Apple and Microsoft have solved a puzzle that has confounded economists for years: how to raise prices while claiming they have no money. The answer, it turns out, is to simply raise prices.
Apple’s leadership recently expressed shock—genuine, almost betrayed shock—that component costs have risen faster than they have ever seen. This discovery was so distressing that the company immediately raised prices by nearly 20 percent on several product lines. The logic is airtight: when your suppliers charge more, you charge your customers more. When your customers complain, you charge them even more for the privilege of complaining.
Microsoft followed suit with Xbox, raising console prices in a move that suggests the company has also been blindsided by this mysterious phenomenon called “costs existing.” Both firms framed these increases as reluctant necessities, as though they were being dragged kicking and screaming to the register.
What neither company mentioned is that “component price increases” and “we have decided to increase our profit margins” are not the same sentence, though they read identically to shareholders. The gap between what components actually cost and what companies charge consumers has historically been where the magic happens—where “we are struggling” transforms into “we are thriving.”
The real innovation here is not in the products themselves. It is in the discovery that you can tell people you are suffering while simultaneously charging them more for relief from that suffering. It is the business equivalent of asking someone to pay extra for the privilege of listening to your problems. And somehow, it works.