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The True Cost of the iPhone

The True Cost of the iPhone


This video is sponsored by Brilliant! The first 200 to use the link in the description
get 20% off the annual subscription. 2018 was a rollercoaster year for Apple. In August, its stock hit two-hundred and seven
dollars, making it the first trillion dollar company in history. Then, in a dramatic few months, it lost $450
billion as Microsoft, Amazon, and Alphabet passed it by. And for the first time in fifteen years, the
company announced it would make less money than expected. The problem? Fewer people buying iPhones. The reasons are many: China’s slowing economy,
sticker shock, market saturation. But there’s also another big factor: Apple
has a new competitor. Not Samsung. Not Google. Not Huawei. …Apple! The iPhone is increasingly competing with
itself. One, because we’re all holding on to them
longer. But also because it doesn’t cost what you
think it does. As the price of an iPhone goes up, something
new is happening to its value, and it’s shaking up Apple’s entire business model. To understand what’s really going on, we
need to calculate the actual, hidden price of the iPhone. Generally speaking, there are two ways you
can get rich selling things to people: One, you can play the numbers game – Sell
a gazillion small things for a few cents profit each. Think: Gas stations, grocery stores, and,
on a good day, Amazon. Sure, you’ll probably lose money at first,
but sell a few more and now you have the power of scale. Lower costs, higher margins. Look at you! Or, you can sell a few really expensive things. Ever wondered why your town has like three
mattress stores for every one person? They’re always empty and yet somehow still
keep the lights on. Well, that’s because a few feet of foam
doesn’t cost thousands, or even hundreds, of dollars. 50, 60, 90 percent of a mattress is pure,
king-sized profit. It only takes a few sales a month to stay
in business. And, therefore, disruption. But a few companies, the really, really successful
ones, manage to do both. If you can make hundreds of dollars on each
item, sell it thousands of times an hour, and convince those same people to buy again
in 12 months, AND make us want to line up with a smile on our face for the privilege
of doing it, well, now you have a $265 billion a year business. The iPhone is, arguably, the most successful
subscription service in history. You can bet Apple will announce a new model,
or three, every September, like clockwork, just as surely as you know they’ll name
it something weird. The problem is, technology is getting really
good. So good that a lot of people are thinking
“Why do I need a new one?” Some of us care about Portrait Mode and dual
optical image stabilization, but, for most people, checking Twitter and using WeChat
is the same on the Phone XS as the X, and 8, and 7. You’re invited to the blue bubble club regardless. According to analysts, the average person
waited three years to upgrade their smartphone in twenty eighteen. This year: four. Of course, phones are a little bit weird in
this respect because so are humans. The iPhone isn’t just a tool, it’s a status
symbol. According to researchers at the University
of Chicago, the best predictors of wealth in 1992 were: owning an automatic dishwasher,
a fireplace, and oooh, a garage door opener. Hi-tech! Today, it’s owning a passport, an iPhone,
and iPad, which have a 70% chance of correctly guessing whether you have a high income. Owning the newest model signals you have a
grand of disposable income to spend every year. Add some AirPods and you won’t even hear
the sound of the money leaving your bank account. But that only works if this year’s iPhone
looks different from last, and Apple only really changes its design every other year. So, here we are. People are losing their appetite for frequent
upgrades, but Apple certainly hasn’t lost its appetite for money. Which means, of course, higher prices! Selling half as many phones isn’t such a
problem if they’re all twice as expensive. The cheaper iPhone has slowly crept from $649,
to 699, to 749, today. The more expensive XS now starts at nine ninety-nine
and goes all the way up to $1,449. Of course, that’s only if you’re lucky
enough to live in the U.S. And yet, revenue is still down. Something’s missing. To make sense of this, we need to answer the
question: How expensive is the iPhone, really? There’s plenty of back-and-forth on whether
the iPhone is, quote, worth it, but what isn’t really debated is that, in general, it’s
higher-priced than most other smartphones from most other brands. Being selective about which price segments
it sells to is pretty much written in Apple’s DNA. There’s no $300 MacBook not because it’s
impossible but because that’s just not what it’s about. And with prices going up even higher, it would
seem that’s never been more true. But sticker price isn’t the best way to
measure actual cost. In fact, it’s pretty misleading. Phones aren’t consumable. Unless you pull a Black Mirror, they’re
still worth something in a year or two. The price of something like a house accounts
for how much it’s expected to gain or lose in value. Usually, the structure itself depreciates
– styles change and wood rots, but the land underneath it appreciates. Which, side note, is why tiny houses aren’t
investments. The land they sit on is often leased, not
owned, and therefore, it only loses value. Basically, you’ve just bought a house-shaped
RV! Anyway, unless your phone was signed by the
ghost of Steve Jobs himself, it’s more like a car – its value goes down. And fast. But not all phones are the same. On average, iPhones lose 45% of their value
in the first 12 months. Samsung phones, 62%. and Google, 81. That may sound a little unfair – Apple only
makes premium devices, while Samsung’s average might be skewed by a few low-end outliers. So, let’s look at specific models. A year later, the Samsung S8 lost 58% of its
value. The Google Pixel XL, 82, and the OnePlus One
94%. Meanwhile, the iPhone 8 still lost only 45. That’s a difference of hundreds of dollars. And that’s before the record-setting iPhone
X. In September 2018, only a week before the
XS was set to be announced, the X was still worth $679. It lost only 32% of its value. Taking this into account, we can calculate
a rough Total Cost of Ownership. A thousand dollars upfront, minus 679 for
selling it a year later, gives us a real cost of $320. That’s $26 a month to always have the latest
and greatest. Now, to be fair, sticker price does matter. If next year’s iPhone cost $20,000, and
sells 12 months later for $19,900, it would be a bit disingenuous to call it a $100 phone. But, of course, resale value is still very
important. And here’s why: Because used iPhones are
now worth more, more people are selling them. Higher supply. Meanwhile, more people want the new design
but don’t necessarily want to spend a whole month’s rent. Higher demand. The result: a huge, thriving, secondary market. Amazon and eBay are flooded with iPhone X’s. Which means the new phone has to compete with
its still-pretty-good last generation. In other words, Apple is, increasingly, competing
with itself. And the better today’s iPhone, the harder
it’ll be to compete against, used, next year. Now, if you’re an investor, this all sounds
pretty bad. Like, sound-the-alarms bad. Remember, the iPhone alone accounts for 60%
its revenue. Any other company would fight this tooth and
nail. So, what’s Apple doing? Not only are they not fighting it, they’re
actually embracing it, making the iPhone last even longer. Instead of buying a whole new phone because
you can’t get 3 hours on a charge, they’ve made it easier than ever to just replace the
battery. And while Android phones often receive only
two years of software updates, iOS 12 runs on all these devices, going all the way back
to the 2013 iPhone 5s and the first iPad Air. Even better, it actually speeds up your phone,
it’s no longer a tradeoff of slow-as-molasses for new features. Or, let’s be real, pressing “Update”
so it’ll stop bothering you. All of this is awesome for you and I, but
isn’t it a terrible business idea? Not necessarily. Unless you buy from Apple.com, second-hand
phones don’t directly put any money in its pockets, but Apple has other ways of making
a profit. New or used, you still buy apps, You still
subscribe to Apple Music, Apple Video, iCloud, and so on. The iPhone is a gateway to things like the
iPad, Apple Watch, and AirPods. Even if you buy none of these things, you’re
still useful to Apple. Google, for example, pays an estimated $9
billion a year just to be your default search engine. Nine BILLION. That’s the GDP of Haiti for one switch to
be flipped. User base means control and control, ultimately,
means money. In other words, things like services can make
up for lost sales. It’s sort-of the in-app purchase model applied
to the iPhone as a whole. In the long term, Apple needs to move its
focus away from the iPhone and towards new platforms entirely. Augmented reality glasses are the future. As we saw in 2018, this transition won’t
be easy. But it’s the best, and really only path
forward. Because, the truth is, what’s happening
now is normal. Everything before was an anomaly. A very profitable one. An easy one for companies to get used to. But, still, an anomaly. From 2007 until fairly recently, the stars
were perfectly aligned – technology was moving incredibly quickly but still always left enough
to be desired for next year. The smartphone was in its growth period. But the average people buying a new phone
every year or two just isn’t sustainable. Not economically. And not environmentally. Phones should last years and years, go through
two or even three owners, and then, gracefully, be recycled. The future is one where a few of us buy the
latest phone, take good care of it, and then give it back to Apple, or sell it second-hand. The problem is, selling your phone is, kinda
the worst. How do you know when to sell? And for how much? So it ends up just sitting in a drawer somewhere. Dave, over on Here’s the Bad Version has
an idea for a solution: An app. You’d scan your phone when you buy it, tell
it how often you wanna upgrade, and then it sends you a notification when it’s the best
time to sell. I’m 100% serious when I say I think this
could be a multi-million dollar startup, someone just needs to program it. You could design the app to make predictions
about how the value of your phone might change in the future, for example, with the machine
learning course on Brilliant, which teaches you, step by step, intuitively, with its computer
science and math courses. Their Computer Science Algorithms course will
teach you the concepts behind how you might design the app to scan the iPhone’s barcode
and then generate an eBay listing when the user is ready. In my programming classes, I noticed that
I learned a lot faster when I was actually making something versus when I was just studying
arbitrarily. Plus, it’s just more fun to make something. Brilliant thinks the same way – instead of
“Here’s this new concept, now just store it in the back of your head”, its Daily
Problems give you a real, interesting problem to solve using your new skills. Use the link in the description to sign up
for free and get started today. The first 200 people to do so will also get
20% off the annual premium subscription so you can view all the Daily Problems and take
all their problem-solving courses. And after you sign up, don’t forget to go
watch Dave’s video.

100 thoughts on “The True Cost of the iPhone”

  1. After you check out Brilliant: https://brilliant.org/Polymatter don’t forget to watch Dave’s excellent video here: https://youtu.be/pVsXf9wH7Q0

  2. Howvabout the HUMAN SUFFERING COST???????? Iphones and all Apple products made by low paid workers in Communist China where workers often are physically Forced to work 16-20 hours straight ..FORCED as in locked made to stay or face some roughing up by brutal security guards. every time you purchase a Apple product it encourages the mistreatment of thousands of low paid mistreated workers with No Rights .

  3. YOUR WRONG !!! ANDROID phones get longer support than you claim.. ESPECIALLY Premium Flagship phones…BUT since ANDROID is Open Source their is a Community of private software and app developers.. MILLIONS of them that make software updates so you can essentially just keep updating to next version indefinitely if you chose to do so.Since Android isnt a Dictatorship like Apple that wants 100% control of your phone Forever and Apple is making software so you cant use independent repair shops even after its out of warranty you can't use after market parts batteries chargers ..Apple OWNS YOU NOW Indefinitely. Apple Store tech's are trained to tell you a LIE and it will be so expensive IF they can repair it its cheaper to buy new. From now on DONT Expect To keep using your old Iphone macbook Ipad because when theirs a problem ONLY APPLE will be able to fix it and they wont.. They Want to Sell you a NEW one. If you want to keep using Apple thats your future. Expect all your Apple devices to be Phased Out by not getting Updates or support..You been warned!!

  4. And than you wonder why on earth Tim Kook doesn't give a flying … about the product. The resource of growth has ran out. They don't see the future of a multibillion company in smartphone industry …like at all

  5. In the end big corporate has already came out with evaluation app and they already took my old phones so I can get the iPhone XS Max and watching this video haha

  6. All that and douchbag never told you what the cost of an iphone is. Based on korean and other 3rd world labor and parts cost, I'd say about $8.00 each.

  7. Thank fuck i read the comments. 1:57 and everyone was annoyed at the content of misleading. Thanx for the heads up viewers

  8. https://youtu.be/5kZRY5xlP6Y?t=675 almost all of the people i see personally are all broken in one way or another

  9. In August I will buy a fairphone 3, a modular phone designed to last for years. Currently using a 5 year old Samsung S4.

  10. Where do you get your info? Android only gets updates for up to two years?? That's just ridiculous… And yes apple has been caught red handed slowing down older devices or reducing battery life in their updates to force users to upgrade to the latest model. Apple fans seriously seem to ignore facts. Apple is more of a cult than a company.

  11. If they significantly changed the design of the phone each year to make it look better, it might sell more. But, then it might also increase the costs so not sure if it is worth it.

  12. the real truth though.. iPhone retain their value because they are almost always in near great condition…
    why?
    because the people that buy them couldn't afford them in the first place.
    so they treat it better than their children, and they put way too much value on it, more than it should have…
    why?
    because the people that buy them couldn't afford them in the first place.

    phones are a status symbol now… if enough people think that the it has value then it has value, but at the end of the day, you can polish shit, but its still shit…

  13. The roller coaster in the intro was the white lightning from FunSpot, Orlando Florida!! Had to point it out haha 😊😊

  14. 9:47 So… Google could buy Haiti, Rename it Google, Move It's Headquarters there, and Tourists could come and buy Google Products there…

  15. Apple has made it easier to replace the battery?! Ha! Only if you buy it from them directly for 10x what it's actually worth. Otherwise, they're increasingly making it annoying if you don't.

  16. Cost to make, or cost to buy? Because the cost AFTER you bought it is 10x the cost of Android. Lets take any app that is made for both. Djay2 for example. Exactly 10x more expensive in Apple appstore, than in Googles appstore. For the exact same app. And this goes for many apps. Also, some apps are FREE on Android, while the same app cost $10+ for ios. Have fun apple boys, devs learned from Apple that their customers are the sheep to be milked 😉

  17. About 2 months ago I purchased an iPhone 6s new for $200, sure it's a device that first came to market in late 2015, though it's performance is still quite adequate & is at least going to get iOS support through iOS 13 which hasn't even been put out yet, which should indicate I will have a device that will have the latest software for a couple years.

  18. Did you mention iphone and China?

    Dude. Everyone on the planet literally knows to use Android and won't touch Apple. Why? Simple. One has a copywrited operating system and the other a freeware operating system.

    I am sure someone in China has an iphone but its an anomaly. The iphone is a US only thing.

  19. nice clickbait you did there, you mumbled and mumbled and you never answered the question you yourself posted…

  20. The title is misleading, when I clicked I thought it would be about how much it cost to assemble an iPhone part by part, then se how the finished iPhone is actually is worth

  21. Honestly, having a phone with features that restrict you from using any other devices than apple ones is pain in the ass, having ability to mirror the screen and not being able to mirror it on any other TV than apple TV is douchy af, it wants you to buy separate device just so you are able to use a single feature, if that ain’t douchy i don’t know what is

  22. Using Apple products to guess someone's economic background or social status is a fallacy. i work in Apple online store. Many people will take out a new line of credit from Barclay just to own Apple devices. I've talked with many customers willing to go into such high debt for many devices but eventually default because they cant pay the monthly bill to start. You also have the people who buy newer due to the issue of not being able to make repairs to iphones and join the upgrade bandwagon forcing then into a loan if bought from apple. Apple creates so much e-waste its crazy. people wonder why the planet is in such a bad state. The resell value or trade in value of apple devices is not very high. anyone who owns an apple device can throw the serial number into the trade in page and see for themselves; no matter how well the owner took care of the devices.

  23. all these people crying about how long the video is. if you wanna know the simple answer to the title simply google it, if you wanna learn more watch the damn video

  24. Iphone x price max have be about 200-300 because phones for 200-300 perform better than iphone x(shit, just name)

  25. All i want to know is what is the true cost of this quality? Your video’s quality is much, much more than anything.

  26. This video was way to long for the question at hand. Apple also is not making their phones last longer either. You say they made it easier to replace the batteries but the newer models have software programmed into them to stop the success of a battery repair by not saying the correct battery health even after replacing it with an Apple OEM part. Don't trust this guy folks.

  27. There is hardly any inovation with apple anymore. Boring styling with that massive notch. The camera isn't the best anymore. They are 2 years behind most other main brands now and I can't see them catching up

  28. Lg G6 64/4 GB 180 Euros
    iPhone 8 Plus 64/3 700 Euros
    lg g6 is a fucking better phone then iphone 8 plus and iPhone costs almost 4x times more beacuse its iPhone

  29. You lost the whole point of this fucking video!
    Just say how much this fucking thing is actually worth and move on !
    We didn’t want the sale rep speech of apple!
    Nor r we interested in how apple makes money!
    Just tell us the actual Goddamn price , you jackass!

  30. you're like those article writers that take 10 long winded paragraphs to answer a simple question. just get to the point 🙄

  31. Great informative video…but I really don't appreciate the misleading tittle. Nothing lasts forever and (finallly) even the normies and sheep fanboys are starting to wake the fuck up (very late) about how trash apple actually is, it is beyond absurd that phones now can get away with robbing people with anything over $500 bucks but since most people are followers and want to be down (even though they know they're broke as hell) buy a status symbol and happily go every year to buy the same shit. Apple died with Steve jobs, there has literally not been ANY real innovation since he's been gone. Even Samsung has gone to shit following apple deliberate planned obsolescence and rigging hones with "updates" that mysteriously make your phone start glitching/filled memory even though you have gigs of space and magically make your battery life somehow drain X2 as fast, I'm never buying a samsung or apple phone ever again because of that bullshit. Many Smartphones are literally so advanced now that whatever the iphones were able to do back in the day or even now they can do just as well if not better than the current iphones.

  32. Hold on… First trillion dollar company in history? Google Dutch east Indian company. 7.9 trillion dollars in the 1600s…Apple is the 7th trillion dollar company in history.

  33. STOP UK ROYAL FAMILY and jewish thugs using poisons and cancerous material in your food. Demonstrate against jewish thugs , UK Royal Family and police thugs in London, Israel, Amsterdam USA using poisons and cancerous materials in food of people in secret prisons run by Apple, Rothschild, UK gov, USA gov. You can get all documents from Interpol or the any police station in your city
    STOP THE UK ROYAL FAMILY IMPOSING ITS 2019 SLAVERY RULES ON all countries; 2019 slavery Indians and Asian documents available in your local police station

  34. I feel like everything in this video is common sense besides the actual percent data. Didn't learn a thing. Also your app idea is beyond stupid and ive been a dev for 7 years. lmao

  35. "GREED" is the going to be the Name of the Documentary on APPLE (ASJ – After Steve Jobs) . People will remember the Two Eras of APPLE – ASJ and DSJ (During Steve Jobs).

  36. Are you for real? People with older iphones dont uodate their phones because if they update it it fuckes up their system on their old iphone…. Iphone is shit thats it

  37. You need to pay the clitz and the suck up 10x the original price. Because for some reason their idea is a divinity.

  38. "They've made it easier to just replace the battery……" What planet do you live on? Trying to change a battery on an iPhone is like trying to perform brain surgery with a meat cleaver. Apple has purposely made it harder and harder to replace the hardware on their products as the years go on, to make people buy new.

  39. Bottom line is Apple products are always overpriced. The 10s and 10s max definitely aren’t worth anything over $1000+. Always using last years tech even on their newest models.

    Android gives you way more features for the price you pay

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