I tend to view most technological advancement much like I do cars. How efficient is this thing? How long before it becomes obsolete? How much energy will it use? How will this impact the environment? How much does it cost? Does it replace vital human interaction or impact communities in a negative way? How much time will this thing save/cost?
Which brings us to the iPhone. I do not have one and likely will not until there is some other gadget which is way more advanced that makes the iPhone an "old model" in three or four years (months?). As serious as I am about running, I almost always buy "last year's model" runing shoes for 25% less than the new model. Why? Because year to year, the changes are mostly cosmetic. Maybe when the iPhone uses up its "Geek Cred" (I totally stole that from another blogger), I'll have one in five years. Maybe not. Therefore, I will not pretend that I know a lot about the iPhone or why it is the greatest item ever fashioned.
That said, it seems to me that Apple pulled one over on their fanboys and fangirls with this $200 price cut.
Steven Levitt, University of Chicago economist and author of Freakonomics (a must read if you have not already read it), had this to say earlier in the week:
If you ask an economist how to price a new product that is just being introduced, the response you will get is that you should charge a very high price at first and then steadily reduce that price over time.
There are two reasons for doing this. First, it generally gets cheaper to produce things over time, so it makes sense to lower prices in response. Second, people vary widely in their willingness to pay for a new gadget. By starting high, you get as much money as you can from those who really want the product, then expand the market at the lower price point.
Hmm … that sounds exactly like what Apple just did with the iPhone. They brought it out at $599, sold one million iPhones, and then dropped the price to $399 after two months, in the hopes of selling nine million more this year...
What economists (and Apple too, I guess) ignore is that consumers hate it when companies follow practices that look like they are designed to maximize profits. You won’t find it in economic models, but consumers care about the reason a firm chooses the price it chooses...
Apple’s price cut looks like one driven purely by a desire to maximize profit, which is why everyone is so mad.
Of course, there is an economic argument that Apple made a good financial decision for their company...in the short run. But part of Apple's gig is that people believe they are getting a better, more innovative product from Apple than they get from other companies. Cutting the price of the greatest invention since the wheel by 33% after two months on the market severely undermines that credibility. It could potentially hurt the Apple mystique for future purchases.
Wendell Berry, Kentucky farmer and writer, set forth this rubric for evaluating technology in his essay "Why I Am Not Going to Buy a Computer":
1. The new tool should be cheaper than the one it replaces.Again, someone who knows a lot more about the iPhone than I do will have to perform this evaluation. And, while I will likely never live an agrarian life quite like Mr. Berry, he does raise some important points that might help us resist the urge to fall into the iHerd of iPeople buying iGadgets for the sake of I.
2. It should be at least as small in scale as the one it replaces.
3. It should do work that is clearly and demonstrably better than the one it replaces.
4. It should use less energy than the one it replaces.
5. If possible, it should use some form of solar energy, such as that of the body.
6. It should be repairable by a person of ordinary intelligence, provided that he or she has the necessary tools.
7. It should be purchasable and repairable as near to home as possible.
8. It should come from a small, privately owned shop or store that will take it back for maintenance and repair.
9. It should not replace or disrupt anything good that already exists, and this includes family and community relationships.