Blizzard and Diminishing Returns

[Dupree]

First off I want to start off in saying that this is in reference to the blizzard cuts 600 employees story on the front page.

Why did I not post this in the comments of the story, and make a specified thread about this?

What I want to discuss, in simple terms is the economical reasons that blizzard cut the employees, and discussing general economics, I feared that posting in a comment to the story would cause one of two things:

a.) Causes a veer into discussing economics and derailing.

or

b.) With qq spam, the message would never be seen.


So the popular talk behind, "blizzard makes billions, why are they cutting employees"?

First off, I want to start in saying, that in economics you think/or are in the mindset of everyone, and everything looks out for their own self interests, which I find to be true in life.

So, what is the purpose or self interest of a corporation or business?

To Maximize profit, plain and simple.

So, while Blizzard makes profits, and a LOT, they need to look at, okay, is this a maximization of those profits.

They will generally have analyze the situation, and come to some conclusions.

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So, what do we need to conclude, they make profits out the wazoo!

First off, we need to have an understanding of efficiency.

Below is a Production Possibility Frontier, it is, in simple terms a graph that shows, 100% production efficiency of a product.

What this means, is that the graph-line you see, the curve. Is the production possibilities, at 100%, anything above the line would be over-efficient (not possible) which is 100+%, and below the line, this is where the reality is. Anything below the line is below 100% efficient, this is where it is in the real world, and the goal is to be as close to the 100% line as you possibly can.





The goal in any producer/business/corporation, is to be at 100% efficiency.

But is that feasible?

Not, really, another way to think of it is 100% employment in the US, its really, just not possible, you could employ every person willing to work, but you still are at a loss, with disabled, and the such, or the people not willing to work.

So, the goal is to be as efficient as possible.

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So... How the hell is cutting employees efficient you moron!?

Basically, the concept is diminishing returns, or diminishing marginal utility.

http://en.wikipedia.org/wiki/Diminishing_returns Link for explanation.

The easiest way, to think of diminishing returns is think think about taping a box on a gymnasium floor, and the goal is to fit as many people as you can in there, to do say, pushups, and get as many as possible. ( In say 2 minutes)

You start off by putting one person in the box, and lets say they crank out 60 pushups, so for one person, you got 60 pushups worth of work.

You then place another person in the box, and they both crank out 60, They get a total of 120, the average per person is still 60!

But now, you place a third guy in, but do to the space constraints they are a bit squeezed together, and it makes it harder to have a full range of movement in, you get 50 out of each person, for a total of 150, only 30 better, but you are still doing better than before.

You, want, and crave more though, so you put in a 4th guy, and they are really squeezed, but they all fit! But do to the squeezing Each member averages out to 37.5 pushups! They are falling, colliding, things are getting really inefficient. This adds up to be, 150 pushups, but... you just paid for another guy to work, you are losing because the cost of hiring another guy isn't outweighing the benefit, to be precise, this guy is doing NOTHING the other 3 could not handle, you are literally, handing him a paycheck to do nothing.


Businesses have this problem, and they don't come across it like in the above, 1+1+1 to find the best fit, so it requires some analysis to catch.

So, a business is expanding into another country, and they over hire people expecting the business to be more of an success than it actually was, it ends up being ~200 people (made up number) doing work that is most efficient to have say, 150 do, that means that "for simplicities sake, that they all receive the same wages, that means that they are paying 25% more for labor, and receiving no benefit, none, they are on the clock, but they just do not have the work to justify it)

That is all that is happening with blizzard at the current moment, they have to many people, and in the grand scheme of the departments that are over populated (not development), is that they end up having to much "free time"

So lets say Customer service in <insert country> has a lot of CS reps, more than they ever use, even in peak hours, but they just don't have the calls, or needs for THAT many reps.

[Fuzzzie]

Moving to the video games discussion forum. Might be more appropriate here.

[Deleted]

sounds like someone works for blizzard.

[Zeta333]

Maby they can afford to hire more modelers and skinners now and not give us reskinned versions of the same mount for an entire tier.

[Gunz]

Looks like someone is taking high school economics

[Wildmoon]

From what I saw they are still hiring more developer but they cut other area which I think is good because some areas are overstaffed.