The last two years aside, as a society, we’ve done a fairly sucky job at controlling our urges to buy the latest and greatest gadgets, and instead label them as “needs.”
- Blackberries are now a need, in the name of career advancement, connectivity, and convenience.
- High-definition TVs are now a need, excused by the increased need to do at-home entertainment in lieu of going out.
- Fast computers are now a need, for research, entertainment, “communicating with family,” and countless other reasons.
It’s undeniable that all of these things are great—otherwise, there would be no market for them. We are interested in them because they represent the latest achievement of humankind to make things smaller, faster, more realistic, or whatever the benchmark might be. For a while, they were also the best way to keep up with the Joneses.
Think of how you feel about 3D TVs right now—to me, they represent the cutting edge of what’s hot right now, so they make for a great example. Capture that feeling in your mind as we continue the discussion.
What You’re Really Paying For
Let’s set this up by talking about what we’re actually buying when we buy new tech, and how we decide when to buy. We’ll use LCD TVs as an example of a technology that’s nearly 100% integrated into our society.
When LCDs first came out to the market, they were an incredibly expensive technology. Then the prices came down, and more people could afford them, until they became almost a staple of the American living room. Now even larger-size TVs are at “affordable” price levels (wow–is that a loaded statement or what?).
You may have heard of a concept called the technology adoption life cycle. It looks something like this:
Graph courtesy of Natebailey via Wikipedia
This represents the point at which someone belonging to a particular group might purchase a new technology. LCD TVs are probably somewhere in the late majority stage. 3D TVs might still be in the early adopter stage. Makes sense, right?
What’s interesting is that the price of something gets exponentially higher the further left on the graph we look. The innovators and early adopters are paying a huge premium for the privilege of being there, and even the early majority can pay out more than those of us who patiently wait on the sidelines.
So what are you really paying for? The manufacturing cost of the product, the soft costs (marketing, distribution, etc.), but also the “adoption premium”—how early in the game you get in.
Here’s the Kicker
This is what most people fail to wrap their head around because we do it subconsciously—we all set an arbitrary limit of the premium we’re willing to pay for early adoption. Think about that for a second.
If technology is super-important in your life, you might be willing to pay out thousands for the latest and greatest gadget. If it’s not so important, you’ll be more reluctant and wait.
But at some point in time, the premium cost of something crosses your comfort level of being willing to pay for it, and if you have the money you’ll at least desire the purchase. Any more expensive, and you’ll say “it’s not worth it.”
It Therefore Stands to Reason…
…that if we reset the comfort level we’re willing to pay for, we can save a ton of money by letting other people drive down the cost of technology to a price point we want.
This is the whole idea behind a timeframe shift. If you can get at the psychology of why you buy when you do and reset your expectations on new tech to move further down the right side of the chart, you’ll pay much less for what you want than you would otherwise.
Think About This, Too…
Why do you desire new tech so badly? It circles back to some of the reasons I mentioned at the start—it represents the latest improvements to things we often use on a daily basis, and for many it also represents a slew of other psychological things—status symbols, etc.
But consider new tech for a minute—3D TVs, for example. Think about the TV which is on sale today for $2,500. In three years, that same TV might cost $1,500, but it will still be the same TV. It still represents great technology, just three years in the past. In other words, at some point that very TV was the best and greatest there was, it just isn’t anymore. I say–so what?
The moral of this story: If you don’t mind living a few years behind the curve, there’s a lot of money to be had and put away.
Don’t you agree?
Photo by JVCAmerica