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01 / 05
A Reminder of How Far Transatlantic Travel Has Come

Blog Post | Adoption of Technology

A Reminder of How Far Transatlantic Travel Has Come

Columbus's 1492 voyage took over two months; today it would take 9 hours.

Trans-Atlantic travel times decreases over the centuries

August 3 will mark the 526th anniversary of Christopher Columbus’s 1492 departure from Spain to the West Indies. The occasion is a reminder of just how dramatically transoceanic travel has improved in terms of lower cost, safer conditions and quicker travel times.

First, consider the cost. Columbus had to petition King Ferdinand II and Queen Isabella of Spain for two years for the exorbitant funds needed to make his voyage. The voyage cost approximately 2 million Spanish maravedis. According to physics professor Harry Shipman at the University of Delaware, 1 maravedi would be about 50 cents today, which would mean Columbus’s voyage cost a million current U.S. dollars.

Such trips are no longer limited to those with access to a royal treasury. In fact, more people than ever are able to afford international travel, including across the Atlantic. Competition that followed deregulation of U.S. airlines in 1978 slashed the price of tickets to make flying more accessible to more people, and progress is ongoing. A record 3.7 billion people flew in 2016.

As Marian Tupy has written, “Between 1990 and 2013, the average international round-trip airfare fell from $1,248 to $1,175 (in 2013 U.S. dollars).” A trip tracing Columbus’s journey from Madrid to San Salvador Island would cost slightly more than $1,000 in 2018. And flights from Madrid to India, which is where Columbus had originally wanted to go, are even cheaper.

By the time that the pilgrims on the Mayflower made their journey from England to the New World, the cost of crossing the Atlantic had fallen to around five pounds or $1,000 current U.S. dollars. But it is difficult for those accustomed to modern transatlantic travel to comprehend the danger and length of that rocky voyage by sea.

One passenger wrote that the Mayflower “encountered many times with cross winds, and met with many fierce storms, with which the ship was shrewdly shaken, and her upper works made very leaky.”

Another passenger died on the ship – a normal occurrence during transatlantic journeys of the era, just as many of Columbus’s crew died from scurvy, a disease caused by poor nutrition, a century earlier. Sea voyages entailed cramped living quarters, a diet of hard biscuits and beer, and the existential threat of storms that could wreck the ship. For most people, the most dangerous part of the trip nowadays is the possibility of leg cramps on a long flight.

And let us not forget that transatlantic journeys have shortened from several months to a matter of hours. For his first voyage in 1492, Columbus departed from Palos de la Frontera, Spain, and landed somewhere in the Bahamas. His journey took a grueling two months and nine days. The first steamship to cross the Atlantic did so in 207 hours in 1819. Today, a flight from Madrid to Nassau in the Bahamas would take an average of 9 hours on an air-conditioned plane with fresh food at the ready, proper restrooms, and most likely televisions with the latest movies.

Some may groan about the inconveniences of transatlantic flights. But they are nothing compared to the horrors of crossing the Atlantic in years past. The very first journeys were prohibitively costly, took months and involved tremendous risk. We can thank technological progress, competition and increasing prosperity for making the trip more affordable, safer and faster.

Blog Post | Cost of Living

Time Pricing Mark Perry’s Latest “Chart of the Century”

Always compare prices to hourly wages to understand the true change in living standards.

Professor Mark Perry recently posted his updated “Chart of the Century,” featuring price and wage data from the Bureau of Labor Statistics (BLS). The chart tracks 14 items over the 24 years from January 2000 to December 2024 and includes both the overall inflation rate and changes in average hourly wages.

To examine the data from a different perspective, we calculated the change in time prices of these 14 items relative to the change in the average hourly wage. We then determined the abundance multiplier—a value that indicates how many units of an item you could buy in 2024 for the amount of work time it took to buy one unit in 2000. If there were no change, the abundance multiplier would equal one. A value below one indicates decreasing abundance, while a value above one reflects increasing abundance. We also calculated the percentage change in abundance for each item.

This analysis illustrates that things can become more expensive in dollar terms while simultaneously becoming more affordable in time prices. For instance, while the general Consumer Price Index (CPI) rose by 87.3 percent, average hourly wages increased by 123.3 percent. As a result, time prices fell by 16.1 percent. For the time it took to purchase one CPI basket in January 2000, a consumer could buy 1.192 baskets in December 2024—an abundance increase of 19.2 percent.

Notably, categories such as housing, food and beverages, new cars, household furnishings, and clothing all increased in money prices. However, after adjusting for rising wages, they became more affordable in time-price terms. Although 10 of the 14 items rose in nominal prices over the 24 years, only five had a higher time price when accounting for the 123.3 percent increase in hourly wages.

We also created a chart showing the percentage change in abundance for the general CPI and each of the 14 tracked items:

Find more of Gale’s work at his Substack, Gale Winds.

Blog Post | Cost of Living

We’re All Billionaires Now (Thanks to New Knowledge)

We may not have a billion dollars in the bank, but we enjoy the benefits of many billions of dollars invested on our behalf.

Summary: Modern society enjoys immense wealth through access to products created with high fixed costs but low marginal costs, thanks to mass markets. By leveraging technology and innovation, products from smartphones to streaming music and affordable medicine provide people with benefits once unimaginable. This abundance illustrates capitalism’s ability to generate shared prosperity, contrary to the views of critics who focus solely on the relative distribution of wealth.


Sen. Bernie Sanders (I-VT) has tweeted “There should be no billionaires.” Compared to 100 years ago, the United States is a country where everyone is a billionaire. We may not have a billion dollars in the bank, but we enjoy the benefits of many billions of dollars invested on our behalf in the products and services we use every day. Let me explain.

Fixed costs and marginal costs. In economics, we consider the cost to create a new product and then the cost to manufacture each additional unit. Many products have high fixed costs but low per unit costs when manufactured at scale. This per unit cost is also called marginal cost. The marginal costs on some products can reach zero.

More people mean we are all richer. We can enjoy products with such high fixed costs and low marginal costs because there are so many of us. Creators of these high fixed costs products can recoup these costs from millions, if not billions, of customers. The Scottish economist Adam Smith understood that in 1776. If you want to get rich, have lots of potential customers. Large markets also allow people to develop their skills and specialize in such things as drug and software development. The bigger the population and the more we specialize, the more variety and lower costs we enjoy in the marketplace.

Here are five examples:

Movie billionaires. The top 10 highest-grossing films cost a total of $2.8 billion to create. You can now stream those movies at home on your $250, 55-inch large-screen high-definition TV along with 1,900 other movies for around $9.99 a month on Disney+. Unskilled workers earn around $17.17 an hour today, so it takes around 14.5 hours to buy the TV and 35 minutes of work each month to enjoy this multibillion-dollar benefit.

The figure shows the 10 highest-grossing films, which collectively cost $2.8 billion to produce, yet remain accessible for ordinary people to enjoy.

iPhone billionaires. It’s estimated that Apple spent $150 million over three years to develop the first iPhone, which was released in 2007. It sold for $499. How could it be sold so cheap if it cost so much? According to CNBC, Apple has sold over 2.3 billion iPhones and has over 1.5 billion active users. That’s how.

In 2009, Apple spent $1.33 billion on research and development. This year, it will have risen to $32 billion. The company has spent $208 billion on developing new products over the past 16 years. About half of Apple’s revenue comes from iPhone sales. Assuming half of its research and development investment has gone into the iPhone, we are enjoying a product that costs over $100 billion for about $30 a month, or around an hour and 45 minutes of work for a typical unskilled worker.

Note: In 2009, Amazon spent $1.24 billion on research and development, similar to Apple. This year, it expects to spend over $85 billion. In the past 16 years, Amazon has spent $485 billion.

Medicine billionaires. The cost to develop a new drug is estimated to range from less than $1 billion to more than $2 billion. The U.S. Congressional Budget Office notes, “Those estimates include the costs of both laboratory research and clinical trials of successful new drugs as well as expenditures on drugs that do not make it past the laboratory-development stage, that enter clinical trials but fail in those trials or are withdrawn by the drugmaker for business reasons, or that are not approved by the FDA.” Once a drug is approved, the marginal cost can be very low, maybe under a dollar.

If it costs $1 billion to develop a new drug, but each new unit of the pill only costs a dollar, how much should you charge the customer for it? The answer depends on the size of the market. If the market is 1,000 people, your costs will be $1 billion plus $1,000. You would have to sell each pill for $1 million plus $1 to break even. If your market was a million people, the breakeven price would drop to $1,001. If your market was a billion potential customers, the price per pill drops to $2.00. This is why new drugs are typically developed for widespread medical conditions. The fixed costs must be spread across a sufficiently extensive market. This is amazing when you think about it. You get a pill that required $1 billion to develop for $2.00 if a billion other people have the same medical problem.

Book billionaires. The Harry Ransom Center estimates that before the invention of the printing press, the total number of books in Europe was around 30,000. The United Nations Educational, Scientific and Cultural Organization estimates there are roughly 158,464,880 unique books in the world as of 2023.

When Gutenberg innovated printing in 1440, an average book cost around 135 days of labor, ranging from 15 days for a short book to 256 days for a major work. If workers put in eight hours a day, they’d have to work 1,080 hours to afford an average book. Today, blue-collar compensation (wages and benefits) is around $37 an hour. If there had been no printing innovation, it would cost about $40,000 to buy a book today.

Google has become the new Gutenberg. It has a library of more than 10 million free books available for users to read and download. Assuming the average book is around 250 pages and a half inch thick, you would need a bookshelf around 80 miles long to hold this library.

Before Gutenberg and his press, Google and the internet, Amazon and its digital tablet, and the manufacture of computer memory chips, it would have cost $400 billion to have a library of 10 million volumes. It would have taken 5.4 million people working full time for a year to create this library in 1439.

Today, you can have this library for around $43. That’s $35 for the tablet and $8 for the 2 TB memory stick. Another valuable feature we enjoy today is being able to search for a word or phrase in any of these books.

Music billionaires. Thomas Edison developed the original phonograph record in 1877. Suddenly people did not have to be present at a live performance to hear music. In 1949, RCA Victor became the first label to roll out 45 RPM vinyl records, and by the 1950s, the price was around 65 cents each. Unskilled workers at the time were earning around 97 cents an hour. This put the time price of a song at 40 minutes.

Steve Jobs introduced the iTunes Store on April 28, 2003, and sold songs for 99 cents. By this time, unskilled wages had increased to $9.25 an hour. The time price of a song had dropped 84 percent to 6.42 minutes. Listeners in 2003 got six songs for the price of one in 1955.

Apple Music was launched on June 30, 2015. Today, a student can access 90 million songs for $5.99 a month. Soundcloud is another popular music streaming service with over 320 million songs priced at $4.99 a month, or 18 minutes of time for an unskilled worker.

In 1955, the time to earn the money for an unskilled worker to buy the Soundcloud catalog of 320 million songs on 45 RPM records would have taken 106,666,667 hours. At today’s rate of $17.17 an hour, it would have cost $1,831,466,666.

Capitalist billionaires. Under capitalism, the only way wealth can grow is if entrepreneurs create it in the form of new products and services. Becoming a billionaire is a by-product of how successful a person is at creating and producing. When someone creates a product based on knowledge, it is non-rivalrous. (Paul Romer won a Nobel prize economics in part for explaining this truth.) Non-rivalry means we can all use a product at the same time. It’s as if we all own the product. Knowledge products make us all billionaires.

Bernie Sanders’s does not seem to understand or appreciate these economic truths. He wants to expropriate capital from Elon Musk and other innovators and give the money to his fellow politicians and bureaucrats to enrich their friends and supporters. Once this capital is seized, however, entrepreneurs will be much less motivated to create more. Ask all the entrepreneurs who lived in the former Soviet Union, and those in China under Mao Zedong, how 100 percent taxation disincentivized them from creating and taking risks.

This article was published at Gale Winds on 11/7/2024.

NBC News | Air Transport

Drone Deliveries, Slow to Take Flight, Come to Silicon Valley

“The hype around drones may finally be starting to deliver.

Drone deliveries, first touted by Amazon more than a decade ago, are slowly taking off in some parts of the U.S. On Thursday, Matternet, a drone delivery startup, launched its service to Silicon Valley…

The announcement adds to signs of growth for drone delivery. In Fort Worth, Texas, which recently became the first major city in the United States to offer commercial drone deliveries, they’re being used to deliver groceries from WalMart.

In College Station, Texas, Amazon’s drone delivery service has become common enough for residents to see the service as a noisy nuisance. And, with recent FAA approval, the company seems set to expand drone delivery operations across the city and beyond. 

Experts say many of the obstacles to drone delivery, most notably the technology and regulations, have been hurdled.”

From NBC News.

Blog Post | Cost of Services

Costco Raises Membership Fee, but It’s Still 21 Percent Cheaper than in 1983

The hot dog combo is 70 percent cheaper.

The nominal price of Costco's membership fee has increased since 1983. While the fee remained unchanged for seven years, it increased in 2024.

Costco raised its Gold Star annual membership fee to $65 in 2024. It had been $60 for the past seven years. The membership fee started at $25 in 1983. Back then, blue-collar workers earned around $11.22 an hour in compensation (wages and benefits). This puts the time price at around 2 hours and 14 minutes. Blue-collar workers earn closer to $36.92 today, putting the $65 membership time price at 1 hour and 46 minutes. Memberships are actually 21 percent cheaper today compared to 1983.

The time price of a Costco membership for a blue collar worker has decreased between 1983 and 2024.

Charlie Munger from Berkshire Hathaway is supposed to have said that the membership card is an important filter:

Think about who you’re keeping out [with a membership card]. Think about the cohort that won’t give you their license and their ID and get their picture taken. . . . That cohort will have 100 percent of your shoplifters and 100 percent of your thieves.

Costco introduced its hot dog and soda combination in 1985 for $1.50. The price has not changed in 39 years. Blue-collar hourly compensation was around $12.50 an hour back then. It took 7.2 minutes to earn the money to enjoy this American treat. Today, at $36.92 an hour, it only takes 2.4 minutes. You get three combos today for the time it took to earn one back in 1985.

Costco introduced the hot dog and soda combination in 1985. For the time price of a Costco hot dog and soda in 1985, a blue-collar worker could afford three today.

Costco went public on December 5, 1985. After adjusting for stock splits, the initial price was around $1.67. Today, shares are selling for around $892. That’s a compound annual growth rate of 17.47 percent. If you had invested $1,000 in Costco the same year it introduced its $1.50 deal, you would have $534,131, enough to buy 356,087 hot dog and soda combos.

Costco's certificate of incorporation.

Long live the entrepreneurs at Costco who make our lives so abundant.

This article was published at Gale Winds on 9/6/2024.