The Cost of "Cheap"

[Breadfan]

With the community here full of diverse backgrounds, I wanted to pose a question about something to see what various thoughts and opinions come up. It's not really car related, but my memory was jogged by Dennis's (Hotrauder's) comment about us having guts to pay more for tomatoes.

That jogged an older thought process that I've pondered from time to time, which I basically consider to be the cost of "cheap." Nowadays we've seen so many items morph from high ticket high dollar items to basic commodities. The reasons behind that can be attributed to technology, manufacturing techniques, but also in many ways to large commerical retails chains and let's be honest, cheap perhaps unethical labor practices (especially abroad, *cough* Walmart...).

My basic question is this - what is the cost of "cheap"?

Are we becoming dependent on items that are cheaper than they should be?

I suppose there are going to be socialogical answers to this, as cheap labor will have an impact in the long running future, and it directly impacts the low prices on items today. China will be a big player, and we've already had a long running discussion about illegal immigration and how it affects labor in this country.

There's also a technical point too - technology is rapidly becoming a commodity. Items that were once very expensive have become cheaper than lunch.

A good example from a technology standpoint that I like ot use is the cost of desktop memory, aka. RAM.

Back in about 1994/1995, we purchased 4mb (megabytes) of RAM for our 486 computer, doubling it to a whopping 8mb. The cost for that 4mb of RAM was $180.

Today, a 2gb (gigabyte) kit (equal to 2048mb) costs about $80. (Or $60 if you shop smart...)

So...doing some math, it breaks down like this.

If RAM cost the same amout per mb as it did in 1995, 2gig of RAM (2048mb) would cost $92,160

If RAM cost the same in 1995 (per mb) as it does today, the 4mb of RAM we bought wouldn't have been $180, it would've been about 15 cents.

(Now that's why this will split into two questions, as the large driver for cheap here is technology and the ability to produce smaller more efficient memory chips)

Digital Camera memory (such as SD Cards) has taken a dive as well - just a year ago large 1gb+ cards were expensive and an add-on accessory after you bought a camera.

I recently bought a 2gb SD card for $6. Yes, $6. Most retailers now give away 1gb cards with camera's to entice you to buy from them. High capacity SD memory has shifted from being a costly optional add-on to a commodity and something "tossed in" to sweeten a camera deal.

Just like cheap labor will have an effect, cheap technology will change how we do business and live our lives.

So in a way, a 2 part question - how does "cheap" affect us, from a socialogical perspective and from a technological perspective. And, are we paying prices that "too low", and if so is this a detriment? (How to convince people to pay higher prices is beyond me...)

I know we've got some opinionated folks and enough different backgrounds to give different perspectives, so what do you think?

[Dragcity]

I think......

You've opened up a ......

CAN OF WORMS


(Pandora's Box, so to speak)

And....

"Good Luck With That"

[KillJoy]

Something is only worth what someone is willing to pay for it.

Period.

KillJoy

[Bluerauder]

With the community here full of diverse backgrounds, I wanted to pose a question about something to see what various thoughts and opinions come up. It's not really car related, but my memory was jogged by Dennis's (Hotrauder's) comment about us having guts to pay more for tomatoes.
You asked for it .....

Very interesting question, Mike. As you have structured your explanation, there are actually quite a number of mechanisms at work underlying the phenomenon.

First, is the Research and Development perspective (this fits into your computer, RAM, camera and many other consumer goods from HD TV to DVDs, microwave oven, etc. It costs a lot of money to engineering, design and develop the first prototype system to get it tested and make it producible. This is why early models are quite expensive. Companies try to recover their R&D and capital investment costs early because they really don’t know whether a specific product will be a hit or a fizzle. Once this picture becomes clearer and public demand increases, then costs generally come down to more reasonable levels. This is a balance between recovering costs + profit and what the market will bear. Strangely enough basic Television cost roughly what they did 30 years ago – 19”-26” range – not the HD, 64” widescreen plasma jobs. Same goes for car batteries and tires. They are not really much more expensive than when I was selling them at Western Auto back in 1966. Of course, car prices have gone through the roof. My first car was a ’72 Chevelle ($3150), then ’74 Charger ($6750), then ’81 Regal ($9500). We all know where that is heading. Now, cheap is in the $18K-20K range.

Next is the disposable, throw away perspective. The majority of big boxes stores do not want to sell you something that lasts forever (or even close). They would rather sell you a “cheap” product that will do the job for a short period and have you keep coming back over and over and over again. The basic theory here is that four $6.00 items is better than one $20.00 item. The benefit is more evident when one considers that they can make the $6 item for $3 but the $20 item costs $15. There’s double and triple profits in cheap. There was a time not very long ago when such cheap products were considered a joke because pride in workmanship and company reputation were considered along with profit. There was quality competition for the producers of junk. Unfortunately, the proliferation of cheap products has made this very difficult. The public seems to have a greater tolerance for mediocrity and the only choice is between 1 or 2 different pieces of cheap merchandise. Personally, I would be willing to pay more for quality (real quality and not just the hype). Anyone who owns a house and has replaced 4 or 5 plastic toilet valves understands exactly what I am saying here.

The third part of your posed question deals with acclimation to products. Things that were luxuries 30-40 years ago are now considered necessities of life. They really aren’t but people have grown so accustomed to having these items that they can’t seem to function without it. In this category, I place things such as air conditioning, wall-to-wall carpet, microwave ovens, cable TV, internet service, cell phones, 3-4 BR with 2.5 BA, garage door openers, bottled water, prepackaged-precooked food, 76 varieties of catsup, 87 varieties of mustard, and 58 varieties of Heinz 57. People can and have lived without such stuff. I grew up without most of these items. Don’t think that I have suffered much because of it. How much are you willing to pay for nice to have items? Too often today it seems people cannot tell what is important. If they are cutting back on the food bill to finance a big screen TV or cable TV or a nice new SUV, then something is wrong.

That is my thoughts on the subject and I suspect it will prompt additional discussion or questions. Bottomline for me is that “Cheap” is relative. What I considered cheap when I was making minimum wage was different than it is now --- by a little bit. ;)

[Haggis]

A penny earned is a penny saved.

[Breadfan]

Something is only worth what someone is willing to pay for it.

Period.

KillJoy

That is too simple an answer. Yes what you say is true but it doesn't take into account the vast number of variables that affect that. The margin dictates what the price is for someone to buy, and competition and technology can help push it below the margin.

If the margin is "what we will pay" how would society react if the margin is artificially too low due to cheap labor, unethical practices, etc.? Or more aptly, how will they react when whatever is making the margin artificially low dries up or bursts?

Dragcity is right, it is a pandora's box, I challenge anyone to tell folks not to shop at WalMart or to pay more for things and actually have them listen, but what is the cost of cheap now if it turns out to not be sustainable? How would you react if changes to labor laws affected where WalMart makes goods and prices go up?

[Breadfan]

Thanks for the response Charlie, you bring up some great points. I also agree, the inexpensive items we are getting these days are getting quite "cheap."

Reverting back to a tech perspective, one can really bargain hunt, and if you build your own computer, you can pick out super cheap parts with rebates that make them nearly free.

I've learned when asked for advice on what to buy, I stress to pay more for decent equipment. Those no-name and nearly free computer components and peripherals are usually so junky and worthless they are no where near worth the headache vs the cost savings.

Some of this stuff is a real gamble. I recently invested in a GPS for my car so I can try to make the CAM meets on time, I had to shield my eyes from all the super cheapo no-name GPS solutions out there these days, I couldn't see rolling the dice for something that could leave me up a creek and without a map somewhere I've never been.

And that feeds back to one of your points, GPS navigation, wow what a luxury and I'm sure give me a year or two with it and I'll say "how did I live without it?"

[dwasson]

Explain to me why I should pay more for anything than I have to.

[duhtroll]

I want to know what Charlie's doing to those toilet valves.

:eek:

On second thought, no, I don't.

[Mad4Macs]

I'll let you know how "cheap" affects me, just as soon as Johnny Walker Blue hits $10.00 a bottle

:lol:

[Bigdogjim]

Free is still better:)

[RoyLPita]

I believe that I got a great deal on a 4 Gig flash storage. It went for $120 but was on sale for $39.95.

[gja]

There is one thing I will say here.
Using DRAM pricing as a model for analysis of financial and sociological impact of the commoditization of goods is a poor choice.

And, here is why:
There are several factors that have lead to the commoditization of DRAM and the drop in resulting prices.
1. Irresponsible building of foundry plant capacity in Asia and the East resulting in excess output helping to depress prices through market flooding. There was, in the past several years, an unwise rush to build foundry plants and raise outputs that ran unchecked, a speculative expectation of needed output that did not materialize.

2. R&D cost finalization and resulting reduction in overhead costs due to amortization of prior R&D costs over the years, combine this withthe fact the current DRAM technology is being reused on multiple platforms resulting in low incentive for pioneering (high cost) new technologies in DRAM production.

3. Refinement of DRAM production methods and manufacturing lowering operations and production cost through operational efficiencies and raised yield rates (lowered defective output).

4. Further, higher density DRAM technologies have lead to lowered costs by virtue of lower overall costs to produce chips in densities that require less of the core materials used to make products.

[Local Boy]

I got a great deal on traction bars for my Blown Bronco... Used to be a Bus Stop post. Freeheeheehee

[Breadfan]

There is one thing I will say here.
Using DRAM pricing as a model for analysis of financial and sociological impact of the commoditization of goods is a poor choice.


You are right actually - oddly enough as I was writing my original post it morphed into two seperate questions, the sociological regarding labor, and then seperate to that, relating to technology.

Totally seperate from the impact of labor, cheap technology will have an impact on us for the future, in a way, it's a topic all it's own.

[MENINBLK]

There is one thing I will say here.
Using DRAM pricing as a model for analysis of financial and sociological impact of the commoditization of goods is a poor choice.

Your explanation is closer but not quite on the head.

RAM prices have to do with POPULARITY.

When DRAM was sold in SIMMs way back when, the prices started HIGH
and then came down as more and more PCs used SIMMs as standard RAM.
(Single In-line Memory Module)

Then came DIMMs. The difference ?
The chips were built in a higher density so that you could put a row
on the front and the back of the card.
(Dual In-Line Memory Module)

Then came the advent of faster DRAM technologies.
DDR was the first (Dual Data Rate).
You could read RAM twice as fast as you could write to it.
When DDR became popular the prices of SIMMs and DIMMs
that had gone down, now started to creep back up.
Why ? It was actually MORE EXPENSIVE to make memory
that was no longer popular.

To compete with DDR came RAMBUS.
RAMBUS was expensive as HE$$ !!
And the performance just wasn't there.
RAMBUS prices fell from an all time high to just about 1/10th of its original cost.
Try to buy RAMBUS RAM today....
It is probably twice what the original price was.

DDR is now up to DDR3 and it will be here for a while.
Bus speeds aren't climbing that fast and processor cores
are now doubling, quadrupling and so on, exponentially.

So you guys are correct on the front end of prices.
But as the technology gets popular, the prices come down.
As the technology gets old, the prices go back up.

Try to find an ECM for a 1992 Lincoln Town car...
It won't be as cheap as you think it will be...

[endless]

You asked for it .....


Of course, car prices have gone through the roof. My first car was a ’72 Chevelle ($3150), then ’74 Charger ($6750), then ’81 Regal ($9500). We all know where that is heading. Now, cheap is in the $18K-20K range.






well, http://www.measuringworth.com/ppowerus/result.php says that adjusted for the change of purchasing power, your the $3150 Chevelle would cost be right around $16,500. http://www.minneapolisfed.org/research/data/us/calc/ for a second result puts it in the mid 15,000s.

which unfortunately takes you from a chevelle, to a cobalt. :D

[Mike Poore]

A wonderful discussion, friends, and, for one, I'd like to see more of them.

Just adding my two cents, but isn't part of the equation, simply, labor costs? For instance, are the folks on the assembly line making memory cards for cameras, whether they be 4MB or 1GB, basically the same? And isn't the amount of actual material (hi-tech sand) in those cards the same?

But, on the other hand, if you consider the cost of an automobile, although there are too many factors to oversimplify, isn't the major cost of manufacture, labor? I'm talking about all the pieces-parts, here, not just putting them together. (assembly). Don't forget to add in the pension plan and health benefits costs.

I think Charlie's point about our want/need for options, being a major contributing factor, is well taken.

Headlights, for instance, are not much different from the new brighter ones on the current cars vs. the ones on his old Buick Regal, with it's removable door option; but the mechanism that allows it to look around corners, as in the Lincoln MK-Z, surely adds cost. Of course, one might argue that the sealed beam units were more costly to manufacture than the twist-in bulbs, but now they go into expensive housings.

Another thought about cost and cheap. I can keep the cost down by cheapening the product in several ways; one by adding more clay to the candy bar, or have it made by pre-adolescents in Bangladesh, or both. In the second option, however, the product has not changed, nor it's componants cheapened, but the cost of manufacture lowered.

[Bluerauder]

Another thought about cost and cheap. I can keep the cost down by cheapening the product in several ways; one by adding more clay to the candy bar, or have it made by pre-adolescents in Bangladesh, or both. In the second option, however, the product has not changed, nor it's componants cheapened, but the cost of manufacture lowered.
In the example of the in-tank toilet valves that I mentioned, I think both mechanisms are in operation -- cheap labor is using cheap parts. The dayum plastic in those things is designed to disintegrate in water after 3-5 years so that you have to buy a replacement.

[Haggis]

I saved 15% just switching to Geico.

[larryo340]

I saved 15% just switching to Geico.
:rofl::rofl::rofl: ^^^that is great, I needed that !!

[finster101]

Do I get credit for this course?

[GreekGod]

"adding more clay to the candy bar"...MMMmmmmm...clay in my candy bar...developing a Pica.

Wal-Mark!...my favorite store.

My plastic toilet valves last and last and last and....

The Chevelle is a good example of a cheap car. No radial tires, no stereo FM radio, no CD player, etc. Prices on cars have stayed relatively the same, while getting many design improvements.

Social Security and other taxes are a major cost added to all products.

[Mad4Macs]

You are right actually - oddly enough as I was writing my original post it morphed into two seperate questions, the sociological regarding labor, and then seperate to that, relating to technology.

Totally seperate from the impact of labor, cheap technology will have an impact on us for the future, in a way, it's a topic all it's own.

How about mail-order Russian Brides?

:lol:

[dwasson]

How about mail-order Russian Brides?

:lol:

When they break down you can't get parts.

[Aren Jay]

I buy used, for expensive good things, and get the expensive good thing for less. I spend about as much as a new Cheap thing and I get a good used made to last thing.

Cars for instance: I bought my Marauder for 1/2 price. It was 3 years old and cost about the same as a low end Subaru or Honda rice mobile.
(you may think Subaru's are still good cars, but you would be wrong)
I also considered and missed by a couple of days getting an Aston Martin for the same price as the Marauder. Aston Martin was older but had 1/3 the mileage, is even more collectable and much better made than any new car for the same price or even double the price.

For computers the RAM and price is a direct cost of technology and possibility of implementation. If the tech was there in 1995 when I upgrade from 4 MB to 5 MB for $105.00. It would have been 1GB to 2GB instead. The cost wasn't for the Amount of RAM but the size of the chip. (1 MB was 4 chips back then) You can blame MSFT for some of this given that Windows is a memory hog, but everybody lately has just been throwing bad resource using graphics at everything to make it pretty.

But the smart shopper can get the good stuff just as easy as the cheap stuff if you shop around. I don't buy cheap stuff typically. Although I did in my youth. I now have tons of cheap stuff and a couple good things. I'm now getting more and more good things. They do still exist and even though they cost a little bit more they don't have to be completely unaffordable.

You can also get the good service and be treated right if you know where to go and what to buy. Hype isn't good, watch the hype but don't listen. Understand the hype but do your homework and get the good stuff. If it is 3 for $2.00 buy the better one for $1.50 You save $0.50 and get less quantity but more quality. And after the other 3 are gone or broken, you still have your good one. (for food you get less enjoy it more and your body thanks you later)

Just make sure that the good one isn't just a cheap one marked up to good prices. That is were your homework comes in.

The secret to happy successful shopping is not to buy so much for so much money, it is to take x amount of money and bring home things you like will keep and can use. If it isn't good stuff don't buy it, If the magazine or book has a nice cover, don;t buy it without reading the first chapter. You might hate it. Pick a book at random once in a while. Not because you like it or hate it or anything, just pick it up because you are there and flip thorugh it read a bit and then see. Do you like it? Yes buy it you will likely have a good one. If you don't put it down and try again tomorrow.

Coming home with nothing, but money is not a bad shopping trip. Coming home with stuff you don't want and no money to get the stuff you do want, the good stuff, is a bad shopping trip.

Get what you want not what you don't.

[DefyantExWife]

I just picked up a new electric griddle on www.kohls.com this morning. My old one is shot. So this one I was eyeballing was regularly 49.99, on sale now at Kohls.com for 34.99. When I clicked on the item to give in and get it finally, the price changed to 19.99 :eek: plus 99 cents to ship.


I dont care whose mama works in the sweat shop manufacturing these things, I just got me a steal. :cuke:


I mean... no. I feel ashamed. :run:

[Bluerauder]

So this one I was eyeballing was regularly 49.99, on sale now at Kohls.com for 34.99. When I clicked on the item to give in and get it finally, the price changed to 19.99 :eek: plus 99 cents to ship.
When prices drop that drastically (i.e. 60%) there is usually a reason. :rolleyes: That's not the griddle with the arsenic coating is it?? ;) Teflon, Arsenic ..... what's the difference. :rofl:

[Breadfan]

That's actually a pretty good deal, I may seek that out I could add one of those to my cooking arsenal

[DefyantExWife]

When prices drop that drastically (i.e. 60%) there is usually a reason. :rolleyes: That's not the griddle with the arsenic coating is it?? ;) Teflon, Arsenic ..... what's the difference. :rofl:



hardy har har :flamer:


actually, it appears to be a computer glitch. Its supposed to be on sale for $35; however, when you click on it to buy it, the price changes to $20.


You BLUE owners, I swear :rolleyes: think you're all that and stuff. :D