Monthly Archives: January 2014

Adamomics: Warranties Make No Sense

Something I always ask when a sales clerk is trying to sell me a warranty, “Why are you selling a product you expect to break?”. I am only half kidding. Products do break and sometimes warranties make sense. My Dad in particular has had terrible luck with weed eaters, snow blowers, water softeners, computers, and vehicles. Now I might advise he not buy the cheapest option, because when you price in the warranty, the better, sturdier, more dependable option might be cheaper. For those products that are not objectively crap, I have developed a simple formula to determine whether a warranty is worthwhile: 

  1. Pretend you are a bulk purchaser and add the cost of 100 of the product. (100 is easy, add two zeros).
  2. Estimate an X% failure rate and add up the cost replacing the X% of the product. 
  3. Add up the cost of 100 warranties on the product. 
  4. If the warranty cost is higher than replacing failed products, the warranty is a money loser. 

Determining the failure rate is the difficult part of this formula. We cannot assume a 100% failure rate like my Dad. Consumer Reports is a great resource determining the failure rate on product lines. Some items defy conventional failure rates, such as the well reported 30-60% failure rate of the original batch of Xbox 360 game consoles and the legendarily indestructible Nokia feature phones. Sometimes store clerks will be honest with you about a products return rate. Do the best guesstimate you can.
Let’s use Macs as an example, because the AppleCare program for Apple products is a particularly attractive warranty for buyers and the failure rate of Macs is well reported at about 17% within 3 years (or at least, it used to be). That means over your lifetime, 17% of your Macs will need to be replaced within 3 years. For a $1200 Macbook Pro, you’d spend $120,000 on 100 and $20400 replacing 17% of them. Buying 100 warranties at $250 each would cost $25,000. Buying AppleCare for a $1200 McBook Pro is therefore likely to be a money loser. 

Also consider this: your stuff loses value over time, and the longer you keep something, the less expensive it is to replace. For electronics and vehicles, you can almost see the drop in value in real time. Most all products come with a 1 year warranty, so you only need consider the cost of replacing the product when it breaks in the second or third year versus the cost of the warranty. Let’s assume a 30% drop in value in the second year and run the MacBook Pro numbers again: the cost of replacing 17% of them is down to $14,280 while AppleCare on all of the computers remains at %25,000.  

Since we mentioned the Xbox 360, let’s use this game consoles as another example. Assuming an average of $400 per console in 2005 dollars, the above formula says that a warranty has value at $120 or less. However, in the second year of the console’s life, the price dropped as low as $300 and the reliability improved dramatically. This second round of consoles was the one to get (careful buyers always win). The lower cost of replacing the consoles means a warranty had value at $90. In actually, though, Microsoft extended the factory warranty of the Xbox 360 to 3 years, thus making any 3 year warranty a waste of money.) The legendarily unreliable turd like the original Xbox 360 is an anomaly, though and game consoles are notoriously reliable with have a failure rate of about 5%. (Microsoft sells a $60 3 year warranty for its $500 Xbox One, meaning it believes the failure rate on Xboxes is back to the industry average). Assuming the life span of a game console is about 6 years and an adult will buy about 7 game consoles in a lifetime the original Xbox 360 raises the average failure rate of a lifetime of purchases from 5% to about %10. That brings the warranty value down to about $9 for a console like the Xbox 360 that lost a quarter of its value in the second year. 

Using this formula, it looks like a warranty never makes sense. That is why everyone is always trying to sell you one!


What Computer Should My Dad Buy?

My parents want to buy a new laptop. They quickly learned that buying a new laptop is a befuddling conundrum of too many choices, low price points, and poor quality hardware. And they don’t even know about the frustrations of Windows 8. So, they frankly told me that they would rather give me the money they want to spend and I have me buy a laptop for them. Challenge accepted!

The only local store that sells all kinds of laptops is Best Buy, a.k.a. the worst store in America. I went to Best Buy over lunch  one day and looked over rows upon rows of laptops, tablets, and transforming laptop-tablet hybrid. The first thing I noticed was how darn bright the screens were. My first task was to figure how to lower the brightness from maximum to a readable levels. The second thing I noticed was the lack of Windows 7. If you want to buy a Windows laptop at Best Buy, you have to accept Windows 8. This was going to be a long lunch hour.

The problem with Windows 8 is that it does not work for Tablets or Laptops. The giant icon interface is great for tablets but very difficult for desktops. Finding anything in the giant icon interface is more difficult than it should be. Windows 8 would actually be great for tablets except the giant icon interface is replaced with a traditional desktop interface every time you open a desktop style app. On a tablet, the easy to read interface is replaced with a micronized Windows 95 interface; everything becomes too difficult to see and touch. On the laptops, the giant icon interface should never exist, yet some of the functional elements of Windows 8 can only be accessed through the cumbersome interface that is very much antagonistic toward mice and trackpads. For the past year, I have heard the debate regarding Windows 8, but I had no idea how bad the OS really is. 

Let us forget about the OS and focus on the hardware. The laptop-tablet hybrids could be awesome. At home and while traveling, I use an iPad 2 and a Logitech Ultrathin Keyboard cover. The tablet-keyboard combination is fantastic. Best buy had laptop-tablet hybrids from Sony, HP, and Acer or Asus. They Sony hybrid that looked solid but I couldn’t figure out how to attach the tablet to the keyboard. HP’s hybrid was so flimsy I was worried I would accidentally crack the screen while holding it in the store. Acer or Asus’s hybrid (I often confuse the two as they both mean “cheap Asian computer” in my mind) had a tablet hybrid with even less build quality than HP. Microsoft had its own tablets with “type covers” that effectively make them hybrid computers, except the “type covers” work on desks and not on laps. The PC industry has effectively taken the solid idea of laptop-tablet hybrids and thrown it into a dumpster full of shoddy products. 

Kindle Fire HDXThe tablets by themselves come in three varieties: cheap Android tablets; and overpriced Windows tablets, and iPads. The best of the cheap Android tablets is the diminutive Amazon Kindle Fire. The price is great and the tablet seems to run well in the store. The brightness controls were also easy to find. The tablet is too tiny to use for serious computer use. Samsung’s 10″ Galaxy Tab is a bigger, more expensive, and slower Android tablet. Android has its fans but in my opinion, kinda’ sucks. The Windows tablets come in two varieties, the cheap and useless Windows RT tablets and the expensive windows Tablets including the aforementioned Microsoft tablets. The problem with all of the Windows tablets is WIndows 8. I think of my parents with their bifocals and how difficult it would be for them to see anything in Desktop mode. All Microsoft had to do was make everything in Windows bigger. They are a multi-billion dollar company; how can they get this so wrong! Compared to the cheap Android tablets and the fumble of Windows tablets, Apple’s iPad Air and iPad mini are without peer. Both tablets look and feel like something out of Star Trek. The screen sizes are also the largest in their class. The only area where the iPad suffers, in my opinion, is backing up files locally. The iPad requires a traditional computer running iTunes for bulk backups.  

The laptops at Best Buy are too divergent to group. Best buy keep keeps one Chromebook laptop next to the iPads. For those not in the know, the Chromebook is an incredibly cheap laptop that runs Google Chrome OS, an operating system whose entire interface is Google’s Chrome web browser and consequently requires an always-on internet connection. On the Windows side, the text on all of the Windows laptops was painfully small. High resolution displays are great, but in Windows, the higher the resolution, the smaller the text. The quality of the Windows laptops is a secondary issue. The least expensive laptops have terrible trackpads and keyboards and looked like they would break on the first day of use. One of the Toshiba’s on display had a few missing key. The more expensive laptops were svelte and well built and correspondingly more expensive. The laptop that most surprised me was the MacBook Air. Not only is it the sveltest laptop at BestBuy, it also has the easiest to read display. (Unlike Windows, Mac OS scales the size of text and icons so higher resolution does not miniaturize the interface.) Pricewise, the MacBook Air costs about as much as the thinner high end Windows laptops. 

For the sake of parity, I also perused the laptop selection at Costco. If you want a bulky, 15″ laptop, Costco is a great store to visit. The stand-out laptop at Costco is HP’s Chromebook. The design of the HP Chromebook is an obvious rip-off of the MacBook Air, except in cheap white plastic. (Most of the good looking PC designs copy the look of the MacBook). As noted, the Chromebook is not a real stand-alone computer, and I would never recommend it for someone like my Dad. 

My thoughts on Windows 8 are apparently shared by the masses, because just yesterday I saw a new story about the return of Windows 7 at HP. The HP Envy in particular looks like an aluminum version of the HP Chromebook and thus a higher quality MacBook Air rip-off. While it is no MacBook Air, it looks sturdier than all of the Windows laptops I saw at BestBuy and it runs Windows 7. Bestbuy should carry these.  

My recommendation to my parents is to buy the MacBook Air. The combination of size, weight, power, and battery life are easily the best I have seen of any laptop. If my parents want to stick with Windows, I then recommended the HP Envy running Windows 7. Knowing my Dad, he’ll probably choose to keep his 5 year old Dell Studio running Windows Vista. (I just shuddered.)

Snow Fun

Typical Iowa this winter, especially in the last 10 years, every snow fall melts the next week only to be followed by subzero temperatures and more snowfall. In this boom-bust cycle of snow, you need to enjoy it while it lasts.


If there has to be winter, might as we’ll be fun.

Downhill Supreme

True story: I had a mountain bike once. In addition to practical purposes, I used it to careen down muddy hills and through phalanxes of trees. I was always on the cusp of serious injury. The adrenaline rush was terrific. Then one day, my front tire slipped on a sandy trail and I fell chest first onto the end of the handle bars. The pain was terrific. By the next morning, my entire upper torso was a dark purple bruise. Lifting my arms above my head was impossible for the next month. Putting on a T-shirt was excruciating. Riding was of course impracticable. A couple of months after I healed, some jerk stole my bike. That was 10 years ago. I have not owned a bike since. But I have played Downhill Supreme.

Downhill Supreme is a fun 2-D mountain bike simulator. The tilt controls are great and the game play is refreshingly simple and free. There are no puzzles to suffer through here. The courses are thankfully short, as some of the later levels become repetitive as you have to re-do them until you exceed an arbitrarily set run time. The ubiquitous 3 star achievement system belies the polish of the graphics and physics. The game is also rather short. There is a promise of later levels, but then you cannot play promises. 

Why I Hate

A true story: 

Of course, I have almost stopped reading Huffington Post too.