Tuesday, June 25, 2013

Tuesday's Gone

This is a quick post about the value of time and opportunity cost. I am expanding some comments I made on a post by Parasoja about capital ship building.

One of the commenters actually recommended buying components BPOs, in a situation where you have limited funds to startup your capital ship production. One of the reasons given is the usage of manufacturing lines. Particularly their underutilization if you are not able to insert many jobs at once, since 5-copy components BPOs will build quickly. The commenter said that you have to login a lot to keep your manufacturing going.

The point about how often you have to login is well taken, however the flipside is that if you have the manpower you can get your components built really fast using 5-run BPCs. If you have low starting resources your initial number of hulls is primarily limited by your capital. Being able to blaze through the component building phase quickly will mean more runs over time. Which means a quicker growth on your capital.

I would actually recommend the opposite strategy for BPOs. Carrier BPOS cost just over 1B a piece, but some of the component BPOs cost around 1.5B. You need many more component BPs. Therefore the carrier BPO will pay itself off in less runs. About 6-9 times faster if my back-of-an-envelope calculation is accurate.

Besides, I'm pretty sure the point of the article was that is was a bad idea to buy component BPOs if you have a small amount of capital to start. 

I would additionally like to point out, in response to some of the comments, yes, it is very much an opportunity cost thing. What Parasoja sort of glossed over is WHY the more inefficient, but lower overhead cost thing works, at least under the current market conditions. You can build many more carriers (and make a smaller profit on each) by forgoing a full set of component BPOs.

For example. Starting capital 13B. You spend 11B on BPOs, because thats pretty much what you can do. The BPOs need to be researched, so you are paying for two months of POS lab time whether you do it or not. You still need to buy a few BPCs but, hey your are a BPO owner you can still save on not buying the BPCs for the components you have a BPO for. You have 2B left to build two carriers. You make 800M isk (2x400M isk) profit.

Alternately, you spend all of you money and minerals on BPCs and build 11 carriers. You just made 3.3B isk profits (11x300M). Even if you limited by the number of build slots (9 per character is achievable in a few weeks), your higher turnover at a lower profit margin will mean a higher monetary velocity for reinvestment. Over time you can buy more BPOs and streamline your operation to maximize profit and minimize gray hairs.

You will probably not be able to build all of the carriers at once, unless you have a very large number of build slots (the number of which I will call n). It would probably be best to queue the jobs such that the components for a ship would all complete at nearly the same time. Then you could put the first carrier build job in the queue and dedicate n-1 jobs to building the next ship's components. Subsequent to that you will n-2 slots to build your components, and so on.

It is critical to evaluate how much of your capital is working for you and how much is waiting around for you to put other pieces of the puzzle together when you are starting up.

This is just my opinion, but your money would be better spend on a Jump Freighter than component BPOs.

If you tie up your money into blueprints that you cant use for 2 or 3 months, you could have just built from BPCs that whole time and made way more money.


Get profits rolling in, then optimize.

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