As technology progresses, products generally become cheaper to produce. We only have to look through history to find some examples. The moving assembly line helped make producing a car much more efficient, and therefore cheaper. Televisions with screens smaller than a ruler used to be an extreme luxury item, and now the average welfare recipient owns one the size of a wall. The same is also true for computers. What once was a machine relegated to a privileged few at a university now is so cheap that kids in third-world countries have them.
There is some technology that we pay an awful lot for, even though it is actually very cheap. Listed here is the top tech that we as a society greatly overpay.
9. Linux
Believe it or not, most of the world runs on Linux. Big networks, large companies, and even appliances like your home DVR and GPS run on Linux. That’s because Linux is free.
Unfortunately, people who know how to use Linux don’t work for free. All the people who write code, come up with product designs, support the hardware, and run the network: all cost money. They usually can demand more money because the rest of the world is familiar with Windows. From a cost perspective, a company that runs Linux actually can spend a bit more than one that runs purely on Microsoft products.
At least that’s what Microsoft says.
8. Microprocessors
If conditions were perfect, then every microprocessor produced would perform at the same level in which it was designed.
Hundreds of the same microprocessor are fabricated at the same time on one huge silicon wafer. Each processor on this wafer (whether they be CPUs, video card processors, chipsets, system-on-a-chip) have variances that make one more tolerant than another. Even though they all went through the same process at the exact same time, some just won’t perform as well. Does the company throw away these “defective” chips? Hell, no. They just run them at a lower clock speed.
So when you purchase a “bargain” processor for $100, remember that it could have been the developmentally-challenged twin sister of the CPU that commands $1000.
7. Premium audio and video cables
The “premium” audio and video products offered by Monster, Beats, and other manufacturers really don’t carry a higher-quality signal than “regular” cables of the same class.
They are usually thicker and have more shielding, but that just makes them more durable. As discussed in the “Why I Chose Bose over Beats” article here, both competing headsets have nearly identical audio quality, despite the obvious difference in cable thickness.
These (and many other) things sell because of their status. Marketers have sold the tale that these products are better, so they come with an “affluence tax”.
Bottom line: you’re paying for a name, not better sound or video.
6. Convenience Fees
The world is plugged in and connected to everything. You can buy just about anything from your cell phone. Having dinner and want to go to a movie afterward? Just type a few things into your phone and you have movie tickets! You can pay for your dinner with a credit card, and on the way out you get some cash from the ATM.
Too bad you’ve been charged extra for all of those conveniences. Fandango and other ticketing services charge you fees. The restaurants have to pay fees to Visa and Mastercard (and they pass that along to their customers), and you better believe that banks charge fees… that’s the basis of their business model.
5. Flash storage
You can get a 32 gigabyte micro-SD card for less than $20 online (fact check here). So how can flash memory be on this list, you ask?
Apple.
The storage in their phone and tablet products are marked up at a premium. The first-generation iPhone had a markup of $100 between the 4GB version and the 8GB version. There’s no way in the world, even back in 2008, that 4GB of storage should cost that much.
It has gotten a little better today, but there is still a major divide. If you want a fancy new iPhone with 64GB of storage then you’ll be paying $200 more than those chumps who can only afford the 16GB. Why is it that 48GB of storage costs that much when I can get a micro-SD card for $20?
The people who found the answer to that question are now Android users.
4. Printer Ink
This should come as no surprise to anyone who has gotten a great deal on a printer in the past twenty years. Sometimes you can even find an all-in-one inkjet printer for less than $50 at a Black Friday sale. Unfortunately, the cost of ink remains high, and many times getting refills of all of your colors of ink costs more than the actual hardware did.
A meager color printer has at least four cartridges, and the average one has six or more. When you tally that each one costs an average of $10 you can see how manufacturers make their money back.
Sure you can use an aftermarket cartridge refill kit and save some money, but it’s still way more than what the ink actually costs to produce. We’re talking pennies worth of ink that sells for hundreds of times its worth.
3. Medication
The pharmaceutical industry makes a god-awful lot of money, and it’s not from curing people; it’s from treating those who are sick. The medication that keeps people alive costs pennies to produce, and yet companies charge $1, $5, $50 and even more per pill. I’ve even known someone who was suffering from brain cancer whose medication cost over $1,000 per capsule.
Sure, there’s a lot of money that goes into research of these products by highly-educated people, and companies have a right to thrive. When you’re talking about a person’s life, though, then life-saving medication shouldn’t only go to the highest bidder.
Most of this medication costs no more to produce than a simple aspirin. That’s why generic medication costs so much less, because the company who discovered the chemical lost legal exclusivity. Generic medication still makes a lot of companies a lot of money, but not the grossly-exaggerated markup that the brand-name demands.
2. Music and Movies
Entertainment has become a lot cheaper over the decades. There was a time (when VHS was new) that a movie would cost over $80 to own. Technology has made producing the physical media so cheap that people are starting to forego the physical disc. Music and movies are consumed en masse in purely electronic form.
Like so many physical products, a certain percentage of what you’re paying for goes to marketing and distribution. With digital media, companies no longer have to pay for the printed materials, gas, manpower, and shelf space. Are those savings passed along to the customer?
Another thing to consider is the loss of value. When you buy a movie, TV show, or music online you are paying for a lower quality version.
When you buy a music track from iTunes, you really don’t have a choice in the bitrate quality. For this reason some people choose to buy a physical CD and rip their own in lossless format or high bitrate MP3s (320 kbit or higher).
TV Shows can also be purchased online, sometimes for .99 cents per episode, but if you total up an entire season then you’ve spent $25 for a copy that’s lower quality than a standard-definition DVD.
The music industry claims that CD and DVD sales have slumped and blame it on piracy. Don’t feel too bad for them, because since the industry went digital sales have skyrocketed.
1. Cell Phone Service
While the cell phones themselves are charged a premium over what they actually cost to make, the real moneymaker are the voice and data services required to use them.
You’ve heard before that “nothing in life is free”, but we see offers for “free” phones all the time. Some plans give you a discounted rate for a phone, but the cell phone company is paying a significant portion of the hardware cost. They know that they will make thousands of dollars over the term of a two-year contract, and they put up a few hundred.
The companies make you pay for your phone in the long run, anyway. If a smart phone costs $200 and they give it to you for free, they will include an extra $10 premium to the plan, so that you end up paying $240 over the two-year-contract for that “free” phone. That doesn’t even include the services they are selling you.
Communication technology has always been a big money maker, and there has been lots of competition over the recent decades. Twenty years ago, companies like MCI (remember them?), AT&T, and Sprint were fighting over long-distance service, and now that is usually included free with your voice plan.
The “long distance era” was a time when communications companies were laying the groundwork with new fiber optics and cell phone towers. Now most of what is required to run them is maintenance. If a company doesn’t have the physical network, they can rent bandwidth or equipment from a company who does.
The gist of this is that cell phone service providers are making money hand-over-fist, and it costs very little in comparison to run it. Consumers are starting to get less and less for the same price, as companies throttle your data bandwidth as a miser counts his pennies. Other companies will give you a “data cap” and happily charge you if you go over your bandwidth. Their answer is to upgrade your plan to the higher tier.
The average smartphone plan with unlimited data and voice is about $100. This can be okay for a single individual, but somehow we have it in our heads that every member of the family, including grade-school children, needs a $500 gadget along with the required plans. Family cell phone services are easily one of the more expensive monthly bills in today’s modern household, exceeding electricity and water.
You can save some money by going with a “pay-as-you-go” plan, such as Boost Mobile or Virgin. Their top-tier phones aren’t as sexy as an iPhone 5 or HTC Evo, and those premium phones require premium service plans.
Going with a pre-purchase plan can cut your cell phone bill in half (even after buying the hardware outright), but you are still paying around $50 a month for a service that costs ten times less to run.
Cell phones are practically a necessity in today’s modern age, and the communications companies know it.