Archive for the ‘ Editorials ’ Category

The Economics of Hybrid Cars

When driving in northern California, it is quite hard not to spot a Prius driving alongside you. If you look a little bit harder, you will notice a hybrid logo on many other vehicles on the road. I guess Silicon Valley is just one more beneficiary of the hybrid fever that has been spreading across the nation. U.S. hybrid sales have skyrocketed 165% per year over the past decade due to increased attention to climate change, escalating gas prices, and an effort to be energy conscious. While more people are buying hybrid cars, it does not seem to as popular in other parts of the country. Maybe citizens of the Valley can afford to live their principles due to their larger-than-average pocketbooks. On the surface, it seems gasoline cars are a better deal than their hybrid counterparts, with hybrids often costing thousands of dollars more. However, deeper investigation reveals that hybrids may be cheaper in the long run than their gas-guzzling cousins.

Let’s look at some examples to see why this might be. Lets say two people, Eco-friendly Elaine and Skeptic Sam are looking to buy a car. Both of them happen to want the Toyota Highlander, which comes in both gas and hybrid models. Elaine decides to buy the hybrid variant, and Sam purchases the regular version with equivalent trim. At first glance, Sam seems to have gotten the better deal. He has paid $35,745 for his car–$2,795 dollars less than Elaine’s $38,540 purchase. In order to proceed, we must assume two things. First, that both Elaine and Sam drive 15,194 miles per year, the average between the ages of 20 and 54, and second, that each year Elaine and Sam own their car the gas price averages around $5. This is difficult to predict, but given the current trends, it is not an unlikely guess. If we divide the miles driven per year (15,194) by the average miles per gallon of the two cars (21MPG for gas and 28MPG for hybrid), we find that Sam’s car requires around 724 gallons per year, while Elaine’s uses 181 gallons less, or 543 gallons per year. If we multiply the difference in gallons used per year (181) by the average gas price ($5), we will figure out that Sam spends $905 more than Elaine per year on gas.

Fast forward five years. Both Sam and Elaine have sold their car, with Sam’s fetching $17,209 and Elaine’s fetching $17,751–$542 more than Sam, reflecting the typical premium a hybrid car commands on re-sale. This means that after Elaine sold her car, she only paid $2,253 more than Sam. Lets calculate how much Elaine has saved in gas purchases over five years. If Elaine used 181 gallons less than Sam per year, and therefore saved $905 per year, then over four years she will have saved $4,522 by having a more energy efficient car. This means she spent $2,269 or 6.3% less than Sam owning a hybrid over five years. If Elaine owned her car longer, then savings would increase. In addition, this phenomenon applies to almost every non-luxury hybrid out there, from coupes to SUVs. This set of data proves there may be significant economic benefits to driving a hybrid car, in addition to lowering emissions. So what are we waiting for?

UPDATE: 

After my original posting, the United States Department of Energy has created a new website–www.fueleconomy.gov–that has a lot of very useful information about hybrids and how much the average consumer can save–albeit quite hard to navigate. It even has an automated savings calculator that does a very similar calculation to the one explained above. Enjoy!

Sources:

http://www.fhwa.dot.gov/ohim/onh00/bar8.htm

http://www.edmunds.com/

http://kruzeniski.com/2010/hybrids-vs-trucks-comparing-sales-over-the-last-decade/

It’s Not the iPhone 5!

In the aftermath of the iPhone 4S announcement in October, countless dreams of complete redesigns and new features were dashed against the rock. These rumors are being shoved back into the rumor mill that has started to heat up as we head into iPhone announcement season. Despite the intense fragmentation of the rumor-mongering community, most seem to believe the next iPhone will be christened “iPhone 5.” While I don’t know what the name of the next iPhone will be, I seriously doubt it will be given that name. Much of the evidence can be linked to Apple’s shifting product-naming paradigms.

First, the next iPhone would be the 6th iPhone, not the 5th (Original, 3G, 3GS, 4, 4S). Despite the fact that the iPhone 4S is only a minor upgrade, Apple has still counted each new version of its phone as a new generation. Therefore, the next iPhone would be the 6th generation of hardware, not the 5th.

Second, Apple has sometimes named products after key features, not after the generation they represent. The iPhone 3G (2nd generation) was named after the 3rd generation cellular network, the “S” in the iPhone 3GS (3rd generation) and 4S (5th generation) was simply a marker for an upgrade from the previous version. This has caused untold confusion, as many of my friends have called the iPhone 4 the “iPhone 4G,” despite the device’s notable lack of the next-gen cellular data network. They also thought that there was a 2nd generation iPhone in between the original iPhone and the 3G.

In addition, the naming trend in Apple’s Mac, iPod, and now iPad lines points towards a possible shift in Apple’s naming standards. Instead of awarding each generation with a new name, it has dropped all names from the product line and instead refers to the product with its generic i.e. the new iPad, the iPod, etc. It is likely Apple will be moving towards that model, rather than continuing the traditional version naming system.

I understand that the iPhone 5 represents the hopes and dreams of the next generation of iPhone hardware, but as we know with the iPad 3–oops! I mean’t new iPad–Apple can be fickle with it’s naming policies. I will end this post with a plea: next time you read yet another post or hear another conversation about the “iPhone 5,” make a point of referring to it as “the next iPhone” instead. There is simply no way to know.

Apple’s Inevitable Demise

Apple has done it again. They have set yet another record for sales of the new iPad, and have captured the hearts and minds of many an Apple fanboy. I myself have bought a new iPad, and I must say it is pretty great. However, diving under the surface, we can see that cracks are beginning to show.

The whole thing started in October, when the iPhone 4S was released. While it was a pretty good upgrade, the updates were marginal: faster, a better camera, and the almost-useless virtual assistant Siri. Yes, the updates made the phone better, but were they really that amazing? I own an iPhone 4, and comparisons to the 4S yield negligible results. Despite this, sales were enormous. Now fast forward to March 2012, when Apple announced the new iPad. Once again, marginal improvements: faster, better camera, LTE (which isn’t necessary), and a higher resolution display. Those were the benefits, but there were even some drawbacks–the new iPad was slightly thicker and heavier than its previous generation. While sales have been massive, there is room for doubt concerning Apple’s ability to consistently amaze. Great, there have been two sub-par product releases in a row, but why does all of this spell doom for Apple?

Apple has set itself upon a fragile but extremely profitable platform of consistent innovation, secrecy, flashy releases, and consumer excitement. Apple develops a product, keeping it an utter secret until its unveiling. This generates enormous amounts of excitement from consumers, who speculate endlessly about what the product might have. Once Apple sends invitations for the unveiling, anticipation grows at an exponential rate, with millions of people anxiously waiting for information. The announcement of the new product adds to the energy even more, rocketing levels into the sky. All of the pent up enthusiasm is released at once when the product goes on sale. This system allows Apple to generate huge amounts of profit in bursts. In addition, this drives the expectation even higher for the next product because consumers expect consistent quality. While this system is extremely profitable, steadily increasing expectations will eventually pass ahead of Apple’s innovation ability. This will cause Apple to stall, and badly. If one of Apple’s product releases is below expectations, Excitement before the product goes on sale goes crashing down, which destroys sales. In addition, consumers will be less excited for future products, which will drastically reduce profits for other new products. In addition, competitors can seize the moment and develop better products that capitalize on the weaknesses of Apple’s latest product.

I am not saying that Apple is going to destroy itself tomorrow, but expect larger issues to arise in the next four years. For now Apple has tremendous momentum because of Steve Job’s reality distortion field. He could make even the most unsatisfactory releases seem revolutionary–as seen with products such as the iPhone 3GS. While products are receiving minor upgrades, competitors are increasing their products’ specs and features by leaps and bounds. Yes, the new iPad is far superior to its competitors, but Apple has to develop it at a faster rate than its rivals, something it is not doing right now. Apple does have the early bird advantage, but soon could be overtaken. Don’t get me wrong–I love Apple–but its current growth model will not be sustainable in the long run.

I Hate Facebook.

I hate Facebook.

You may say, “But Brad, Facebook is great for connecting with friends and keeping track of your social life! How can you hate it? You even use it yourself!” I don’t dislike the concept of Facebook, as I think it is extremely important, but I find it cluttered and disorganized in its current state. This may sound strange to you right now, but bear with me.

One of the main issues I have with Facebook is its user interface. The pages on your Facebook account are crowded with menus, options, and feeds that I find overwhelming. Many people don’t even use most of the features available, sticking to core functionality like the wall posting, photo uploading, and chat. You could argue that you can’t hate a product just because it doesn’t have a great interface, but the interface problem reflects a much deeper issue that only manifests itself in the UI.

Most successful consumer technology brands are more focused. Most of their products and services can be described in only one sentence:

Apple: An integrated ecosystem of personal computing hardware and software across multiple platforms designed to create the greatest user experience

GoogleA set of productivity tools and services based in the cloud, unified by a social media platform

Amazon: An online superstore and hardware companion dedicated to simplifying content delivery and consumption

Dropbox: A set of applications that allows users to access their personal data from anywhere

Groupon: A social platform dedicated to helping people find the best deals on everything

This applies to many popular social networks as well:

Twitter: A universal platform for expressing and following thoughts in a concise manner

Google+: A social network centered on organizing your communications and relationships with others through custom “circles”

LinkedIn: A platform dedicated to improving communication between businesses

Foursquare: A social platform centered around users current locations

Pinterest: A platform allowing users to express their interests by pinning content on themed “pinboards”

Then there is Facebook:

Facebook: “The social graph of everything”

What makes these other companies and services above so appealing is they focus on doing a few things well. They also excel at making their products beautiful, clean, and simple. Facebook is becoming more like “tech-glomerates”: Samsung, HP, Acer, Sony, and Microsoft – none of which have the same vision and focus of my earlier examples. While I understand that most of my earlier examples don’t make nearly as much revenue as tech-glomerates, they aren’t throwing tons of new products at consumers in the hopes that they will use/buy a few of them.

Facebook is a lot like the companies I just mentioned. Have you ever used Facebook features like “Lists,” “Ask A Question,” “Find Friends,” “Notes,” and “Gifts”? This is because they are not necessary for the experience Facebook is aiming to create, so as a result, consumers don’t use them. In addition, many seem half-baked, or so buried in the website that I wonder if they have been abandoned. In some ways, Facebook is like Apple after Steve Jobs was kicked out. They tried to enter into too many markets in the hopes of increasing profit. When Jobs returned, he drew a 2 by 2 grid on a whiteboard and said, “This is how it should be. Two average-use computers, desktop and laptop, and two power-user computers, one desktop and one laptop.” As a result, Apple began to strengthen. This story highlights one of the most important lessons Jobs taught us: less can be more. Facebook should take a page from the playbook of Steve Jobs and get rid of extraneous features and functionality, and bump up connectivity between products.

There are many things I admire about Facebook, such as its massive user base, and how for now it has kept my family and friends solely on it,. Despite this, users are fickle. As soon as an alternative with better core functionality and less clutter (*cough cough* Google+), Facebook could go the way of MySpace in the blink of an eye. MySpace proves that market share isn’t enough to stay dominant. Don’t get me wrong; Facebook is an extremely important part of modern life and culture. I only think that Facebook needs to do some serious housecleaning and make itself leaner, more tightly knit, and pleasing to use. You may disagree, but remember, if Facebook becomes a thing of the past, I predicted it first.

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