Greedy Goblin

Thursday, March 3, 2016

Business post: a handful of SP farmers

As you saw yesterday, I made quite a profit on buying and stripping pilots. Despite I'm no longer bidding on new pilots, with the ones that keep arriving, I'm over 200B profit. However, as mentioned, most of it isn't in cash, but in SP farmers, each valued to 2.5B. You can check the bazaar and see several sales for such farmer for 2.5B. The price isn't by mistake, as the seller pays the 2 PLEX transfer fee, he barely gets 100-200M for his pilot.

The pilots I've stripped - along with my old pilots - are now farming SP:

Yes, that's probably more than a handful. Currently an injector sells for 635M in Jita and an extractor is 270M, so 500K SP costs 365M. With 2700SP/hour, you make 3.89 packages a month, 1420M ISK. If you buy a PLEX from Jita sell for 1190M, you get 230M profit for a few clicks a month or less.

Some tips: You don't really need to log in every month, just check Evemon daily and log in when the skill queue is almost empty or the account is about to expire. Extract skills, reset queue, PLEX account. If you are buying PLEX from Jita sell orders, you are dumb, that goes without saying. There is also a barely used item, multiple pilot training certificate. I guess people buy it from AUR. Anyway it gives the same 30 days training for a secondary pilot as a PLEX and it's cheaper than PLEX.

Finally and most importantly, how does it connect to the previous post and how is it new (SP farming is common sense idea)? The new thing is that the cheapest way to start SP farming is to buy a character from the bazaar with lots of SP, strip it and recoup some of the buy cost. Actually I made about half B per pilot cash for an average extraction on top of the "free" pilot. These pilots often come with implants and Cybernetics 5. So if you are planning on SP farming, hit the bazaar instead of starting new pilots!

PS: mass-buying PLEX-es has its benefits:


Anonymous said...

I'm a little bit sad to not jump into this train, I was too scared of a price shift but day after days the parity between plex price and profits seems to further increase...

Amarr-Zon said...

In Amarr the price for the Multiple Pilot Training Certificate "dances" around the PLEX-price. Sometimes below PLEX, mostly above it. One should keep an eye on that.

I'm thinking about starting SP farming, but I can't really cross that line. I'm not that rich (by far), so I can't just do it.
Additionally, I can't really understand the high price for skill injectors. People pay half a PLEX in money to save a quarter of a PLEX in time? Either, that's still the starting hype or there's way too much ISK on the wallets.
I don't dare to start SP farming, since I can hardly predict, how long the prices will stay this high.
And taking the initial costs into account, the profit wouldn't start immediately.

John said...

That's not how valuation works. Assets are valued at a reasonable estimation of what you could get from them, not what your would pay to get them. Your SP farm pilots are worth 200m at best, because that's a reasonable expectation of what you could get by selling them.

Gevlon said...

@John: so your clothes are worthless, since only the salvation army would take them for free. Because of that, the shop that sold them should also value its stock for zero.

John said...

"so your clothes are worthless, since only the salvation army would take them for free. Because of that, the shop that sold them should also value its stock for zero."
Not worthless, but I certainly wouldn't value my shoes at the $100 or so I paid for them. If I were valuing them as a business asset, they would be worth maybe $15-$20 as that's all I could reasonably sell them for.

Since the $100 includes sales tax, the shop themselves would not have valued them a $100 either, though they would have certainly have had the value at more than me as boxed, unused products will sell better than used products.

Consider if you were to liquidate all of your assets, with your current valuation your overall value would drop drastically because you've overvalued your assets. You have to decide whether you are valuing the asset based on some desire to make the number as high as possible to boost your ego or as a realistic reflection of your net worth. Most serious traders do the latter.

Gevlon said...

@John: If you value your clothes to $15-20, then why did you pay $100 for them?

You can hope that my SP farm will fail (either because SP cost goes below PLEX or because it turns out to be much more effort than "a few clicks"). If it happens and I close it, I will have to write it down to zero. That would indeed be a 138B writeoff. However as long as it runs profitably, I can claim that I own a profitable company worth 138B, as re-creating it would cost 138B. Or are you claiming that a thing that produces 14B/month without further effort is worthless? If you'd have an investment that pays 10% return per MONTH after buying once, would you call it worthless?.

John said...

"If you value your clothes to $15-20, then why did you pay $100 for them?"
Because brand new clothes from a retailer cost that much, but once you own them if you want to consider them a buiness asset you have to give them a realistic valuation. A brand new car generally loses 20% of it's value from the moment it's bought if considered as an asset.

"You can hope that my SP farm will fail"
Why would I hope that? I hope you have a profound success and make many billions and I'm sure you will.

"However as long as it runs profitably, I can claim that I own a profitable company worth 138B, as re-creating it would cost 138B"
You can, but that's not how asset valuation works, so you'll find that most people will take other claims of your less seriously since you are running questionable math here so it will be assumed the same occurs elsewhere. Some players buy a bunch of material for 100 isk a piece then sling them on the market at 1m a piece knowing they won't sell but increase their own calculations of their asset value. This is no real different from that, you're knowingly valuing assets at a price far above what value you could realistically turn them into.

"Or are you claiming that a thing that produces 14B/month without further effort is worthless?"
No, I'm claiming that it is worth 14b/month which you will continuously gain as liquidity and/or assets, increasing your total value by 14b/month, but its value as an asset itself is not 138b, it's more like 11b. If you do pack all this up and choose to write it off, all you're doing is correcting the blinding error in your asset valuation by realistically revaluing them at that point, you're not actually writing off assets.

Hamlyn Medley said...

Oh Man... That mistake... See I can't play this game because of money issues and real - dolar rate is 4:1... So I can understand how important a plex is...
But, with your money and time, I belive you don't need that plex that much... I feel bad for the guy, it's a mistake that could lead him to a situation like mine... I would ha returned that plex for him, even if the cost was stop playing the game...
But that's me... i'm a good guy I guess, and I can't tell you what to do

Anonymous said...

Hamlin: you are not a good guy, but a stupid one. Best case a naive one.

I have made a few billion isk mistakes in the past, never asked my money back, it was the price of learning.

Also if you checked Gevlon's guide of trading, you would be easily able to play this game without paying a single real.

Hanura H'arasch said...

@John: I'd agree if we would be talking about external accounting, many countries even require it by law in that case.

In internal accounting however you don't value stuff for it's face value. You value it by it's potential to create profits for you. And for investments, it's just a much more useful number.

Just another example: What do you think would WhatsApp be worth if you'd sum up all it's assets by face value? A few millions maybe? Yet Facebook paid some $20 Billions for it.

Anonymous said...

For the purposes of valuing real estate when used as collateral in a commercial loan, there are several methods to determine the value:

Replacement cost - what would it cost in materials and labor to rebuild this if it is destroyed.

Earning potential - what is this commercial property proven to earn (an example being ongoing rent from an apartment building).

Market value - what price have comparable properties sold for recently.

The most valid method in any particular case is in the eye of the underwriter. I'm sure you can see how each of these methods could be applied to determine the value of an SP farm.

Phelps said...

FWIW, in the business world, most businesses are now valuated based on Cash Flow times a multiplier. So really, the scheme would be worth whatever the Margin is, times some multiplier based on what people would pay for it (which I suspect is something on the order of Margin per month * 12ish).

Anonymous said...

Hamlyn Medley
> See I can't play this game because of money issues
Entertainment budged. I hope you didn't buy that 4k$ UBER gamer computer.

> I feel bad for the guy
don't. people need to fail in EVE trading hard to learn from it.

> i'm a good guy I guess
that's the reason for your 'money issues' be it rl or space.

maxim said...

In actual business valuation, people recognise that there are three ways to count the value of stuff. First is the cost of recreating stuff (which is what Gevlon is doing), second is the liquidation price you could get for your stuff if you were to go and sell it on the market, third is the profit estimation of stuff.
You get 3 numbers, you assign weight coefficients to every number, multiply, sum, voila.
The weights coefficients are assigned according the the situation in which the sale takes place. If we are talking buying a profitable business, with the intent to exploit profit, then profit expectation gets strong weight. If we are talking, say, fire sale due to bankrupcy, then the profit expectation gets less weight, and more weight is given to liquidation price.

Anonymous said...

@Hanura H'arasch
I agree with John on that one. You value it at what the asset is actually worth, otherwise like Gevlon has pointed out, if it ever comes to shutting down that part of the business you are writing it off anyway, so all you've done is lie to yourself about the value of your assets.

Sure, as others have said there are other methods of valuation, but they aren't so useful in EVE where the point of the valuation in the first place is figuring out your point in time net worth. You can really value it however you want, people just won't take it seriously if you're not factoring it what it would cost to liquidate when assigning your assets a liquid isk value.

Hamlyn Medley said...

About a 4k computer it's a nope, I have a simple notebook that I used to play eve, with almost all the graphics on ultra low :)
And Brazil is in kind of a crisis right now (
The dollar rate is shit aswell (
So i'm not joking when I say "money issues" in rl because of shitty country.

And I am a "good guy", if that was me I would have returned the money even if I needed... Stupid? Maybe... That's just the way I am, I can't change it.

Wonder if "the price of learning" is a valid argument... Losing your arm is a good price of learning how to operate a machine? "I lost my arm and my job because I can't operate the machine anymore... but that was a good price of learning!" said no one ever.

Anonymous said...

The average price of a commodity is going to be determined chiefly by the price to produce it plus a socially acceptable rate of profit. Thus skill injectors will never drop below the price of PLEX for the long-term, though may do so in the short-term due to a drop in demand.