One Further Note on IBM Service

I blogged the other day about the nice service I got on having my IBM laptop repaired. The second commenter on the post, “Kent,” wrote this:

Why is the co-author of Freakonomics buying overpriced insurance/ warranty for a computer?!

He then goes on to cite our friend Tim Harford as arguing that add-on insurance for things like computers, cell phones, etc., is “grotesquely inflated.”

That may be true — but, for the record, I didn’t buy any such insurance for my ThinkPad. The repair was done under the original manufacturer warranty. It’s interesting to me that Kent’s assumption was otherwise; I’m not sure why that is so.

FWIW, the comments about my IBM experience here, on Consumerist, were in general so pro-IBM that I wondered if they’ve got some BzzAgents working for them. But if that were the case, they probably would have hit the comments on our blog a little harder.

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  1. justakim says:

    well… generally speaking, the thing that dies on a laptop that must be replaced, is the motherboard, and a motherboard is like buying a whole new computer, $800+. I buy 3 year $300 complete coverage (spills included!) from IBM. In that time, I am almost guaranteed to need my motherboard replaced. This is a better deal than buying 2 cheaper laptops in that time frame. IBM makes good stuff, but this machine takes a lot of abuse and is exposed to many risks over the course of three years.

    Skip the coverage if you don’t take your laptop out and keep it away from all liquids.

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  2. justakim says:

    well… generally speaking, the thing that dies on a laptop that must be replaced, is the motherboard, and a motherboard is like buying a whole new computer, $800+. I buy 3 year $300 complete coverage (spills included!) from IBM. In that time, I am almost guaranteed to need my motherboard replaced. This is a better deal than buying 2 cheaper laptops in that time frame. IBM makes good stuff, but this machine takes a lot of abuse and is exposed to many risks over the course of three years.

    Skip the coverage if you don’t take your laptop out and keep it away from all liquids.

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  3. fomu65 says:

    at a former employer, i was the primary analyst for implementing a new world-wide system to sell and track base and extended warranties. it is ironic that is what i was asked to do, given my general disdain for anyone who would waste their money on such ‘insurance.’

    that was, until i saw what happened to my girlfriend’s laptop.

    her HP, purchased at best buy about 2 years ago, has already had the motherboard replaced, battery replaced twice and the power supply replaced. all 4 services have been manufacturing issues, not something she has broken. ouch.

    given that she spent only a small fraction of the total cost on that extended warranty plan (something like $50 out of the $1000+ for the laptop), and how many service calls it has needed, she has more than made her money back by purchasing the warranty.

    so, while i can’t give any hard economic figures here, let me try to show factors i think about if i determine if the warranty is worth it or not:

    1) is the price of the warranty a small % of the total purchase price?
    2) is the total price of the item comparatively large to my earnings potential during the life of the item?
    3) is the item too complex or specialized that self-repair is unlikely? (repairing a cheap stool is easier than an iPod)
    4) what is the opportunity cost of purchasing the warranty v/s the possibility of lost time/effort/knowledge if the item dies?

    basically, these are all calculations that come down to a single question: am i willing to undertake the risk of the component dying prematurely upon myself or do i want someone else to assume that risk for me? the numbered questions are just guides for me to determine the answer to this ultimate question.

    question 1 is really asking about how the purchaser perceives the cost of the initial purchase. if the extended warranty makes the purchase of the combined item more than the purchaser is willing to pay, then the warranty will not be selected and the person will just take the item.

    question 2 is more about replacement. if the item is inexpensive relative to my time-adjusted income, then a warranty is not useful as i could purchase a new item instead.

    question 3 determines if the warranty itself is a desired thing for the individual buyer. if i am a computer geek, and build all my own PCs, then a warranty probably isn’t worth it to me (at least not for most components) as it is easy for me to interchange them.

    question 4 is probably the most complex because it really depends upon not only the user but the item. if Dubner’s hard drive had totally died and was unrecoverable, then warranty or not, he lost. if it was recoverable, and he didn’t have the skills to do it himself, then the warranty is a savior. if Dubner kept nothing on his laptop of use (or always had backups), then a hard drive crash is only an annoyance, thus the opportunity cost would only be in the time spent without it, thus the warranty probably isn’t worth it.

    obviously i’ve put way too much thought into this over the 4 years i helped implement that system. anything you guys see that i missed? (i actually edited this down, too!)

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  4. fomu65 says:

    at a former employer, i was the primary analyst for implementing a new world-wide system to sell and track base and extended warranties. it is ironic that is what i was asked to do, given my general disdain for anyone who would waste their money on such ‘insurance.’

    that was, until i saw what happened to my girlfriend’s laptop.

    her HP, purchased at best buy about 2 years ago, has already had the motherboard replaced, battery replaced twice and the power supply replaced. all 4 services have been manufacturing issues, not something she has broken. ouch.

    given that she spent only a small fraction of the total cost on that extended warranty plan (something like $50 out of the $1000+ for the laptop), and how many service calls it has needed, she has more than made her money back by purchasing the warranty.

    so, while i can’t give any hard economic figures here, let me try to show factors i think about if i determine if the warranty is worth it or not:

    1) is the price of the warranty a small % of the total purchase price?
    2) is the total price of the item comparatively large to my earnings potential during the life of the item?
    3) is the item too complex or specialized that self-repair is unlikely? (repairing a cheap stool is easier than an iPod)
    4) what is the opportunity cost of purchasing the warranty v/s the possibility of lost time/effort/knowledge if the item dies?

    basically, these are all calculations that come down to a single question: am i willing to undertake the risk of the component dying prematurely upon myself or do i want someone else to assume that risk for me? the numbered questions are just guides for me to determine the answer to this ultimate question.

    question 1 is really asking about how the purchaser perceives the cost of the initial purchase. if the extended warranty makes the purchase of the combined item more than the purchaser is willing to pay, then the warranty will not be selected and the person will just take the item.

    question 2 is more about replacement. if the item is inexpensive relative to my time-adjusted income, then a warranty is not useful as i could purchase a new item instead.

    question 3 determines if the warranty itself is a desired thing for the individual buyer. if i am a computer geek, and build all my own PCs, then a warranty probably isn’t worth it to me (at least not for most components) as it is easy for me to interchange them.

    question 4 is probably the most complex because it really depends upon not only the user but the item. if Dubner’s hard drive had totally died and was unrecoverable, then warranty or not, he lost. if it was recoverable, and he didn’t have the skills to do it himself, then the warranty is a savior. if Dubner kept nothing on his laptop of use (or always had backups), then a hard drive crash is only an annoyance, thus the opportunity cost would only be in the time spent without it, thus the warranty probably isn’t worth it.

    obviously i’ve put way too much thought into this over the 4 years i helped implement that system. anything you guys see that i missed? (i actually edited this down, too!)

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  5. egretman says:

    Dubner, I thought YOU were the Bzzagent.

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  6. egretman says:

    Dubner, I thought YOU were the Bzzagent.

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  7. prosa says:

    Why is the co-author of Freakonomics buying overpriced insurance/ warranty for a computer?!

    A more intriguing question: why is the co-author of a smash best selling book still using a 3-year-old computer? I’d say that it’s due to some sentimental attachment, but hardly anyone feels any emotional ties to a computer.

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  8. prosa says:

    Why is the co-author of Freakonomics buying overpriced insurance/ warranty for a computer?!

    A more intriguing question: why is the co-author of a smash best selling book still using a 3-year-old computer? I’d say that it’s due to some sentimental attachment, but hardly anyone feels any emotional ties to a computer.

    Thumb up 0 Thumb down 0