Wednesday, March 31, 2010

Computers Just Keep Getting Cheaper and Better and We Should Eagerly Await the Days Ahead

Craig Newmark points to a great website "Classic PCs vs. New PCs: Their True Cost: Doing the math makes technology's relentless progress even more amazing," where they compare the costs and specifications of various computers from the 1970s and early 1980s to today's computers.

One example is illustrated above: a 1984 Apple Macintosh vs. a 2009 Apple iMac. Adjusted for inflation, today's Apple iMac is 26% cheaper ($3,849) than the 1984 Macintosh ($5,186). Measured in the number of hours of work at the
average hourly wage ($8.48 in 1984 and $18.57 in 2009) to purchase a computer at the retail price in current dollars, the price of an Apple computer has fallen by almost 30% (294 hours in 1984 vs. 207 hours in 2009). But what's maybe even more interesting is to adjust for the phenomenal increase in computer power, and compare the real dollar cost per CPU (MHz) and RAM (KB) in 1984 versus today. Here's that comparison:

Real Dollar Cost per CPU (MHz)
1984 Apple Macintosh: $662.35
2009 Apple iMac: $0.34

Real Dollar Cost per RAM (KB)
1984 Apple Macintosh: $40.52
2009 Apple iMac: $0.00025

In terms of the cost of processing speed (real dollars per MHz), the 2009 Apple iMac is 1,947 times cheaper, and in terms of memory cost (real dollars per KB), the 2009 Apple iMac is 162,000 times cheaper. And keep in mind that the 1984 Macintosh didn't even have a hard drive - you had to store all of your files on a floppy disk!

From the website:

"Computers today are mind-blowingly more powerful than they used to be. More importantly, consumers get vastly more computing power and capacity for their dollar today than they ever have before. The low end of the market gets lower, and the high end…also gets lower. It’s very difficult to buy a non-diamond encrusted $10,000 PC, much less a $20,000 one, which you could do back in 1980s without breaking a sweat. But it’s easy to buy a steel-encrusted $350 bargain PC that’s just as powerful as a top of the line model a few years ago.

From this simple analysis of computer cost, I suspect that baseline desktop PC prices will continue to decrease over time. To what end and how much, I’ll leave to professional market analysts. But I do know that, in the computer industry at least, the past is often a good indicator of broad trends that will continue to unfold for years to come. I eagerly await the days ahead."

MP: If the dramatic price reductions and quality/speed improvements of computers and other electronic products happened suddenly all at once, it would probably be declared to be a miracle. If nothing else, it would certainly catch our attention. But when the price reductions and quality improvements happen continually and relentlessly all the time, we become immune and either don't even pay attention, or tend to take the improvements for granted.

Thankfully, the comparison of today's economy to the Great Depression have started to fade, because it was easy for many to think our standard of living would somehow return to the level of the 1930s. This comparison of computer prices helps us appreciate how technological improvements elevate the standard of living of the average American to levels that previous generations couldn't have even imagined. Another lesson here might be that even a Great Recession can't stop the progress of human ingenuity, technological improvements, and the entrepreneurial spirit that will continue the relentless trend towards better and cheaper products, and a continually rising standard of living.


At 3/31/2010 8:36 AM, Blogger Colin said...

That's not all:

At 3/31/2010 9:19 AM, Blogger Nicolas Martin said...

In 1982 I paid $2,500 for a 25 megabyte external drive, or $100/mb. In 2009 I paid $60 for a 1 terrabyte external drive. One terrabyte is roughly one million megabytes. At 1982 prices the 2009 drive would have cost me $100 million. I think I got the math right.

At 3/31/2010 10:57 AM, Anonymous Benny The Man said...

This is a terrific post--btw, similar advances are being made in other areas, such as lithium batteries, and the extraction of natural gas and other fossil fuels.

In a similar vien, yields at palm oil plantations are rising at 4 percent annually compounded--as Dr. Perry says, some may not call that a miracle, but after 10 or 20 years, it begins to loom large.

In short, doomsoothing about any commodity or services is shortsighted, if we have a price signal and relatively free markets.

For an example of what happens when we do not have free markets, consider the cost of one US aircraft carrier: $1 billion in 1976, but $14 billion today.

Operating in a nearly completely communistic way, our military industrial complex resembles--well, the old Soviet Union. You can quickly see why the old Soviet Union collapsed.

Compare Apple to the aircarft carrier example. Simply amazing.

At 3/31/2010 11:09 AM, Blogger Bret said...

An extremely interesting chart by roboticist Hans Moravec showing computation per $1,000 is striking in its implications would be a good addition to this post. The chart goes back to the beginning of last century and compares the computation to that available in the brains of various animals.

At 3/31/2010 11:43 AM, Blogger sethstorm said...

You're ignoring the defect rate being lower for the older machine.

The problem is that particular model already has known defects(screen issues, overheating, case warping) that would be unheard of in the other model.

You've just proven the point of why quality means more than minor feature improvements.

At 3/31/2010 12:05 PM, Anonymous gettingrational said...

The hardware side of computing has come down trmendously in size and cost -- but so has the software.

Using Sintra a person can create an app for the IPhone or the IPad (launch this weekend) in under 50 lines of code. The coding will be familiar to people that can use HTML somewhat.

The cost of software is reduced to zero in some apps and also could replace the construction level
(Individual results may vary).

At 3/31/2010 9:08 PM, Blogger Charles Platt said...

I believe the numbers would be far more impressive if an old original IBM PC were compared with a current Windows computer (from Dell or HP or similar). Standardization of PC architecture has facilitated competitive forces from which Apple has attempted to protect itself, with its proprietary operating system.

At 4/01/2010 7:13 AM, Blogger David Haile said...

I repeat what I often say: The fastest computer I've ever used was a 20MHz 486! The editor was simple and everything worked well. Compare that to my present 3.8GHz 6GB RAM dual-processor machine that crawls to a standstill due to some friggin' application taking 99.99% of the CPU cycles, I still prefer the old 486.


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