The Amazing Wealth Machine

How much is that smartphone really worth? Phil and Stephen discuss multiple analyses.

Everything from 1991 Radio Shack ad I now do with my phone

The back page of the front section on Saturday, February 16, 1991 was 4/5ths covered with a Radio Shack ad.

There are 15 electronic gizmo type items on this page, being sold from America’s Technology Store. 13 of the 15 you now always have in your pocket.

So here’s the list of what I’ve replaced with my iPhone.

  • All weather personal stereo, $11.88. I now use my iPhone with an Otter Box
  • AM/FM clock radio, $13.88. iPhone.
  • In-Ear Stereo Phones, $7.88. Came with iPhone.
  • Microthin calculator, $4.88. Swipe up on iPhone.
  • Tandy 1000 TL/3, $1599. I actually owned a Tandy 1000, and I used it for games and word processing. I now do most of both of those things on my phone.
  • VHS Camcorder, $799. iPhone.
  • Mobile Cellular Telephone, $199. Obvs.
  • Mobile CB, $49.95. Ad says “You’ll never drive ‘alone’ again!” iPhone.
  • 20-Memory Speed-Dial phone, $29.95.
  • Deluxe Portable CD Player, $159.95. 80 minutes of music, or 80 hours of music? iPhone.
  • 10-Channel Desktop Scanner, $99.55. I still have a scanner, but I have a scanner app, too. iPhone.
  • Easiest-to-Use Phone Answerer, $49.95. iPhone voicemail.
  • Handheld Cassette Tape Recorder, $29.95. I use the Voice Memo app almost daily.
  • BONUS REPLACEMENT: It’s not an item for sale, but at the bottom of the ad, you’re instructed to ‘check your phone book for the Radio Shack Store nearest you.’ Do you even know how to use a phone book?
    You’d have spent $3054.82 in 1991 to buy all the stuff in this ad that you can now do with your phone. That amount is roughly equivalent to about $5100 in 2012 dollars.

How much would an iPhone have cost in 1991?

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.

The iPhone in Your Pocket Is Worth Millions

My iPhone 7 has 128 gigabytes (GB) of flash memory, which would have cost around $5.76 million back in 1991. Its A10 processor, which includes a CPU and GPU, has 3.3 billion transistors, running at 2.34 gigahertz (GHz) and delivering roughly 120,000 million instructions per second (MIPS). This amount of computing power would have cost something like $3.6 million back in 1991.

The iPhone 7 also delivers astonishing communications speed via 4G LTE mobile networks. Peak and average mobile speeds vary, depending on geography, network load, and other factors, so I just decided to use the speed I normally get on my mobile LTE connection (not Wi-Fi) at my office. With just two of five dots’ worth of signal strength, I enjoy a connection of 33 megabits per second (Mbps). That kind of wireless bandwidth might have cost something like $3.3 million back in 1991.

Adding it up, we get $5.76 + $3.6 + $3.3 = $12.66 million to produce today’s iPhone back in 1991. And that’s just for the three components that are easiest to measure and compare across time. This estimate doesn’t include the camera, display, random access memory (RAM), MEMS gyroscope and accelerometer, or any of the other amazing parts and features packed into an impossibly compact package. Nor does this account for inflation, which means our comparison may understate the effect.

These are fairly rough estimates. Yet it’s interesting that the new $12-million figure is four times the $3-million estimate from three years ago – which just happens to be the pace of Moore’s law, a doubling every 18 months or so. By many accounts, Moore’s law is slowing down or is even “dead.” Yet these types of cost-performance improvements suggest Moore’s law, at least for now, lives on.

Do “They” Really Say “Technological Progress Is Slowing Down?”

Consider the 256 GB memory iPhone X: Implemented in vacuum tubes in 1957, the transistors in an iPhoneX alone would have:

  • cost 150 trillion of today’s dollars: one and a half times today’s global annual product
  • taken up a hundred-story square building 300 meters high, and 3 kilometers long and wide
  • drawn 150 terawatts of power—30 times the world’s current generating capacity

Oh. And clock speed. The AN/FSQ-7 operated at 75khz. The A-11 is a 6-core 24 mhz processor:

  • 2000 100 billion square meter buildings, each a hundred-stories—300 meters high—and 3 kilometers long and wide
  • 3000 times today’s global annual product
  • 300 petawatts of power—60,000 times the world’s current generating capacity
  • for the late-1950s vacuum tubes to match one iPhoneX…

And we haven’t even gotten started on the hardware architecture, or on the software and maintenance support necessary to emulate an iPhoneX at speed back in the late 1950s…

 

WT 375-686