Thursday, November 21, 2013

A Little Night Music

[Highsec] industrialists will clamor and fight over single-percentage-point margins... and null industry will not exist when it's essentially raw cost plus shipping to get it to front lines.
   - Lockefox, quoting The Mittani®

Here's a little thought experiment:

It's morning. You roll out of bed, wander down to the kitchen. You put on the coffee (this is my thought experiment, so we're drinking coffee) and while the staff of life drips into the carafe you turn on the computer and log into a website that earns you $600 an hour. Between sips of coffee you look up from your newspaper to make sure the website is doing its thing. Once in a while you have to set down your newspaper and enter a few keystrokes, but otherwise it's pretty light work. After two hours you check your bank account, note that the anticipated $1,200 has been deposited, and log off the work site. You rinse out your coffee cup and put the newspaper in the recycling bin.

The rest of the day is yours.

In this way you earn roughly $312,000 per year for a two hour work day.  In fact, everybody in your town has the same sweet deal and earns money in pretty much the same way.

Being the thoughtful readership you are, you're probably already thinking, "What about inflation, Mord? After all, if everybody makes that much money that easily, shouldn't inflation kick in and the cost for goods and services rise to reflect the town's access to such easy money?"  

Happily, while some things do cost more in your town, your town is largely untouched by inflation. Why? Because there is a class of people who cannot make money the way you do. They don't live in your town, they live ... elsewhere. However they are very, very interested in selling goods and services to the prosperous folk in your neighborhood.  In fact, they compete aggressively for the opportunity to do so. They compete so aggressively that the price of most goods are kept very, very low.

And that's a good thing for you and your neighbors. Despite the fact that your money is very easy to come by in your town, your income retains its value. Which is, you must admit, a pretty sweet deal.

This is, to a large extent, the situation in nullsec today.

Nullsec's population is, from an economic consumer's standpoint, sitting in the catbird seat. ISK are easy to make and there are all manner of people competing aggressively to make and sell stuff to nullsec buyers. In fact, they compete so aggressively to be the maker/seller of choice that profit margins for many items are razor thin. In some cases the competition is so fierce that producers heavily discount their own in-game labor as a production cost. 

Of course, this might be a bad thing if it were putting nullsec players out of work. However, the fact that these producers are falling all over themselves to undercut each others' prices has no impact on a nullsec player's ability to make 60M ISK an hour ratting in a semi-AFK Ishtar. Indeed, most nullsec players regard the fact that someone else is willing to grub ore at 7M ISK an hour as a public service rather than a stolen opportunity; particularly if it keeps the price of ratting Ishtars low.

Thus an economic symbiosis has evolved over time, a product of basic labor economics and player preferences. While it's been a particularly sweet deal for nullsec, it's been pretty much a win-win for all involved. 

Alas, every party needs a pooper, and certain lords of nullsec are determined to put a floater in the punch bowl.

Hopefully while I was away you had an opportunity to listen to Xander's interview of CSM Mynnna and Eve Prosper's Lockefox (both of Goonswarm) on Crossing Zebras last September.  If you haven't it's certainly worth your time.

First of all, you get to hear Xander, a genuine Scottish roughneck, practically a-giggle with delight over Mynnna's participation in the interview. It's truly eyebrow-raising and not to be missed. See if you can listen without the words 'man-crush' coming to mind.

You will also hear Mynnna admit that nullsec industry is indeed suffering from a labor shortage.   Despite the Odyssey improvements to nullsec mining, there hasn't been a parade of industrial bears lining up to fill Mynnna's hangers with low-end ores and/or minerals.  And it seems that parade won't form up until the hourly wage for mining and hauling Tritanium is competitive with the 60M ISK per hour (as Mynnna reckons it) that one can earn doing far less onerous tasks in nullsec.

Yeah. I was right. Mynnna was wrong. All right, move along. Nothing to see here.

Then there's that lovely rendition of The Mittani®'s favorite aria from La fanciulla del Deklein.  My Italian is a little rusty but, roughly translated, the lyric goes something like this:  
Woe is me! Behold the rapacious merchants of highsec.
They vie like raging beasts, one against the other,
For the honor of selling me my hearts' desires.
See how their prices fall, how their profit margins dwindle!
The market-house is like unto the floor of an abattoir; 
So awash is it in blood-red ink. 

But ah, my poor heart!
Though I delight in low prices, yet do I sorrow.
For Nullsec industry shall n'er quicken and grow,
Lest I pay in excess for my purchases, and lavishly so.
Alas for nullsec bears, who live piteous lives of penury
While greedy highsec bears grow rich by mining ore for free

Which is, of course, a big, wet load of Puccini. 

Despite all the wailing and gnashing of teeth, there is a lot of industry going on in nullsec. It is primarily industry in which nullsec enjoys a competitive advantage and where the large returns on investment compensate for the high cost of nullsec labor inputs.  For nullsec industry to dominate manufacturing in product families that don't offer those advantages some combination of the following must occur: 
  1. The price of the finished goods must go way, way up
  2. The cost of nullsec labor inputs to the finished goods must come way, way down
That's it. One, the other, or both at once. Every possible plot, plan or scheme I've heard on this subject to date pushes one (or both) of those two buttons once you get past the wishful thinking.  Most push button number one. However, pushing either button results in a nerf to nullsec player income: They either make less ISK per hour, or the hourly ISK they make buys less. Or both. It's a pay cut either way you slice it.

Given the benefits of the status quo, the real question isn't whether the lords of nullsec can compete in the manufacture of commodity goods, but why they would want to.

Wednesday, November 13, 2013

Watch This Space

Yes, I know. It's been two months and change. Apologies for that.

Life in real-time has moved at a blistering pace. It does that, at times, without much in the way of warning. Between new corporate clients, dead EVE Online clients and gazelles (yes, gazelles), there's been little wherewithal for on-line play. But that time is drawing to a close. All work and no play make Mord a dull boy. Now the dull days of Autumn draw to a close and it's time to have some fun.

There's change on the wind at Fiddler's Edge.  While I haven't been writing, I have been planning.

More on that anon.