Apple released the Apple II 46 years ago on June 5, 1977. The base unit was priced at $1,295. It had 4K of memory and a 1MHz microprocessor. This price did not include a monitor or disk drive. Almost seven years later, on January 24, 1984, Apple released the Macintosh at $2,495 with its memorable ad during the Super Bowl. It had 128K of memory with an 8 MHz microprocessor. The new Vision Pro Virtual Reality system announced this week is priced at $3,499.
The Vision Pro uses Apple’s M2 chip and a new R1 chip to ensure lifelike visual flow. The unit also includes 23 sensors, 12 cameras, and 6 microphones. The system is capable of streaming over a billion color pixels per second on 23 million pixels across two panels that are the size of a postage stamp. For reference, a 4K TV features a bit more than 8 million pixels.
A good review of the new product can be found at AppEconomyInsights.com.
So how expensive is the Vision Pro? In terms of time prices, it costs about half the original Apple II. In 1976, blue-collar hourly compensation (wages and benefits) was around $7.15 per hour, putting the Apple II at 181.1 hours in terms of time price. By 1984, the wage rate had increased to $11.78 per hour, putting the first Macintosh at 211.8 hours. Although the Mac cost 30.7 more hours, or 17 percent more, you got a monitor, mouse, eight times faster speed, 32 times more memory, and the most valuable feature: the Mac operating system. Today, blue-collar hourly compensation is around $38.33 per hour, putting the time price of the Vision Pro at 91.3 hours.
What did it cost Apple to make the first Vision Pro? Apple has spent over $100 billion in research and development over the last five years. At least $20 billion has probably gone to the new device. Apple says it filed over 5,000 patents related to the Vision Pro.
If it cost $20 billion to make the first unit, what will it cost to make the second? Apple’s product costs typically run around 63 percent of its retail prices. This would put the cost of the second unit at around $2,200.
Why do we get a product that costs $20 billion to make for only $3,499? Because there are so many of us. Apple can spread these development costs over millions of customers. Will the price of the Vision Pro come down? Apple released the Lisa computer on January 19, 1983, at a price of $9,995. The Mac was released a year later for $2,495. Once Apple can recover its development costs, expect a lower-priced version and more features. The next six months gives developers time to make apps that will make the Vision Pro even more valuable. App developers work on similar economics with high startup costs. Since the apps are software, marginal costs are close to zero.
With 8 billion of us, these kinds of products become profitable—more people creating and enjoying one another’s creations. Life is beautiful.