Hey Kappers. Knolls again, and I wanted to explain a very important concept. It's a real economic tool, and players use it in this game every day to make more money. It's simply called
ROI = Return On Investment
It's easy to learn for anyone, and to help me I have an assistant. Faquey the Curious. Say "hi," Faquey.
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Who is Roi and why does he spell his name like that?
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Guest
Who is Roi and why does he spell his name like that?
Last edited by Guest on 02.06.2007, 03:54, edited 1 time in total.
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Guest
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Guest
I thought you were at the clubs. What is that, code for the library where you mathletes get together? 
When they graduate me, I'll send 'em to you.
I'd like to see some of the other math-minded folks offer up primers too. I know SPB Corp., Elder, Widgetry, Cygnus, and others have good minds for this stuff.
And possibly we can get to the point of having different approaches to things, and then debate them. The geek factor would go through the roof!
When they graduate me, I'll send 'em to you.
I'd like to see some of the other math-minded folks offer up primers too. I know SPB Corp., Elder, Widgetry, Cygnus, and others have good minds for this stuff.
And possibly we can get to the point of having different approaches to things, and then debate them. The geek factor would go through the roof!
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Guest
Knolls, you have so much time and patience, you must be like 65 
anyway, good job
I'm not an economist, i know much about math, butr i don't know the economy terms, so if there is some for this, you can correct it:
you count profitability of buildings by ROI, but you don't take into account that you have only limited number of buildings and once you get the investment back, the ROI is no more a factor to determine your profit
i try to do some counting (with imaginative numbers)
let's say you only can have 2 buildings (instead of 60/100)
1st building:
costs: 100,000
anyway, good job
I'm not an economist, i know much about math, butr i don't know the economy terms, so if there is some for this, you can correct it:
you count profitability of buildings by ROI, but you don't take into account that you have only limited number of buildings and once you get the investment back, the ROI is no more a factor to determine your profit
i try to do some counting (with imaginative numbers)
let's say you only can have 2 buildings (instead of 60/100)
1st building:
costs: 100,000
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Guest
Very good, excellent point Drvic.
But then you answered it too at the end.
The next trick, and I didn't get into this because it's more complicated, is to calculate the expansion ROI. So now your'e talking about 2 large buildings vs 2 small buildings + some expansion. And the ROI will change, but it's still the key.
I actually have a spreadsheet I made on just this topic. Click here to open up a Google spreadsheet. It's easier to read than posting numbers in the thread here.
As you can see there, the expansion ROI can be very different from the starting ROI. Right on that first building, it starts at 9% but immediately drops down to 3.7%.
This is because cheap and green buildings are cheaper to build, but they use just as much materials to expand as everyone else and that makes the expansion investment much bigger by comparison. For a large red or yellow building, the numbers also drop off as you expand. But not as severely.
Because of this, I tend to use a "when in doubt, go big or go red" rule of thumb. For example, if you scroll down that sheet you can compare a red factory making steel with a green one. The green one is much better when new, and still a little better on each expansion. Yet I have all of my factories in red. This is because there are other conditions (cheaper inputs, switching to another product, contest influence) that may change the dynamics and I prefer the power of more production.
Yet the numbers don't lie. Steel is better in green with the current data. Also, when you have net worth of 3 mllion or something small, a lot of people would choose to focus on what is more profitable now rather than what is more profitable in the long run - since those expansion days are still a way off. That's not a bad strategy.
But then you answered it too at the end.
The next trick, and I didn't get into this because it's more complicated, is to calculate the expansion ROI. So now your'e talking about 2 large buildings vs 2 small buildings + some expansion. And the ROI will change, but it's still the key.
I actually have a spreadsheet I made on just this topic. Click here to open up a Google spreadsheet. It's easier to read than posting numbers in the thread here.
As you can see there, the expansion ROI can be very different from the starting ROI. Right on that first building, it starts at 9% but immediately drops down to 3.7%.
This is because cheap and green buildings are cheaper to build, but they use just as much materials to expand as everyone else and that makes the expansion investment much bigger by comparison. For a large red or yellow building, the numbers also drop off as you expand. But not as severely.
Because of this, I tend to use a "when in doubt, go big or go red" rule of thumb. For example, if you scroll down that sheet you can compare a red factory making steel with a green one. The green one is much better when new, and still a little better on each expansion. Yet I have all of my factories in red. This is because there are other conditions (cheaper inputs, switching to another product, contest influence) that may change the dynamics and I prefer the power of more production.
Yet the numbers don't lie. Steel is better in green with the current data. Also, when you have net worth of 3 mllion or something small, a lot of people would choose to focus on what is more profitable now rather than what is more profitable in the long run - since those expansion days are still a way off. That's not a bad strategy.
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Guest
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Guest
Couldn't get to it? You may have to sign up with Google, but that's no big deal and the docs feature is really cool you might use some other time.
You are correct I didn't account for the expansion time. Hadn't even occurred to me. My gut tells me that it's ignorable since we're talking about a couple hours one time over a multi-day payback period. But I'll have to think about it.
Hmmm.
You are correct I didn't account for the expansion time. Hadn't even occurred to me. My gut tells me that it's ignorable since we're talking about a couple hours one time over a multi-day payback period. But I'll have to think about it.
Hmmm.
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Guest
Here is a ballpark way to assess it.
18mins = 1% of daily profit
30mins = 2% of daily profit
Once you expand a certain amount, it starts to matter.
Try looking at the cost/benefit on expanding 10m2 for a powerplant at 1000m2.
Still - this is suffered by all buildings of a type - so it only really matters a lot when comparing one type of building to another.
18mins = 1% of daily profit
30mins = 2% of daily profit
Once you expand a certain amount, it starts to matter.
Try looking at the cost/benefit on expanding 10m2 for a powerplant at 1000m2.
Still - this is suffered by all buildings of a type - so it only really matters a lot when comparing one type of building to another.
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Guest
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Guest
OK I thought about this. And you're right, if we want to be thorough we might as well include this.anyway, what you probably didn't count is also the time for expansion, which is 30 mins for wells, but only 18 mins for factories and others and that should be considered in the lost profit while expanding
And I think a direct addition to payback period is the simplest and best way to do it. From above, I was using the values
Grocery: 25.5 payback
Well: 28 payback
(still not counting materials - which we should - for simplicity)
A grocery store takes 5 hours to build. That's 5 more hours before we get paid back, or 5/24 = .2 day. And the well takes 10 h, or .4 day. Making the total
Grocery: 25.7 payback
Well: 28.4 payback
It's posssible with two values close together that this could make a difference. Very good addition.