cornwall, and you’ll see the real problems we face. Shops closed down, rent astronomically high as properties become scarcer, areas of poverty and crime, streets boarded up and barred up in fear of the locals. Moving money around isn’t making it. We’ve become so reliant on making it on interest that we’ve lost entire industries – the mining industries were essentially taxed and regulated out of existence, so too was our car industry. We also used to be a world leader in electronics, we don’t really do that anymore. Many used to use us for call centers, now India is cheaper.

Some in Europe may think cutting is the answer, some may think that spending is the answer. Both are true to some extent. But without the acquisition of value on goods to tax, neither will get to the root causes that you’re just not making enough money year on year. Politicians are fighting amongst themselves, scoring a few points here and there but really none of them have a damned clue what they’re doing – most of them got out of University, worked in a few public service offices and then got promoted into political parties – fewer and fewer people of importance have any actual business or economic experience. Without it, they’re doing what they’ve learned from lessons and the past – and that can only ever lead to a spiraling downward trend that we can never escape from.

It’s something that takes time to learn – heck knows I was a reckless spender in my teens and early twenties. I got myself into a right state – and it took time to get out, but I didn’t do it by getting further into debt by cutting corners. I sold what I didn’t use, I made sure I was on the right tariffs and in the right deals, saved money like it was a monthly expense. Result? On top of my monthly outgoings, have some disposable income each month, a good savings account and a pretty good credit rating (which to be honest, I’d rather not use anymore. I learned that lesson the hard way).

I can’t cut how much I spend on my electricity. Or my TV Licence. Or my telephone bill. These things need to be paid, and sure you can see if there are better deals out there – but in terms of countries, social funds need to be spent. Funds for regeneration need to be spent. Wages need to be paid.

Cut those, less jobs and less money going back into the economy, and more reliance on the social funds to support them. Which means more cuts need to be made. Repeat until you learn this can never save you money.

If Europe and the West want to get back in the black – it may indeed have to look into the past. And work out what industries have fallen at the wayside in the last century – and if there’s any chance that they can be revived in some form.

Because to make money, you have to sometimes spend it. As long as what you’re spending it on can turn profits and add value, it’s a good investment – and a sustainable one for jobs as well.

This is something some of us just know. But to politicians, it’s nothing more than virtual numbers in a big MMO – and one that they’re currently losing at to others who have a far stronger grasp of the basic mechanics of the world.

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