Unrestrained Business Expansion can cause business failure
Day 1,224, 13:13
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Published in Ireland 
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by
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by DerBrad
Yes it looks like we are heading towards another market crash. Nothing new there I suppose. There are people writing daily about the problems that our economies face. Yet I haven't seen any articles/discussion about the threat to global markets from unrestrained business expansion.
The old business module limited the number of companies a person/organisation could own, therefore restricting growth to some degree. Ultimately supply to the market was restricted accordingly.
The new business module allows citizens to continue expanding indefinitely by purchasing new land and companies. Therefore supply is no longer suppressed.
In the short-term (right now) profits appear to be easy to obtain by having many companies and by operating as self-employed. In fact the more companies you own the bigger the profits. However it's a proven fact that continued expansion cannot be sustained indefinitely.
I give you a quote from Dr. Paul E. Adams:
"Watch out for the temptation to own the biggest business on the block. As we live in a society where bigness is viewed as a symbol of success, be careful that you do not confuse success with how fast you can expand your business. Seasoned entrepreneurs well know that overexpansion is a leading cause of business failure."
Over-expansion is happening on a large scale across all economies, not just in Ireland. This will ultimately give rise to supply exceeding demand and sequentially price disintegration. Then what do you do when it's no longer profitable to own many-many companies... you offload some of your companies of course, but so does everyone else. This will lead to a collapse in the price of companies. Ultimately you will end up dissolving your companies for 5G because of the collapse in prices.
OK that's a worst case scenario, but based on the level of overexpansion that I am seeing out there it may come to pass! Just make sure you "do not confuse success with how fast you can expand your business".
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I dont think this exactly applys to eRep, as the game itself expands much faster than the real world.
Whats happening alot at the moment, is older members are just holding onto comps and doing nothing, working for themselves and self supplying, or simply quitting, whilst newbies start with nothing.
Tho this being said, over production is happening alot in eRep, but a simple change can radically change an entire market, look at raw materials.
I dont think we will see a market crash any time soon, atleast not before we see mass unemployment.
5n4keyes - I agree that time-lines are much faster in erep but the new business module has opened its doors to citizens who previously found it too onerous to own companies. Now the vast majority of regular players (excluding newbies) have multiple companies. Therefore resulting in a significant rise in supply to world markets.
Very good article, really good read.
Cheers Marcus!
😁^what 5n4keyes said
btw, I pedict an announcement for tomorrow that comapany upgrades (and quite possibly storage-expansions) will require national currency instead of gold.
Paul E. Adams thesis won't apply. Even if you eventually have to dissolve your company you made far more than you could loose. As long as you don't sell your companies their value remains.
Quite frankly there are three major problems in the economy module:
1. There is no need for "must buy" products anymore (such as food in V1)
2. Ressources are unlimited
3. There are no random events to reduce or stop production (or wars which can do > real
If Stranger's prediction comes to fruition, and they are introducing a new money sink for local currency, that will drive prices upward.
I appreciate all the differing views. I recognise that the economics of the game are complex and diverse opinions are guaranteed. Thats what I love about thre game.
Keep em coming and of course, come back and read again sometime.
Reichenbacher I agree with your point:
"Even if you eventually have to dissolve your company you made far more than you could loose"
However the key word there is "made". Its past tense. What if u expand your business at the peak of this bubble? Thats where the losses will exist. Its like our very own property bubble in the real world. Just make sure you dont expand at the peak!
I know profits have been made in the past and continue to be made. I am just warning against expansion at the height of the bubble.
This just again demonstrates that the Admins have lost their economic minds.