Syndori
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Posted - 2009.05.08 12:25:00 -
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Honestly, I skimmed most of the 2nd and 3rd page, but this is a general response to the "opportunity cost" folks. All Economics 101 courses define opportunity cost as what you give up to get that item. If you're going to take what you could have made selling the ore, then you have to add up ALL the things you could have done. This includes every single market order, every single blueprint, every possible use of the ore. That an opportunity cost also covers other factors, such as time, frustration, enjoyment, and other hard-to-quantify data.
Now that I've gotten that out of the way, I agree somewhat with what the first poster said. But they forgot to factor in a few things. Unfortunately, I'll have to go in a somewhat lengthy explanation to try and get people to understand some things.
First: All time is not equal. If I can play 10 hours/day and you can only play 1 hour/day, my time is less valuable to me. Also, because I'm on so often, I do some stupid stuff to keep from being bored, like run around in a Hulk named "Sacrificial Lamb." So, my costs to replace my ships from my excursions is extraordinarily high. Working this out, it end up that for ME, each hour of my time is worth less than ISK, because I have a ton of time, but no ISK. Also note that as another symptom of too much time, I need to break the monotony of mining for 10 hours/day.
Well, after a few days of playing target in 0.0 and W-Space, I end up broke. So, I mine. And mine. And mine... until eventually I have a TON of ore. Now, I could sell that ore, but where's the fun in that? I've never made a Tormentor before, and HEY! The blueprint's cheap and I can offset it easily with only a few runs. There must be a high demand for them because I see them EVERYWHERE! So, I make 1000 Tormentors.
Eventually, the Tormentors pop out, and I drag them over to Jita. Looking at the detailed market info, your stack of 500 Tormentors sells at 10,500 ISK, which is 5% the material cost of 10,000 ISK. Being that I want to sell these things as quick as I can so that I can go reenact Duck Hunt as one of the ducks, I undercut you by 5% and sell at your cost.
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What happened here is not made up. This is actually how I acquired my Tormentor blueprint (minus the Jita hauling). I'm certain I'm not the only case. In your definition, I have lost money, somewhere.
What you fail to see is that cost (and therefore profit) is not based on woulda-coulda-shoulda. It's hard facts and cold numbers. I spent 300,000 ISK on a BPO. I also spent 500,000 on the slots to produce them. That brings me to -700,000 ISK.
If I sell all of my Tormentors at 10,000 ISK, that's 10,000 * 1000 = 10 million ISK income.
Now, remember the only cost of doing this is 300,000 for the BPO and the 500,000 for the actualy construction. So, I take income minus the REAL cost of the venture. I have made a net profit of 9.3 million ISK.
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Now, some people will be frothing at this point and start typing a response. Stop. Hear me out. There's actually a name for this. It's called vertical integration. Specifically, balanced vertical integration. Instead of a corporation, we have a single person, but the concept is the same. We cut out as many people as we can so that even if the pie is smaller, we get more net pie because we get a bigger portion.
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Therefore, yes, the people who sell under the market price of the materials will not make as much money as they could have, but they still make money. The only thing they lose is "fake" money. The pure manufacturer doesn't because they lose real money.
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And on that note, time for ME to pipe in on the "free ore." My ore isn't free, but because I DO like to play the duck, I value ISK more than my time, and I value fun and new experiences more than ISK(basically, I'll waste time to have fun), I make a net profit in both ISK and value when I sell under market value.
--Syndori
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