How do 'they' work this out?

lindsmuse

Anybody replying to this topic must please keep it at street level. I don't understand finance, inflation etc etc - a few simple drawings might help ...

Back in 1997 we bought a http://www.forevermac.com/tag/apple-m3979-powermac/

- a MONSTER OF A MACHINE!!! - and looking at the specs - I really can't even remember at 2 G HD and 32MB RAM - I mean we were cruising. It cost us R35000. I kid you not. And remember we had to buy software to go with this that was compatibly priced! But in those days there was lots of work etc - so we just accepted this. Now I read somewhere that the Rand doubles every 5 years. What you bought 5 years back - more or less - will cost about double now. Not with everything of course. But to make my point and grossly exaggerate a little - this machine would now cost R280000. (I told you I don't understand). Oh and we had another smaller, secondhand one that cost us 15k. Yip.

Now (can't seem to insert link!!!) - Apple Imac 27 " R33999 . The RAM is 8GB and the HD is 1TB - from what I gather ... And it costs a little bit less. And this is 15 years later. I mean if this had been built 15 years ago it would have cost about R300000 and today it would cost about Two and a half million Rand.

We have a way around this(my son thought of it). I am placing my order and paying now for a machine that hasn't been invented yet by Apple ... I so want it. ?

Gearhead

You are looking at three effects combined: one is that most things in life get a little bit more expensive all the time and two is that new things get less expensive rapidly. Three is that the Rand has at a stage lost a lot of value against the Dollar.

When 'they' talk about inflation it's a figure that gets calculated from the prices of a 'basket' of things that people of average income buy: certain food, petrol, water, electricity etcetera. BTW If you are earning less, the inflation that you experience relates to a different basket, one that has been going up quicker.

When you look at prices of computers, they have a small weighing in the 'basket' (since you are likely to only buy one every three years while you buy bread every three days) and as the market for computers grew and technology improved, it became cheaper and cheaper to make this stuff. There's two reasons for that: firstly Apple have had to practically invent everything themselves including production equipment and software, whereas a startup computer firm today can get microchips and the knowledge at a dozen competing firms. Secondly, Apple never made so many m3979 Powermacs whereas today the number of computers manufactured globally is ginormous. Per unit it therefore is cheaper to manufacture.

If you look at how many Dollars your Rand bought in the early eighties, you will find that over the past thirty years it has gone from 1:1 to 1:10 so there's roughly ten times less you can buy across border today (not exactly as much because of the difference in inflation, but quite a bit, still).

Bob-Dubery

Technology comes down in price as volumes go up. What was a professional tool in '97 is just about a commodity these days.

Things get smaller, cheaper to manufacture and sell to more people. That'll drive costs down.

A long time ago in a galaxy far, far away I came to work one day to find my colleagues marvelling over a circuit board that was the best part of a metre tall and wide. What was the reason for this wonderment? That board (remember the dimensions) held a whole meg of memory. A whole meg! On one circuit board! Incredible. Now we had to find a customer who would want this dizzying capacity for their computer and would be prepared to pay the price.

These days I have a 16 GIG flash drive that is just a little bigger than my thumb nail. Those are a couple of hundred bucks.

Look at the price of tablets now - and especially the price you pay for the features you get. Those devices are getting cheaper quite quickly now.

You see something similar with cars - cheap small cars now have features only present on big luxury sedans 15 or 20 years ago.

You get more bang for the buck now as technologies become more pervasive and start to become commodities.

This changes your accounting as well. When I first got into IT a computer was an asset on your books. These days you write them off over three or four years - they're an expense.

domhatch

you might also want to read up on moore's law. while i don't necessarily understand the ins and outs, basically as technology progresses, it becomes cheaper/more efficient to cram more processing power into a smaller space, thus making the entire computer (for want of a simpler term) cheaper over time/the medium to longer term.

that's my take on it. the wikipedia article is worth reading to take into consideration in your case/calculations
dh|

Chocklit_Thunda

And to further reiterate their points, what you bought back then was considered state of the art technology and hence demanded a premium price, nowadays that sort of thing is run of the mill and as stated before is mass produced with the intention that everyone can have 2TB hard drives and intel pentium processors in their bedrooms. You pay for state of the art which is why a new Mac Pro basic unit without any bells and whistles will set you back about R50 000 and with all the extras can go up to R100 000

But again, why pay that when most people can get all the functionality they need from a little Mac mini whose technology would probably blow the 1997 mac out the water for a fraction of the price...

lindsmuse

Thanks for the replies - that gives me a better idea. Interesting as Bob say they've gone from being an asset to an expense. Moore's law fascinating Domhatch - thanks. I also come from the ferrite core (I think it was) generation! Can't believe how tiny all the components are becoming - and continue to. The mind boggles. I just wonder sometimes whether some other invention is going to come along and throw all this technology completely out the window (and Moore and everybody else's laws!)