Burgernomics vs the iPhone

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Which index shows how rich we really are: iPhones or Big Macs

REMEMBER the famous Big Mac Index, invented by (peckish?) Economist journalists in 1986?

It was intended as a more ‘realistic’ measure of a country’s wealth than the infinitely more boring Gross National Product.

So today Ukrainians can buy three Big Macs for the price of one in Spain – which in turn is 30 per cent cheaper than in Switzerland.

The index does of course come unstuck in those parts of the world Macdonald’s hasn’t yet colonised. With relatively few golden-arch franchises, Africa has its own equivalent: the KFC Index.

Also problematic is that you apparently get 8 per cent less burger in your Mexican Big Mac than you do in Australia.

But now the techno age has spawned a new index. This one highlights the huge gap, nay gulf, between what it actually takes for consumers to buy the very same electronics around the world – devices almost all made in the same place (China), but with very different degrees of affordability.

Take the recent iPhone X. At a wallet-bruising € 1,150 or so in much of Europe, it’s today’s most expensive mainstream phone (alongside its new rival, the Samsung Galaxy Note 9). The X has spawned an adaptation of the Big Mac Index: how long you would actually have to work to buy one.

The Swiss (yes, them again) can trouser a new iPhone X after working just 38 hours. Spaniards must toil nearly four times as much, 140 hours. Spare a free ringtone for the Ukrainians (708 hours), Indians (900 hours) and the poor old Egyptians (1,066 hours).

The good news is that although technology doubles in power roughly every two years according to Moore’s Law, fortunately it doesn’t double in price. In fact it’s getting cheaper.

Back in 1982, you might recall from a previous column, a basic word-processor cost an eye-watering € 7,500 in today’s money. Last night I spotted a mini computer on Amazon for € 90, and a Raspberry Pi for barely a third of that.

The original 2001 iPod was around € 350, which would be about € 500 today. But it isn’t: the current iPod costs less than € 150 in most of Europe. And some lesser music players are now so cheap they’ll soon be giving them away with your corn flakes.

So despite not living in Zurich there’s at least some hope for the rest of us.

Burgernomics apart, by all the statistics technology is indeed becoming steadily more affordable for all of us every day we wait. It’s the waiting that’s so hard.

Loss leader

WHILE the iPhone has virtually the highest profit margin of any mainstream techno product today (it sells for a bruising three times what it actually costs to make, still want to buy one?), some tech products actually sell below cost.

Perhaps the most famous bargain is still Amazon’s Kindle e-reader. Not only does poor Mr Bezos make zero profit on every one he sells, but he’s actually selling it at a loss in many cases. Until you factor in all the e-books he dearly hopes to flog you.

Printers have long been sold with a similar rationale.

They’re often highly-subsidised devices which you will finance many times over by buying their ink at a cost-per-drop infinitely higher than the finest champagne. A pity there isn’t an indelible Cava.

 

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