Today I found an interesting question from one of our readers in my inbox: If producing an XO costs more than $200 how can a $399 G1G1 v2 donation Give 1, Get 1?
The question is based around a piece of information from an InfoWorld article which I myself had previously highlighted in a comment on the original Amazon to run G1G1 starting in November story:
Preparing to Give 96% of 1, Get 1
The XO currently costs around $203 or $204 to make, said Keller [director of Europe, Middle East, and Africa at OLPC]...
With the production cost of 2 XOs apparently being $406~$408 and the donor definitely getting one of them there's only $195 or $196 left to pay for the XO which is to be donated to a child. That's not quite enough...
Especially since this initial calculation doesn't include any of the overhead required to actually handle the whole process starting with the donation to physically shipping the XO from the factory to the desired destination. Even with OLPC's own overhead being very low there are costs like credit card fees, warehousing, customs, shipping to some of the remotest regions of the world, etc. which all have to be considered and don't seem to be included in the current price.
Last year during G1G1 when the XO still cost ~$188 to make it was reasonable to assume that the $23 delta between the $399 donation and $376 production cost was used to cover (at least part of) these hidden expenses. By this train of thought G1G1 v2 should really have to cost more than $399 and considering things like the significantly increased cost of transportation due to higher oil prices it might be quite a bit more.
It's too early in the game to draw comprehensive conclusions but I can't stop thinking that if G1G1 v2 is really a donation program designed to make a difference then its price should be higher!
>I can't stop thinking that if G1G1 v2 is really a donation program designed to make a difference then its price should be higher!
Hrm.... a higher price-point is also a barrier to entry. Then again, barriers to entry can bring about a higher sense of commitment in participants.
What would be better -- getting 40K people participating in an equitable G1G1 program (40K in participant hands, 40K in student hands), or 100K people participating in a G05.G1 (100K in participant hands, 50K in student hands) ??
I'm not saying that the latter equation is the _better_ equation, I'm just pointing out some possibilities.
OTOH, 40K fanatical participants would be a nice shot in the arm, too!
Only a GHG1 (G05G1, give half get one) will be that successful or more successful than the original one was.
By today, most of the enthusiasm is gone from the community due to the badly managed first G1G1, defective keyboards and the 1 year loooong wait for a working Sugar (we are still not there but getting really close).
Moreover, the geek factor is also gone because there are several netbook machines now in the $400 price range.
$250 - $299 range would make the second program interesting. A lot of people would participate only to get an XO, and that would increase the user base (which is badly needed).
Give One Get One is a good idea. Let's buy a HiVision Mininote for just 98$ (http://techvideoblog.com/ifa/98-linux-laptop-the-hivision-mininote/).
So: 98$ x 2 = 196$.
Is it not the real price for the "100$ Laptop project" ?
As far as I know, G1G1 has always been a donation program. I'm sure OLPC doesn't physically pair XOs between donors and receipients -- it's funding for the Give 1 program. As mentioned above, $399 is a lot more attractive than $407. Even charities can do marketing ;)
If they are calling the program G1G1, then they should be as honest as possible and have donors pay enough to cover the second machine. After all, it is fairly strongly implied that there is a one to one correspondence, and that correspondence is probably there to give donors a warm and fuzzy, "there's an education computer out there that was given by me to a child in the developing world."
Well, there are other ways to look at it too, though I think that they should change the programs name in that case. Sola is sort-of onto it with the talk about charging less to sell more. But I don't agree with the overly simplistic math. It is possible to look at it as an optimization problem. You start out by saying that the goal is to get as many XO's out to developing nations as possible. You then try to estimate how many XO's would be sold at any given price (e.g. sales as a function of price). It would not be easy to estimate, and it would probably have a few quirks (e.g. G1G1 and G2G1 would probably represent larger sales simply due to psychological factors). Convert that into revenues as a function of price, and subtract costs as a function of price. That should give you your estimated profits as a function of the price per unit. Maximize the profits, and you get as many XO's out to kids as possible.
If my explaination lost you, maybe we should develop better mathematics and economics activities for the XO. ;)
i'm just curious about how this works exactly. so we're not giving enough to buy let alone ship a 2nd one...so what happens to all that money? its almost enough for a 2nd XO...is it being put into some fund/account and when there is enough money for another one, then one is purchased?
its a shame our program couldnt have a sponsor of some sort...one that would provide the 30 or so additional dollars needed for every g1g1 that was done.
The question is does the $203 or $204 cited by director of Europe, Middle East, and Africa at OLPC come from performing exchange rate calculations from Asian currency to Euros to dollars or directly to dollars. This will give different results because of the vagaries of exchange rates. Also day to day fluctuations can make a difference. Also depends on how OLPC does foreign currency arbitrage. Could be the EMEA director does not actually no the exact cost in dollars and was just guessing.
I need free laptop
all it does is make me question how they came up with $203-$204 for the device when the company/org selling them is saying $399 for two. Who do you believe and does it even matter.
What a waste this thread is. Surely someone could have come up with something better to put down the project than this.