In short, the video’s statement is that the high cost of cars in Brazil is not really due to high taxes, but to profit margins from car dealers. This conclusion comes from the fact that although car taxes are high, they’re not a significant part of it’s  end price. At a first glance, this seems legit, since we’re comparing the proportional price of taxes over the car’s total end cost. With that said, I will now discuss in this post why I believe that analysis is incorrect and attempt to prove that taxes can have a huge impact in a product’s end sale value.

You see the percentage of taxes over a products end price is misleading. Saying that 10% of taxes on a $10.000 car will not change it’s end price significantly enough to impact it’s sales is an insufficient analysis of this problem. What’s necessary is in evaluating the buying capacity of the market, and the segments in which it divides itself. Here’s a simple example, from a hypothetical country Foo :

Foo’s citizens can be described in the above market segments, where each has a corresponding buying capacity for a car. This means if a car costs $3.000 then all users can buy it. But if it costs $8.000, then only users B and A can afford to buy it. The key component here is the margin in which a user can buy something, since all off them have one.

If you don’t believe so, think the last time you went to a store to buy something. You said to yourself you would only spend at most $80. However the product’s cost was $100. After pondering for a while you still decide to buy the product. Now you could think you over spent your initial budget, but that’s irrelevant. What really happened is that you spent within your buying capacity. It’s not that you will buy a product if and only if it costs less than $80 — you will buy it if it’s within a bound.

Since users can then afford to spend their money over the same object — a car — what the market then attempts to do is two things :

• First it tries to create products for each user segment. There will be specific car brands for each user segment.
• Second, and here’s a key factor here, the market will try to sell these car brands at the top price for each user segment.

To understand the second bullet, think of it this way. Suppose car brand #4 is geared towards the low income individuals — namely users D. The market will then try to sell car brand #4 the closest possible to $5.000, since it knows that users D can afford it. In short, the market will diversify itself to reach out to all potential user segments, and maximize it’s profit margin as much as possible within each user segment.

It’s under this point of view that taxes become a crucial factor in a car’s end price. A reasonable thing to do is to keep car taxes in a way that the end cost of a car’s brand will still be under it’s original user segment buying capacity. Here’s an example — suppose car brand #4 costs $4.000. With a 10% tax rate it’s cost will bump it to $4.400. Under that price car brand #4 will still be withing users D buying capacity. However if the tax rate is 30%, the end price will be $5.200. What happens then is that car brand #4, which was targeted for users D, can now only be bought by users C and above.

This is specially problematic since this “car brand bumping to the next user segment” effect spans the entire chain, as it can be seen in the diagram below.

However, as previously stated, we cannot forget the fact that the market will attempt to maximize it’s profits by making the products they sell to be as close as possible to a users buying capacity. So the net effect isn’t simply that car brands bump up in user segments — their prices bump to the maximum value of that user segment as well.

So what ends up happening is that under 10% tax rate, car brand #4 will on average be sold for $5.000. However under 30% tax rate,  it will not be sold for $5.200 – it’s average price will be $7.500, over half as much as before.

It’s important to highlight this since the high tax net effect doesn’t affect only cars — it affects all products, games included. Over the last few years, with specialized distribution models such as Steam, and with the advent of new user bases such as the casual market, games prices per user segment have become dramatically important. Via this, an entire matrix of users buying capacity per product has been established in the gaming industry. There’s bundles of games per discounts, daily games per $0,99, DLC averaging from $5 to $30, and so on. All sorts of combinations, trying to cater to each specific consumer market.

There’s a large set of consumer products under the $10 range. Gamers view a one dollar game sale in a completely different way than they do if it costs five. Proportionally, four dollars won’t have a significant impact in someone’s life, but it’s irrelevant — this discrepancy exists and users react to it.

It’s under this scenario that high tax rates are especially problematic. If taxes bump games prices up, than the entire portfolio of user products per market segment gets whipped out. A $10 tax rate on any external game, even though it’s quite small, simply abolishes the low cost game market.

Thus we need to understand that tax rates impact not only the end product’s price, but the whole net effect of what it does in the market as a whole. Simply put, high tax rates makes cars incredibly more expensive and cripples the low to mid-tier game development community.

By non-deterministic (or should I say counter-intuitively?) Gabe discussed how those sales presented an abnormal amount of growth in revenue, and how the revenue curve kept even after the sale ended. As STEAM played with it’s numbers in terms of sales, the market reacted with unexpected (and positive) results. Why do these trends occur? As Gabe points out, he and his team currently “don’t understand what’s going on”.

Given that I’d like to use this blog post as a humble attempt in explaining what might be occurring, as well as pointing to a potential gap of revenue STEAM might be missing. In order to do so I’ll refer to a game from my past. Which one you might ask?

Well it’s non other than Yoshi’s Safari!

You see, nearly 15 years ago for christmas my parents got me a Nintendo Scope (I still own it to this day). I was super excited about my new present. However my parents only bought the Scope,  and forgot to get any games for it.

After hearing my pleas, my parents and I headed off to a local store to buy a game that used the Scope — the only one being available though was Yoshi’s Safari. I was eager to pick it up but it was part of a bundle and could not be sold separately. If I bought Yoshi’s Safari, I also had to buy

BattleToads in Battlemaniacs

and a weird black jack / poker / roulette game I had never heard off before, Vegas Stakes

To my sheer luck the bundle’s price was that of a regular game, so my parents had no problem in buying it. 3 games for the price of one, no worries! I was also a big fan of the Battletoads series, having played the original on the NES to death. Given that, the bundle ended up being a great deal — I got my prized Nintendo Scope game, plus a sequel to a game I loved…

…as well as some other side bonus game I initially couldn’t care less about.

So after coming back home, dying to play Yoshi’s Safari with my Nintendo Scope, I find out that it’s a really bad game. OK it wasn’t that bad… It just didn’t provide me the thrill I was expecting. But I wasn’t worried! I still had Battletoads in Battlemanicas (BiB) to play! Overall I had quite a lot of fun with BiB, but its the sort of game that get’s repetitive really fast.

So the days passed, I kept switching back and forth between BiB and Yoshi’s Safari. Eventually I got bored of the two, so I picked up Vegas Stakes… I hadn’t even played the game yet, it was just laying on top of my desk until then.

In my opinion it’s easily one of the top 10 games for the SNES. Yes, you heard me right, I’ll even repeat it for you: I would put Vegas Stakes in the same list Chronno Trigger, Final Fantasy 6, Super Mario World and Megaman X would be.

Vegas Stakes is a phenomenal game for it’s time and to this day I remain jaw struck with it’s charm, cleverness and design. The amount of time I played that game dwarfed how much time I spent playing Super Mario World.  I say this, since for starters, it’s not just a game about poker, black jack and roulette. It’s a casino simulator with those games involved. You had dozens of characters to interact with, each with their distinctive personality and playing styles. Each casino had it’s own setting, music, theme and even gambling types.

Part of what it made so compelling was also the special events that occurred.  Every now and then someone would approach you and ask a question, such as if a lost wallet was yours. You could lie and keep the wallet with all it’s money. However you could get caught by security and pay a large fine. It was a simple game of chance but with great setting. I recall playing it with my grandfather, whom never ever E.V.E.R. played video games before and he himself had a blast too.

Anyway, what I took from that experience as a whole was that the game I had completely dismissed initially was the game I ended up playing the most. Had it not been via that bundle, this would have never happened. I would also not have been capable of coming up with my analysis for the non-deterministic pattern  in game sales that STEAM has.

Going back to the discussion about the article featuring Gabe N. I think I can present a small explanation to what might actually be occurring, which is similar to what occurred to me with Vegas Stakes. Indeed it’s only an analysis of a subset of the problem as a whole. However it might serve as an attempt to describe the initial complexity that the full analysis would start off and grow from.

You see, there are a variety of gains from sales bundles. Obviously, they increase the return over investment (ROI) for a user when he buys a game. Via this, however,  a new pattern emerges as well:

1. A set of users (User set 1) acquires a bundle. This bundle has games these users like and care (game set A), as well as some they don’t care / never heard off (game set B)
2. After playing games from set A, a small segment of those users (user set 2)will branch out and experiment with the games in set B. What’s important to note here is that there is a time gap for users to play games from set A to set B.
3. A percentage of users from set 2 will actually enjoy the games from game set B (user set 3) . They will then most likely carry on to:
• Learn and engage more about the game. This potentially increases the user base of a game, as well as it’s revenue.
• Discuss about their new found games with friends (user set 4). Since these friends probably share a same set of interest, it’s very likely they also treated these games with the same disinterested as the initial users in user set 3. In other words, it’s very likely these users would have divided the initial bundle into set A and set B, with a broad overlap off the games that fall into each category being the same as their friends did.

The graph below sums that up in a visual explanation. In it you can see that User set 3 < user set 2 < user set 1.

What’s important to see here, is that via this process we have the capacity to attract the attention of users that where not a part of the original set of users that bought the bundle. This new group then, recursively repeats the process (if they buy the bundle) and everything repeats once more.

Indeed that is true, but the key here is that people are sharing experiences from game sets they haven’t touched before, after a delta of time (remember, they play games from set B after playing the games from set A). This happens on a completely non-deterministic way, since you can’t really indicate that people that liked Final Fantasy 6 will like Vegas Stakes for example. What’s going on is that we’re touching here on the non-deterministic nature of taste, spread out on a large set of individuals, after a gap of time. It’s the collateral effect of game sales that’s affecting these trends, not the sale itself.

Although you can’t control it, you can attempt to measure it’s potential conversion rate (via past data and trends). From that one could try to induce it, thus generating greater revenue. A method to induce this would be via creating bundles of not only different prices, but different game sets. I believe this is a component that Valve in most of it’s sales offers is currently missing. Most of the bundles target sales towards games under common sets of franchises and/or styles.

To address that, they could increase their potential revenue by adding “odd ball games” into the set. These could be obscure games with little visibility. Think of Left 4 Dead bundle plus Cake Mania.Or how about Modern Warfare & Lumines? This might be a form of playing with pure chance, but that’s exactly the component you want — chance. Odds are someone will find their own little Vegas Stakes in the next Yoshi Safari bundle, and blog about it.

Junto-me as piadas de internet. Apresento, Tiozão classe média alta:

The public tends to point to corruption in Brazillian politics as a mutation in our society, something that lies outside the norm. Everyone acts surprised and perplexed on how such things can occur since it’s not part of the  Brazillian moral fabric.

They’re wrong. Corruption is at every level in the Brazillian society, and it’s political counterpart is just an extension of an overall cultural trait. Allow me to explain.

By corruption, I don’t refer solely to crook politicians. I mean the act of breaking and exploiting rules to one’s advantage. In Brazil, we see that everywhere and in all shapes. When you park in a non-parking zone. When you play your music as loud as you can during the night. When you give a little bit of cash so the cop doesn’t ticket you. When you’re a government employee and you’re paid to work from 9 till 5, but show up only at 1 and leave at 4. It just goes on and on… Corruption is about doing something you know you’re not supposed to, since you also know you’ll get away with it.

Ask yourself the following question: how many people do you know that have done at least one of the things I’ve described above? How about something similar? Or even, something worse?

Corruption in our political system is not an isolated fact; until we as a people take a good hard look at the mirror, and fix ourselves rather than the image, we’ll keep pretending that it’s the mirror that’s broken.

That analysis boiled down to this statement:

There are two types of jobs when it comes to certificates. Those that create certificates, and those that require them.

What I mean by that is that I believe the tech industry can be separated into two. Given a company it can either be mostly a service provider, or mostly a technology provider. The types of employees these companies hire, their corporate culture, how these companies do business and how they manage themselves is vastly different from one another.

However both are complimentary to each other. Technology companies require services companies and vice versa. There really isn’t a better type of company.

Allow me to define the two:

A technology company focuses on creating products that can be sold, leveraged and/or traded. Programming is a product to these companies, since what they produce will be inherently used again by the company itself. Programming therefore is viewed as  technology that can be sold.

A service company focuses on providing products, the means of obtaining them and/or the quality of usage of such products. Programming is a commodity to these companies, since it’s part of their overall service architecture. Programming therefore is viewed as a means to and end, which serves itself for a specific purpose, and not in of itself.

When you buy a game, when you buy a piece of hardware, when you use a static library for your code you are using a product of a technology company.

When you pay for maintenance of a product, when you rely on someone else to develop something for you, you are using a product of a service company.

So say you buy a game in a store. Who made the game was a technology company, while who probably sold it to you was a service company.

So what’s the big deal with that definition? Well I can now explain to you why I think the game industry in Brazil never kicked off. The answer is quite simple:

Brazil’s tech industry, and culture, is compromised of mostly just services providers.

This is due to several reasons, such as historical reasons. Since Brazil did not pioneer the tech revolution, the tech companies Brazil had relied on leveraging out the products from companies in the US and Japan made.

These service companies created a need for service like personal. This lead colleges to direct their portfolio to fit Brazil’s tech industry requirement. After all the tech industry and academic world have often been tightly coupled, with Brazil being not exception.

So Brazil kick started as a service provider, but why technology companies never emerged in Brazil? Probably due to risk, bureaucracy and lack of proper investment. For the most part of the past 3 decades, Brazil has been a good investment in commodities, not technology assets. The Brazillian government has invested in mostly that type of market, since it’s an obvious advantage Brazil has. Investment of technology also requires investment of education, something the Brazillian governmant has been lacking since it existed. But that’s a conversation for another day.

Brazil government system is also riddled with inefficient bureaucracy, which hampers the performance of companies. This is a critical blow to technology companies that require to stay on their track in a fast and competitive market.

So going back to the original point, Brazil never really had a technology industry, but mostly a services one. This is not something that’s necessarily bad, but it does have a draw back: For the exact same reasons we can evaluate on why the Brazilian game industry never kicked off. Why? Because deep down a game company is a technology company.

When trying to develop a game, game companies have to create new game designs. When you say “my character will be able to jump 3 times in a roll!” you are elaborating on not just game design, but game technology. Programming is an asset that’s inherently tied to the buzines model of your company. It’s requires continuity. It requires the success of the project in terms of sales, in terms of market share. It requires the success of the software itself, and not only it’s shipment to a 3rd party in time.

Development of a game is the development of technology. Thus, a game industry is compromised of technology companies.

And since Brazil is geared politically, economically and academically towards services companies, we can then understand why the game industry in Brazil never kicked off.

One could point out to Tec Toy as a counter example, saying they’ve been around for decades and selling strong. But let’s look at Tec Toy. They don’t develop their own games. They localize games to the brazillian market. They are not inherently making games. What Tec Toy really is is a successful game services company.

Again, I’d like to reinstate the fact that services/technology is not a matter of better/worse. It’s a matter of needs. For games we need technology. For web apps maintanance, we need services.

Until Brazil has the capacity to leverage out a technology industry, game companies won’t thrive in Brazil. We might have a few successful ones, but those are exceptions to the rule, since we won’t have a successful game industry.

So you can understand why this song had such a huge impact with me let’s go back in time a bit to 2005…

I was a freshman at college, and as I explained in a previous post, I was obsessed with the concept of creating a portfolio. I knew that I had to use my college years in order to produce a portfolio strong enough to aid me getting a job in the gaming industry. I had to use those 4 years wisely.

It felt like a countdown had begun on my first day at college and that I had to keep pace before time ran out. It in itself was a fun sensation, I felt like I had a constant challenge to beat.

It was also a tough sensation to live with throughout those years.

I still recall working on my projects till dawn and looking at myself alone in my dorm room. Many a times I felt like a fool, attempting to prove nothing to no one. To make matters worse I was going pretty badly in my first year of college, receiving lack luster grades on my first tests.

Coding large projects was something I was still getting a grasp off. Getting anything done or productive just took forever. Those late night bugs with Solis made me question if my time spent in fixing them was really worth it. I questioned if projects, or any other method, would really aid me in getting my dream job. Honestly, it was really tough feeling alone and without a proper direction on where to go.

All of that changed one late night though.

It was a Saturday, close to end of my first college year, and I had several bugs in the Solis Editor. It was close to 1 in the morning and the editor would just not work. I was dead tired. I had spent most of the week trying to fix those issues, but didn’t manage to make any significant progress at all. I thought to myself if I should go to bed and attempt fixing those bugs at a later time or if I should keep at it until it worked.

Oddly enough I had a very strange sensation dawning on me. As if that choice had become monumentally important, larger than what it really was. I didn’t know why but it felt like that. Looking back now, I realize I wasn’t just deciding to keep working on my project for that day. I was deciding if I was going to keep working on my project as a whole, and with that, attempt to get a job in the gaming industry.

I was deciding if I should continue to pursue my dream or not.

I almost did go to bed. But then a song played in the radio: Bailes da vida. And boy did that song hit me like a thunderstorm. If felt like a shockwave that petrified every cell in my body. The lyrics are:

Não importando se quem pagou quiz ouvir
Com a roupa enxarcada e a alma replete de chão
Todo artista tende a ir aonde o povo está
Se foi assim, assim sera
Cantando me disfarço e não me canço de viver
Nem de cantar

Not caring if those who paid wished to listen
With soaking clothes and a worn out soul
All artists tend to go where people are
If it’s like so, then let it be
While Singing I disguise myself, and won’t get tired of life
Nor of singing

What Milton talks in this song is not the act of singing in itself. It’s about the artistic desire of self-realization. An artist’s desire to sing sprouts from within for himself. It doesn’t matter if no one will listen; he sings for himself. He sings because he enjoys it in itself. He sings because he cannot imagine himself in a form or a way without music.

It’s weird but those lyrics finally made me understand why I was doing those projects. I wasn’t doing them because I wanted to prove something, nor because I just wanted to build a portfolio. I wasn’t just attempting to get a dream job.

I was doing these projects because they are part of who I am. I am a game developer. It’s not a job, it is who I am.

With that song, everything finally clicked. It all made sense. I kept working in the Solis Editor, and had a working build at 4 am.

And after Solis came Conira.

And after Conira came World Train Royale.

And after that my current job at Microsoft where I work with the game development aspects for the Windows Phone. But I’m not done there! There are many other projects and things to do! Because, like Milton said, it’s not just the goal:

É buscar o caminho que vai dar ao Sol

It’s searching for the path that leads us to the Sun

It’s a path that never ends, and honestly, I wouldn’t want it to end either.

We shouldn’t.

The ‘jeitinho brasileiro’ displays a clear systematic failure in our capacity of getting things done. It displays our inability to create dynamic processes in a way that is fair, consistent and reliable to others. For if you need the cordiality of an individual at the right time, then clearly others will not have the same aid when they need it. There will be no basis to judge who really needs it or even if someone doesn’t deserves it all

The ‘jeitinho brasileiro’ thus creates a parallel system to the current processes being executed in which individuals can switch back and forth when possible to gain personal advantage over others. It thus induces people to follow the rules only as needed, as well as power play, and even to allow individuals the capacity to control such a system altogether. Let me give you an example;

A few months ago, I went to a bank to close an account, since I was leaving the country. The clerk told me that the only way to close it was if I made the request at the original agency where I opened it. The only problem was that this agency was 2 and a half hours away from where I was.

I left the bank and by luck found another one just a few blocks down the street. I entered the agency and used a very emotional ‘pwuese help mi mista’. They said I had to indeed go to the original agency to close the account, but after discussing a few minutes with one of his co-workers, he found a loop hole in the system. Basically he printed a check from the bank, put in my bank account information and with it I withdrew all the money I had in the account. When you empty an account, it prompts the clerk if he wants to close it and he used that trick to cancel my account.

Sure it was great he helped me with the ‘jeitinho’ but that’s exactly the problem. If a system inadvertently possesses a loop hole, why isn’t it being fixed? If a system possesses a way to aid users, why isn’t it being standardized?

That’s the problem with the ‘jeitinho’. With it, we can use it to keep and even maintain a clearly inefficient system. Since the system is ‘working’ why fix it? It hides weak links that need to be fixed….. and yes that implies firing people. It also implies in hiring people… trainning them… and all that comes with it.

Unless things keep being done in the ‘little way’ they’ll stay exactly like that: Little.

Now the idea in itself wasn’t the problem, reaching that goal however, was. As a Brazilian living in Brazil for most of my life, I often felt in a situation where I had to somehow find a way to break out and make it in the gaming industry. It was like I was in an uphill battle to at least get my foot in the door. How could one find a way to cross the ocean and prove himself?

For most of my childhood and early teens I had no idea how this could be done. I remember reading and re-reading countless interviews with game professionals, on how they got their start, trying to find a pattern so that I could follow the same approach. To my frustration, those interview didn’t help at all. Most of the developers said they landed on the industry ‘by luck or chance’. That was of no help to me.

You see if you want to become a doctor, you go to Med school. If you want to become a lawyer, you go to Law School. It’s a pretty A to B basis in terms of career paths. Due to the nature of the gaming industry, my frustration was the lack of a clear path on how to become a developer. Just because you went to college and got a Computer Science degree, that didn’t mean you’d eventually find a way towards a game development house.

However, like most stories, that all changed one day…

Years ago, circa 98-99, I was watching an episode of Cybernet, an old british program about games. In that episode, they were interviewing several famous developers and asking them on how one could find a way to join the gaming industry. Some of them gave vague answers, others told about books you could read, etc. None of it, to me at least, gave a clear and concise structure.

Then showed up a developer named Gabe Newell. I’m sure most of you have heard of him. His approach to it was quite simple, something alone the lines of:

“Develop something. Anything. Show it off to friends and to developers. Get the feedback they give you and insert it into your development process. Improve and expand what you’re doing. Keep doing it and eventually you should pick up the interest of someone willing to hire you.”

When I heard that, it was like I was shot with a diamond bullet. It was simple, brilliant and elegant. If you want to become a professional game developer, just develop games until they are good enough to spark interest.
I finally had what I needed: a plan.

And boy did I take that plan seriously. I took it for granted in every sense of the word. I bought dozens of books to develop my projects. I setup time during my college years to develop my projects. I gave up on academic scholarships with my professors so that I could focus on my projects.

Everything evolved around them. If I had free time, projects. Vacation time, projects. Weekends, projects. Time in between classes, projects. I became obsessed with it as some of my colleagues probably noticed, but to me it was a chance.

In some ways I felt it was my only chance.

Now these projects they were simple, crude, unfinished and lacking any real polish, but by god I worked on them. I re-wrote the Solis engine and editor so many times I grew used to it. I remember during my late night coding sessions taking the conscious decision on developing the entire Solis scripting language and interpreter. I said to myself “I guess during an interview process, this should impress someone”.

And it did, for I was asked to explain it during my on-sight interview at Microsoft, in Redmond. Two weeks later, I got the e-mail saying I go the job.

Thus here I am saying that the plan worked. Of course I owe to my family and friends for their support during those years, but in some ways, I wanted to say thanks to Gabe N. A long time ago, in a forgotten interview, you showed a young Brazilian a way to get things working.

And they did. Thanks.

I saw my grandmother, who’s been learning to play the piano for a few months, play for the first time. I was the first person, besides her teacher, that heard her music.

And it was magical. It filled me with so much joy and pride that I don’t know how to put it in words… here is a lady, that’s been through hell and fire, playing this soft piano music…

And it hit me like a diamond bullet… It made me realize that things change. That people change. That things do get better eventually. When she finished I had no idea of what to say…

So we just hugged, laughed and cried.

Because you never need words after a nice song.

The funny thing is that it creates in my mind a sort of union between the band I was hearing and the game I played. Also, since I traveled a lot due to my father’s career, these games and songs also marked the place where I stayed.

So whenever I listen to that band or play the game or hear a conversation about a place I visited I remember the other two. It’s gives me a good nostalgia sensation that I love. Here’s a list that I managed to remember:

Middle school in Rio

• Lufia 2 — Queens Greates Hits Vol. 1 and 2.

• Final Fantasy 7 — Queen Live at Wembley

• Chronno Trigger — The Cranberries Bury the Hatchet

Falls church in Washington D.C.

• Day of Defeat (Half Life Mod) — Pink Floyd Echoes

• Halo — Pearl Jam’s ten

College years in São Carlos

• Gradius V and Breath of Fire 3 — ExtraLife Radio Podcast

• Okami — The Doors discography