Aardvark Daily

Please visit the sponsor!

Technology will kill the collectables market

Sometimes things get more valuable as they get older.

For example, if you have an original Apple 1 computer you have something very valuable and worth far more today than it would have cost you to buy exactly 50 years ago.

If you'd stumped up with US$666.66 for an Apple 1 back in July 1976 and put in a safe place for the next five decades, you'd now be able to sell that very same computer for over half a million US dollars, perhaps even more if the kit was still unassembled.

That original $666 represents the equivalent of around $4,000 in today's money (inflation adjusted) so you're still looking at an increase in value of around two orders of magnitude over five decades. That's a pretty astonishing return in anyone's money, averaging around 10 percent per year, compounding over that 50 year period.

So, it's fair to say that investing in the right bits of kit and holding them for a while can be a pretty good way to increase your net wealth.

It's not just select computer-tech that has such significant appreciation over time, the same value increase can be seen in things such as exotic cars, expensive watches, sought-after artworks and other purchases which appreciate instead of depreciate.

However, changes to the way we implment our systems is already putting an end to the concept of complicated technology becoming an "investment".

Whereas that old Apple 1 computer, if properly stored and cared for, is quite likely to still work just as well as the day it was first assembled, the same can not be said for much of the modern technology we're buying.

The reason for that is the fact that we're being transitioned from an "ownership" model to a "subscription" model. Increasingly, key elements of the technology we buy and use are owned and operated by someone else, usually a large technology company.

There are now countless instances where people have bought a device which offers cool features that are later disabled or fail because the cloud-based infrastructure on which they rely either ceases to exist or is no longer offered as part of the purchase. In such cases, the equipment becomes instant e-waste.

This is only going to get worse as we see the transition from powerful personal computers to the thin-client model that is more or less just a keyboard, screen and mouse for a cloud-based processing service. Such a system becomes totally reliant on that cloud-based back end to perform almost every function so it is very unlikely that, in another 50 year's time, it will be able to do anything but power-up.

A 50 year old vintage car can still be driven. A 50 year old Apple 1 computer will still run the same software it did half a century ago. However, the computer you buy in a few year's time may be nothing but a paperweight long before another 50 years has passed and that will reflect in its value as a collector's item.

The same may go for cars.

Today's modern vehicles are pretty much all reliant on over-the-air updates to ensure that their onboard computers are kept up to date. While the loss of that back-end support doesn't seem likely to disable any of today's cars, you can be pretty sure that within the next decade, cars on sale will be totally reliant on that back end to function.

Car makers have already twigged to the value of the subscription model as a way of ensuring ongoing cashflows long after the initial sale so they'll build in that dependence to ensure the money keeps flowing. This is even more likely when you consider that old ICE vehicles require far more regular maintenance than EVs. That regular maintenance was a cash-cow for manufacturers and their dealers. The easiest way to replace that after-sales revenue is to turn cars into subscription-based machines.

How do they overcome market resistance?

Simple, they'll offer to sell you cars for half the normal retail value - plus a monthly subscription with a 5 year contract. This means you'll end up paying (in total) far more for the car than if you'd bought it outright but it also means the initial purchase will be far more affordable and attractive to most people. This is especially true when the average family car is now hovering around $50K-$80k. Saving $25K to $40K on the purchase price is going to be an awfully big lure. Of course the first year's subscription will be free, just to sweeten the deal.

So what happens to that car as time goes on?

Well at some stage, the manufacturer will stop supplying the back-end support that a subscription would provide and when that happens, the vehicle simply stops working. Another possibility is that the manufacture goes bankrupt, in which case the back-end still disappears and the vehicle stops working.

Nobody is going to collect and lovingly restore a vehicle that is bricked because there's no way to renew the subscription it was reliant on for its operation, are they?

So basically, when you buy new hi-tech stuff today, you are not going to see much in the way of appreciation in its value, no matter how well you look after it, no matter how long you hang onto it for. Everything reliant on back-end services will depreciate very quickly and permanently, hence collecting it will be pretty pointless.

So, in 50 years' time, we are unlikely to see the fantastic arrays of old tech that are presently available in private and public collections around the world. All we'll have are things made prior to about 2030, the memories of those made after.

At least we'll (own nothing and) be happy, right?

Carpe Diem folks!

Please visit the sponsor!

Here is a PERMANENT link to this column

Rank This Aardvark Page

Change Font