Black Swan Event of Technology

A black Swan event is something that was not expected to occur, but a series of events caused it. Normally hindsight allows those looking at it to see that it was actually predictable. Here is a link where you can read more on Black Swan events: http://blackswanevents.org/?page_id=26

In our case, I can see clearly why technology is increasing in price and in some cases is just not available.

Computers, server and technology grows old or dies and must be replaced. If you need to replace them now, you selected a bad time.

  1. Microsoft ended support for Windows 7, Server 2008 and Office 2010, so more people are buying computers which means less parts and increased prices.
  2. The United States and China are having a tariff war, which means buyers are trying to time purchase which means less parts and increased prices.
  3. The Coronavirus started in China, several technology plants are closed which means less parts and increased prices.

Let’s delve a little deeper.

As of January, this year, 2020, Microsoft no longer supports Windows 7 (or Vista or XP), Office 2010 and Server 2008. They gave us plenty of warning (over two years) and I was emailing out to my customers a year in advance. Warning that prices would go up starting in October of 2019 because supply and demand would drive them up. That is exactly what happened.

Then occurred the tariff issues between the United States and China. The Executive branch had implemented, dropped, increased and decreased tariffs between the nations, and China replied in kind. This caused buyers for technology distribution companies to attempt to “time” purchases to get the lowest prices available. Which in turn caused prices to arise.

Now these two reasons are more than enough to force prices up and availability down. After-all, a 3% price increase at the beginning of a product does not end in that price only. It results in a 3% increase all the way across. A $10 part is now $10.30 to the distributor, they mark up their normal price plus that 3%, so one that was $15 is now $15.45, so a part that was $18.75 to the end user is now $19.32. In the long run this makes an $800 computer now $825 to the end user. That may seem small until you add sales tax, other needed software.

Our final unexpected event that has occurred is the Coronavirus outbreak. It started in China and now has spread around the world. I will leave it to you to study up on it, however for our needs, the virus is so widespread that it has now closed technology producing plants.

As a result of the virus two things are occurring. First parts are not being produced. The world market has gotten used to cheap Chinese labor and technology industries have moved manufacturing and assembly plants to China and Asia by the droves. The illness has caused people to not be able to go to work or be told not to show up to work, thus shutting down entire manufacturing facilities and entire cities. These companies include Apple, Samsung, Microsoft, Tesla, and Google. (Google has also closed offices in nearby Hong Kong and Taiwan.)

The 2nd effect is that the Chinese are not purchasing technology. They are cooped up in their homes, some being welded into their apartment buildings (go to DuckDuckGo.com and search). This means that the billion people in China are not buying their own tech, further forcing manufacturers in and out of China to cut back on production.

This is how we came to the current Black Swan event. Four events, unrelated, yet all causing a domino effect on the worldwide distribution and purchasing of computers, phones, routers, switches and other forms of technology.

Until we meet again, have a (corona) virus free week.

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