Allocating Capital: Your Consumer Technology Portfolio

It used to be that when you went out to buy a new computer, you would spend $2000 and you would get whatever the latest setup was. That would probably include the new computer itself, a new monitor, a new printer, and maybe a few other peripherals (remember when we used to call them “peripherals”?).

At the time, technology was changing so rapidly that it often made sense to upgrade everything. For example, your old computer might only have a floppy drive but now hard drives are available. Or the old computer had a hefty CRT monitor but now LCD flat-screen monitors are available. It was a time when the changes in technology were so obvious that the old equipment just looked… old. Nowadays the changes still happen rapidly but they are not as dramatic (or compelling).

For example, my desktop computer is about nine years old. I have, over the years, replaced the DVD drive (which I no longer use), the hard drive, and upgraded some memory. And of course replaced the keyboard and mouse at some point – even upgraded the monitor. But the computer itself is still chugging along just fine and there is literally no reason to think about replacing it any time soon. I guess over the years I may have spent about $800 in various upgrades. But that’s over NINE YEARS!! That works out to less than $100 per year in order to keep my desktop computing happy. Not bad.

Contrast that to folks who get frustrated and replace their whole setup every two to three years. True, they can buy a new desktop setup for about $300 nowadays, but there are other costs involved in migrating to a new system (those costs are getting lower, as “cloud technologies” are becoming more prevalent). And contrast that to the Mac folks, where unfortunately the price point for a complete new setup is still easily $1000 – and often a good bit more.

We recently replaced my wife’s laptop computer. It was about five years old, and it was up to its second dead battery. The cost of replacing the battery would have been a significant chunk of what it would cost to replace it with a similar unit (it was an old ThinkPad X series – pretty portable).

But nowadays my wife uses an iPad and an Android phone for her mobile computing, so there was no reason whatsoever to try to replace the laptop with something portable. We opted for one of the oversized Toshiba laptops from Best Buy – I figured we could get one for about $500, and if we did that every two years or so then we would still be spending less on hardware than most people.

In the end, we found a fine unit for about $270 (including tax). It is far faster than she will ever need, with far more memory and hard drive space than she will ever need. And it comes with a one-year warranty from Best Buy, so all it really needs to do is last us one year and we will feel pretty satisfied with our low-cost buy. Plus, we bought it on a credit card that doubles our warranty so we really have a two year warranty. Not bad for $270. 🙂

Here’s my strategy: We buy much of our hardware at low cost (and I also find much of our software free, from various open-source projects). But it all works out roughly the same as what it used to when I used to plunk down $2000 every few years for a shiny new computer setup. The reason is that we now spend money on mobile devices and things like TiVo. We each have a smart phone, a tablet, and I have both a netbook and a (nine-year-old) desktop. That’s a lot of computers, and any one of them could need to be replaced at any time. We need to buy stuff fairly cheap.

Plus, we buy a lot of web services. Backup services, web hosting, premium upgrades to various productivity tools on the web (e.g., Evernote and Remember the Milk), digital access to publications – all sorts of stuff.

The money we used to spend primarily on hardware and software is now spread around between a wide variety of lower cost hardware, and lots of handy-dandy web tools.

It’s a new world out there on the Internet. You’ve got to think differently about how you allocate your consumer technology capital! They don’t tell you that at the store.