Paul’s technology budget theories: $1000 Phone VS $1000 PC

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Many times Paul makes the case that it makes more sense for people to spend $1,000 on a phone and $500 on a computer or tablet or whatever because you use it more, and derive more value from it. Most recently he said this on GFQ but I’ve heard him say it many times: https://youtu.be/IOZwt6AX5CE?t=28m16s

 

This logic doesn’t make sense to me at all. So, you should spend more money on a device you use more often, even if spending more money on it doesn’t return more value to you?

 

For example. I can go buy a 32GB iPhone 6s for $549 or I could go buy a 256GB iPhone 7 for $849. When it comes down to my return on investment, they have nearly the exact same return with one requiring a much larger investment. The iPhone 7 might be a bit faster and obviously has more storage, but in all my time using my iPhone I’ve never needed more than 32GB thanks to the cloud.

 

Furthermore, both devices are great build quality, good warranty, great customer support, and on and on. When buying a PC that is not the case. A $300 HP stream does not have the same level of build quality as a $1500 HP x360. Also for the additional price you get a more flexible device, which pen and touch support, more ports, faster ports, better quality screens, and of course faster components.

 

It seems like the justification for spending $1000 on a laptop far outweighs the justification for spending $1000 on an iPhone.

 

What do you think? Did I miss Paul’s point? Do you agree/disagree with Paul? How do you decide how to allocate your tech budget?

Comments (36)

36 responses to “Paul’s technology budget theories: $1000 Phone VS $1000 PC”

  1. Usman

    He did make it clear to most normal people, their phone is their primary device and their laptops are secondary, which I do agree with.


    Thing with the tech budget thing is that people don't look at the price of the phone unless you're buying outright. If you were to ask if people were willing to spend $1000 on a phone or laptop at point of sale, then I would believe more people would go for the laptop.


    The majority of people who, purchase high end flagship smartphones, don't pay for the phone in one go, they do have a set budget for a phone bill (as opposed to calling it a tech budget) and when you present it to them as $50 a month for 12 / 24 months (12 if trading in and getting the latest phone), they'd be happy to do that rather than drop the $1000 at point of sale.


    There's better finance / spreading cost plans for mobile phones than tablets or laptops. Surface plus is another interesting scheme as well to look at, as that is the iPhone upgrade program but for surface.

  2. Roger Ramjet

    The best explanation for the high prices people pay for phones is as Bling. The high end phone makers, led by Jobs who set the tone, and who always had a great eye for mass luxury, high end pricing, realized how this could become what it is, ubiquitous, beautiful, affordable status symbols, and made it happen, by positioning, pricing, pay as you go, coopting carriers as retailers, etc.

    Such a carefully arranged set of factors is not an accident, and must have strong influence on the resulting shape of the market, a mere 10 years out from the initial standard. Every argument advanced for the "value" of a $1000 phone vs a $4-500 version can easily be applied to say, a Mercedes Benz vs. a Toyota. This is the definition of Bling. Nothing wrong with it, obviously it enhances utility of the buyer, that's why they buy.

    Further, deriving a high value from a product is not a necessary correlation to high pricing, and is not a good reflexive explanation of high pricing vs something else. Many of the most valuable things like food, electricity, medicines, are dirt cheap. Rather pricing comes from many factors including what is the competition & business models (volume vs. margin) amongst sellers, who are predominant buyers (hint: consumers are less sophisticated than business) , and the level of success or lack thereof of major producers of imposing their preferred outcome in the marketplace, etc.

  3. wunderbar

    You know, after thinking about this a bit last night, I think you focus too much on the $1000 figure that Paul basically pulled out of thin air on a whim.


    Coin it a different way. You have $X to spend on either a smartphone or a laptop, You cannot buy both. What is the device that you will buy to take with you?


    The overwhelming majority would pick the smartphone, hands down.


    I think this is more the point that Paul is trying to get across. The specific number matters less than the concept of overwhelmingly, people generally spend a lot more time with/on a phone than they do a personal computer now. Even for me, I'm an IT pro, I work with computers all day every day. But if given the choice between either a phone or a laptop for my own personal use, even I would still pick the phone without a second thought.

    • TheJoeFin

      In reply to wunderbar:


      Well the $1000 was in reference to the rumored cost of the iPhone X, and the actual cost of the Note 8. There is no doubt in my mind that if Apple releases a $1000 phone it will sell very well. My point was that for most people buying a phone in 2017, $500 should be their target budget.

      • wunderbar

        In reply to TheJoeFin:

        Why? Just because you think $500 is the right price for a phone you want to buy doesn't mean there is a large demographic that is more than willing to spend significantly more on the piece of technology that is more than likely the most important piece of technology they own by a wide margin.

        • TheJoeFin

          In reply to wunderbar:


          Because for most people the ROI per dollar after $500 is not very good. Just because something is important doesn't mean you should spend more money on it. I use my car to get to work every day, that doesn't mean I should spend more on it. I could spend another $100,000 on my car and my drive to work experience would not change very much.


          However much like cars our phones also serve as a signal to our friends and peers about what kind of a person we are. As a way to signal wealth a $1000 smartphone is a great investment. But as a tool a $1000 phone doesn't get you much more than a $500 phone.

  4. MattHewitt

    I think your iPhone example is missing the point because you're comparing two iPhones that have the same featureset w/ different storage capacities. If you were to compare a $300 Android smartphone vs. a $1000 Android smartphone, I think it makes more sense in this scenario.


    For the extra $700 you're getting a faster phone, a better camera, a better display and other bells and whistles that people use every day. In fact, many people use their smartphone camera instead of a regular camera, so it may be work it having a phone with a great camera, especially if you don't have a regular camera and you have kids and you want photos of them.


    Phones are devices that many people hundreds of times per day. It's hard for me to think of a consumer PC that a person would get more use or more value out of. To spend an extra $700, especially if it's going to last a couple of years is a no-brainer to me over purchasing a more expensive PCs, which are used infrequently.


    In my case, in my personal life I boot up a PC once a month to take care of bills and then once a year to take care of taxes. 90% of my personal tech usage is a phone. To spend anything extra on a PC that is used so infrequently vs. a phone that is used all day long is an easy decision.


    I'm not saying I never use a PC. I use a PC at work every day to get work done. But that's their money.

    • Sprtfan

      In reply to MattHewitt:

      I think the focus on the amount of use is missed placed. I'd focus on how much more my experience is improved when I do use the $1000 device over the $500 one. For me, the experience would be the same so I derived no increase value by getting the $1000 device. I think most normal users would fall into this category.

      This isn't an argument for spending more money on a laptop either. I think the normal user would probably have their needs met well spending some where around $500 for each. I do think the minimum amount needed to be spent on an acceptable laptop is higher than the minimum amount that needs to be spent to get an acceptable phone though. I've used some $200-$300 laptops that were very frustrating to use while having relatively good experiences with phones that were priced in the same range.


    • TheJoeFin

      In reply to MattHewitt:


      Your point about getting more features with Android is true, but for most normal people there is no difference between a $500 Android Phone and a $1000 Android Phone. Other than the social signaling that comes along with owning expensive things.


      I agree most people don't need a PC at all, but if you do need a PC you'll get more bang for your buck if you spend an extra $500 on your laptop rather than your phone.

  5. hrlngrv

    I finally listened to last week's What the Tech.


    I guess I have to wonder why buy either $1,000 phone or $1,000 PC? If the camera is important but not so important that one would buy a DSLR camera, then I could see spending $200 extra for a camera (though I gotta wonder how much less expensive a solid DSLR would have been after paying another US$200 the 3rd or 4th time around).


    After the camera, presumably screen size and storage. Storage begs the question whether the phone accepts add-on memory cards. Maybe another $100.


    If decent midrange phones are available for US$300, then it's hard to believe acceptable phones can't be had for under US$800 with an excellent camera, reasonably large screen and sufficient storage.

  6. Wizzwith

    I'd say your point is correct, in that a $400-500 phone provides far more value-per-dollar than a $1000 phone does. 

    The thing is, are high end phones (and all iPhones) overpriced? Of course they are; just look at the profit margins, which are way out of proportion to PC's or even iPads.  That's just the way it'll be till enough people stop paying the premiums. 


    As far as the comparison to PC's, that's a lot more subjective.  Paul was just making a generalization and over simplifying it down to "value=time-used" which is not really accurate but serves to make the general point.  It's really about value you CREATE using the device, not TIME SPENT using the device.  I make money creating content on a PC, I do not make money doing anything on a phone.  Regardless of the usage time split then, the PC is FAR more valuable and worth spending more money on then a phone.  A quality tool makes the job easier and the result better with less effort. 


    Another thing is, most people still get given a PC or two for work by their employer.  So all those people don't have to buy their own PC for work, and they may not need one for home also, so that skews things further.    



  7. skborders

    How many people could even afford a $500 phone if they had to pay cash for it. However, this is America and what is one more monthly payment.

  8. Sprtfan

    To play devil's advocate, how about that it makes more sense to spend $1000 on a laptop because you'll probably use it 4-5 years when you'll only keep your phone for maybe 2 years?

    • TheJoeFin

      In reply to Sprtfan:


      This is an excellent point! Paul even mentioned how most people get their phones from carriers on a monthly plan so they'll get a new one every 2 years. Why spend more every month when you don't get anything for it, and if after 2 years the phone is a little long in the tooth, then replace it.

  9. Daekar

    If I had a budget of $1000, I'd split it 50/50. That would get you a midrange phone and a lower midrange PC. I'd say the collective utility of that combination is greatest. If I could only have one? Unfortunately, it would be a phone. I'd have to change my file backup strategy, but I could get along with my Bluetooth keyboard and mouse with my phone casting to the TV when I needed to do work. It would be terrible, but it would work.

  10. offTheRecord

    It depends on what you do, and what you need to do it. I think you can get adequate devices of both kinds for much less than $1,000 each.


    We picked up a few of the cheap Acer Signature PC laptops from the MSFT store that Paul was recommending a couple of years ago for about $200 each. They have dual-core N2830 Celeron processors and 4 GB of RAM, which is more than powerful enough for almost everything we do at home (including browsing with literally dozens of tabs open, streaming video, etc.). I replaced the stock 500 GB HDDs with cheap 128 GB SSDs (about $50 each) and they work like a champ. We still use them to this day.


    Now, they're not the thinnest and lightest, but they feel solid and well-built. They're generic 15.6 in laptops with 1366 x 768 resolution displays (which can actually be refreshing to use if you have older eyes), but they're perfectly fine for what we use them. If you need something for travel, you might want to pay a bit more for something more portable. But even for $500 to $600, you can get i5-based laptops with the latest tech that are light enough for regular carry and powerful enough to handle most business tasks and number-crunching.


    If you're looking for the latest top-end specs with tons of RAM and storage, and in a thin, light, sexy package with exotic metal cases, then yes, you're probably going to be spending over $1,000. But for most folks, that's probably overkill. It certainly is for us.

  11. wunderbar

    I actually do fully agree with Paul on this. And something to remember is that this idea is also aimed more at "normal" users, which the majority who would read thurrott.com or listen to a podcast with Paul are not. More and more the average consumer doesn't use a personal computer on a regular basis outside of work. One of my best friends moved a couple years ago, and when she did she never set up her PC, and hasn't missed it since. She does everything on her phone or iPad. I have a number of family members who use phones and maybe an ipad as their computing devices, and barely ever go on a PC type device. Remember, these aren't the types of users who spend hours on photoshop editing photos, or playing games on their PC's, or doing heavy type work on them. For the majority of usage of the majority of users, something like a phone or an iPad works fine.


    Heck, even my own usage patterns are changing. I used to upgrade parts of my home built computer every year. New hard drive here, new video card there, added ram the next year. I built a machine in 2014 and literally haven't put a dime into it since. I probably average an hour a day of use on it, some days not using it at all. In the mean time, my phone is rarely out of reach (for better or worse), I listen to a lot of music/podcasts on it, it is the device I use to communicate with people 99% of the time, not my computer. Why would I dump a bunch of money into my computer when the phone is 10000% the more important device to me day to day.


    Again, I cannot stress this enough, we have to look at this from the standpoint of the average user, and the user reading thurrott.com is generally not an "average" user.


    EDIT: also since the original poster seems adamant about this being about storage, paying for more storage is absolutely something that's worth it. Ask all the people who bought 16GB iphones in 2015. i'm an advocate for buying more storage because as the phone does become the primary device we all store more on it.

    • Sprtfan

      In reply to wunderbar:

      From the standpoint of an avg user, I don't think it makes sense to spend $1000 on a phone. It probably doesn't make sense to spend $1000 on a laptop either. I do that there is a greater diminishing return when going over $500 on a phone though compared to a laptop.

    • TheJoeFin

      In reply to wunderbar:


      Nearly all my friends are 'normals' when it comes to technology. Not one of them owns a phone that costs over $700. My point is that 90% of people can do 99% of what they need to do on a phone costing $500 (in 2017) or less with no compromises. There are the small minority of people who need crazy awesome phones, but I've yet to meet any of them.


      If I were advising normal average people on a phone purchase I would never advocate for a $1000 phone.

  12. navarac

    I have always worked on getting the most/best of what I can afford. No way am I going to break the bank, especially with a phone. 1000? Are we all mental ! Same as 2500 for a Windows Laptop and Win 10 S. Absolutely crazy.

  13. Roger Ramjet

    Paul's explanation is just a rationalization of what he sees. He isn't a microeconomist. A bit fitting there is no way to get a real answer to the question without sitting down at a PC, gathering data and crunching numbers.

    Don't get me wrong, smartphones are enormously useful to every day people, and it is possible his answer is correct(after all its a coin toss). But for most people, you can get reasonable approximation of same use from some $500 phone and a $1000 phone (same for PCs), so value derived in itself clearly does not explain the price people are paying for these devices.

  14. Paul Thurrott

    I brought this topic up for the first time this week. In fact, the reason I brought this up is because I read someone else's justification for a $1000 phone and it makes sense to me.


    Did you miss my point? Yes.


    Most people don't need PCs. Most people certainly don't use PCs all day long. Most people, however, do need phones and use them all day long, at work, at home, and while they're out in the world.



    • skane2600

      In reply to paul-thurrott:

      I think it's more like most people who never needed a PC before smartphones, still don't need one.

    • TheJoeFin

      In reply to paul-thurrott:


      To be clear I'm not advocating that people buy laptops instead of phones. I'm saying a $500 iPhone 6 can do everything a$1000 iPhone 7. For the vast majority of people there is no reason to buy the wildly expensive phone, even if you do use it all the time. What will the extra $500 spent on the iPhone get you? Longer battery life? More durable? More features?


      If I had $1500 to buy a new phone and a new laptop/tablet, I would spend $500 on the phone and $1000 on a laptop. Mostly because throwing $500 more at the phone wouldn't get me anything, but throwing $500 at the laptop would get me a lot more laptop.

    • hrlngrv

      In reply to paul-thurrott:

      Few people without jobs from Hell need constant access to e-mail. Granted most people may have jobs from Hell, so constant access to e-mail may be a necessary evil. Same goes for voice calls and maybe texting.

      Aside from voice, text and e-mail, what else is need rather than want?

  15. Sprtfan

    I think it comes down to added benefit which is going to be very personal. If you game, use photo shop, or even just type a lot it might be worth more to that person to spend the extra for a better laptop even if they use their phone more hours a day. If the camera is the biggest priority, if you like to have a lot of music local, or maybe if you're into some of the VR stuff it would make since to spend the extra on a phone.

    I do think it should be measured by benefit over the alternative though not necessarily how much you use it. I'm not going to spend $500 on a pair of shoes when there would be nearly no benefit for me over a pair that cost $75 even though I'd be using them all day. (this may not be true for everyone though obviously)

  16. Bats

    Yep, Paul makes a lot of sense. Tech stuff is personal. People are accomplishing a lot of what they need to do their phone than on a PC. Just the other the day, I bought something from the store called Bloomingdales, the purchase was made near the escalator with the salesman using an iPhone. A few months, I found out what's wrong with my car using an OBDII OBD2 scanner with my Android App, via Bluetooth. Now when I go to the dealer to get my car fix, I tell them exactly what needs to be done and I don't get tricked into an cross-selling.


    The point is not to say phones give more value than PCs (Windows, Chrome OS, Mac, Linux), but to level the playing field between the two type of computers. From a personal computing standard, mobile computer is better than non-mobile. After all, are you going to bring your HP x360 wherever you go? WHen you go to grocery store, is there a PAY-BY-LAPTOP option at the checkout? That's really the point. You can do more, much more with a $1,000 phone than you can with a $1,000 PC, therefore it's better to buy the phone than the PC, because the user will get more value from it.

    • TheJoeFin

      In reply to Bats:


      I'm not trying to say $1000 laptop is better than a $1000 phone. I'm saying a $500 iPhone is just as good as a $1000 iPhone.


      Essentially the productivity ceiling for a phone can almost be reached for $500 in 2017. Thanks to a good selection of phones and highly compatible apps.


      The ROI for each dollar spent on a new iPhone drops off significantly after $500. For laptops that point is more around $1500.

  17. StoneJack

    it is same argument whether you need a notebook with 128 or 256 GB of storage. I had 128 and it truly sucked. So, larger storage means higher prices (for iPhone 7, in addition newer processor and camera).

  18. jpwalters

    I don't agree. I think there's a place for both. I think the physical size limitations of the phone will always be a factor, if not for input and display, then for processing power. Moore's Law may be breaking down, but I think dollar for dollar a CPU with a larger die size will always be more capable. Losing or breaking a $1000 phone seems much more likely than a $1000 desktop. I don't think we've yet imagined the role desktops can play in the future with AR/VR or how we interact with computers down the road. Put it this way, even despite Captain Kirk's great communicator, he still came back to the all knowing computer. You may be able to sell me on the thought that TV, the gaming console, and the desktop converge. But I don't think mobile is "it" and all we have to look forward to is the $1000 phone.


    I think Apple has made it's bet clear on mobile. It's clear. Their desktops are almost an afterthought at this point. iOS Is the bet. But it's not without some huge risks. Microsoft has made an equal but opposite bet on all things "not" mobile. An equally foolish bet. But my long term thinking is still in behind Microsoft.

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