Thursday, April 17, 2008

The Myth of Planned Obsolescence

This idea is a favorite of conspiracy buffs:

There's a sort of urban myth that companies spend millions designing products that will fall apart or otherwise cease to function just three days after their warranty expires. This would cost extra, be difficult to achieve, and would probably result in customers buying a rival's product next time because the first one turned out to be no good.
The Adam Smith Institute's blog is quickly becoming one of my favorites. When it comes to the 'corporations are liars' meme, this conspiracy is usually followed quickly by the idea that oil companies are keeping 100 mpg cars from us.

12 comments:

psikeyhackr said...

Only technological morons, like most economists, don't know that planned obsolescence is going on.

But you may notice that economists do not compute and report the depreciation of so called durable consumer goods. That depreciation happens on the DEMAND SIDE.

They don't mention Net Domestic Product much either. The equation for that shows how economsits can't do grade school algebra.

GlobaLIES
.

Clement Wan said...

Thank you for visiting the blog. However, I think ironies abound. Who precisely is the "moron" if choosing between those who consistently buy from firms whose products fall apart versus those who don't? To use an example, upgrading a new computer to run faster and more useful software is also hardly "planned obsolescence" in the sense that it's done with malicious intent by manufacturers who sell more. To blame manufacturers for this is also blaming them for coming out with newer, better and more useful products.

Most economists would prefer to use net GDP as a depreciation number would help to estimate the capital required to maintain current levels of income. The problem is the lack of available objective metrics to do so on a broad scale while GDP is a trusted government metric.

What economists (and any financial analyst for that matter) do measure however is productivity of capital which arrives at a similar and more useful metric in that it can be more objectively tested as it looks at capital that is intended to create income. Looked at in another way, while a video game is recorded as a sale and part of GDP, it is difficult to see the GDP productivity or even utility of that purchase versus a machine.

From a productivity of capital standpoint, as the economy continues to transition towards being more service oriented, and as the barriers to entry continue to fall particularly for small businesses and their ability to project themselves, I suspect productivity will continue to rise (not to mention the fact that firms will make increasingly better products replacing those whose products easily fall apart - e.g. Japanese vs American automakers is a simple and obvious case study).

psikeyhackr said...

{{{ Thank you for visiting the blog. However, I think ironies abound. Who precisely is the "moron" if choosing between those who consistently buy from firms whose products fall apart versus those who don't? To use an example, upgrading a new computer to run faster and more useful software is also hardly "planned obsolescence" in the sense that it's done with malicious intent by manufacturers who sell more. To blame manufacturers for this is also blaming them for coming out with newer, better and more useful products. }}}

There are 3 phenomenon which can be called "planned obsolescence" with literal accuracy.

1. Technological Advance

When Intel was developing the 8086 processor they were selling the 8085. The 8085 had 6000 transistore and the 8086 has 26,000. So the 8086 was vastly superior so Intel was PLANNING to make a current product OBSOLETE with a technologically superior product.

2. Styling Changes

Changing the style of women's dresses every few months is a form of planned obsolescence but it does not involve the new product falling apart. But how many billions of dollars worth of clothes do women have hanging in closets that they would not be caught dead in?

3. Cheap Construction

Then there is the problem of manufacturers not making the products last as long as they could. I suspect all auto manufacturers know how to make cars last 30 years or 500,000 miles. 18 wheel trucks already go 1,000,000 miles. Of course economists will say that this would make the cars more expensive. But useless and stupid styling changes already make the cars more expensive and economists don't complain about that.

But the economists don't collect and report the data for the depreciation of durable consumer goods like cars and air condationers and and TVs, etc/ etc.

but in most products all 3 of those factors are implemented simultaneously. And how many economists can evaluate them. I have a Linux book from 2001 that talks about the planned obsolescence of computer software. Isn't that was VISTA was about?

Computers could have been made with passive backplanes with plug in CPU/memory cards. I don't doubt the number of whole computer upgrades coould have been cut in half. Power supplies and cases have been replaced for nothing. But economists don't even talk about the depreciation of all of this junk.

The way the system works depends on most consumers being dumb. Double-entry accounting is 700 years old. How hard can it be? Do educators and economists suggest mandatory accounting in the schools? What are these cheap computers for?

Clement Wan said...

I believe you may have missed the second part of my response. As noted, there are good reasons why anyone wouldn't collect the depreciation on consumer products given there's really nothing to collect and values are almost entirely subjective as they are not being used to generate income.

Depreciation reflects an estimate of the value consumed. Ask any accountant for an objective determination for a series of products the depreciated cost, and they would probably tell you that it is too difficult to determine a precise/verifiable number - particularly for assets for which there's no liquid market.

As for technological obsolescence, that too is subjective given that a consumer has the choice of whether or not they want to upgrade to the faster more efficient technology - and plenty choose not to (and I note that when they choose not to - which, to use your example of Vista, most including myself did not upgrade from Windows 95, depreciation values would be overestimated).

Economists do talk about "this junk" - but as far as measuring productive capital, they don't measure consumer hard assets because there is no objective way to determine these values with a useful degree of accuracy. However when it comes to business usefulness however, the greater levels of transparency and required documentation make it both possible and available - which is why economists do report on the productivity of capital.

The way the system works does not depend on consumers being dumb. The way the system works is that it rewards manufacturers and companies for meeting consumer needs and wants which change and are ever demanding.

While it was presumably a facetious comment, I note that depreciation was not an idea that was codified or used when double entry accounting was developed at least 700 years ago. Incidentally, my background is also in accounting.

psikeyhackr said...

{{{ The way the system works does not depend on consumers being dumb. The way the system works is that it rewards manufacturers and companies for meeting consumer needs and wants which change and are ever demanding. }}}

Well considering that double-entry accounting is 700 years old and how powerful computers are today, why don't economists suggest that accounting be mandatory in the schools? Eliminate a couple of English Literature courses.

The BRILLIANT consumers might start figuring out how DUMB it is to buy a $2000 laptop and lose $1500 in depreciation in 3 years. LOL

Clement Wan said...

Being one of those people who buy 2000+ laptops imagining a 3 year depreciation level - and have done so for my last 3-4 laptops, I would say that the value/utility/productivity I've personally gotten from them has climbed significantly.

As for mandatory accounting, a lot of schools do require it - I don't know if it's mandatory everywhere but it was a component in grade 9 business at least in Ontario.

The issue of accounting for depreciation however as noted, is not entirely about computer resources - actually very little at all - but rather an issue of objective metrics. See above.

psikeyhackr said...

{{{ Being one of those people who buy 2000+ laptops imagining a 3 year depreciation level - and have done so for my last 3-4 laptops, I would say that the value/utility/productivity I've personally gotten from them has climbed significantly. }}}

ROFLMAO

Ever heard of an IBM 3033 mainframe? It was introduced in 1978. It sold for $3,000,000. What kind of companies bought that machine in 1980?

If you check the Jan 1983 BYTE magazine you will see that it was the fastest machine among MANY hardware and software combinations tested.

Now the FUNNY thing is that it took a MAXIMUM of 32 MEGABYTES and yet companies considered it worth $3,000,000. So how is it that ONE GIGABYTE is not enough for NETBOOKS these days?

I have a Linux book from 2001 that talks about the planned obsolescence of computer software. If the hardware becomes more powerful then we need more inefficient software to WASTE THAT PROCESSING POWER.

How many people need as much computer processing power as corporations willing to spend $3,000,000 in 1980?

Now admittedly they weren't using those mainframes to compress MP3 files and watch videos but do those tasks justify $2000? ROFL

You economists need to rationalize the BS you have been telling everybody for decades. LOL

A two year old desktop for about $300 and an HP 311 for $400 should be fine for almost anybody. OH yeah, replace the hard drive in that used desktop. You never know when an old drive might crash. And clean the dust out. That blocks air flow and causes over heating.

That 3033 mainframe was about equivalent to a 300 MHz Pentium. I have run that BYTE benchmark on modern machines. Netbooks blow it away. But plenty of articles cast aspersions upon netbooks as NOT POWERFUL ENOUGH. Gotta keep the suckers believing the BS. It's a CASH FLOW economy. Who cares about the NET WORTH of the suckers?

Clement Wan said...

I really don't understand what your point is. Hardware and software can do substantially more than it has in the past. To suggest that it is "planned obsolescence" or some massive conspiracy theory / con job is absurd on its face.

Not everyone is able to achieve the same levels of productivity but that's the trade off. Those people don't need to buy new computers. Computers are a tool like any other - and given that the value of human productivity has risen as quickly as it has - (the greatest costs for employers aren't the hardware or the software - it's people), ensuring that they are effective.

If you don't believe me, consider how few people upgraded from Windows95 to say Windows98 or even Vista - but people made the jump though to Windows 7. When people don't see the value of a new product, they simply don't buy it.

driskanonono trilaknonoshmakva said...

Clement wan. You made a fantastic case filled with arguments and convinced me that planned obsolescence is a myth.
Psikeyhackr: You started out with a nice triple split argument witch i was interested in but when faced with a counter argument your only response were things like
-Economist need to stop talking Bs
-Lol
-Rolf
-etc.
My friend, you just showed that you had no response what so ever and resorted to mocking Clement Wan witch is...well just lame.

psikeyhackr said...

It is 45 years after the Moon landing. Wasn't that a nice feat of engineering? 5 years before that the SR-71 Blackbird could do 2,000 mph at 80,000 feet. Don't you suppose they had to know something about aerodynamics to do that? What kind of computers did they have in 1964?

In 1995 there were 200,000 cars in the US. When and where do our brilliant economist specify the depreciation of all of these cars every year?

But we are supposed to care about design changed in cars considering what they could do in the 60s while continuing to give Nobel Prizes in economics to people who can't do algebra. No, consumer automobiles don't depreciate. LOL

Clement Wan said...

I don't know if you realize you're undercutting your point or if you really understand your point. What does the depreciation of cars have to do with anything? A car has much more to do with just aerodynamics.

Cars after all, are creating value/utility for buyers in the meantime. It doesn't take a mechanical engineer to recognize that there's a cost-benefit relationship for durability - ie there's no point in building a million dollar car that lasts for decades only because mileage continues to improve, comfort begins to improve... and at some point they'll even start driving themselves - and we'll have a lot fewer cars.

But don't let me stop you from dwelling on your conspiracy theories ;)

Jeff Samples said...

psikeyhackr, are you aware that the capabilities of and demands on computer hardware in 1983 were very different than that imposed on current systems by the full color graphical interface and parallel pipelined, multi-threaded operating systems of today?

Yes, the engineers at Lockheed and NASA did a stellar job (pun intended) designing the Blackbird and the Apollo vehicles with the meager processing power available at the time. But that was a result of engineering not computer processing. Do you not think if they had today's computers they could have done the same job faster, more efficiently, with fewer people?

Do you suppose a more modern engineering accomplishment like stealth aircraft or the real-time flight control systems of inherently unstable airframes could be done just as well with a computer from the 1960s?

Planned obsolescence is with out doubt a real industrial design model. But not all obsolescence qualifies as planned obsolescence which requires that the artificially short product lifespan be intentionally designed for the express purpose of increasing future sales at the expense of the customer.

Using cheaper materials to keep manufacturing costs down when designing a product with a projected useful life of some expected duration is not some kind of shady deal, its value engineering. Designing a product to last beyond its useful life is wasteful and serves only to increase the price of a future paperweight.

If you have any logically valid rebuttal then I think it would be widely welcomed, otherwise don't feel the need to respond with another non sequitur. I am certain you can find more productive ways to fill your time.