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### Building the Model

Before we get too carried away with variables and equations, it's time that we put something down on paper (or computer screen, in this instance). Without taking into account Time - when to buy - a simple plot of a set of products along the interval \$150 to \$250 dollars looks like this:

 Product Price Video Card A \$150 Video Card B \$175 Video Card C \$200 Video Card D \$225 Processor A \$175 Processor B \$200 Processor C \$225 Processor D \$250

This chart is pretty useless. The reason why we introduced products deviating by \$50 from our set allowance of \$200 is to account for fluctuations in price once we introduce Time into the model. If all hardware devalues at the same dollar amount, exposing time to the equation is pointless. Generally processors take a dip in price every few weeks, so let's see what would happen if we put a 3% price cut on the products every four weeks on video cards, and a 4% price cut on processors. This discrete model doesn't make a lot of sense, since hardware generally devalues at a discrete rate, but in the meantime, we will use it for this example.

Things have changed a little bit on this graph. Notice that it actually gets more expensive to wait six months before buying Video Card C, even though the vendor sells it for slightly less. Putting this quantitative value on how much our time is worth per day gets us out of the perpetual waiting cycle that we had mentioned earlier. It becomes real easy to say "I can just wait six months for the cost to drop \$200," but if that's your mentality, then why upgrade at all? The upgrade isn't needed if there is no cost associated with waiting.

And finally, just to make things really interesting, let's take the Quality of each component and base it on a fictional benchmark like a video game. Each component's relative quality is listed as a percentage of base performance. Just by taking the price variable P and dividing by Q, we've changed our graph enough to give a pretty realistic representation of what a generic model looks like.

 Product Price Quality Video Card A \$150 200.00% Video Card B \$175 240.00% Video Card C \$200 260.00% Video Card D \$225 280.00% Processor A \$175 235.00% Processor B \$200 270.00% Processor C \$225 305.00% Processor D \$250 340.00%

Click to enlarge.

What we are seeing in this graph is that we will get best return on our investment at different times for different parts, assuming the constant rate of decline in price and a 25 cents per day cost to not upgrade. For example, we get the the most out of a dollar by buying Processor D in six months - in fact, looking at the curve in the graph, it would be better to continue to wait even longer! If our time is only worth \$0.25 per day, it apparently isn't worth it to buy any of the new processors today - only the "budget" processor A is a good buy. Otherwise, we would be overpaying for the Quality. Of course, Processor D is a little bit out of our price budget too. We maximize our price to quality by week 12 for Processor B, and Processor C looks to be leveling off towards week 24. All of the video cards, on the other hand, will actually maximize our performance for our dollar if we buy right now.

To demonstrate the entire process that we just described above, we created a simple Excel workbook. By modifying the assumptions highlighted in yellow, we can create a dynamic graphical process to easily verify two things: whether or not it makes sense to upgrade now, and the relative Price and Quality of each product in our set. The idea is to purchase the hardware that gives us the largest Price to Quality ratio while taking in account the Cost to Not Upgrade (we refer to this as CNU). If the maximum ratio exists at some other date than the start date of the model, then either our CNU per Day doesn't reflect our need to upgrade accurately, or the part in question is too expensive for its relative quality.

Quantifying Price A Simple Example

• #### Jedi2155 - Monday, January 31, 2005 - link

Anand should really have a VGA and a CPU chart of some sort as well! I don't really trust tomshardware all that much.
But then, most of us don't anyways :P.

I like the article and its calculations tho...believe it or not....i use similar ones....
• #### kmmatney - Monday, January 31, 2005 - link

sorry about the third post - but there is one statement that I think hits the nail on the head:

"Determining the exact performance increase from a Radeon 9600 Pro to a Radeon X850XT is not something that you'll readily see published on AnandTech or anywhere else."

We can "almost" get this from Toms Hardware, from the VGA charts.

http://graphics.tomshardware.com/graphic/20041004/...

They don't have half-life 2, but there are enough benchmarks to at least allow for an informed decision. In fact, I used the article to help a friend buy a Radeon 9600 Pro, which was the best bang-for-buck at the time.

Why can't Anandtech have something similar, or the ability to create a similar graph on demand? Having the ability to chart both video card and cpu upgrades would be the ultimate tool for the upgrader.

• #### kmmatney - Monday, January 31, 2005 - link

This article reminds me of something I always wanted. The ability to pull up benchmarks dynamically. I could put in my system specs, or select a similar procesor from a list. Untested speeds can be estimated to first order. Then I could pull up benchmarks from different video cards and compare exactly what I want.

For now, I use the Toms Hardware video charts, as Anandtech doesn't have anything so comprehensive. A "Real-Time benchmark Engine" would be awesome for this.
• #### kmmatney - Monday, January 31, 2005 - link

I'm a bit qith #19. It pains me to pay more than ~\$100 for a video card. My plan was to stay with my Ti4200, but I managed to Ebay off \$120 in old hardware last week, which brings my 6600GT upgrade down to an affordable \$90, minus whatever nmy old card sells for. I'm definately sticking with my Athlon XP for a while, though.

• #### roostercrows - Monday, January 31, 2005 - link

excellent article kristopher, as i have had all the components for my new anandtech high end computer (except the video cards) just sitting on my bench for three months now just waiting... i can't help but think about what a price gouging graph would look like for the 6800gt pci-e sli video cards...... Reply
• #### Googer - Monday, January 31, 2005 - link

#13, I agree; but for some of us doing cost benefit analysis is part of the fun too. I really enjoy doing my mathmatics when I have the opertunity to do so. For me It is all part of the research that goes in to learning about new hardware. Its a hobby for me too. Reply
• #### JarredWalton - Monday, January 31, 2005 - link

The point of this articles wasn't to give everyone a specific decision. Some people are always waiting for the ideal time to upgrade. If you're happy with your current computer, then by no means do you need to upgrade. If you're disappointed with performance, however, and you start thinking something like, "I'll wait for SLI..." or "X800XL is coming soon..." or soemthing similar, is it really worth the wait?

That's the whole point behind the "cost to not upgrade". How much are you willing to spend per day for a better computing experience? We arbitratily chose 25 cents, but suppose you're willing to spend 50 cents or a dollar? Given the model in the spreadsheets, you can plug in various prices and estimated depreciatioin rates, and suddenly it may not look so important to wait for the X800XL or whatever.

The article certainly wasn't meant as a joke. It was intended as some reasoning behind our price guides. We don't often suggest people wait for the Next Big Thing, and the models presented here help to show why. We didn't even touch on the topic of market segmentation, which will often keep high-end parts at a higher price despite decreased production costs (witness SCSI, for example). There were plenty of other concepts that could also be applied. Hope that helps.

(I helped quite a bit with the article, so I feel I can safely put in my two cents.)

• #### Poser - Monday, January 31, 2005 - link

Thinking about it a bit more, I guess my situation (#19) could be wedged into the model you built pretty easily -- I don't have a Cost to Not Upgrade (CNU) of \$0.25 a day, instead I have a NEGATIVE CNU. The longer I wait, the more cool gotta have 'em games will be released which I can't play on my old rig. That'll push up the value of current gen hardware. Reply
• #### Chuckles - Sunday, January 30, 2005 - link

It looks like an interesting model. With some tweaking it looks like it may be valid for a variety of market segments. Cool. Reply