Risk to ISK
From UniWiki
This is the EVE version of the general idea of Risk vs Reward, which is that you will always need to risk something to gain a reward, but you want to limit your risk to improve your chances of coming out on top. If the amount you need to risk is high and your chance of losing it is high, while the reward is low, then it's not worth taking. Any steps you can take to limit your risk will improve your average profits by reducing your losses if things go wrong. Most people understand this concept intuitively, but implementing it in EVE can be a bit trickier.
In abstract terms the idea is fairly simple:
- ISK ventured x Chance of losing it = Risk.
- Profit x Chance of getting it = Reward.
If Risk > Reward then it's a bad idea. If Reward > Risk then it's (probably, see below) a good idea.
Sometimes this formula is simple to apply. For example, taking your freighter in to low sec space for a distribution mission that pays 10 million is clearly a bad idea - your freighter is worth hundreds of millions, your chance of losing it is high and your reward is only 10 million. More often though things are much more difficult to estimate - What is my expected reward from camping a gate in low sec? What are the chances of being blown up in this wormhole?
There are some fairly simple ways to reduce risk:
- Scout in something cheap - if you think there's a good chance of jumping in to something you can't handle, then best do it in something that won't hurt to lose.
- Use what you need to complete the objective efficiently, and no more - taking your pimped out faction battleship in to a class 1 wormhole is risk you don't need if a tech 2 Drake will do the job just fine.
Finally, even if a venture seems like a good idea because of high reward against expected risk, you still need to remember the golden rule: Don't fly what you can't afford to lose. Risking all of your ISK for a massive reward may look good on paper, but if it doesn't work out then you're back to grinding rocks with your civilian miner in your rookie ship, which is never a good place to be.
Ships and Fittings
A subset of this principle can be applied to ships and fittings. For example, do I fit my t1 frigate with shield extender rigs or not? Well, small shield extender rigs cost about 1m each, so 3 of them will probably triple the cost of your ship for 30% more shields - not a good ISK to reward ratio. If you were flying this ship in high sec pve where there's little chance of it being destroyed, then the overall risk is still low so the shield extender rigs aren't such a bad idea, but if flying the ship in pvp where there's a good chance of losing it then spending lots of ISK on a small performance improvement is definitely a bad idea. On the other hand do I rig it with weapon rigs? These rigs cost more like 50k, so I can get 30% more firepower for 10% more cost - the low cost makes it a good deal, and worth it for both pve and pvp. The same principles apply for expensive faction modules and faction hulls.
