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TECHNOLOGY’S DEFLATIONARY CURVE

By Michael Castelluccio
May 1, 2015
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The enthusiasm over Gordon Moore’s Law that computer processing power doubles every two years has toned down. We’re no longer impressed with increased chip capacity, but one dimension of the perpetually increasing power of computing can lift even the most apathetic eyebrow—the plummeting costs that accompany the increasing power.

 

We’ll begin with a hardware paradox. Because our modern computers are so much more powerful, they should cost much more, right? They process software instruction lines at frightening speeds, and computer memory is almost limitless and permanent (with backup). But there’s actually an inverse proportion regarding computing power and cost—as it gets better, it gets cheaper, and by a lot.

 

In 1983, computer manufacturer Morrow Designs posted full-page magazine ads extolling the virtues of its new M10 and M26 DISCUS hard disk systems. The hard drive looked like a conventional hard disk drive without the cover. The ad’s headline read: “First compare quality. Then compare cost.” You were assured, “You’ll find that Morrow Designs’ hard disk systems offer the best price/performance ratios available.”

 

And what were those best performance ratios? The M26 was a 26-megabyte (26MB) hard disk system listed at $4,995, and the M10 was a 10MB hard disk listed for $3,695. ­According to the copy at the top of the page, “The M26 works out to under  $200 a megabyte.”

 

Today there’s another unique memory solution offered by a company called Gigs 2 Go. These little thumb drives are flash drives, not disk drives, and they’re mounted on a cardboard holder. You tear off a drive, load information onto it, and give it away. A set of four drives is available in several configurations, including a card of four 8GB drives that will cost you less than $40 on Amazon.

 

Do a price/performance check of the Gigs 2 Go solution, and you’ll find it costs $40 for 32GB, a capacity that converts to about 32,000MB. If you were able to match that kind of capacity at the “under $200 a megabyte” premium for the Morrow M26, you would find yourself paying $6,147,840 ($192.12 × 32,000) for the same amount of machine recall—keep in mind that those amounts are in 1983 dollars. So 32GB would have cost you about $6 million if you wanted to take the trouble to connect all those Morrow drives. Today, the same memory is on sale for $40. That’s some kind of deflationary curve.

 

Actually, a recent chart of the deflation tracked the cost of one megabyte of memory over the last three decades, and this is what the analysts found: In 1980, one megabyte cost $193. In 1990, it was down to $9. In 2000, a megabyte was less than  two cents, and by 2010, you could get  61MB for a penny. Today, when you buy a $99 annual license to use Microsoft Office on five of your computers, the company gives you one terabyte of free storage on its OneDrive cloud.

 

HOBBY KITS

 

The build-it-yourself computer kit that appeared on the January 1975 cover of Popular Electronics has been credited by some as the first personal computer. Called the Altair 8800, its role in the development of computing was considerable. Paul Allen and Bill Gates wrote a BASIC interpreter program for the machine, which was the first Microsoft product. The first meeting of the legendary Homebrew Computer Club in Silicon Valley, Calif., was held in Gordon French’s garage in March 1975. The group met to discuss the first MITS Altair microcomputer, which had been sent to them to review for the People’s Computer Company. Steve Wozniak, who attended the meeting, claims that what he saw there inspired him to design the first Apple-1. Time magazine later called the club “the crucible for an entire industry.”

 

As inspiring as the Altair 8800 was for those pioneers, it isn’t much of a computer. It had a 2.0 MHz CPU, 256 bytes of RAM (that’s right, bytes), and memory that operated on paper tape. Today, there’s a worldwide community of young hobbyists and experimenters who have a much more capable kit computer. It’s called the  Raspberry Pi, “a low cost, credit-card sized computer that plugs into a computer monitor or TV, and uses a standard keyboard and mouse…It’s capable of doing everything you’d expect a desktop computer to do, from browsing the internet and playing high-definition video, to making spreadsheets, word-processing, and playing games.” (www.raspberrypi.org)

 

The Altair was priced at $395 as a kit or  $650 assembled. The Raspberry Pi costs  $35. It’s hard to imagine what the Raspberry Pi kit will inspire from its enthusiastic international membership, especially with such a low entry fee.

 

 

Michael Castelluccio has been the Technology Editor for Strategic Finance for 21 years. His SF TECHNOTES blog is in its 19th year. You can contact Mike at mcastelluccio@imanet.org.


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