Beating the System: The AnandTech Guide to Economic Upgrading
by Kristopher Kubicki & Jarred Walton on January 30, 2005 5:59 PM EST- Posted in
- Guides
Building the Model
Before we get too carried away with variables and equations, it's time that we put something down on paper (or computer screen, in this instance). Without taking into account Time - when to buy - a simple plot of a set of products along the interval $150 to $250 dollars looks like this:
| Product | Price |
| Video Card A | $150 |
| Video Card B | $175 |
| Video Card C | $200 |
| Video Card D | $225 |
| Processor A | $175 |
| Processor B | $200 |
| Processor C | $225 |
| Processor D | $250 |
This chart is pretty useless. The reason why we introduced products deviating by $50 from our set allowance of $200 is to account for fluctuations in price once we introduce Time into the model. If all hardware devalues at the same dollar amount, exposing time to the equation is pointless. Generally processors take a dip in price every few weeks, so let's see what would happen if we put a 3% price cut on the products every four weeks on video cards, and a 4% price cut on processors. This discrete model doesn't make a lot of sense, since hardware generally devalues at a discrete rate, but in the meantime, we will use it for this example.
Here comes the important step - how much is your time worth? An easy way to visualize this is if you had a computer at work, and six minutes of your day every day was wasted waiting for Outlook to load up. Your company is paying you two hours a month on lost productivity. You can put any value per hour on this number, but let's say the Cost of not upgrading your existing hardware comes down to $0.25 per day; each day you don't upgrade it costs you another 25 cents on the resale value of your old hardware, or in lost productivity, or something else along those lines. The actual Cost to Not Upgrade (per day) can actually be something more abstract as well. Perhaps in the few hours per day that I play World of Warcraft, the frustration that I get while waiting for the screen to render is worth $0.25 per day. For the purposes of this example, we will just say that we value a new computer upgrade at $0.25 per day. This skews our graphs slightly.
Things have changed a little bit on this graph. Notice that it actually gets more expensive to wait six months before buying Video Card C, even though the vendor sells it for slightly less. Putting this quantitative value on how much our time is worth per day gets us out of the perpetual waiting cycle that we had mentioned earlier. It becomes real easy to say "I can just wait six months for the cost to drop $200," but if that's your mentality, then why upgrade at all? The upgrade isn't needed if there is no cost associated with waiting.
And finally, just to make things really interesting, let's take the Quality of each component and base it on a fictional benchmark like a video game. Each component's relative quality is listed as a percentage of base performance. Just by taking the price variable P and dividing by Q, we've changed our graph enough to give a pretty realistic representation of what a generic model looks like.
| Product | Price | Quality |
| Video Card A | $150 | 200.00% |
| Video Card B | $175 | 240.00% |
| Video Card C | $200 | 260.00% |
| Video Card D | $225 | 280.00% |
| Processor A | $175 | 235.00% |
| Processor B | $200 | 270.00% |
| Processor C | $225 | 305.00% |
| Processor D | $250 | 340.00% |
Click to enlarge.
What we are seeing in this graph is that we will get best return on our investment at different times for different parts, assuming the constant rate of decline in price and a 25 cents per day cost to not upgrade. For example, we get the the most out of a dollar by buying Processor D in six months - in fact, looking at the curve in the graph, it would be better to continue to wait even longer! If our time is only worth $0.25 per day, it apparently isn't worth it to buy any of the new processors today - only the "budget" processor A is a good buy. Otherwise, we would be overpaying for the Quality. Of course, Processor D is a little bit out of our price budget too. We maximize our price to quality by week 12 for Processor B, and Processor C looks to be leveling off towards week 24. All of the video cards, on the other hand, will actually maximize our performance for our dollar if we buy right now.
To demonstrate the entire process that we just described above, we created a simple Excel workbook. By modifying the assumptions highlighted in yellow, we can create a dynamic graphical process to easily verify two things: whether or not it makes sense to upgrade now, and the relative Price and Quality of each product in our set. The idea is to purchase the hardware that gives us the largest Price to Quality ratio while taking in account the Cost to Not Upgrade (we refer to this as CNU). If the maximum ratio exists at some other date than the start date of the model, then either our CNU per Day doesn't reflect our need to upgrade accurately, or the part in question is too expensive for its relative quality.
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arud - Sunday, January 30, 2005 - link
Poser - Sunday, January 30, 2005 - link
I've been thinking about upgrading my computer for the past 6 months or more. Gutting it, really, since once the motherboard goes, most of the other components will get upped too to prevent dumb bottlenecks -- I'm looking at around six to seven hundred dollars worth of upgrades. But, the thing that's held me back ISN'T waiting for the next big thing, or for prices to drop, it's that upgrading to Half-Life 2 or Doom 3 grade hardware is worth AT MOST $150.I love this site, I consider computer hardware to be a genuine hobby, but I can't justify to myself spending more than that on playing FPS video games. The price of a good PC gaming rig is so completely out of line with what it'd cost to just pick up an Xbox that I suspect I'll be sticking with strategy games for a very long time... that or buying a current or next gen console.
Eventually, I might find some "killer app" that is actually hardware-intensive (usably good speech recognition software with excellent OS integration?), but for the moment the only thing I do that challenges even my old 1400+ Athlon XP is gaming. I just can't bring myself to think that gaming on a PC is valuable enough to justify dropping the money.
This article was a cool read, because if nothing else, it made me think to put a number on how much I really would "value" or pay for better hardware.
Dragonbate - Sunday, January 30, 2005 - link
LOL I can't help but think this article was a farce.cosmotic - Sunday, January 30, 2005 - link
Next time maybe you should tell us what we should do. Like "If this is your setup, the average person would upgrade HERE" and give what you would upgrade to. This is like trying to sell something to some one but then never actually asking them if they want to buy it. You have all these details and then no real conclusion. When SHOULD I upgrade? I have no idea, and it's not worth my time to read all this stuff and then figure it all out. Again, a nice conclusion with a concrete example would be nice. And some else that would be nice would be like arrows on the graphs that say "this is when you should upgrade and for reason X, Y, and Z". The graphs mean nothing without an explination or point.Dranzerk - Sunday, January 30, 2005 - link
I think the single hardest part of a PC is upgrading. If we did not have PC games how many here would be running the latest hardware? I would upgrade once every 2 years, instead of buying new hardware little at a time every month to make a new pc every 6 months. lolgaidin123 - Sunday, January 30, 2005 - link
Great article! Granted most people won't actually do the formulas but this is a great article to link to when people moan about waiting for the next big thing. ;)Of course if you *need* the next big thing for the purpose you will use the computer for (ie SATAII or 802.11n) you have to wait...
Gaidin
archcommus87 - Sunday, January 30, 2005 - link
But how is this reliable? The quality percentages are for one application only and even then are very estimated. And the cost per day of one quarter of NOT upgrading can vary greatly. If I'm gaming fine just now I'm not losing out on anything by not upgrading yet.MarkM - Sunday, January 30, 2005 - link
Also, I think I might add, this is a hobby for most people, not a business. The whole point is to have fun, and sometimes the excitement of researching the new hardware is the best part. A cost/benefit analysis reduces the biggest benefit for some, the fun.MarkM - Sunday, January 30, 2005 - link
Uhh ... that was interesting. Man, I'm an ANALYST for my career, I write cost/benefit analyses all the time, and even I was skimming by the last few pages of that!The one variable you didn't figure in (I think?) was the evaluator's time. Spending hours of your time calculating whehter it's workth it to spend the extra $50 may not be cost effective, in the gneral sense of resource cost. One thing I learned very early in my career is that there is a cost/beniefit ratio even in preparing the cost/benefit. If it is a relatively minor outlay, you need to apply heuristics over full blown analysis.
Still, I think this is perhaps a good intro to peopel not used to thinking in this way.
deathwalker - Sunday, January 30, 2005 - link
Ah...the benifits of being an impulse buyer. I don't have to worry about stuff like this. If you want it...get it...trash the formulas.