Spending Money

Gold sitting in your bank is not doing you any good.  But Honus, you say, "I can do all kinds of things with my gold.  I can buy that mount I want!  I can buy that rare pet, or buy better armor for my alts!"  Well, go on and do that then.  I'll wait for you to get back.

Got that new ride?  Sweet.  The gold still sitting in your bank is doing nothing for you.

You can use gold for quite a few things.  Some of those things advance your character, either in power, prestige, or vanity.  Whatever you feel is worth spending gold on is fine.  You should do whatever makes you happy with your gold.  But if you're looking to make more gold, you're not going to do it by just sitting on your stockpile of gold.  It doesn't matter if you have 1,000g or 1,000,000g.

In the real world, if you put your money in a bank, you generally earn interest.  The interest rates on CDs and savings accounts are currently abysmally low (talking less than 1%).  But you still do earn money on them. No such thing exists for WoW.  Your gold in your bank doesn't earn interest.  It doesn't do much of anything, other than being there when you want to spend it.

Another concept that's important is inflation.  100g in Vanilla could buy a lot more compared to 100g in MoP.  It was also much harder to come by that 100g in Vanilla.  You'd have to go out and farm herbs or ore or cloth or even gold itself to get it.   In MoP, do 3 or 4 daily quests, and you're done.

All of this to say: You have to spend money to make money.  The more you have on the AH, or available to sell (immediately, or when the time is right), the more you're going to make.  Exactly how much of your gold you should have tied up in items to sell is hard to put an exact figure on.  If you're gold capped (or more), you may have a hard time having more than 20 or 30% of your wealth in items (maybe not, depends on your server).  If you have significantly less, you'll likely be able to have the majority of your wealth in items.

A few things to keep in mind:

1. Always have enough gold (or materials) around to fund whatever your main objectives outside gold making are.  If you're a raider, that means always having flasks, potions and possibly buff food.  Always have money for repairs.
2. Do your research before you buy anything.  The Undermine Journal is always a good resource, but there are many more.
3. Take risks.  The greater (educated) risk you take, the greater rewards you are likely to reap.
4. Don't spend more than you're willing to lose.  When you take risks (which you need to be doing), you're going to lose occasionally.  Maybe one day I'll tell the story about my massive Runecloth stockpile.  But I digress.
5. If you see an opportunity, take it.  Even if it's a stretch.  

In short, don't be afraid to spent a lot of gold. You'll earn it back, and you'll earn more than if you don't make bold purchases.  Fortune favors the bold.

Ethics and the Economy

Most of the time, ethics doesn't cross my mind when buying and selling on the auction house.  As far as WoW goes, I live by caveat emptor.  Let the buyer beware.  I'm not going to get into real life politics too much, suffice to say in the real world, a market ruled by caveat emptor alone is a really, really bad idea. 

In WoW, it's a much different story.  No one can come to personal or financial harm as a result of auction house transactions.  Well, mostly.

Before I continue, please keep in mind I'm only referring to the auction house, and to gold only transactions.  I would strongly advise you to NEVER get involved in any transaction that involves real money (TCG codes, Blizzard store pets/mounts, game time, etc).  Also, if you buy anything out of trade that seems too good to be true, it probably is.  So three rules:

1. Only pay gold for something that can be traded in the trade window, and even then, be careful.
2. Don't do anything against the ToS, or that involves real money in any way.
3. If it seems too good to be true, it probably is.  Walk away.

Buying from the AH is almost always fine (from Blizzard's standpoint).   Outside the AH, you could run into issues.  Follow the above three rules, and you'll probably be fine.  With the disclaimers out of the way, let's get to the meat of the issue. 

If you buy a item, or number of items for a ridiculously low price, it's generally for one of 4 reasons:

1. It was a typo.  Unfortunate for them, but they'll learn the lesson, and probably not make that mistake again.  
2. They're clearing out their bank. They might prepping for quitting the game, getting out of buying and selling on a regular basis, or a myriad of other reasons.  They're purposely selling stuff really cheap.
3. It's a hacked account.  Someone's account was hacked by a third party, said third party is selling all their stuff, then probably selling that gold for real money.  They'll sell as much as they can, cheaply, because they want the gold off the account before Blizzard or the account holder figures out what's going on, and the account gets locked down.
4. It's materials from a gathering bot.

Obviously in case 2, there's no ethical issue.  In case 1, there might be an emotional or courteousy issue.  There's circumstances under which I could see myself returning the item (assuming they refund me whatever I paid for it).  Rare circumstances mind you, as I can be heartless, but I'm not completely so.

Cases 3 and 4 are tough to determine.  It's hard to know for sure if it really is a hacked account or from a bot.  It could be case 1 or 2.  It can be case 1 even if it's a lot of items; they may have typo'd in an auction mod and just didn't notice it.  The more familiar you are with the game and auction house, and the economy on your server in particular, you start to have a better feeling for when it's a hacked account or bot.  Still not ironclad, but odds are you have a pretty good idea.

This is where the issue of ethics comes up.  Hacked accounts are not good for the affected individuals, nor the community as a whole.  It's ultimately bad for the economy, and hurts people that are legitimately gathering by driving down prices. Bots are also bad for the economy (at least everyone besides the botter), for the same reason.

So let's say you're reasonably certain the items in question are botted or from a hacked account.  Do you buy them?  Why or why not? 

Your competitors will probably buy them.  The buyer might not even be buying for crafting mats or resale.  They may just be leveling a profession.  There will definitely be at least one person that won't even consider the ethics of the situation.  But will you?

It's hard to say if there's a right answer.  If it could be answered on a macro or community basis, I think the consensus would be that no one should buy them.  It would make bots useless (they couldn't sell the mats, at least in great quantity as they'd risk detection).  Hacked accounts would be somewhat less valuable (besides the gold, which is obviously liquid), which could lead to fewer compromised accounts.

Just some things to think about.  If you persist in the gold making business, odds are this situation will come up eventually.  Make the choice that you'll be comfortable with, even if it means less gold in your pocket.

Georgophobia

That's the fear of farmers.  Couldn't find a term for fear of farms/farming, so here we are.  A ham-handed attempt at being clever.  So, what's this all about?  Hint: It's not just about the Tillers!

Time is Money, Friend!

For many of us in the gold making business, we don't head out in the world to advance our ventures.  Often, we have alts camped at specific places, log on to them to craft, harvest and replant at our farm, do profession cooldowns, and buy and sell at the Auction House.  Were they living, breathing beings, they would be miserable.  Only doing a couple of set tasks every day, running back and forth to the same spots, joints aching from repetitive motion...But I digress.

There's a reason for this, and best best way to explain it is: "Time is money". The activities listed above generally provide the more gold per hour than farming (of any kind).  And gold per hour is really what you want to concern yourself with, because it takes into account both the gold you earn, and the time you spend to get it.

Time is a scarce resource.  Meaning, there's only so many hours in a day you can play WoW.  In theory, that limit is 24 hours a day.  But that's unrealistic, not to mention unhealthy.

Plants versus Metals

Let's compare 2 actual activities.

Activity A:  Tillers farm plot.  I plant harvest and plant herbs every day.  It takes roughly 5 minutes.  Harvesting yields about 5 Golden Lotus, plus 35 other herbs.  Golden Lotus is currently about 55g on my server, and the other herbs about 1g each.  That's a total of 310 gold.  A Bag of Enigma Seeds costs 27g (with the guild perk), has 10 charges.  2.7g per charge, 4 charges per day, is 10.8g.  So in about 5 minutes, I make ~300g, which is 3600g per hour.

Activity B: Ghost Iron Ore gathering.  Let's say you can gather 30 stacks of Ghost Iron Ore per hour.  30 stacks x 20 per stack x 3g each is 1800g, so that's 1800g per hour.

So Activity A nets you double the gold per hour that Activity B will.  But wait you say!  Activity A only earned me 300g, and Activity B would earn me 1800g!  But if you did both activities for the same amount of time, you'd get double the gold from A than you would from B.

In this particular example, you can't harvest and replant your Tiller's farm for an hour on a single toon.  You can only do it once, then wait until the next day.  But, if you had 12 toons with 12 farms, you could. However, that's unrealistic for most players.  Still, the point stands.  Tiller's farm harvesting is much more profitable per hour compared to Ghost Iron Ore gathering.

Ok, So What Now?

Let's take this to a practical level.  Every day, you'll need to spend time listing (and probably cancelling) auctions.  That's what is going to drive your gold making.  You'll want to use whatever methods you can to limit this time, but it's always going to be greater than zero.

Figure out how much time you have to spend on making gold.  Subtract the time you'll spend at the auction house.  You'll want to spend the amount of time you have left on the most profitable activity possible.  Right now (Patch 5.4.1), that is likely going to be Tiller's Farm on as many toons as possible, plus "other time".  Consider all the activities you can make gold doing, and figure out which makes you the most gold per hour.  That's the activity you should be doing during that other time.  It could be gathering ore, it could be searching the auction house for cheap deals.  It might even be reading blogs or looking at the Consortium. The best thing to do will vary by server, your professions, amount of time you have, and maybe even other factors.  What might be right for you, may not be right for some.