This is part two of a multi-part series examining the industrial changes coming to EVE Online. If you haven’t read the first part, you can find it here.
Where part one examined the possible negative outcomes of these changes, this piece will examine the potential for positive outcomes and elements of economic change. The need to adapt to a new normal, by CCP’s design this will force players into a position where they can embrace the change or suffer the consequences. Though harsh, this is EVE.
CCP Hellmar has been on a nearly three-year bent about how EVE Online echoes, mirrors, and sometimes more accurately presents economics models than the real world. In the closed sandbox that is EVE, we certainly have greater resolution than those studying real-world markets. It is important to understand that these changes do, to some varying degree, align New Eden’s economy with that of the real world. We should also acknowledge that these alterations are presented fait accompli.
INN author Gwailar was instrumental to the writing of this article, as there was a lot to process. Without his, and Dirk Stetille’s, assistance, it would have been nearly impossible to get this article out in a single week. Thanks, gents.
The TL;DR
The following are the goods on upcoming potential positive outcomes:
1. Market Making. There has never been a better time to make markets. There is incredibly increased benefit to making convenience work for you.
2. Specialization. With the growing complexity, you don’t have to control the whole vertical. You can focus on just a singular component aspect and still make money.
3. More Gaps. There are going to be many, many more gaps in the market, and significant opportunities to find a niche. No one group can do everything; even Goons need Drone Region salvage.
The following are suggested strategies to adapt to the changes:
1. Specialize. As suggested above, you don’t have to do it all. Just focus on something you can reliably deliver, and do that. Do it at scale, and sell it to everyone.
2. Cooperate. If you make markets, or make opportunities for markets, you’ll be rewarded. Network, meet people, participate in filling in the gaps.
3. Reciprocate. In addition to making markets, make opportunities for industry. For example, Fraternity just created the Polaris Freeport in M-OEE8. This freeport will offer a T1-rigged Sotiyo for manufacturing and market access, and a T2-rigged Tatara for reprocessing and reactions. The easier we make industry for others, the more we will be rewarded with convenience and local markets.
Shifting the Model
Before the incoming changes, there was a simplicity in building a finished product such as a capital ship. You truly needed only three things; minerals, blueprints, and characters skilled to make the core components and the finished capital product.
This left the majority of the effort nested in harvesting base materials, with the remaining effort divided between settling materials across build slots. The rest of the endeavour just waited for production.
The simplicity baked into the current model is reflected in the primary place to scale operations – harvesting materials. The harvest process was itself scaled to the point of absurdity by the mining Rorqual and excavator drones; any character can accomplish even the most ambitious builds with time and ISK. This lack of complexity is what fueled the out-of-control capital proliferation in EVE.
After the upcoming industry changes, CCP expect to see a significant redistribution of the effort involved in gathering the materials, building (and reacting) the basic components, assembling the advanced components, and putting the whole finished product together.
Harvesting the required materials remains a significant focus of attention and effort after the patch, and some may argue the values I represent need to be higher. However, I would argue that while the number of required base materials change, the actual effort hasn’t grown. EVE players were already engaged in PI, gas huffing, moon mining, and reactions; now these products are just needed for more things. Where the effort is likely to feel most burdensome and time-consuming is in the gathering of wormhole gas.
Part of the incoming change is that there will need to be more attention paid to networking. Industrialists will need to build contacts to market-make, establishing sales in order to remain competitive in the market without being priced out of it. This is reflected in the 5% increase in required sales effort, above.
Players who already handle primary resource harvesting can keep doing what they’re doing. Profitability will depend on their ability to make or feed a market; your mileage may vary.
Why the Modern Model is Significant
The requirement of advanced components in the new build process doesn’t necessarily represent a significant scaling up for the highest-classes of industrialists. The wealthy will just absorb the price as part of the cost of doing business. The core of the problem relies on ISK, not time or capacity.
Everyone who wants to engage in building advanced components will just learn to react, mine gas, mine moons, and so on. Adding characters is the mechanism by which you accomplish this. If you have space capital, or friends with space capital, you are probably going to be just fine. However, for those who are just getting started, there is significantly more growing to do.
As such, the players themselves will feel more financial burden from EVE Online, in the form of additional account subscriptions and more characters for multiboxing. If they don’t want to scale out that way, they can focus on becoming specialists; establishing a niche where one can be found. Getting to that place and being able to afford to support the added complexity, though, is an artificial barrier to entry.
This is one of the areas where bringing EVE’s economy into closer alignment with the real world economy might not be a great thing; creating dependency on capital from inside the system, or outside of the system. The players who have less than 3-5 hours per week to play may possibly abandon industry as a career path.
For those who can dedicate more time to EVE, many opportunities open.
Opportunity Cost
A major challenge comes from how CCP has decided to approach the process of breaking scalability.
An important concept to grasp, though it can be fuzzy for some people to get a hold on, is opportunity cost. Opportunity cost represents the potential benefits you miss out on when you choose one alternative over another. In the New Eden cluster, an example of an opportunity cost proposition would be weighing the benefits of building Megathrons against building Vindicators.
They are functionally the same hull, ship model, and general design. The mineral cost for the Vindicator is less than 5% more raw materials than the Megathron. Presently, the biggest modifying factor on the price of Vindicators is the cost for the faction BPC and the loyalty points required to purchase them. As such, the cost of the BPC is kept afloat by the market value of Serpentis loyalty points.
If you consider the prospect of making Vindicators over Megathrons as a simple calculation of “I pay more to make the Vindi, but I can charge more for them at sale”, then you are looking purely at mark-up value.
Opportunity cost factors into how many Megathrons can you build, seed, and sell in the time it takes you to find, buy, and transport Vindi blueprints to where you build. If you are obtaining the Vindi blueprint copies yourself, you must also factor in the time-value of obtaining 400,000 Serpentis LP, and the 100M ISK to pay for the blueprint copy; whereas, someone building Megas only needs a cheap BPC and minerals.
Sure, you might be able to turn out a more valuable ship on a single instance basis, but the guy building Megas and putting them up on null-sec contracts is probably moving a lot more product.
Lost opportunity cost represents an area where players can carve a niche for themselves. This is either by filling the gaps left by someone who chooses a different product methodology, or by out-producing someone who isn’t able to dedicate the same material or time resources.
Restricting Economies of Scale
With these changes, CCP will break the scalability and speed of production via three tools:
- There is no effective scale-up above Ventures and Prospects for harvesting gases from wormholes. It’s just a basic skillbook, fitted ship, and having more characters. Smart strategies and adding more bodies will make a single enterprise more efficient, but that’s not the same as technical scale.
- There is no effective scale for resources after scarcity redistribution. In particular, where CCP has repeatedly stated that their intention is to require regional trade and/or conquest. Jump freighters are the best logistical tool we have, and their maximum cargo capacity is a limiting factor in redistribution.
- Time and lost opportunity cost. There are almost 50 hours of reaction time baked into the new costs of Tech 1 Battleships. That is hard to quantify in terms of lost opportunity cost, because many EVE players working the market struggle to price their time effectively.
To simplify it to a single image:
You will be using smaller tools to push out bigger ships over a much longer period of time.
Opportunities Abound
These changes are long-overdue, much-needed, and important for the health of the game – I won’t contest that. There was insufficient complexity in the industry process in New Eden, despite the skill wall for new players to get into it.
CCP has expressed discomfort with the idea that players might control the complete vertical process, from resource harvesting to final product. I also think it was unhealthy to expect that new players, or even independent producers, should have been able to implement the complete vertical all the way up to capitals with as few as four characters. This is an account and a half, at most, and is how I currently build capitals.
This increase in complexity, required materials, and components, alongside additional processes to create finished products, actually present a lot of opportunities for players within EVE Online. It is possible within EVE, following the changes, to establish oneself as a specialist in a particular mode of production, or even a specific component production.
Convenience is also a factor
The scale of complexity required in each level of the build process – up to capitals and super-capitals – is sufficient that higher-level producers, capitalists, and conglomerates will want to cut corners where they can. Time, investment, and risk are all mitigating factors. By simply buying some of the more onerous components from the market, larger producers can shift some of that risk. In other words, “If you’ll make it for me, and the price is right, I’ll just buy it from you.”
Part of the reason that the Delve model has been so fantastically effective is because Goons sell to Goons; the 1DQ market is arguably healthier than the Jita trade hub. There are 45,000 Imperium members participating in that market. In Delve, you don’t have to go 12-jumps round-trip to Jita in a jump freighter to get the lion’s share of the resources you require.
If items are available locally, and at a reasonable price, you will buy them locally.
Market Making
Creating a market where there isn’t one, and where there is a high-sec route to Jita, almost guarantees that you will see region trading, station trading, and hauling occur as companion enterprises. There are also companion opportunities for those who want to get into speculation, investment, and capital finance.
Specifically, with the number of people who may want an entrance to the new industry paradigm, there is a market for people to offer micro-loans, financing, and capital partnerships. These will likely take the form of collecting residual fees in exchange for initial funding, advisory partnership, and providing capital when needed on an ongoing basis.
Let’s use a speculative example: With the removal of the Niarja route from major trade to Amarr (it’s now 46 jumps from Jita), the shortest high-sec route to another minor market is Stacmon. While Stacmon has never been a major trade hub, it is uniquely situated to serve Solitude, Syndicate, Black Rise, Placid, and Essence.
If industrialists living in these regions can setup Stacmon, Amygnon, or any other system in that route as a trade hub, seeding items dependably and en-masse, it will create a hub. This will have a follow-on impact on the region traders who are traversing Jita <–> Amarr, providing further incentives to make their trip through Verge Vendor.
There are also those people who really, honestly enjoy complex gameplay, and will do it just because it tickles their brains. These are invariably the people who give meaning to the statement, “Spreadsheets in space.”
Steve Ronuken, I’m looking at you.
Before and After
[Note: The costs shown for ships in this section are raw material costs. These are furthermore presented based on today’s prices for raw material as calculated by EVE Isk per Hour.]With a few exceptions, it is expected that the build costs of T1 combat ships, from frigate to battlecruiser, will go down. The cost of building T1 industrials and mining barges will go up; largely due to the increased requirement for Pyerite.
Battleship prices could go either way, with some of the cost saved on basic minerals, but time and cost added in the reacting and assembly of advanced components. Again, there are almost 50 hours of reaction time baked into T1 battleships going forward, reflected in the fact that Megathron prices are unlikely to change despite mineral prices being projected to fall.
The material cost for Orcas is currently projected to increase 167%.
The navy and faction frigates, such as the Caldari Navy Hookbill are projected to climb in price; in this case stratospherically (a 1,572% increase).
Another example is the Osprey Navy, which sees a 413% increase in raw material cost.
If we examine one of the more popular faction battleships, the Rattlesnake, we see a 472% increase in raw material cost.
Under the new build schema projections, the Providence goes up 165% in raw materials cost alone. Which doesn’t sound as drastic as for these other vessels, but it’s still a nearly 2 Billion ISK appreciation in value.
While these projections are subject to change pretty much immediately once the patch is introduced, it would be a safe bet to say that most Freighters will conservatively double in sale price. In a more expansive projection they triple in price, subject to demand.
Please also be aware that these changes in pricing are strictly for the raw materials at the time of writing – this does not reflect sunk costs for production fees, taxes, blueprint copies, transportation, escrow, and so on. These are purely material costs to build these ships. These numbers also avoid the varied profit markups, which could skyrocket.
With that said, each of these growth areas is an opportunity to benefit from the increased sale prices.
Ivory Towers and Cottage Crafts
The tycoons of New Eden will – for reasons that should be obvious following Part 1 of this series, and this far into the article – hardly feel a thing. They live in Ivory Towers, removed from the concerns faced by nascent industrialists and the common capsuleer. Thick wallets are an excellent buffer to changes of this magnitude; if anything, they enable the tycoon to make even more money while everyone else is adjusting to the new normal.
Does this seem at all familiar?
The natural response to a sudden shift in paradigm is for the affected to turn to whatever small production and services can be eked out in marginal times, wherever those opportunities may be found and where necessity mothers invention. For most small producers who’ve seen their current plans dashed, to be replaced by growing complexity, dimishing returns, and increasing capital costs, the tendency will be to resort to hustle.
I use ‘hustle’ in reference to the modern and toxic love-affair with overwork and extra avenues of income. For some people, this will only feel like hustle, and they may find themselves diversifying in the same way as the school teacher who tutors after hours, and also delivers meals for Skip the Dishes and Uber Eats while marking papers in her car.
For others, this will be the kick-start that forces them to commit more fully to the task of growing as an industrialist and taking that career more seriously. This will no longer be a side-hustle. This will be an opportunity to specialize in one area and make it your niche.
Closing Thoughts
My initial feeling was, and remains, that this has a greater longitudinal likelihood of generating negative outcomes than positive outcomes. This is perhaps a result of my generational bias. I have observed that those who came before existed in a state of glut and exceeding ease and competition in the economy; those of my age and younger face a growing state of economic uncertainty, instability, complexity, and growing marginalization with diminishing returns.
Or, as @Merman_Melville quipped on Twitter:
It is also possible that the sense of foreboding I feel comes from that greater alignment of New Eden’s economy with that of the real world – something which CCP Hellmar has repeatedly lauded as one of EVE’s greater features over the last 24 months. Specifically, that New Eden’s economy will become increasingly Neo-Liberal in its leanings (speaking specifically to economic theory, and not people’s real-life political affiliations).
I am not, by my nature, a pessimist or a curmudgeon. I want to believe the very best about CCP’s intentions and the capabilities of the EVE community to respond to these changes. As such, I have spent the last week voraciously devouring media and writings from economists, scientists, public health researchers, and industry leaders. Dean Kamen and Richard Wilkinson come to mind among the more notable.
I found my silver lining in something Nick Hanauer said during his TEDSummit 2019 talk, The dirty secret of capitalism – and a new way forward:
We need a new economics… In fact, a growing number of academics and practitioners have concluded that Neo-Liberal economic theory is dangerously wrong and that today’s growing crises of rising inequality and growing political instability are the direct result of decades of bad economic theory.
Instead of siding with CCP Hellmar in chasing the dragon and throwing ostensibly good ideas after bad economic theory, I suggest that the community learn from Nick, and pay close attention to where he picks up from the above quote:
What we now know is that the economics that made me so rich isn’t just wrong, it’s backwards. Because it turns out, it isn’t capital that creates economic growth, it’s people; and it isn’t self-interest that promotes the public good, it’s reciprocity; and it isn’t competition that produces our prosperity, it’s cooperation.
What we can now see is that an economics that is neither just nor inclusive can never sustain the high levels of social cooperation necessary to enable a modern society to thrive.
Nick Hanauer, TEDSummit, 2019
Given that EVE Online is inherently the most social game I can think of, and that which most rewards social engagement and organization, I thought it best to approach this article with the objective of suggesting how EVE’s community might use these changes to produce positive outcomes which may outweigh the disruptive nature of the release.
