As virtual fantasy worlds go, Blizzard Entertainment's Diablo III is particularly foreboding. In this multiplayer online game, witch doctors, demon hunters, and other character types duke it out in a war between angels and demons for control of a dark world called Sanctuary. The world is reminiscent of Judeo–Christian notions of hell, complete with fire and brimstone and the added elements of supernatural combat waged with magic and divine weaponry.

But between February and May 2013, various outposts in the world—Silver City and New Tristram, to name two—had more in common with Berlin in 1923 or Zimbabwe in 2007 than with Dante's Inferno. The culmination of a series of unanticipated circumstances—and, finally, a most unfortunate programming bug—produced a new and unforeseen dimension of hellishness within Diablo III: hyperinflation.

This chapter is outlined as follows: I begin with a literature review and exposition of the concepts of inflation and hyperinflation within the ambit of virtual economies—including a review of the means by which virtual monetary policy is conducted. I then briefly describe the method used to analyze the case of Diablo III. Finally, I offer a full account of the hyperinflationary saga.

AUSTRIAN ECONOMICS, INFLATION, AND HYPERINFLATION

In orthodox economics, the term “inflation” is used to mean a general rise in prices. In this chapter, though, we use the term in a different and more useful sense. The Austrian economist Ludwig von Mises (1924) described inflation as an increase in the supply of money in excess of the demand for money (that is, an increase not “offset” by an increase in the demand for money), resulting in the reduced purchasing power of money. Price increases are thus a direct result of this process, not its essence. From a practical perspective, as Henry Hazlitt (1964) wrote,

The online game EVE Online is of interest to scholars from a wide range of academic disciplines in addition to those concerned with the specific topic of video games as such. That is because the nature of the game and its setup, together with the deliberate policy of its creators, CCP Games, has brought about a complex and evolving emergent order. The phenomenon of emergent or spontaneous order is very important for several disciplines but in this case, the details of the order and the paths the evolution has taken are relevant for several important debates in a number of disciplines. In particular, EVE Online casts light on questions about the ability of rational choice to give a convincing account of the evolution of political orders, the value of Hobbesian state of nature models, and questions about the dynamics and stability or otherwise of interstate systems—to mention just three.

EVE Online is perhaps the best known and most widely discussed example of the genre of massively multiplayer online games (MMOGs) (Achterbosch, Pierce, and Simmons, 2008). This is despite its having far fewer subscribers and active players than some other MMOGs, such as World of Warcraft for example. EVE has appeared on major mainstream news outlets such as the BBC and has already become the topic of a scholarly literature (BBC, 2013; Carter, Bergstrom, and Woodford, 2016). Interest from mainstream media reflects distinctive features of the game, such as its single server and the lack of prohibitions against conduct that would be considered “grieving” and lead to barring in almost all other games (Evans, 2010). This results in spectacular scams and acts of betrayal and, most notably, massive armed conflicts in the virtual world of EVE, the best known of which destroyed capital assets worth $300,000 in real money (Moore, 2014). The scale of these events is what attracts the popular attention. The scholarly interest has two foci. One is the way in which the game is different from others in terms of its organization and the degree of control exerted by the designers as well as in other ways. It is thus an example of a different kind of online game to the normal or typical models. It is therefore of interest to those concerned with the internal logic, nature, and development of the genre of virtual worlds.

Harish Hande, the founder of SELCO, was my senior at Indian Institute of Technology (IIT) Kharagpur. Our paths crossed a decade later when I learnt that Harish, having completed his PhD, was building an organization that would provide solar lights to poor villagers in his home state of Karnataka. I travelled with him in upcountry Karnataka and saw first-hand how the lack of access to energy created challenges in the lives of villagers and how the work that Harish was planning to do was a lifesaver for them. Having grown up in a town and later staying in a city, I had little familiarity with the life in villages. I had never seen as much darkness in my life as I witnessed in those villages at night. Harish was lighting up their lives. I came back awestruck and inspired. But I did not fully comprehend what Harish meant when he said he would create a business where he would sell solar lights to the villagers. Looking at their economic conditions, I could not imagine how the villagers were going to pay Harish. Should he not raise funds from charitable institutions and just donate these lights, I wondered.

After I joined Indian Institute of Management (IIM) Bangalore as a faculty member, I focused on researching about Indian multinationals competing in international markets. While I continued to follow Harish's and SELCO's journey with admiration, it was quite distant from what I was teaching and researching as an academician. Around 2007, at an international conference in Bratislava, I met Sahba Sobhani from the United Nations Development Programme (UNDP) who explained to me the concept of inclusive markets and gave the example of SELCO. Sahba was looking for academics who could write case studies on organizations that created inclusive business models. Suddenly, I remembered what Harish had tried to explain to me almost a decade ago – how it was possible to address the needs of the poor by building a financially sustainable business – and things started to make sense.

I told Sahba that I would write a case on SELCO and I started my research in this domain.

In this chapter, we talk about the evolution of International Development Enterprise (IDE), a not-for-profit organization working in rural Nepal, and the impact that its various development initiatives have had in improving the socio-economic conditions of smallholder farmers. IDE raises funds from donor and philanthropic agencies and utilizes them to develop smallholder communities by creating livelihood opportunities.

IDE in Nepal evolved from being a supplier of technology for irrigation and water storage to becoming a critical enabler of a smallholder ecosystem that was sustainable and scalable. While the context of this case is rural Nepal, the socio-economic conditions of smallholder farmers are not very different from that of India and many other emerging nations where the lessons learnt from this case can be replicated. The advantages of developing and empowering economically underprivileged communities are well known. This case demonstrates the process of creating such communities and making them self-sustainable. It also highlights the critical role that various stakeholders, such as the government and development organizations, can play in enabling such communities to overcome their vulnerabilities.

IDE Nepal is one of the few cases in this book dealing with a not-for-profit organization. IDE by itself is not an example of an inclusive business model unlike most other cases described here. However, it enables the creation of inclusive businesses that is essential for developing and sustaining the smallholder ecosystem. IDE's case also helps us to understand the different ways in which a not-for-profit can create value for economically underprivileged communities when compared to inclusive business models. This is a theme that we will visit in greater detail in the concluding chapter of the book.

EVOLUTION OF IDE NEPAL

International Development Enterprise (IDE) is an organization that operates in 11 countries worldwide with the aim of creating income opportunities for poor, rural households in developing countries. Established in 1981 by a group of North American social entrepreneurs, IDE provides the rural poor in Asian and African countries with low-cost access to water for agricultural use and links them to markets so that their agricultural products can be sold profitably.

INTRODUCTION

This chapter turns the reader away from the discussion of video game monetary economics to a broader issue: video game business strategy for MMO game companies. Instead of asking how video game economies work, here we look at how video game companies manipulate both their internal capabilities and their external industrial environment to increase their competitive performance. At the end of the day, a video game company is usually a for-profit firm like any other, looking to increase its financial performance through business strategy (Gidhagen, Ridell, and Sörhammar, 2011).

Scholars have not closely examined the best competitive strategies that platform-based firms use to cope with competitive pressures from user-generated content (Bogers and West, 2012). Sometimes user-generated content increases revenues by increasing overall platform usage, but other times it can decrease revenues by cannibalizing the core product offerings. This chapter uses transaction costs theory and the literature on the informal economy (Godfrey, 2011; Chen, 2005) to analyze MMO firm strategy. Three MMO mini-case studies on Rage of Bahamut, Minecraft, and Dota 2 address why MMOs face a “facilitate or acquire” decision for management of user-generated content.

Gray markets are a fascinating, and yet under-theorized, phenomenon (McGahan, 2012). Often confused with black markets, gray markets are places where humans conduct “socially legitimate” economic transactions but with little regard to existing formal (legal) business institutions (Webb et al., 2009; Chen, 2012; Maloney, 2004). Black markets deal directly in goods and services deemed socially irredeemable, whereas gray market actors’ productive and exchange activities contribute positively to welfare. Each gray firm, no matter whether an individual, an ad hoc group project, or an organization, chooses grayness to achieve some goal while also avoiding costly institutional obligations and legal formalities required of white firms.

Gray firms may thrive if the costs of institutional formalization exceed the benefits. Gray transaction types are diverse, including conducting “handshake” informal agreements, impromptu bartering, using peer production in “common” spaces (Benkler, 2002), the used product aftermarket, and parallel markets—a business model that cheaply resells legal goods through informal trade networks to bypass official marketing channels, arbitraging local price differences (Lindauer, 1989). The most common gray firm in the world is probably an “under the table” service worker in the household-to-household economy, such as teenagers who do small amounts of yard work and childcare (Chen, 2005).

Diablo II is a noteworthy game for a variety of reasons: it was a tremendous commercial success, one of the bestselling titles of its era, and along with contemporaneous MMORPGs, its online mode was among the first game environments to generate gray markets for in-game goods and the associated commercialization of “gold farming” (although in Diablo II's case, this is quite a misnomer). When it comes to political economy, however, it deserves a place of particular distinction because its virtual economy evolved in a distinct (and far more interesting) fashion than many of those in MMOs—a process related only indirectly to its associated gray-market item sales denominated in “real-world” currency. As became quickly evident to individuals joining the online player base, Diablo II's nominal in-game monetary unit did not function effectively as a medium of exchange for player transactions. With this default option proving nonviable, and no obvious alternative available, players looked to barter one item for another rather than acting as buyers and sellers of goods valued in monetary terms. From this initial situation in which, in the absence of a monetary unit, players fell back on barter transactions, the course of the game's history shows a gradual transition toward the use of an increasingly sophisticated system of commodity money. Diablo II's monetary standard is one remembered with sufficient fondness that the economy in one of its present descendants (Path of Exile) was designed to replicate it.

Diablo II is a case study of great interest for monetary theory, first of all because it provides a set of observable circumstances in which monetary exchange emerged from a barter economy. We can therefore use it to assess competing claims regarding what preconditions, if any, are required for the emergence of monetary exchange, and of the degree of correspondence between the properties expected of an emergent monetary commodity and their mapping into the game's environment. This allows us to evaluate the accuracy of theories regarding the mechanisms at work in the process of monetary emergence. More general questions can be asked as well regarding the institutional environment in which exchange in Diablo II took place and the relationship between these institutional features and the successes—and shortcomings—of the game's economic interactions.

While close to 62 per cent of India's 1.3 billion population lives in villages, agriculture contributes to only about 15 per cent of India's gross development product (GDP) (Plecher 2020). Even though a significant part of the rural workforce is involved in non-agricultural activities, such as services and trading, rural India is unable to generate adequate employment opportunities for its workforce, resulting in high rates of unemployment as well as disguised unemployment. Any such adverse statistics are more unfavourable for the female population than the male. For example, while the employment-to-population ratio for rural male was 51.7 per cent in 2018, it was a mere 14.2 per cent for women. This results in large-scale migration of the youth from villages to cities in search of jobs. Given the conservative nature of India's villages, it is very unlikely that parents of young women would allow their daughters to go to cities on their own in search of jobs. Therefore, while educated men from Indian villages often have the option to migrate, educated women can only search for employment opportunities within their villages until they get married. Their inability to find suitable livelihood opportunities not only acts as a dampener for parents to educate their girl child but also perpetuates the idea that the only responsibility of the parents of girl child is to get her prepared for marriage, which, therefore, should be conducted as early as possible.

With a total revenue of USD 28 billion, India has a thriving business process outsourcing (BPO)3 industry that employs about 1.1 million people (Talgeri and Singh 2018). Almost all such BPO organizations are located in big cities, such as Bengaluru, Gurugram or Pune. Apart from the ready availability of English-speaking educated youth, these cities provide the suitable physical infrastructure that is essential for running such a business.

RuralShores is a BPO organization that wanted to change this urban-centric model and set up operations in rural India. It intended to create employment opportunities for the rural youth close to their villages to prevent their migration to cities. It was established in 2008 and three years later, it operated 10 centres across seven India states and provided employment to over 1,000 rural youth. The following sections describe how it established its business, the impact that it created and the challenges that it confronted on its way.

Microfinance, or specifically microcredit, comprises lending small quantities of money to the poor to address their entrepreneurial or personal financing needs. In developing countries like India, the poor do not usually have access to formal sources of credit, which prevents them from undertaking any entrepreneurial activity that has the potential of increasing or diversifying their income. Microfinance can be considered as the poster child of inclusive business models, thanks to the pioneering effort of Muhammad Yunus, who, in 1983, established Grameen Bank in Bangladesh that showed the world that it was possible to build a profitable bank whose sole purpose was to provide micro-loans to the poor.

THE GRAMEEN BANK MODEL

Yunus, a professor of economics at the Chittagong University in Bangladesh, realized that small loans could have a significant positive impact on the lives of the poor during his visit to the nearby village of Jobra. There, he met poor women who were involved in making bamboo furniture. However, since they did not have access to formal credit, they needed to take loans from moneylenders to buy bamboo, the raw material. The moneylenders charged them such exorbitant rates of interest that the women could hardly make any profits and continued to remain poor. Yunus lent USD 27 to 42 such women, which resulted in them earning profits from their businesses for the first time. This led Yunus to investigate the systemic problems that resulted in the poor's inability to get formal credit and what could be done to overcome those problems.

There are several problems that prevent a poor person from getting credit from formal financial institutions, such as a bank. The poor usually do not have assets that they can pledge to the banks as collateral, nor do they have any credit history for the lender to rely on. Therefore, they are viewed as high-risk borrowers. Moreover, the loans that they need are typically of small denominations, which implies that the income that the bank can earn from the interest on such loans was meagre, compared to the transaction costs that the lender would incur in evaluating the borrower or for processing the loan. This compels the poor to borrow from informal sources, such as friends and family members, and, very often, from moneylenders.

There are 1.5 million schools in India catering to 250 million students. Eighty-five per cent of these schools are located in rural India and 75 per cent of them are run by the government. However, the share of students going to private schools has been steadily increasing and the 25 per cent of schools that are run privately cater to little less than 50 per cent of students (Majumdar 2018; Nambissan 2012). While in developed countries, private schools typically cater to students from rich households, Indian private schools cater to students coming from a wide economic background, such as children of migrant labourers to those of company CEOs and rich businessmen. Low-cost private schools are a set of schools that cater to children from low-income households. They are often run by individuals from their homes, charging fees that are lower than those of government schools and sometimes even lower than the minimum daily wage, as earned by the parents of these children. It is unofficially estimated that about 92 million children are enrolled in about half a million low-cost private schools in India.

The need for such low-cost private schools that can educate children from poor households is likely to grow in India, given (a) the large-scale migration that continues to happen from villages to cities; (b) failure of the government to expand its schools in urban areas to keep up with the pace of urbanization; and (c) poor public perception of the quality in government schools. Migrant labourers typically settle in slums in the cities, places that are characterized by poor infrastructure, high population density and lack of basic amenities. Eijipura in Bengaluru, purportedly the largest slum in the city dubbed as the Silicon Valley of India, is an example. It has 10,000 school-age children living within an area of 7.5 square kilometres. If one has to follow government regulations regarding minimum space that is required to set up a school, only two schools can be established in this area, which can cater to a maximum 2,000 children. Therefore, the need for the 8,000 remaining children can only be fulfilled by low-cost private schools.

Close to 90 per cent of India's working population belongs to the unorganized sector, people who are typically poor, consumption deprived and socially vulnerable. During the last two decades, even while the number of people below the official poverty line has reduced, the number of people consuming less than INR 30 per day has increased within the informal sector. A majority of people working in the informal sector are rural migrants who come to the city in search of livelihood because of dwindling opportunities in the villages. India's sprawling cities are able to absorb many of them because of the booming construction sector as well as an increasing tendency among Indian corporations to outsource their non-core activities. However, in the cities, the migrant labourers face hostile conditions and the wages they receive are grossly inadequate to make ends meet. Thus, if India wants to solve its poverty and inequality problem, it needs to squarely address the needs of informal sector workers. LabourNet, a for-profit social enterprise, is trying to address these needs. M. Gayathri, the Managing Director of LabourNet, noted,

ORIGIN AND EARLY DAYS

The roots of LabourNet lay in MAYA (Movement for Alternatives and Youth Awareness), a Bengaluru-based NGO founded in 1989 with the intention of dealing with the problem of child labour. MAYA wanted to send children working in the streets back to school and its founders along with volunteers spent the next several years spreading awareness among children, youth and communities about the evils of child labour and enrolled working and street children into non-formal education schools.

Consider the practice of storytelling—a deliberate human contrivance where a storyteller consciously guides the listener through a series of events, introducing characters and places, usually with the intent to convey a moral lesson or elicit certain thoughts and emotions. In many stories, especially in more traditional media such as novels and films, the design of the narrative is paramount because it is the only explicit source of the audience's knowledge. Seen in this light, video games provide a fascinating case study of spontaneous orders in narrative: players possess a unique ability to interact with the game space, the game's creators, and other players, and this can fundamentally change how stories are created and experienced. Even in cases where consciously designed stories exist, the narrative that instead arises out of player actions and interactions is often the more interesting and enduring one for gamers themselves. In this chapter, I explore the idea of spontaneous order in games. I argue that early video games had mostly spontaneous narratives due to hardware and software limitations; however, this emergent quality was gradually replaced with more structured, on-rails narratives of increasing complexity. Nevertheless, in the past decade especially, there has been a resurgence of interest in the spontaneous generation of narratives, which many argue provides a nearly infinite richness not achievable through conventional story structures. More spontaneous games create “stories” that, as Adam Ferguson said of spontaneous order in general, are the “result of human action, but not the execution of any human design.” I also argue that the video game medium is particularly well suited to this kind of interactive storytelling, giving it a unique place among artistic media.

SPONTANEOUS ORDER?

Among Adam Smith's many contributions to economics is the idea of market participants being led “as if by an invisible hand” to increase the welfare of all members of society (Smith, 1776; Rothschild, 1994).

This case describes the evolution of Vaatsalya Hospitals – a network of hospitals, set up in small towns and cities in the southern Indian state of Karnataka. In India, good quality healthcare services are mostly provided by private hospitals that are located in large cities and focus on tertiary care. Nearly 800 million Indians living in semi-urban and rural India have little or no access to high quality healthcare services at affordable prices. Vaatsalya was founded by two doctors, Dr Ashwin Naik and Dr Veerendra Hiremath, in 2004 to fill this gap. They decided to provide good quality primary and secondary healthcare to semi-urban and rural India by setting up a network of low-frills and low-price hospitals. In their four-and-a-half years of operation, Vaatsalya established nine hospitals across seven districts in Karnataka, created a capacity of more than 450 beds and treated close to 175,000 patients, making it the largest chain of its kind. The case describes the various challenges that Vaatsalya faced and the different ways in which it overcame them in the process of establishing a financially sustainable business model.

STATE OF HEALTHCARE IN INDIA

The inadequacies of the Indian healthcare system cause 1 million Indians to die every year and leave 700 million without any access to specialized care. While more than three quarters of the Indian population lives in villages and small towns, 80 per cent of specialist doctors are located in urban areas. As a result, patients from semi-urban and rural India are forced to choose, more often than not, between the local unqualified practitioner and the free treatment provided at the nearest government-run hospitals that are characterized by poor quality equipment, unhygienic conditions and perennial absence of appointed doctors and hospital staff. A survey of government-run healthcare centres revealed that there was a high rate of absenteeism among doctors (43 per cent), nurses (40 per cent) and pharmacists (30 per cent) (Muralidharan, Chaudhury and Hammer 2011). Likewise, researchers found the infrastructure in Indian healthcare facilities to be more deficient than that of many countries in sub-Saharan Africa, which are poorer than India (Bajpai 2014).

As and when patients realize that neither of these two options – the local quack or the government hospital – is going to provide them with the necessary cure, they undertake long journeys to reach hospitals in big cities.

According to the Indian census in 2011, 81 million households in India suffered from energy poverty, of which 71 million were in rural India. Energy poverty is defined as households having less than adequate consumption of energy, using a polluting source of energy or spending excessive time in collecting fuel. While the Government of India took an aggressive target of connecting every Indian village to the grid and declared in April 2018 that, with the electrification of Leisang village in the state of Manipur, India has achieved 100 per cent rural electrification, connection to the grid did not imply that households in a village had access to electricity. A village was declared electrified if 10 per cent of the households could access electricity along with public institutions, such as health centres and schools. Hamlets and the residences of poor households were not considered in this calculation. Thus, even if a greater number of households might have obtained access to electricity post the 2011 census, a significant part of rural India and considerable part of urban India continue to have unreliable and intermittent access to electricity, if at all. Dr Harish Hande founded SELCO in 1995 to sell solar lights to the poor with a belief that access to solar energy would significantly improve the productivity of rural households. By 2010, SELCO had sold solar lights to more than 120,000 rural homes and 4,000 institutions, such as orphanages, clinics, seminaries and schools, in the state of Karnataka. Additionally, through its partnership with the Self-Employed Women's Association (SEWA), it had provided energy-efficient cook-stoves and solar lamps to another 80,000 poor consumers in the state of Gujarat. In this chapter, we look at how SELCO evolved as an organization, the various challenges it faced along the way and the unconventional ways by which it overcame them. We end the chapter by discussing what may be some of the lessons that social enterprises can learn from SELCO's journey.

THE EARLY DAYS

Harish got the idea of bringing solar lighting systems to rural India when he was doing his PhD on sustainable energy at the University of Massachusetts in the USA. During a field visit to the Dominican Republic, he was surprised to find poor villagers using solar lighting and reasoned that if it was possible there, he should be able to bring solar lights to the rural poor in India too.