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How is the TI-83 calculator still around? (repost)
Reposting a popular older post for Thanksgiving break
Does anyone else remember Squanto? I thought I hallucinated learning about the friendly Native American who taught the Pilgrims how to plant maize and trace their hands to make paper turkeys. He was real though - I checked. Actually, he was kidnapped by English settlers, sold as a slave in Spain, and then returned to New England to find his entire tribe was wiped out. After that he remade himself as some kind of badass New World diplomat. Most of that is left out of elementary school textbooks, probably to make room for a full-page picture of Columbus’ ships or close-up shots of Pilgrim’s belt-buckle hats.
In the spirit of the broken American education system, this week is a repost on the TI-83 Calculator. This was originally published in June but most of you joined MoneyLemma after that (which is awesome). Hope everyone has a great Thanksgiving!
American high school. It’s the only thing Marty McFly, Thurgood Marshall, and Ted Bundy have in common. American schooling is cultural glue; it binds us together. It taught us that Teddy Roosevelt is easily the coolest president. That cafeteria fries are the best fries. And of course, if you were born after 1975, American schools taught us how to use a Texas Instruments Graphing Calculator, or a T.I. (from here on the calculators = T.I. and the company = Texas Instruments).
If Dorian Gray took AP Calc
The TI is a technological relic. When it first came out in 1990 for $100, it was a marvel, an emblem of human achievement on equal footing with the moon landing or fully-colored Penthouse magazines. A handheld graphing calculator! 30 years later it belongs in a museum. It’s great, but obsolete. Yet a quick survey of the top-selling calculator on Amazon reveals that the T.I. still reigns supreme. Not only that, but the price has increased to $120. Has T.I. technology kept pace with the times? No, not it has not:
This is the internet age. The latest iPhone becomes an ancient artifact after six months. Tik-tok stars undergo entire Bieber-esque cycles of hysterical teen adulation to self-destructive egomaniacs to reborn Hollywood swamis in a matter of days. How has a calculator, of all things, sat unchanged inside the Silicon Valley pressure cooker for thirty years and emerged intact and in demand? The answer starts with network effects.
A quick aside on network effects, bro
You may have heard the term Network effects in connection with Venture Capital, the class of investors that focus on early-stage, fast-growing companies. Those start-up bros love network effects as much as they loathe hiring women.
Network effects describe a phenomenon where the number of users of a product increases the value of a product. If you learn Chinese then you’ll probably get a raise at work. If you learn Klingon, you won’t. Why? Two billion people in Asia don’t speak Klingon (yet). Languages exhibit network effects. As do telephones, dating apps, and Mexican pesos. All are worthless if only one user exists.
In business, network effects are like Willy Wonka’s Golden Ticket. Everybody wants them, very few get them, and even those that get them usually find a way to mess it up (looking at you, Augustus Gloop). Companies that do manage to bottle up network effects are worshipped for their power to annihilate competition and overflow Caribbean tax havens with excess cash. Network effects are so valuable that investor enthusiasm for them has a religiosity to it. Watch as the early-stage backers of Facebook, Skype, and Twitter (three companies built around connected users) debate the finer points of network effects theology:
Network effects are a pillar of the digital age. The internet and computers enabled new types of business models that exhibit network effects, and these businesses have created trillions of dollars in value in a very short time. Amazon, Google, Facebook, and many of the most successful companies of this century are fundamentally network effects businesses.
Indirect network effects
In 2007, the main utility of the iPhone was signaling to your friends and family that you were better than them. By 2009, iPhone owners could fling Angry Birds, hail an Uber, or stream music on Spotify. The value of the iPhone increased exponentially because in 2008 Apple opened up the iOS ecosystem and allowed external developers to create apps. Like the United States in the 19th century, Apple broadcast a message: “Hey, we’ve got a frontier full of opportunity. Feel free to take some land and build. We’ll all get rich.” That’s exactly what happened, and although it feels like the network effects described above, it’s not. App creators are not users, they are suppliers.The phenomenon at play here is a sibling of network effects called indirect network effects: when the value of the product increases because of more complementary, compatible products. Network effects mean more users increase value. Indirect network effects mean more uses increase value.
T.I.’s Indirect network effects
Indirect network effects are the reason that T.I. calculators' are immune to obsolescence. Compared to all the great technology of the 1990s, T.I.s themselves are a forgettable jumble of silicon. What’s made them last is that they’ve become foundational beams in the education system. Thousands of American math teachers have well-oiled lesson plans that require specific T.I.s functions, many of which they’ve been using for decades. T.I.s are one of the few calculators allowed for the 60 high-stakes standardized tests, including the SAT. Those exams actually design questions to be solved with T.I.s. Pearson textbooks across the country explain content with T.I. calculator examples. There are study guides, homework banks, online forums, and entire websites devoted to T.I.s. And sure, there are substitutes for the T.I. - off-brand calculators, phone apps, computer programs. A lot of those are free and substantially better than the T.I. But the uses of those calculators are limited because they don’t have the indirect network effects of the T.I. The T.I. may be a floppy disk with buttons but ditching it is an academic risk for students and a career risk for educators. T.I.s are like the sand underneath Las Vegas: there’s nothing unique about a patch of sand in the Nevada desert until a city is built on it.
All of this is no accident. Texas Instruments has spent millions and millions of dollars to create an ecosystem around their calculator. They pay textbook companies to include T.I. content in their examples and practice problems. They sponsor teacher conferences, lobby politicians and administrators, cultivate relationships with educational institutions like the College Board, spend a ton on targeted advertising at educators, and (I’m speculating here) blackmail decision-making bureaucrats. The strategy employed by Texas Instruments was to create a mandatory, branded school supply. That supply just happened to be a graphing calculator.
The danger of indirect network effects
Indirect network effects mean that Texas Instruments owns graphing calculators (93% share of the calculator market) and therefore has no incentive to improve upon its product. Like Comcast, which has no competition, or Dr. Oz, whose connection to Oprah makes him invincible, the T.I has become a despised American institution that we just can’t get rid of.
When it comes to the U.S. school system, T.I.s are like tiny pieces of trash that slipped into a patient’s chest during open heart surgery. Is there discomfort? Yes. But it’s not worth cutting your chest back open to fix it. We are stuck with T.I.s until something major changes: new regulation, a truly disruptive product (the appendix has a few candidates), or some kind of nationwide anti-calculator uprising. T.I. helped design this glitch in the matrix, and they’re making hundreds of millions off it too:
Indirect network effects, in fact all types of network effects, create incredible profit power for companies that harness them. As an investor, I love them - what investor wouldn’t? That profit power is also a danger: these companies create a dependence that corrupts traditional consumption dynamics. Normally, if customers hate a product they just don’t use it; capitalism is self-regulating that way. Network effects, like monopoly power, create situations where there is no alternative product and the self-regulating mechanism in capitalism breaks down. This is why everybody hates Facebook and nobody can quit it. How can you coordinate 1 billion people to quit one social media site and join another? It’s all but impossible. Like Willy Wonka, Facebook can blithely commit civil rights abuses without worrying about consequences.
Still, If a company acknowledges it has unfair market power, then it invites government regulation that will plug a stick of dynamite in its money-making machine. That’s why companies with network effects or monopoly power constantly deny the fact, even when they look ridiculous. Here is Mark Zuckerberg adamantly testifying to Congress that Facebook operates in a highly competitive environment despite being unable to name a single competitor:
Likewise, Texas Instruments constantly denies any market power and argues that its calculators are just great tech products. Peter Balyta, President of EdTech at Texas Instruments, says customers buy T.I.s because they are a worthwhile one-time investment that can be taken from middle-school to graduate school . Peter, if the Romans made points like that then Caesar would have been bludgeoned to death.
You disrupted all over me!
Indirect network effects are a wellspring for the little agonies of the modern age: they create the temper traps and cranial vein busters, those loose thumbtacks of market inefficiency that are dead-set on needling us all to death. Indirect network effects explain why we haven’t switched to the far superior metric system. We’d have to rewire our educational complex, change all our road signs, update a lightyear of computer code. They also explain why it’s taking us so long to switch to electric cars (gas stations are the Apple app store of the combustion engine) and why sliced bread is always a fixed width (it’s gotta fit in the standard toaster). Every industry has a laundry list of annoyances caused by indirect network effects. I’ve talked to I.T. professionals who are forced to use obsolete Cisco products because their office building’s blueprint was designed to fit old Cisco equipment and only old Cisco equipment. I’ve talked to executives who can’t stay at Airbnbs when they travel because their accounting department’s software only recognizes large-chain hotels. Skilled professionals, from doctors to hairstylists, use outdated equipment because they’ve already invested the time and energy to train on them. All of these are little aches and pains of indirect network effects.
What’s fascinating to think about is all of these, T.I. calculators most of all, were at one point disruptive and cutting-edge technologies. Indirect network effects create a lot of value for a lot of people, but they are also the mechanism by which technology ossifies and, far after it becomes obsolete, proves hard to remove.
 Company Insights: Rise and Fall of T.I. Calculator: This is a really cool YouTube channel I came across during writing this. They do company profiles of companies you didn’t know you wanted profiled. Check them out!