Measuring Cost Gravity

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pieterh wrote on 21 Jan 2013 10:04

The other day I bought a little black and white laser printer for my office. It cost about 50 Euro, and it prints very nicely, and rapidly. The first comparable consumer lasers came from HP in 1985 and cost about $4,000. They were huge, and slow. I wondered, could we use these two data points to compute the "cost gravity" of laser printers?

I'm going to compare the HP LaserJet Plus, which printed 8 pages per minute at 300x300 dpi with the Samsung ML 1665, which does 17 ppm at 600x1,200 dpi. The former cost $4,000 and the latter $50, when introduced in 2010.

Let's start by adjusting for inflation. That $4,000 in 1985 is just double in 2010 dollars, at $7,995. Next, let's adjust for technical specifications. The Samsung prints twice as rapidly, at 8 times the resolution, and is about a quarter of the size. So I'm going to rate it at 32 times better, technically.

If there was no cost gravity at work (0%), and assuming that we're paying proportionally for technical quality, that original $4,000 printer would cost a cool $256K today, which is 32 times the price, doubled again for inflation.

If cost gravity was 10% per year, today's little printer would still cost $18K. A cost gravity of 29% per year brings us to the 2010 price. That's a fall of about 50% every 24 months (0.71 x 0.71). $50 probably represents the bottom of the price curve, effectively zero. Technical specs will improve (WiFi, color, longer-lasting cartridges), and then Korean and Japanese manufacturers will stop making them.

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