Eric Seufert joins to dissect AI hype, marginal ROAS, Jeremy Bentham's legacy, and managing a multi-million-dollar marketing budget that falls empirically short. WE discuss:

• How do you evaluate an “AI startup” in 90 seconds without being duped?
• Can LLM-driven hypothesis testing replace the Monday creative meeting and outperform it?
• If marginal ROAS is the real constraint, why do teams still optimize to averages?
• When should a Battlefield-scale launch actually spend less on day one and wait two weeks?
• Why did free-to-play economics conquer games but stall on platforms like Twitch or Spotify?
• Will AI-driven volatility make electricity markets funky?

Forget the endless autopsies on why Web3 gaming flatlined, @Chris gets past the clichés and gets into the real pathology: a misdiagnosis of what “play-to-earn” was ever good for. 

• @Eric & @Phil on vertical progression is the most important retention driver for several specific reasons
• The “market for lemons” problem in developer <> publisher relations: why developers can banbooze publishers

Sub to Eric and Chris' Substack here:

• https://substack.com/@ericguan
• https://substack.com/@chriseconomics

00:00 Introduction and Free Trials in Drug Dealing
00:28 Economics of Drug Dealing
02:11 Personal Experiences and Data Collection
03:24 Car Dealerships and Market Monopolies
04:57 Gaming Industry Insights: Clash Royale
19:08 Battlefield 6: Gameplay and Strategy
27:11 Rollerblading Adventures
28:36 Rollerblading Economics
30:16 Web3 Gaming Struggles
34:54 Understanding Play-to-Earn Mechanics
43:42 The Market for Lemons
52:24 Conflicting Data on Gen Z Spending
56:51 The Importance of Reliable Economic Data
01:05:43 Conclusion and Future Topics

Eric covers the economy and the system’s design of Ukraine’s Drone squadron. What does economy balancing look like in the face of war? Phil can’t stop gushing about Heroes of History, but there's one economy design piece holding it up. The crew descends into a John Maynard Keynes debate as a 4* or 5* character. Chris covers the economic impact of the UK’s new obligation for internet providers, potentially transforming UGC as we know it.

https://ericguan.substack.com/p/ukraine-gamified-drone-warfare

Yat Siu, Co-founder and Executive Chairman of Animoca Brands, steps cast to defend Web3 against @Eric and @Phil’s vigorous skepticism. @Chris just want to know why gamers don’t get it. Is Web2 fundamentally incapable of grasping the promise of open markets? What is and should be promised to token holders? 

We discuss:

• Laying down Web3’s steelman case
• Why the West still doesn't get Web3 like the East
• Examining the original token sin, where did it all go wrong?
• Do digital property rights actually hold back economic growth?

Pokémon's patent of spherical objects throwing of cartoon creatures threatens Palword's lifeblood, while Tim Sweeney has lifted, at least a percentage point, in total gaming GDP with its injunction success.

How does Apple's rent-seeking rate change in the face of this ruling? Should Apple lower its rate to 15%, like it did in subscriptions? Remember, it faced competition primarily from "webstores" too. We premier a new segment: SOLVE that for EQUILIBRIUM.

We discuss the marginal *monetization* effects and debate the benefits of personalization opportunities (hint: there are none) with webstores.

@Chris is intrigued by Joost's piece on rising game costs, while AI's effects on the industry are measured in the Solow model. @Phil insists rising game costs mean rising revenue and stable margins, while Eric has his own doubts.

Eric's on IP Laws: https://substack.com/home/post/p-161276950
Joost's On Gaming Costs: https://superjoost.substack.com/p/gamings-billion-dollar-gamble

What is the GDP-maximizing set of copyright protections? 10 years? 5 years? None at all? Chris, Eric, and I debate the relevance of patents and copyright protections and the gains to network effects of knowledge. Does the "gentlemen's agreement" to avoid patent protections on game design help or hurt the industry? 

Chris talks about Monster Hunter's lineage and woeful service, while Eric introduces a novel use of AI in game design. Phil believes the Gini coefficient is underutilized for measuring live-ops-driven revenue.

Phillip & Eric navigate the strangely subdued landscape of GDC 2025, pondering if there really is such a thing as a free lunch. Chris dials in, wondering if his absence is secretly the key to Eric's roundtable success. 

They dissect the talks, the conference economics, the rise of mobile's respectability, and a guest in economy designer, Charlie Hsu.

In this episode:

• Is the game industry actually shrinking, or just taking a nap? And if Web3 isn't the savior, what's left besides... sweeps?
•  Is GDC just a cleverly disguised wealth transfer from sponsors to developers
• What's the latest "reasonable" pitch for Web3 in games?
• What's the economic model behind those San Francisco walk-up shops overflowing with candy bars right next to the register? High margins? A tourist trap? Something... else

The best tech firm experimentation seems to offer thousands of button color experiments. Dr.Runge has a better approach, which changes at every game development stage. We debate gaming's broken relationship with science, the proper experimentation framework, and how much you'd bet on yourself to complete Cousera assignments.

Read Dr.Runge's new paper NOW!

Showlinks:
Julian Runge
Gaming Companies Run Thousands of Experiments a Year
Game Data Pros
How to use games to build relationships with your customers

Pokémon TCG Pocket is one of a handful of games to implement P2P trading on mobile. Yet it sucks. On purpose. As @Eric explains, their game economy needs high sinks to combat hourly sourcing of card packs. Without the nearly 80% trading tax, prices would tend toward $0. However, that's secondary to a UX that is so gimped it makes Friend Codes look seamless by comparison.

We deconstruct Matthew Ball's new State of Gaming report slide by slide (or at least curated slides.) @Chris thinks we're failing to keep pace with inflation, putting the industry at risk, while @Phil wants to know why TikTok is winning at the margin. Is gaming becoming LESS compelling relative to social media?

Loot boxes have all the markings of a moral panic. Dr.McCaffrey reviewed the emerging literature, and like the research on video game violence, it's destined for methodological malfunction.

We discuss why everything isn't a loot box, the apathetic interest of economists in games, what George R.R. Martin's economic equilibrium teaches us, and how to get more people interested in economics.

Follow Dr.McCaffrey on Twitter [1], see him on video games [2], and read his loot box and A Song of Fire and Ice papers here [3].