Comparative advantage is my favorite economic idea. It's a really nice thing, it says "everyone who is ready to do some work has a place under the Sun". How does it tell it? By saying that anyone who have a relative advantage of producing something can profitably do so, even if someone else is better than him in that. Let me tell it with an example.
Smartguy is producing 10 item A in an hour or 15 item B. He wants to consume 20 A and 20B daily. If he is alone, he must spend 2 hours producing A and 1:20 producing B. Slowguy is producing 5 item A in an hour or 5 item B. He is half and 1/3 as good in producing. If he is alone, he must spend 8 hours to get his 20 A and 20B every day. Slowguy clearly sucks compared to Smartguy, why should the latter bother trading with him? Because his sucking rates are different, he sucks in creating B more than A, compared to Smartguy. So they can set up a deal: 4 item B sells for 3 item A. Now Smartguy creates all 40 item B which takes him 2:40. He sells 20 to Slowguy and receives 15 item A. He creates the remaining 5 item A in half an hour, so he'll work 2:10 every day, saving 10 minutes. Slowguy will create 35 item A and nothing else, which costs him 7 hours, saving 1 hour! Both of them won!
You might ask why there is unemployment in the World if comparative advantage is so great? Because of welfare. In the real world Slowguy won't work 7 hours creating item A, but watch TV and drink beer he bought on your tax money.
But it's an EVEBusiness post, so back to EVE, shall we. Highsec PI sucks. The valuable raw materials like Autotrophs are nearly non-existent in highsec. OK it's not true, my beginner post features an Autotroph extractor, but it was some time finding the planet. Also you have to pay 10% tax for transporting items up and down between the launchpad and the customs office. In Low and nullsec there are more valuable resources and you can place tax-free player towers. If you are doing PI in highsec, you are Mr Slowguy.
What can you do when you are behind the low-null people in every field of PI? Find the fields where your disadvantage is the smallest. There are two such fields.
One is production. Your command center and factories are just as good as the nullsec ones. So you can cut the extractors which produce seriously less materials than their low/null counterparts, buy all the P1 materials and produce them to P2-3-4. This is my coolant factory, which takes 8 water (200 ISK + 25 tax) and 8 electrolytes (480 ISK + 25 tax) and process it to coolant (8000 ISK - 900 tax).
The pictured factory gets 1260 ISK on a coolant and produces 18*5*24 = 2160 every day. That's 2.6M profit. However it's extremely sensitive to prices, a mere 12% drop of coolant price would put it out of business. This points to the the other comparative advantage in Highsec: mine cheap crap and use it for higher quality products. Take Coolant for example. It's pretty expensive because Ionic Solutions are hard to find, especially in Highsec. Ionic Solutions can be refined into Electrolytes. I buy these, transport them to my planet which is abundant in Aqueous liquids. It's not hard to find, highsec is full of oceanic and terran planets that has nothing but water on it. Therefore water is cheap and no one bothers to mine it. I do. I send the Electrolytes down, skip paying tax for water as I mine my own, combine them to Coolant and sell it. The trick is that the lowsec guy is better off extracting more Electrolytes than using CPU and Power to mine his own Water. Actually he is better off extracting more Electrolytes than using CPU and Power to run a factory that combines Electrolytes with hauled highsec Water. The plant below has 2800 ISK profit on every coolant but produces only 6*5*24 = 720/day, providing 2M/day profit. It's lower than the previous, but the same 12% price drop would only cut the profit to half but wouldn't kill it, so I don't have to check prices often and do the tedious work of reprogramming the factories one by one to another product. Since water is really common, I managed to plant two such factories 1 jump away from Rens.
There is no EVE business report today as we were on a Holiday on the weekend and still are when the post is published. I guess I didn't make much ISK this weekend, but I'll survive that. Hopefully.
PS: Jester posted a 63 items long list of his ships. I have 3 after 3 months (transport frigate, Badger II, Orca), but I'm sure that even after years I won't have even 15% of Jesters. I'm currently in P-W remap and learn now all the ships. Then remap C-M-I and never look back, practically locking myself out of new ships for a year. Here is the list:
Smartguy is producing 10 item A in an hour or 15 item B. He wants to consume 20 A and 20B daily. If he is alone, he must spend 2 hours producing A and 1:20 producing B. Slowguy is producing 5 item A in an hour or 5 item B. He is half and 1/3 as good in producing. If he is alone, he must spend 8 hours to get his 20 A and 20B every day. Slowguy clearly sucks compared to Smartguy, why should the latter bother trading with him? Because his sucking rates are different, he sucks in creating B more than A, compared to Smartguy. So they can set up a deal: 4 item B sells for 3 item A. Now Smartguy creates all 40 item B which takes him 2:40. He sells 20 to Slowguy and receives 15 item A. He creates the remaining 5 item A in half an hour, so he'll work 2:10 every day, saving 10 minutes. Slowguy will create 35 item A and nothing else, which costs him 7 hours, saving 1 hour! Both of them won!
You might ask why there is unemployment in the World if comparative advantage is so great? Because of welfare. In the real world Slowguy won't work 7 hours creating item A, but watch TV and drink beer he bought on your tax money.
But it's an EVEBusiness post, so back to EVE, shall we. Highsec PI sucks. The valuable raw materials like Autotrophs are nearly non-existent in highsec. OK it's not true, my beginner post features an Autotroph extractor, but it was some time finding the planet. Also you have to pay 10% tax for transporting items up and down between the launchpad and the customs office. In Low and nullsec there are more valuable resources and you can place tax-free player towers. If you are doing PI in highsec, you are Mr Slowguy.
What can you do when you are behind the low-null people in every field of PI? Find the fields where your disadvantage is the smallest. There are two such fields.
One is production. Your command center and factories are just as good as the nullsec ones. So you can cut the extractors which produce seriously less materials than their low/null counterparts, buy all the P1 materials and produce them to P2-3-4. This is my coolant factory, which takes 8 water (200 ISK + 25 tax) and 8 electrolytes (480 ISK + 25 tax) and process it to coolant (8000 ISK - 900 tax).
The pictured factory gets 1260 ISK on a coolant and produces 18*5*24 = 2160 every day. That's 2.6M profit. However it's extremely sensitive to prices, a mere 12% drop of coolant price would put it out of business. This points to the the other comparative advantage in Highsec: mine cheap crap and use it for higher quality products. Take Coolant for example. It's pretty expensive because Ionic Solutions are hard to find, especially in Highsec. Ionic Solutions can be refined into Electrolytes. I buy these, transport them to my planet which is abundant in Aqueous liquids. It's not hard to find, highsec is full of oceanic and terran planets that has nothing but water on it. Therefore water is cheap and no one bothers to mine it. I do. I send the Electrolytes down, skip paying tax for water as I mine my own, combine them to Coolant and sell it. The trick is that the lowsec guy is better off extracting more Electrolytes than using CPU and Power to mine his own Water. Actually he is better off extracting more Electrolytes than using CPU and Power to run a factory that combines Electrolytes with hauled highsec Water. The plant below has 2800 ISK profit on every coolant but produces only 6*5*24 = 720/day, providing 2M/day profit. It's lower than the previous, but the same 12% price drop would only cut the profit to half but wouldn't kill it, so I don't have to check prices often and do the tedious work of reprogramming the factories one by one to another product. Since water is really common, I managed to plant two such factories 1 jump away from Rens.
There is no EVE business report today as we were on a Holiday on the weekend and still are when the post is published. I guess I didn't make much ISK this weekend, but I'll survive that. Hopefully.
PS: Jester posted a 63 items long list of his ships. I have 3 after 3 months (transport frigate, Badger II, Orca), but I'm sure that even after years I won't have even 15% of Jesters. I'm currently in P-W remap and learn now all the ships. Then remap C-M-I and never look back, practically locking myself out of new ships for a year. Here is the list:
- Bustard: for picking up some random stuff
- Crane: for picking up stuff in lowsec
- Orca: jack of all trades, master of hiding cargo
- Stiletto: "I'm in Rens in 20 mins"
- Buzzard: "lowsec implants here I come"
- Charon: because lot of crafting is lot of tritanium
- Rhea: when my alt will be in a nullsec alliance, I can give a hand now and then
- Basilisk: to fly with my girlfriend
- Guardian: nullsec alliance small fleet
- Archon: nullsec alliance large fleet
- Avatar: nullsec alliance capital fleet boost
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