The Exchanges

Q Wow. Yeah. And so within the conditions of those factories, what is that like?

A Oh, I mean, just in terms of them not being great jobs? Yeah, I mean, a former senior vice president of Apple told me that he would never be able to do the job of a normal laborer in a Chinese factory. Um, yeah, Foxone's not a great place to work. Um, let's see, uh, you're not allowed to speak, you're not allowed to smile, you often have nine to 11 seconds to perform your task, and it's just grueling work with a couple of 15 minute breaks for 12 hours a day, often six days a week. Um, I do push back against the idea that this is slavery, however. Um, you know, iSlavery became something that, that, that became a term of art, um, after, um, when there were a number of, um, suicides at Foxconn. Um, and the company's response to this was awful. I don't know if you know, they, they, they built, like, nets around the factories, and basically asked, this is Foxconn, not Apple, asked workers to sign pledges that they wouldn't commit suicide. Um, I mean, conditions have to be pretty dire, and your response has to be pretty Um, awful for, for, for that to be the actual policy for a company with literally at the more than one million workers at the time. Um, but you have to remember that the people working in those jobs are coming from the rural hinterlands where if they don't take those jobs, they're working 14 hours a day rather than 12 under the hot sun toiling in the fields. So you ca…

AI assessment note: “you're not allowed to speak, you're not allowed to smile, you often have nine to 11 seconds”

Q Are you worried about their copying strategy? Do you think that even matters anymore? Are we just two separate entities?

A I absolutely worry about it. I mean, part of the narrative is that Apple didn't worry about it. I think they had a certain hubris that they could always stay one step ahead. And they absolutely could in the early years of the iPhone when Johnny Ive really was changing the design and improving it. But at a certain stage, you got yourself a six inch glowing rectangle with an infinity pool like design. I mean, there's no sort of step beyond that that Apple has to introduce. And so to some extent, it's just easier for the Chinese companies to catch up. Um, But, you know, one argument I make is that we often think of Apple killing Nokia, that Nokia couldn't keep up with the touch screen and software features and such. And I say that, like, just look at the numbers. Apple's not big enough to have killed Nokia. Market share wise, the iPhone has never been more than 20% of the global market. So who has more than 20% that can actually take on Nokia? It's the Chinese competitors. They have 55% market share, right? So you couple that with Apple, couple that with Samsung, you basically get to a hundred. So it's those companies that are able to kill off Nokia. And how did they kill off Nokia? Well, Apple trained all of their suppliers, and then the suppliers in turn supplied Huawei, Xiaomi, Oppo, Vivo. So that's why Nokia couldn't keep up. It's that China had this amazing ecosystem built fo…

AI assessment note: “I absolutely worry about it. I mean, part of the narrative is that Apple didn't”

Q Because we've built up so much tension with China over the years, what would you do if you were CEO of Apple right now? What would you do if you were Tim Cook?

A My, so, my, uh, subtitle is that Apple's captured, right? So I don't think they have any great moves. To sort of steal a line from Henry Kissinger, um, we play chess in the West, which means that when we have war, when Trump goes after Huawei, it's sort of like a go after the king mentality, and you want to, like, knock that piece over and, like, be done with it. Like, one decisive move. The Chinese don't play chess. The Chinese play Go. And if you're familiar with Go, and there's a great documentary called Alpha Go about computers playing this game from 2016 that I highly recommend to anyone listening. Um, in Go, you encircle your enemy, and there is no decisive move. It gets to the point where, um, the, the opponent actually just has to give up and realize that they don't have a strategy. That's where I think Apple is right now. I don't think they can move to India. They certainly can't move to the US. Their production plants are basically encircled by Chinese competitors that they themselves created, and they're in a position where they can't make any good moves. I don't know what I would do if I was Tim Cook.

AI assessment note: “they're in a position where they can't make any good moves.”

Q As we wrap up, I have one question I, I really want to ask you. Um, so this is a Kalshi market. What kind of device do you think that Johnny Ive and OpenAI will create?

A Yeah, no, it's a great question. Um, so let me first just say something, um, nice before I, I maybe go the other way, which is just that Sam Altman in terms of his products over the last three, four years have blown my mind and probably blown your mind and everyone's mind. So I wouldn't bet against that guy. And Johnny Ive designs like every product that's on my desk on a daily basis, and the computer that you're, you're having right there. So the combination of those two really brings back the vibe of like a Steve Jobs, Johnny Ive type thing, 25 years ago. So I wouldn't want to bet against them, and I'm looking forward to them coming up with something that I cannot imagine as a journalist rather than a technologist with those sort of pedigrees. On the other hand, um, The best chips in the world, year in, year out, are in the iPhone, right? To someone that doesn't know anything about chips, they must think that they're probably in a fighter jet or something like that. But, you know, TSMC is the most sophisticated, um, fabricator of chips in the world. Apple is their largest client, and the most cutting edge chips every year are in their latest iPhone. So what can Johnny Ive and Sam Altman do that would live and exist in a hardware product that wouldn't actually perform better on the latest iPhone? I don't know the answer to that question. So people have talked about it being a …

AI assessment note: “It's not going to have a screen. It's some sort of hardware thing”

Q In terms of what that has resulted in, uh, and kind of an effect of the severely intense manufacturing capabilities of China, there was another stat I pulled that there are over three hundred and fifty million floating workers around China. So could you explain what that means and what a floating worker is and like the, the real depth of their capabilities?

A So The capability question, let me come back to that because I would sort of push back on it or try to elaborate a little bit. Um, well actually, maybe I'll address that quickly. Um, The really what the novel sort of narrative take of the book is, and I really didn't know this until I sort of published an article that became the kernel of the basis of the book pitch, is that what attracted Apple to move to China in the 2000 was not tech competence. Um, it was just abundant labor, the cost of that labor and an industrial policy that was very welcoming to foreign direct investment. And so they would build factories very quickly, but it wasn't like they knew what to do. Nobody could respond to Apple's demands, even in the more sophisticated countries at the time, like Japan and Taiwan. But China certainly couldn't. And so Apple's solution wasn't like, well, we'll just wait for them to get better. It was, why don't we send plane loads of engineers to dozens, and then today hundreds of factories across the country to train all these people to get to our level. And so they will sleep on the factory floor. In fact, someone with Apple experience at Reindustrialize talked about sleeping on the factory floor yesterday. Um, for the building of the Apple Watch in 2015. So this is how they got the Chinese up to the level of, of competence that they needed. So to some extent, you can think o…

AI assessment note: “The capability question, let me come back to that because I would sort of push back”

Q you. You wrote Apple in China. So, you know, firsthand the magnitude of scale of what real manufacturing could look like if taken completely seriously. I think to start, I want to put it all in perspective. One of the glaring stats that I got from your book and some of the research around it was How much Apple has invested in China? Could you put some dollars behind that?

A Um, yeah, I, it's hard for me to do it without giving a bit of narrative, so, so stop me if I'm giving too much of a, uh, you know, whole story here, but basically what happens is that when Xi Jinping comes into office in 2013, Apple is by far the biggest, like, retail company operating in China, and more importantly, it's the biggest operator, it's the biggest production giant, so it's sort of cracked the market in two different, um, cases, but Xi Jinping and the hardliners in Beijing sort of don't understand Uh, what they're contributing to the country, and they're basically, like, threatening to blacklist Apple. Um, and so Apple begins this, like, Apple sort of has a wake-up where they realize that we don't understand China, we don't understand the politics, we don't understand the culture, and so they send over or hire, um, like, China experts and people that know China for the first time ever. So at that point, they'd been in China for two decades, but they'd just been flying in and out of the country, having these engineers fly into factories, sort of teach engineering one-on-one, build up all these products. Um, and really train, train, train, um, audit, supervise, put in the machinery, and we're spending billions of dollars on this sort of stuff, but no one in Beijing really knew that because Apple's a secretive company, and so when the hardliners come in and begin sort…

AI assessment note: “it's hard for me to do it without giving a bit of narrative”