I just came across a fascinating video https://www.youtube.com/watch?v=7h4tepFbMso&t=78s which makes a coherent case - I don't feel I can pass a final verdict on whether he's right or wrong, but a coherent case - that the Mac was a mistake, that equal or better results could have been obtained by incremental development of the Apple II line without sacrificing backward compatibility. In support of this, he presents evidence that the Apple II GS at $1500 with color monitor, was a better machine than the Mac Plus at $2600. I'm not convinced by his claim that the 65816 had the potential to match the performance of the 68000, but the rest looks pretty solid.

What I'm wondering is, given that the Apple II GS by and large had better hardware, how did it cost less?

One obvious possibility is that the Mac did not actually cost any more to manufacture, but was sold at a higher price for higher profit margin. That seems a bit of a stretch. Granted Apple was reputed to have the highest profit margins in the industry, but the estimates I've seen for their profit margins as a ratio between retail price and manufacturing cost have been along the lines of 3x, maybe 4x; for reference, Commodore typically had 3x, which seems to have been quite normal. The Mac Plus, by that explanation, would have had to go far beyond that. And if they were going to bump the price of any machine to extract profit, why wouldn't they do that with the old cash cow instead of the new machine they wanted everyone to buy because it was hoped to be the future standard?

The ideal would be a table of cost estimates like https://en.wikipedia.org/wiki/Commodore_64#Manufacturing_cost for the two machines, but I haven't been able to find such. The closest I've found so far is https://web.stanford.edu/dept/SUL/sites/mac/primary/docs/bom/cost.html which is Apple's own estimates for the Mac, years before the fact (and seems to have been an underestimate by a considerable factor; why the underestimate, I don't know).

Are any cost data or credible estimates for these two machines, either absolute or relative, available?

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    I think the theory presented in the video is fatally flawed. It was the marketplace that chose the Mac over the IIgs, not Apple. And, regardless of margins, the view from Apple's boardroom would surely focus on the top-line revenue growth of each platform, which is driven by customers not marketing. – Brian H Nov 24 '17 at 17:22
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    So the original Macintosh came out in January 1984. It wasn't until September 1988 that a fully 16-bit OS was available for the IIGS, which gave the Macintosh almost a 5 year head start in the business world. The video seems to imply that the IIGS's OS was as capable as the original Mac's, but it wasn't. – traal Nov 25 '17 at 3:18
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    The video claims the IIgs was "deliberately slowed down to not compete with the Mac" - It maybe was deliberately slowed down, yes, but the reason very probably was a different one: To retain compatibility with legacy Apple IIs – tofro Nov 25 '17 at 17:24
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    @tofro: No, the IIgs had a fast and and a slow mode, the slow mode kept the same speed as original apple2, whereas the fast mode was well below the maximum frequency that could reach the 65816. – TEMLIB Nov 25 '17 at 21:03
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    @rakslice 'given that the Apple II GS by and large had better hardware, how did it cost less?' – rwallace Apr 22 at 9:22
up vote 10 down vote accepted

The Macintosh sold for more because — as the shiny new thing — it could be sold for more. It was marketed as an aspirational product, not sold as a reasonable markup on an engineering BOM.

The IIgs was about as far as you could go while keeping compatibility with the II range, and served as a useful cash cow funding Apple's Macintosh division for several years through educational sales of the IIgs. The IIgs architecture, though featuring a 16-bit processor and advanced support chips, still favoured development of small applications written in assembly language. The Mac's 68000 allowed complex programs to be written in higher-level compiled languages, even if the original Mac was shipped with an unusably small amount of memory.

The 6502 original Macintosh BOM that you linked to was from Jef Raskin. Raskin saw the Macintosh as an information appliance, and went on to develop the brilliant yet spectacularly unsuccessful Swyftware and Canon CAT devices. Raskin's device was based on utility, for which the public will only pay a reasonable amount. The Macintosh was built on image, and was perhaps the first computer marketed on image rather than spec.

So technically, yes, the Mac was a mistake. There are lots of alternative timelines where the IIgs was the success and the Mac withered. But that's not what happened in reality.

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    Agree. The Mac was seen as "the future", while the IIgs appeared as the last gasp of a declining technology. People were willing to invest in the future rather than into the past. And once people are willing to spend, you'd be an idiot not taking their cash. – tofro Nov 25 '17 at 20:10
  • The IIgs leaned heavily on its compatibility with existing Apple II software and was heavily targeted at schools. Once the Mac II came out in 87 the Mac had a clear business machine that could do things the IIgs could not. I'm saving this as the owner of a IIc and IIgs who switched to the Mac in 91. – Michael Shopsin Feb 23 at 15:54
  • @tofro: The Motorola 68000 was the second-lowest processor in what was expected to be a series of increasingly-powerful microprocessors. By contrast, the 65816 was the end of a line of processors that really had nowhere further to go. – supercat Apr 23 at 20:03

Why would one system be priced less than another system despite having better hardware? Due to the absence of a reason why not, basically.

It's possible that a company prices systems in line with the cost or capability of the hardware, as other companies will be able to deliver similar capabilities with similar hardware at corresponding price points based on the cost of the hardware, but this is only one possibility.

Bad pricing decisions are penalized only in a roundabout way -- if they go on for long enough maybe the company will underperform and the decision makers will lose their jobs, and someone else will get a turn to make the decision; repeat until a good decision maker is found, if the company is still in business.

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    It's debatable whether the IIGS had better hardware than the Mac Plus, but I don't want to dwell on that because I don't think it was the focus of the question – rakslice Apr 22 at 23:00

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