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> Modern forms of capital, such as software, depreciate faster in value than equipment did in the past: a giant metal press might have a working life of decades

• mikeash 12y ago
  I think it's tremendous confusion on their part about what "obsolete" means. If people upgrade software every few years it's because the new software is much better (or at the very least perceived as such). Even most consumer software keeps on working almost forever (although this is starting to change now that so many things depend on external services). Imagine if the giant metal press had a new version come out a few years later than was twice as efficient. You could keep operating the old one as long as you wanted, but paying for a new one would be well worth it. The old one is "obsolete." But the value of the old one, in terms of what it does for your business, is unchanged! If you wanted to sell it, the price on the secondary market will take a big hit, but that's less important. Rather than demonstrating that return from capital is declining, the rapid obsolescence of software demonstrates that return from capital is increasing! If businesses were buying new giant metal presses every few years even though the old ones worked fine, would you say "oh, the return must be decreasing," or would you say, "wow, those new presses must be a huge improvement to be worth such a quick turnaround"?