A New Economy
Arkandy
When I stated in my last article that things have changed a tad since I last played half a decade ago, I made a massive understatement. The economy module is nearly unrecognizable in terms of behavior, usage, and design from back when I played. Not that this is necessarily a bad thing, but it's more to get used to nonetheless.
Two things have really stuck out to me in terms of the new economy module. The perfectly competitive raw materials market, and profit margins. These two factors are probably the biggest when it comes to how one structures a company and it's production. Understandably then, I'll have to re-assess our strategy in terms of how Arkcorp will be structured, especially in reference to the new model. I'll break down what I've seen just from my last week or so of being back, and I encourage any reader to contribute their views and critique mine in the comments. What's running a business if you can't talk about the market with others?
First off, raw materials. To my knowledge, these didn't exist when I last played. Personally, I love the idea of having companies dedicated to just extracting materials. The way that regions used to be set up, raw materials makes perfect sense. If I wanted to open FRM (food raw material) company, I'd pick a country/region that best assists my output. With the new system, however, I get all of those bonuses in any connected region. Normally this would be a reason to rejoice! Why would a business owner not want all regional bonuses wherever they worked? This is true, there are reasons to enjoy multiple resource bonuses regardless of location. For instance, now you can expand into other markets, start different types of companies, locate in the state you want to without suffering bonus loss, the list goes on. It's not the bonuses themselves that create the problem we have in our market today. It's their effect on profit margins that do.
Profit margins are the possibly the only reason companies exist. Who's going to pour capital into venture if it's not going to have anything but a negative return? While bonuses are fantastic for production, and increase the amount of product available, profit margins for companies suffer. Now if companies could still turn a decent profit given a good amount of capital investment and location, I'd say the trade-off of lower profit for more production is a good one. However, at least here in the eUSA, We nearly have what economists call a perfectly competitive market. This means that no matter what “advantages” you have over your competition, your prices are going to be the same as the current market prices, and there's going to be practically no price elasticity for you to work with. So if I extract 250 RFM and the current market price is .02 USD and I try to sell those materials for .03 USD, that product will not be moving any time soon. Companies in perfectly competitive markets only make profit when moving massive amounts of inventory, because of the incredibly low profit threshold. This makes startups like Arkcorp incredibly hard to get rolling in the early stages without a decent amount of capital.
Another important effect that low profit margins have on the economy is the hiring of employees. I was shocked to find in most markets, especially in factories that take in raw materials and spit out products, that a worker doesn't even cover their own wage in their day at work. In fact, managers who just convert RM into low-quality product usually suffer a loss, even when they do it themselves(unless they're the ones supplying the RM). While this isn't true for all markets it's a trend for the majority of them and is something that should be addressed. Why is the eUS wage hovering around 60 USD when production of lower level materials doesn't come close to paying for that? My hypothesis is that it's higher quality factories that employ workers. RM and low level production just can't sustain a workforce, and thus is makes more sense for the manager to just work them all themselves. This creates what I call a “non-economy”. There aren't really workforces, but rather super-industrial single citizens, that produce many resources themselves. Companies are now essentially single-player functions.
I could go on, but I'll save the rest for the next article. I'll also quickly announce that Arkcorp has it's first business, an Aluminum mine. While it's not much, it's a start. I hope you all enjoyed the first official edition of the Arkcorp Business Journal! Let me know what you think by commenting, and if you're so inclined, endorse the paper! Every dollar goes right back into the eUS economy.
Cheers!
-Arkandy
CEO Arkcorp Industries
edit: I'll be out of town for the week, more articles when I return!
Comments
I always enjoy reading things when people actually know how business works. Since you have been a way for awhile I will save you some time by saying almost all companies are unprofitable and the ones that are will be either really expensive or they take forever or give a low ROI. The Econ module sucks right now and if you want to know any more PM me
yep i agree, but how to fix it?
i think if usa started doing more wars, to reduce foreign bonuses then american profit margins would be better, both the increased demand for all the fighting, and the loss of the foreign production due to the loss of bonuses. would both drive down production and encourage more workers to work in america reducing the labor cost!
it really does suck it was great over last summer and everything took a dump towards the fall. WRM prices were .03-.04 food prices were higher profitability was a lot higher then now and then all of a sudden just fell off. i wish plato would focus on it and just atleast make it a little better. since they added the houses it gave a little silver lining but soon disappeared..
but i do like that idea jkeller but i don't think it would happen we have stayed pretty much out of the light in wars with the exception of helping out allies here and there (the resource wars was a freak thing and doesnt count 😛) we helped out mexico and russia but not much really happens we just need to abandon our isolationism and increase consumption.
i really liked your idea of raising minimum wage wont ever happen because 1. we have a national MU who uses minimum wage. and 2. what MU doesnt use the 1$ to their advantage.
yeah, the min wage thing is sad 🙁 i wish they would increase it. but like you have given up on trying.
boy now i not sure about when eusa got wiped 🙁 i remember we dumped our reserves and other countries spent theirs trying to attack us. so lots of currency was dumped into the markets at those times.
i think it was last spring or two winters ago?
2 winters ago because it was right after i left due to RL issues and then came back towards the next summer after that and missed out
im sure it was (economically) a good time of course us suffering isnt but you get what i mean
I will only talk about these two lines
"Profit margins are the possibly the only reason companies exist"
"Why is the eUS wage hovering around 60 USD when "
First the game is all about war not building a awesome business so you have many, many, people build tons of factories of all kinds to produce for their self sufficiency. Then the extra is dumped in the markets at best price they can get. I am not completely saying that people do not want to make some kind of profits.
Second the wages are governed by the first as more people leave game or join MU communes there is now less people to work so wages go up.
Side note wages went really high when houses were introduced, before houses 30.00 or so, after houses they ran at 100.00 or so for a bit then have come down.
Interesting, I thought that houses would have a positive effect on wages. I'm merely commenting on what I observe today, as I wasn't around for quite some time.
well there is till, looking at my industries, q6 food factories and q7 wep, and a few q5 raws and a few q1 house, i could employ 710 people, and at maximum i can work 7 times a day with over time.
so because there is a demand of 700, and a supply of 7. wages will always be extremely high and profits minimal for hiring workers.
but i might be a rarity. it would be interesting to see what the total for all of america is, open jobs vs amount people can work.
basically if each person has one q5 wep raw, that would make enough demand for all the available workers.
however i guess your right q1 houses, should always be profitable to produce.
it takes about 5 work days to produce a q1 house, and they produce 7 work days. so q1 houses someone always will make the 2 day wage. so i guess the consumer of the q1 house might profit more when people start over producing q1 houses 🙁
but i think that will take some time.
well i came here to build a big business and make lots of money 🙂 but its not the only reason they exist 😛
Good article.
Thanks!
Steve Nash!
o7