Tag Archives: Iphone

How much would an iPhone have cost in 1991?

Amazing! An iPhone is more capable than 13 distinct electronics gadgets, worth more than $3,000, from a 1991 Radio Shack ad. Buffalo writer Steve Cichon first dug up the old ad and made the point about the seemingly miraculous pace of digital advance, noting that an iPhone incorporates the features of the computer, CD player, phone, “phone answerer,” and video camera, among other items in the ad, all at a lower price. The Washington Post‘s tech blog The Switch picked up the analysis, and lots of people then ran with it on Twitter. Yet the comparison was, unintentionally, a huge dis to the digital economy. It massively underestimates the true pace of technological advance and, despite its humor and good intentions, actually exposes a shortcoming that plagues much economic and policy analysis.

To see why, let’s do a very rough, back-of-the-envelope estimate of what an iPhone would have cost in 1991.

In 1991, a gigabyte of hard disk storage cost around $10,000, perhaps a touch less. (Today, it costs around four cents ($0.04).) Back in 1991, a gigabyte of flash memory, which is what the iPhone uses, would have cost something like $45,000, or more. (Today, it’s around 55 cents ($0.55).)

The mid-level iPhone 5S has 32 GB of flash memory. Thirty-two GB, multiplied by $45,000, equals $1.44 million.

The iPhone 5S uses Apple’s latest A7 processor, a powerful CPU, with an integrated GPU (graphics processing unit), that totals around 1 billion transistors, and runs at a clock speed of 1.3 GHz, producing something like 20,500 MIPS (millions of instructions per second). In 1991, one of Intel’s top microprocessors, the 80486SX, oft used in Dell desktop computers, had 1.185 million transistors and ran at 20 MHz, yielding around 16.5 MIPS. (The Tandy computer in the Radio Shack ad used a processor not nearly as powerful.) A PC using the 80486SX processor at the time might have cost $3,000. The Apple A7, by the very rough measure of MIPS, which probably underestimates the true improvement, outpaces that leading edge desktop PC processor by a factor of 1,242. In 1991, the price per MIPS was something like $30.

So 20,500 MIPS in 1991 would have cost around $620,000.

But there’s more. The 5S also contains the high-resolution display, the touchscreen, Apple’s own M7 motion processing chip, Qualcomm’s LTE broadband modem and its multimode, multiband broadband transceiver, a Broadcom Wi-Fi processor, the Sony 8 megapixel iSight (video) camera, the fingerprint sensor, power amplifiers, and a host of other chips and motion-sensing MEMS devices, like the gyroscope and accelerometer.

In 1991, a mobile phone used the AMPS analog wireless network to deliver kilobit voice connections. A 1.44 megabit T1 line from the telephone company cost around $1,000 per month. Today’s LTE mobile network is delivering speeds in the 15 Mbps range. Wi-Fi delivers speeds up to 100 Mbps (limited, of course, by its wired connection). Safe to say, the iPhone’s communication capacity is at least 10,000 times that of a 1991 mobile phone. Almost the entire cost of a phone back then was dedicated to merely communicating. Say the 1991 cost of mobile communication (only at the device/component level, not considering the network infrastructure or monthly service) was something like $100 per kilobit per second.

Fifteen thousand Kbps (15 Mbps), multiplied by $100, is $1.5 million.

Considering only memory, processing, and broadband communications power, duplicating the iPhone back in 1991 would have (very roughly) cost: $1.44 million + $620,000 + $1.5 million = $3.56 million.

This doesn’t even account for the MEMS motion detectors, the camera, the iOS operating system, the brilliant display, or the endless worlds of the Internet and apps to which the iPhone connects us.

This account also ignores the crucial fact that no matter how much money one spent, it would have been impossible in 1991 to pack that much technological power into a form factor the size of the iPhone, or even a refrigerator.*

Tim Lee at The Switch noted the imprecision of the original analysis and correctly asked how typical analyses of inflation can hope to account for such radical price drops. (Harvard economist Larry Summers recently picked up on this point as well.)

But the fact that so many were so impressed by an assertion that an iPhone possesses the capabilities of $3,000 worth of 1991 electronics products — when the actual figure exceeds $3 million — reveals how fundamentally difficult it is to think in exponential terms.

Innovation blindness, I’ve long argued, is a key obstacle to sound economic and policy thinking. And this is a perfect example. When we make policy based on today’s technology, we don’t just operate mildly sub-optimally. No, we often close off entire pathways to amazing innovation.

Consider the way education policy has mostly enshrined a 150-year-old model, and in recent decades has thrown more money at the same broken system while blocking experimentation. The other day, the venture capitalist Marc Andreessen (@pmarca) noted in a Twitter missive the huge, but largely unforeseen, impact digital technologies are having on this industry that so desperately needs improvement:

“Four biggest K-12 education breakthroughs in last 20 years: (1) Google, (2) Wikipedia, (3) Khan Academy, (4) Wolfram Alpha.”

Maybe the biggest breakthroughs of the last 50 years. Point made, nonetheless. California is now closing down “coding bootcamps” — courses that teach people how to build apps and other software — because many of them are not state certified. This is crazy.

The importance of understanding the power of innovation applies to health care, energy, education, and fiscal policy, but no where is it more applicable than in Internet and technology policy, which is, at the moment, the subject of a much needed rethink by the House Energy and Commerce Committee.

— Bret Swanson

* To be fair, we do not account for the fact that back in 1991, had engineers tried to design and build chips and components with faster speeds and greater capacities than the consumer items mentioned, they could have in some cases scaled the technology in a more efficient manner than, for example, simply adding up consumer microprocessors totaling 20,500 MIPS. On the other hand, the extreme volumes of the consumer products in these memory, processing, and broadband communications categories, are what make the price drops possible. So this acknowledgment doesn’t change the analysis too much, if at all.

Prof. Krugman misses the App Economy

Steve Jobs designed great products. It’s very, very hard to make the case that he created large numbers of jobs in this country.

— Prof. Paul Krugman, New York Times, January 25, 2012

Turns out, not very hard at all.

The App Economy now is responsible for roughly 466,000 jobs in the United States, up from zero in 2007 when the iPhone was introduced.

— Dr. Michael Mandel, TechNet study, February 7, 2012

See our earlier rough estimate of Apple’s employment effects: “Jobs: Steve vs. the Stimulus.”

— Bret Swanson

Tech Nerds Talk

A good conversation between Harry McCracken of Technologizer and Bob Wright of bloggingheads.tv. Topics include Apple’s ascent (and world domination?); iPhone vs. Android; whither Microsoft; Facebook’s privacy flub; etc.

Agreeing with Kessler

After challenging Andy Kessler over the Google Voice-Apple-AT&T dustup, I should point out some areas of agreement.

Andy writes:

Some might say it is time to rethink our national communications policy. But even that’s obsolete. I’d start with a simple idea. There is no such thing as voice or text or music or TV shows or video. They are all just data.

Right, all these markets and business models in hardware, software, and content — core network, edge network, data center, storage, content delivery, operating system, browser, local software, software as a service (SAS), professional content, amateur content, advertising, subscriptions, etc. — are fusing via the Internet. Or at least they overlap in so many areas and at any moment are on the verge of converging in others, that any attempt to parse them into discreet sectors to be regulated is mostly futile. By the time you make up new categories, the categories change.

Which naturally applies to one of the most contentious topics in Net policy:

Competition brings de facto network neutrality and open access (if you don’t like one service blocking apps, use another), thus one less set of artificial rules to be gamed.

Exactly. Net Neutrality could be an unworkably complex and rigid intrusion into this highly dynamic space. Better to let companies compete and evolve.

Kessler concludes:

Data is toxic to old communications and media pipes. Instead, data gains value as it hops around in the packets that make up the Internet structure. New services like Twitter don’t need to file with the FCC.

And new features for apps like Google Voice are only limited by the imagination.

The Internet is disrupting communications companies. Although yesterday I defended the service providers, who are also the key investors in all-important Net infrastructure, it is true their legacy business models are under assault from the inexorable forces of quantum technologies. Web video assaults the cable companies’ discrete channel line-ups. Big bandwidth banished “long distance” voice and, as Kessler says, will continue disrupting voice calling plans. On the other hand, the robust latency and jitter requirements of voice and video, and the realities of cybersecurity will continue to modify the generalized principle that bits are bits.

Even if we can see where things are going — more openness, more modularity, more “bits are bits” — we can’t for the most part mandate these things by law. We have to let them happen. And in many cases, as with the Apple-AT&T iPhone, it was an integrated offering (the exclusive handset arrangement) that yielded an unprecedented unleashing of a new modular mobile phone arena. Those 100,000 new “apps” and a new, open Web-based mobile computing model. Integration and modularity are in constant tension and flux, building off one another, pulling and pushing on one another. Neither can claim ultimate virtue. We have to let them slug it out.

As I wrote yesterday, innovation yin and yang.

Web 3.0

Could the iPhone 3.0 release this summer help create the mechanism — and culture — of micro-payments that many have long been seeking to solve the Web’s intellectual property problem?

UPDATE: These guys were thinking the exact same thing.