The Economist ~ Productivity and profitability (Part 1)
Day 3,785, 08:26
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Published in United Kingdom 
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by
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by Spite313
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Dear friends,
Following my last article I had some comments and PMs asking about company profitability and what companies people should buy. First of all, I’ll never straight up give instructions on what you should do, because everyone has different goals, a different playstyle and so on. How much money you have, your income, your age and so on all influence your decisions about which companies (if any) you buy. After speaking with our illustrious leader I will likely re-write a new player’s guide to making gold at some point next month, but for everyone who isn’t starting fresh the best advice I can give you is to weigh as many facts as you can and make a rational decision yourself. Of course that is a lot easier if someone lays the facts out for you in a nicely formatted, and refreshlingly unbolded article.
Firstly, lets talk about companies in general terms. Companies each have a base productivity. For Weapons Raw Material (WRM), Food Raw Material (FRM), Aircraft Raw Materials (ARM) and Housing Raw Material (HRM) this is:
Q1 = 0.35
Q2 = 0.7
Q3 = 1.25
Q4 = 1.75
Q5 = 2.5
Food companies all have a base productivity of 100 units of food (regardless of Q), Aircraft 5, and Weapons have a base productivity of 10. Houses vary per Q as below:
Q1 = 0.2 houses
Q2 = 0.1 houses
Q3 = 0.05 houses
Q4 = 0.025 houses
Q5 = 0.016 (recurring) houses
With all companies this base productivity can be modified by certain variables, which the game calls bonuses. These effectively act as buffs or debuffs to the base amount, increasing or decreasing production.
To use a company you would first need a holding company. This is located physically in a region, and all of the (standard) buffs/debuffs are determined by the country and region the holding company is in.
Firstly each country has certain resource bonuses determined by what resources it has access to. With food and FRM production for example, the resources are Grain, Fruit, Fish, Cattle and Deer. Each of these adds progressively more buffs to your production (10%, 15%, 20%, 25% and 30
Secondly each region also has a bonus depending on which resources are found there. Many regions have no resources at all, but some (like Florida, USA) have many. This can dramatically increase productivity and the region bonuses in Florida give +18% to the housing industries. Like the national resource bonuses, each resource present in a region gives an increasing amount of bonus to your production. Using the example above of food, with Grain, Fruit, Fish, Cattle and Deer, they give 2%, 3%, 4%, 5% and 6% respectively, and you can have up to four in one region for a total of 18% in theory.
This means that the maximum theoretical bonus your productivity can receive is 218%, or 2.2x base productivity. As an example, a weapons company would have a maximum productivity of 21.8 guns per worker.
The other factor involved is pollution. Pollution is a debuff (removes bonus) of between 0 and 25%. This resets each day at daychange (00:00 hours erep time). The amount of pollution is determined by how many products of that type have been produced so far that day. For manufactured products, each Q has its own pollution rating, however all raw materials of each type share a single pollution rating. This is meant to counter people from all crowding into the best regions, as the regional benefit will be offset by the amount of pollution. For example, despite being an excellent place to produce houses, Florida reaches maximum pollution in the some Qs of the housing industry due to the popularity of the region. Despite this, it remains the best option for Q5 housing at present, with aggregate productivity bonuses of 112.5.
Jamesw shared a very helpful tool with me for checking overall bonuses and I’d advise you use it as well. The red box with the pen by the search field allows you to choose which industry to search.
So now you understand the basics, let’s talk about which industries are actually profitable. Because resource bonuses vary, as do regional bonuses and pollution levels, I am going to base all these numbers on a productivity of 200%. I am also going to assume a wage of 388cc, as that’s what I’m currently being paid. These numbers can all be changeable, but as I am using the same numbers for everything, it will provide a means of comparison.
WRM and FRM industries
WRM and FRM raw materials are produced by you, as the owner. With wages of 388 cc, even the most efficient FRM and WRM materials companies cannot support workers. A q5 weapons raw material company would produce RM at a cost of 77.6cc per unit, around sixteen times the market rate. So they will always be for Work As Manager (WAM) only. For that reason, the main costs for producing goods as WAM will be the cost of 10 health, and the work tax.
10 health currently costs around 0.80 on the market. Of course you could produce your own, but as discussed in my last article, 0.80cc is the opportunity cost. Work tax is worked out from the average salary in the nation the holding company is in over the last 30 days. So if the average salary is 388, and work tax is 3%, the work tax would be 11.64cc. However due, I presume, to large numbers of people working in communes, as well as multis and other nefarious accounts, the work tax is usually much lower than you expect. For me, it is around 6-7cc, not 11. Still, this has a big effect on the profitability of various raw materials companies. Let’s look at current prices in Romania, a major world economy:
FRM - 4.45
WRM - 4.72
This means, taking into account work tax of 6.5cc and 0.8cc food costs, the profitability per unit of FRM/WRM are:
FRM
Q1 -4.19
Q2 -1.07
Q3 3.83
Q4 8.28
Q5 14.95
WRM
Q1 -4cc
Q2 -0.7cc
Q3 4.5cc
Q4 9.2cc
Q5 16.3cc
This means that Q1 and Q2 straight up lose money every time you work in them, and that’s assuming the best possible bonus. With a bonus of 1.3 or less, Q3 FRM also becomes unprofitable. For those of you in the UK, it has a 70% Food bonus and 25% Weapon bonus.
So assuming we only consider the top 3 Q of raw companies, which is the best investment? Of course this depends on the amount of money you have and a number of other factors, but to be simple, let us look at return in investment:
FRM
Q3 - 1142 days
Q4 - 906 days
Q5 - 1023 days
WRM
Q3 - 1126 days
Q4 - 897 days
Q5 - 1015 days
I have used currency for ease of conversion, but the exchange rate varies and of course currency is often easier to get ahold of than gold due to the gold exchange limits and the requirement of gold for other things (such as fighting).
As you can see, all of these industries have very long and very slow returns on investment. What they do however is exchange your ready capital for a daily income. They are also considerably cheaper than factories (at least the higher Q ones) and are therefore in reach of newer or poorer players.
I won’t tell you what to do on this matter, but genuinely I think given the almost non-existent profit margins in food I would avoid that industry altogether. Weapons raw materials could be worth considering, but if I was a new player starting and looking to invest my hard won gold, would I want something that won’t even pay for itself for nearly 3 years? I’m not sure I would given it is much easier to get gold and currency other ways (i.e. fighting, training, working etc). When I bought all my raw material companies, WAM was king and you could repay them in around 1-2 months. Nowadays it clearly isn’t the same situation.
HRM companies
A relative newcomer compared to the other two industries, housing still hasn’t fully settled in. As there are less housing companies, and less demand for housing, the prices are more volatile. In addition, as you have to use employees (not WAM), this means that prices are set by the most efficient form of production (Q5 HRM). Again assuming a housing bonus of 200%, and wages of 388, the cost per HRM in each Q is:
Q1 - 554cc
Q2 - 277cc
Q3 - 155cc
Q4 - 110cc
Q5 - 77.6cc
As you can see, it is impossible from the start for any Q to compete with Q5. This is an example of poor balancing by the game designers. Rather than have a sliding scale of efficiency, like with WAM companies, the admins should simply have made it so higher Q companies could employ more workers, so that (for example) a Q5 company would require a higher initial investment (say 400% of the cost of a Q1) but would overall produce more (500% of a Q1) due to being able to employ more workers. As it is, only Q5 is actually usable in any sense. As discussed in my previous article, using any other Q even in a commune is not worth it due to the lost opportunity cost.
So is it worth building Q5 housing raw material companies? You will have to work that out yourself. Perhaps you pay your staff less than I get paid, or you have slightly better bonuses due to being in a region with over 200% production (some have as high as 205, or Florida higher if you can work before everyone else). However at the prices I calculated, the cost of making 1 HRM is around 77.6cc, and on the US market you can currently buy HRM for 72.8cc, or around a 5cc loss. Therefore even if you have a house factory, it is better to simply buy the HRM at present. If that changed, it would be worth reconsidering.
ARM companies
I am not going to comment on this industry a great deal since it is very new. However it essentially works the same way as the housing raw material industry- and currently the best prices on the market are around 65cc per unit, which is definitely a loss. I would stay clear for now until supply/demand resettles, and the admins rebalance production.
Conclusion
As I’m approaching 2000 words I’m going to stop the article here for now. I may have made the odd mistake in my calculations, if I have feel free to PM me. The maths shows that currently, raw material production is an expensive and long term investment which is not very well suited to new investors.
Part 2 of this series will come out in a few days and will look at manufacturing (factories), their profitability and recommendations about investment. If you have any suggestions about other areas you would like me to look at, please post in the comments below.
Iain
Thanks to Bulletz4Breakfast and Mormeg for their answers to a quick straw poll about work tax rates around the world. I may write a future article on the subject. We can call it the multi workforce index.
Translations: Please feel free to translate any article I write. If you PM me the link I will include it in the original article.
Farsi- erepublik.com/en/article/2668211
Thank you's
Thank you to the following kind citizens who endorsed my last article:
Arrlo
n0s3
AG.trimafadzi
Bulletz4Breakfast
Paul Tyndale
Nader.ImmOrtal
Kravenn
Bogi
Chemical Chaos
Vettige Swa
El Speverino
Rua Dam Vale
perilouspanther
Mann551
Juliebiro
alexanad the great
The Lone Cobra
Dear friends,
Following my last article I had some comments and PMs asking about company profitability and what companies people should buy. First of all, I’ll never straight up give instructions on what you should do, because everyone has different goals, a different playstyle and so on. How much money you have, your income, your age and so on all influence your decisions about which companies (if any) you buy. After speaking with our illustrious leader I will likely re-write a new player’s guide to making gold at some point next month, but for everyone who isn’t starting fresh the best advice I can give you is to weigh as many facts as you can and make a rational decision yourself. Of course that is a lot easier if someone lays the facts out for you in a nicely formatted, and refreshlingly unbolded article.
Firstly, lets talk about companies in general terms. Companies each have a base productivity. For Weapons Raw Material (WRM), Food Raw Material (FRM), Aircraft Raw Materials (ARM) and Housing Raw Material (HRM) this is:
Q1 = 0.35
Q2 = 0.7
Q3 = 1.25
Q4 = 1.75
Q5 = 2.5
Food companies all have a base productivity of 100 units of food (regardless of Q), Aircraft 5, and Weapons have a base productivity of 10. Houses vary per Q as below:
Q1 = 0.2 houses
Q2 = 0.1 houses
Q3 = 0.05 houses
Q4 = 0.025 houses
Q5 = 0.016 (recurring) houses
With all companies this base productivity can be modified by certain variables, which the game calls bonuses. These effectively act as buffs or debuffs to the base amount, increasing or decreasing production.
To use a company you would first need a holding company. This is located physically in a region, and all of the (standard) buffs/debuffs are determined by the country and region the holding company is in.
Firstly each country has certain resource bonuses determined by what resources it has access to. With food and FRM production for example, the resources are Grain, Fruit, Fish, Cattle and Deer. Each of these adds progressively more buffs to your production (10%, 15%, 20%, 25% and 30
😵. If the country your holding company in owns all 5, you get double the base production.
Secondly each region also has a bonus depending on which resources are found there. Many regions have no resources at all, but some (like Florida, USA) have many. This can dramatically increase productivity and the region bonuses in Florida give +18% to the housing industries. Like the national resource bonuses, each resource present in a region gives an increasing amount of bonus to your production. Using the example above of food, with Grain, Fruit, Fish, Cattle and Deer, they give 2%, 3%, 4%, 5% and 6% respectively, and you can have up to four in one region for a total of 18% in theory.
This means that the maximum theoretical bonus your productivity can receive is 218%, or 2.2x base productivity. As an example, a weapons company would have a maximum productivity of 21.8 guns per worker.
The other factor involved is pollution. Pollution is a debuff (removes bonus) of between 0 and 25%. This resets each day at daychange (00:00 hours erep time). The amount of pollution is determined by how many products of that type have been produced so far that day. For manufactured products, each Q has its own pollution rating, however all raw materials of each type share a single pollution rating. This is meant to counter people from all crowding into the best regions, as the regional benefit will be offset by the amount of pollution. For example, despite being an excellent place to produce houses, Florida reaches maximum pollution in the some Qs of the housing industry due to the popularity of the region. Despite this, it remains the best option for Q5 housing at present, with aggregate productivity bonuses of 112.5.
Jamesw shared a very helpful tool with me for checking overall bonuses and I’d advise you use it as well. The red box with the pen by the search field allows you to choose which industry to search.
So now you understand the basics, let’s talk about which industries are actually profitable. Because resource bonuses vary, as do regional bonuses and pollution levels, I am going to base all these numbers on a productivity of 200%. I am also going to assume a wage of 388cc, as that’s what I’m currently being paid. These numbers can all be changeable, but as I am using the same numbers for everything, it will provide a means of comparison.
WRM and FRM industries
WRM and FRM raw materials are produced by you, as the owner. With wages of 388 cc, even the most efficient FRM and WRM materials companies cannot support workers. A q5 weapons raw material company would produce RM at a cost of 77.6cc per unit, around sixteen times the market rate. So they will always be for Work As Manager (WAM) only. For that reason, the main costs for producing goods as WAM will be the cost of 10 health, and the work tax.
10 health currently costs around 0.80 on the market. Of course you could produce your own, but as discussed in my last article, 0.80cc is the opportunity cost. Work tax is worked out from the average salary in the nation the holding company is in over the last 30 days. So if the average salary is 388, and work tax is 3%, the work tax would be 11.64cc. However due, I presume, to large numbers of people working in communes, as well as multis and other nefarious accounts, the work tax is usually much lower than you expect. For me, it is around 6-7cc, not 11. Still, this has a big effect on the profitability of various raw materials companies. Let’s look at current prices in Romania, a major world economy:
FRM - 4.45
WRM - 4.72
This means, taking into account work tax of 6.5cc and 0.8cc food costs, the profitability per unit of FRM/WRM are:
FRM
Q1 -4.19
Q2 -1.07
Q3 3.83
Q4 8.28
Q5 14.95
WRM
Q1 -4cc
Q2 -0.7cc
Q3 4.5cc
Q4 9.2cc
Q5 16.3cc
This means that Q1 and Q2 straight up lose money every time you work in them, and that’s assuming the best possible bonus. With a bonus of 1.3 or less, Q3 FRM also becomes unprofitable. For those of you in the UK, it has a 70% Food bonus and 25% Weapon bonus.
So assuming we only consider the top 3 Q of raw companies, which is the best investment? Of course this depends on the amount of money you have and a number of other factors, but to be simple, let us look at return in investment:
FRM
Q3 - 1142 days
Q4 - 906 days
Q5 - 1023 days
WRM
Q3 - 1126 days
Q4 - 897 days
Q5 - 1015 days
I have used currency for ease of conversion, but the exchange rate varies and of course currency is often easier to get ahold of than gold due to the gold exchange limits and the requirement of gold for other things (such as fighting).
As you can see, all of these industries have very long and very slow returns on investment. What they do however is exchange your ready capital for a daily income. They are also considerably cheaper than factories (at least the higher Q ones) and are therefore in reach of newer or poorer players.
I won’t tell you what to do on this matter, but genuinely I think given the almost non-existent profit margins in food I would avoid that industry altogether. Weapons raw materials could be worth considering, but if I was a new player starting and looking to invest my hard won gold, would I want something that won’t even pay for itself for nearly 3 years? I’m not sure I would given it is much easier to get gold and currency other ways (i.e. fighting, training, working etc). When I bought all my raw material companies, WAM was king and you could repay them in around 1-2 months. Nowadays it clearly isn’t the same situation.
HRM companies
A relative newcomer compared to the other two industries, housing still hasn’t fully settled in. As there are less housing companies, and less demand for housing, the prices are more volatile. In addition, as you have to use employees (not WAM), this means that prices are set by the most efficient form of production (Q5 HRM). Again assuming a housing bonus of 200%, and wages of 388, the cost per HRM in each Q is:
Q1 - 554cc
Q2 - 277cc
Q3 - 155cc
Q4 - 110cc
Q5 - 77.6cc
As you can see, it is impossible from the start for any Q to compete with Q5. This is an example of poor balancing by the game designers. Rather than have a sliding scale of efficiency, like with WAM companies, the admins should simply have made it so higher Q companies could employ more workers, so that (for example) a Q5 company would require a higher initial investment (say 400% of the cost of a Q1) but would overall produce more (500% of a Q1) due to being able to employ more workers. As it is, only Q5 is actually usable in any sense. As discussed in my previous article, using any other Q even in a commune is not worth it due to the lost opportunity cost.
So is it worth building Q5 housing raw material companies? You will have to work that out yourself. Perhaps you pay your staff less than I get paid, or you have slightly better bonuses due to being in a region with over 200% production (some have as high as 205, or Florida higher if you can work before everyone else). However at the prices I calculated, the cost of making 1 HRM is around 77.6cc, and on the US market you can currently buy HRM for 72.8cc, or around a 5cc loss. Therefore even if you have a house factory, it is better to simply buy the HRM at present. If that changed, it would be worth reconsidering.
ARM companies
I am not going to comment on this industry a great deal since it is very new. However it essentially works the same way as the housing raw material industry- and currently the best prices on the market are around 65cc per unit, which is definitely a loss. I would stay clear for now until supply/demand resettles, and the admins rebalance production.
Conclusion
As I’m approaching 2000 words I’m going to stop the article here for now. I may have made the odd mistake in my calculations, if I have feel free to PM me. The maths shows that currently, raw material production is an expensive and long term investment which is not very well suited to new investors.
Part 2 of this series will come out in a few days and will look at manufacturing (factories), their profitability and recommendations about investment. If you have any suggestions about other areas you would like me to look at, please post in the comments below.
Iain
Thanks to Bulletz4Breakfast and Mormeg for their answers to a quick straw poll about work tax rates around the world. I may write a future article on the subject. We can call it the multi workforce index.
Translations: Please feel free to translate any article I write. If you PM me the link I will include it in the original article.
Farsi- erepublik.com/en/article/2668211
Thank you's
Thank you to the following kind citizens who endorsed my last article:
Arrlo
n0s3
AG.trimafadzi
Bulletz4Breakfast
Paul Tyndale
Nader.ImmOrtal
Kravenn
Bogi
Chemical Chaos
Vettige Swa
El Speverino
Rua Dam Vale
perilouspanther
Mann551
Juliebiro
alexanad the great
The Lone Cobra
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Comments
man i love you 😁 i translated your last article last night xD and i wanted to do the same thing oyu did here for iranians 😁) but you made it easy thank you so much , good as always o7
voted
You back 😮
Voted
Probably the only quality newspaper in erepublik.
Very nice!
Soooo indescribably good to see quality, thoughtful AND helpful articles again.
I learned something ,thanks!
There is no sense to run any company. Unfortunately.
[removed]
Watch out, someone might learn a thing or two.
I always enjoy reading your articles, even when you write about matters that don't interest me much (such as economy).
✌
thanks again
The problem is that it'll take years to get back any return in investment and this games doesn't have years... With people slowly wandering away and the number of new players not really reversing this (multis not included) then the situation will get worse.
My advice is that if you have enough gold to buy a high level factory then you might as well keep it and spend it on weapons or food as needed.
That's what we all thought back in 2011.
While it's never been apocalyptic as people say, the game is a vastly different place it was in 2012. I'm with Mr Knee, it's pointless to build new companies. You'd be better off saving that gold and cc, building up ya stocks and selling when prices jump.
Moar profit was made during the last event then most players would make in 6 months.
All noted.
v + s
Endorsed, but I would have endorsed 100 pounds if you reached the 3000 words... think about that next time.
Next time, I'd love to hear from you an article about algebra: 2x3 = 5 , 4x7 =14, and that sort of magic things.
so.... if you have no money to buy or to invest... then you have to stick to the same production, no matter pollution, profitability... well , dismantle Q1 factories... (that would be the entire article: "dismantle Q1 factories". )
Can you please just not comment on my articles? You just make yourself look foolish and all you achieve is annoying me. I'm sure there is something better you could do with your time.
I cann cope with looking foolish.... Just remember, I am practising english all the time... actually the real strong point of being here...
I'm not talking about your English. It is just annoying that you come to my articles every time I post one, and write negative comments and insults. Please don't read them if you don't like them.
insults? which one? Never,ever
vote, excellent