Greedy Goblin

Monday, April 23, 2012

Reprocessing/producing: split them!

Let's say that 1 tritanium cost 6 ISK on the major hub in your zone. You find an item for mere 1 ISK on the market that you can reprocess for 10000 tritanium. Then you craft an item from that 10000 tritanum and sell it for 40000 ISK.

What is your overall profit? 39999 ISK

Are you a smart businessman making good profit? Absolutely not!

Every operation must be split into parts. A part can be any creation of an item from another (or from farming). The part should be defined in a way that it cannot be split into smaller parts which has a price tag on the market.

The example above has three parts, the first is getting the item below market price. The item has the running price of 40K, so picking it up for 1 ISK has 39999 profit. The second part is reprocessing the ISK item (20000 ISK profit) and the other is crafting the second item (-20000 ISK profit). Now it becomes obvious that the third part must be forgotten and the tritanium must be sold. If the item would have 70K running price, than the profits would be 69999, -10000, -20000, making reselling the item the best choice.

The ship manufacturers forget this now in masses, selling their ships on prices calculated from old material prices, often below current material prices. They should recognize that in the changing market holding materials is an operation itself (investing) and they shall either resell the materials on the new price or craft only if the crafting itself is profitable (calculated from running price).

Don't forget time! Neither your own worktime, nor the profit rate of your capital. For example if you work for 100M/hour, then buying an item for 10M in Rens, flying it there in half an hour, selling for 20M and flying back in another half an hour looks 10M profit, but actually it's -90, assuming you could do your normal 100M/hour activity instead. If you couldn't then your work does not worth 100M/hour. Picking up an item from a buy order and resell it for 10M more takes like 10 seconds and I often do such things, but it doesn't mean I have 1M/sec = 3.6B/hour income. My average must be calculated.

Buying 1B worth of item, saving the transport time by setting up a courier contract for 10M and selling it for 1.1B is not 90M profit if you had to wait a whole day for the courier, even if you could do something else. If your average profit rate is 5%/day, then waiting for the courier cost you 50M. Maybe you should have given a large tip to speed it up or run it yourself.

So, don't let the nice overall profit fool you, analyze every step on its own, probably half of your operation parts are on loss or pitiful profit. Cut these out and enjoy the large profits of the good parts.

EVE Business report: Saturday morning 10.5B (2 PLEX behind for second account, 0.1B spent on Titan project)
Sunday morning 11.3B (2 PLEX behind for second account, 0.1B spent on Titan project)
Monday morning 11.9B  (2 PLEX behind for second account, 0.1B spent on Titan project)
Last Monday my report was "9.3B (3 PLEX behind for second account, 0.1B spent on Titan project).", so in the last week I earned 3.1B. Missing a day and locking 1B into slowly selling items taxed my income, but it's still almost a PLEX every day.

Remember that you can participate in our EVE conversations on the "goblinworks" channel (60-80 people on peak time) and your UI suggestions are welcomed.

I also seen a great player initiative: Save Jita! However I have doubts as the griefers are already considering their ships lost, so shooting them down won't make much difference.


Alkarasu said...

Shooting yes, but denying them kills must. The only problem is that the way they intend to do it, there are very little one can do to stop them (unless CCP will allow to POS-shield gates and stations in Jita). In fact, that would've been pretty interesting improvement, to allow players to pay special tax, that will, if the amount collected is right, place forcefields around system gates and stations for a certain period (in fact, there are already many station fees that can be considered for such a purpose). That way it will be significantly harder to lock down a major trade hub, while leaving most of other hisec space the way it is now.

Foo said...

Point interested readers in the direction of where to learn more about your topic of the day. Eg Wikipedia's Opportunity costs and other Marginal Concepts.

This was a useful lesson, worthy of repeating. However calling the terms for what they are; and even better where to find out more encourages those capable of learning more to do so.

Stabs said...

@ Foo people don't really need to do background reading to see why making a ship that sells for 4 isk per trit is a bad idea when trit sells for 6 isk.

Regarding the Save Jita crowd I find it hilarious that it's being orchestrated by high sec war dec corp More Tears. These guys are asking people in high sec to help them stave off Goons so that they can go back to canflipping and wardeccing us in peace. No thanks!

Monkeytroubles said...

I have found that Jita sell prices tend to be higher than mineral costs for most items, and sometimes even jita buy prices are higher than those mineral costs (I assume the many market-optimizing goblins in Jita are responsible).

If dealing with low volume items, reprocessing rarely makes much sense if you can just fly them to jita (ships and other high volume stuff are a different story).

Reprocessing a whole hangarload of low meta junk is, on the other hand, time-efficient. But one ought to know that this time-efficiency usually has a cost.

Aureon said...

Thing is, 'nados are ill-tanked, especially if intending to suicide.
Sniping fleets and smartbombing domi's can clear the gates without too much hassle.

Goons are rich? Trader/industrial corps are rich, aswell. people in my ~50man corp have been upping a grand total of 50b for a "war budget" apt to suicide some stuff on goons in jita.

Aureon said...

*Meh, missclicked Go.

The only problem is actually finding manpower to shoot them down: if they've got 28k tornados and assorted stuff for wardeccers, it can get problematic. ~1000 goons, with ~30 ship per head.. is a LOT of kills to be done before they go away.

MoxNix said...

I plan to be there on a brand new alt with a hundred or so vigils fitted for ninja salvaging.

It doesn't take very long at all to skill up an alt with decent navigation, salvage and capacitor skills. 2-3 days to get them all to 3 and another two days gets you salvage IV.

Fit a vigil with 3 salvagers, MWD, 2 cap rechargers, 3 nanofibers, 2 cap recharge rigs and 1 semiconductor memory cell and you have small, cheap (under 2 mil ISK), fast (3300+ m/s) little salvager.

Anonymous said...

I think the easiest way to discourage the goons event is to not show up for it. Simply take a couple days off. The most effective players to do this would be industrialists that would otherwise buy the goons resources that they will be bringing to market.

This would work because there would be no financial incentive for the leadership. And the rank and file members would be bored out of their minds gate camping if nobody shows up.

A viable mechanic to prevent further events could be shared security status among fleet, corp, and alliance mates. If you are fleeted with someone who agresses the whole fleet gets flagged and takes the same security standing hit. It'd be best to make the negative standing hits scaled to the level of connection, so that if the aggressor gets a -1, his fleet mates would get a -0.75, Corp mates get a -0.5 and Alliance mates get a -0.25. Those ratios and values are just for example but you get the idea.

Buggrit said...

In your time per hour for travel calculation, you're assuming travel time as lost. Sometimes I just set something up and let it go, then do something else.
After a while I go check and sometimes its been there for a while already.
(don't you get ganked? No - tank and making it not worthwhile)