Speaker 1: Also media coming up, Will Steve Burke of gamers Nexus
Speaker 1: be able to help d zitron understand tariffs? Should we
Speaker 1: treat Sam Altman's new startup like a venereal disease?
Speaker 2: And who is the mysterious.
Speaker 1: Identical man living in Kevin Russ's mirror? All this and
Speaker 1: more on this week's Better Offline.
Speaker 3: Good grief.
Speaker 4: That's right, you're listening to Better Offline. I'm your host
Speaker 4: ed Zititron. As a reminder, you're now able to buy
Speaker 4: Better Offline merch. Check the episode notes for a link.
Speaker 4: Of course, More importantly, today, I'm joined by Steve Burke,
Speaker 4: the host of the incredible Game is Next as someone
Speaker 4: I wanted them the shows since I started at Steve
Speaker 4: recently put a three hour long video called the Death
Speaker 4: of Affordable Computing, and it's the single best way of
Speaker 4: seeing anybody explain the current tariff situation. Steve, thank you
Speaker 4: for joining me.
Speaker 2: Oh thanks for having me.
Speaker 5: Yeah, I'm excited to talk more about it.
Speaker 4: So, is there any way you can break down in
Speaker 4: simple language how these tariffs actually work?
Speaker 5: I mean, effectively the tariffs are they're effectively attacks. Right,
Speaker 5: let's pay it on imports? So the goods come in
Speaker 5: from any other country that's potentially tariff and the company
Speaker 5: bringing those goods in has to pay some amount in
Speaker 5: order to complete bringing them in, and so that then
Speaker 5: gets passed on to somebody. Maybe they absorb some of
Speaker 5: the costs, maybe they increase the price of the product.
Speaker 5: But tariffs in general, of course not a new concept,
Speaker 5: and it's just this particular round of them has effected
Speaker 5: the computer hardware industry in a larger way.
Speaker 4: So they're paid by the people receiving the goods. So
Speaker 4: the computer so like height or CyberPower, whomever receiving a case,
Speaker 4: for example, would pay the tariff before they even shifted
Speaker 4: to someone.
Speaker 2: Correct.
Speaker 5: Yeah, I mean it's the same all the way down
Speaker 5: to the smallest companies. We spoke to Lewis Rossman as
Speaker 5: part of that piece. He's known best for probably right
Speaker 5: to Repair, and he's a good example where as a
Speaker 5: small repair shop in Austin, Texas. He's got maybe six
Speaker 5: or so employees. He personally doesn't, as he said in
Speaker 5: the video, bring them the goods, but he buys them
Speaker 5: from someone who does. So you know, then that person
Speaker 5: would be the one importing them in paying the tariff.
Speaker 4: So what made you want to make this video because
Speaker 4: you've done a good amount of PC industry stuff, but
Speaker 4: tarift feels like a jump from you. Not an allogical
Speaker 4: one though.
Speaker 2: Yeah, tariffs.
Speaker 5: It's a big topic and it was very challenging to
Speaker 5: try and approach because for us, the number one reason
Speaker 5: to get into it was just we're starting to see
Speaker 5: the impact on computer hardware and a lot of companies
Speaker 5: had things to say about it, so that was the
Speaker 5: obvious reason to maybe look into it. The hesitations from
Speaker 5: us initially were this is a topic that it's very
Speaker 5: difficult to completely isolate from politics, which we try to
Speaker 5: stay away from. But it's also important and it does
Speaker 5: affect what we talk about every day, which is value
Speaker 5: and pricing. But the other challenge is that this is
Speaker 5: not something where I can claim to be an expert,
Speaker 5: like global trade. You might imagine, Yeah.
Speaker 2: Yeah, it's a very large topic.
Speaker 5: But that made it interesting to us because it was
Speaker 5: one of those like, okay, so we're closer to where
Speaker 5: you might expect most viewers to be in terms of knowledge,
Speaker 5: where you're just getting the information daily, with the one
Speaker 5: exception that we might have better access to companies that
Speaker 5: do have a lot of experience with this stuff, and
Speaker 5: maybe no one person can break down global trade for us,
Speaker 5: and we've all seen economists on TV and whatever. But
Speaker 5: what we could get is people talking about just how
Speaker 5: does it affect them and their company and then hopefully
Speaker 5: with that put together a fuller picture that's a little
Speaker 5: more maybe like a pragmatic approach to it. So that
Speaker 5: was a yeah, that was the way to break it
Speaker 5: down for us.
Speaker 4: So for the listeners who haven't watched the video, and
Speaker 4: I say, this is someone who can barely make it
Speaker 4: through a half an hour video, watch the whole bloody thing.
Speaker 4: How what are the current effects? What are the things
Speaker 4: happening today? To say, PC manufacturers that people might not
Speaker 4: know about.
Speaker 5: It's interesting, so might not know about makes that interesting.
Speaker 5: The ones that people do know about. I'll keep brief here,
Speaker 5: but just days ago Microsoft moved to increase pricing of
Speaker 5: its xboxes. Logitech has increased prices of its peripheral components
Speaker 5: keyboards and mice and so forth. And this is something
Speaker 5: we're going to see a course here.
Speaker 2: I was just speaking to them.
Speaker 5: They're about to increase the price of some of their
Speaker 5: computer cases that we're in the process of reviewing, and
Speaker 5: that's kind of the obvious one of that's the one
Speaker 5: people expect. There's also and having listened to some of
Speaker 5: your previous episodes, I think this might be a topic
Speaker 5: you'd want to get into. But there's also some room
Speaker 5: for greed, corporate greed where this is a great cover
Speaker 5: story for them to change some prices. But then as
Speaker 5: far as answer the question like what effects might people
Speaker 5: not know about, I think there's there's some really interesting
Speaker 5: ones sort of downchain in the in the supply chain,
Speaker 5: where things like logistics and freight and shipping companies are
Speaker 5: starting to have to deal with potentially reduced hours. And
Speaker 5: so you think about the supply chain, like to get
Speaker 5: a product from a country to another country, you know,
Speaker 5: just to make it in say China, a motherboard might
Speaker 5: require something like one hundred factories futality, all of them
Speaker 5: meaning including yeah, including the metals factories. And so you've
Speaker 5: got all those impacts, and then you have the freight
Speaker 5: and the couriers, the port, the dock workers, the couriers
Speaker 5: on the other side, the warehouse workers. Right, it's just
Speaker 5: a huge chain, and it's really it can't be elastic.
Speaker 2: It's got to be pretty rigid.
Speaker 5: One of the interesting ones we're seeing though, is some
Speaker 5: of the factories from some of the companies I was
Speaker 5: just speaking with, are beginning to adjust their terms. So
Speaker 5: factories will allow terms of payment to be potentially partially
Speaker 5: upfront and partially on completion of order. Some of them
Speaker 5: are starting to adjust to frontload more of the upfront
Speaker 5: cost or all of it. And that's because they have
Speaker 5: kind of gotten scared of potential order abandonment. When companies
Speaker 5: can't afford the tariff, they abandon the container and stiff
Speaker 5: the factory. Yeah, and so that'll have this unseen impact later.
Speaker 5: It's going to affect the cost of money. Companies have
Speaker 5: to borrow money a lot of times to bring this
Speaker 5: stuff in. They have to pay more upfront.
Speaker 4: Oh, so I hope be borrowing more money upfront because otherwise,
Speaker 4: exactly the way, they won't be able to afford the
Speaker 4: orders that are now more expensive on the front end.
Speaker 5: Yeah, and then they pay interest for a longer period
Speaker 5: of time that gets factored in. So it's just really
Speaker 5: like the more you talk to people, the more there's
Speaker 5: all these hidden consequences that pop up. And the one
Speaker 5: thing everyone kind of drove home was. It's not to
Speaker 5: them the tariffs themselves that are necessarily the problem. It's
Speaker 5: sort of the way they were being rolled out where
Speaker 5: it was at least for a couple of weeks. They're
Speaker 5: nearly daily changes and unpredictable.
Speaker 4: I did like during the video watching as you went
Speaker 4: from from person to person saying, Okay, right now, this
Speaker 4: tariff is this By the end of this conversation, it
Speaker 4: may not be. Yeah, insane way to run global trade.
Speaker 4: You had a few examples as well where it kind
Speaker 4: of looked like certain things would just doubling cost for
Speaker 4: the company, that they would just be paying effectively nearly double,
Speaker 4: or like if it's one hundred and twenty bucks to
Speaker 4: buy something, they're paying one hundred bucks on top. How
Speaker 4: is any of this sustainable?
Speaker 5: I think, I mean, yeah, for the computer industry, I'm
Speaker 5: not sure that it is sustainable. There's already there's already
Speaker 5: been price creep that is not anything to do with tariffs.
Speaker 2: It's just over the last several years.
Speaker 5: The companies, Yeah, I mean, they've they have big markets
Speaker 5: to sell into, and so if you're a small time
Speaker 5: consumer or gammer, you use Adobe Premiere with the Kuduk
Speaker 5: GPU you're just not at the top of the priorities,
Speaker 5: and the only way to get closer to the top
Speaker 5: is to pay a whole hell of a lot more
Speaker 5: for the components. So like there's already been price creep.
Speaker 4: Well, when you say pay a lot more for the components,
Speaker 4: who's paying more there?
Speaker 2: It's it's the consumer.
Speaker 4: I mean, yeah, so it's really the high end stuff
Speaker 4: is the best you have. Why do you have to
Speaker 4: buy the more expensive stuff? Is it just that it
Speaker 4: will be the cheap ones are having to use lower
Speaker 4: quality components or is it something else?
Speaker 5: Well, it's it's interesting because it's almost like this question,
Speaker 5: I think, is it the real answer is that cheap
Speaker 5: stuff doesn't exist anymore? Huh, Like the cheap products are gone,
Speaker 5: and this is pre tariffs. This is like it's only
Speaker 5: getting worse. But you look at GPUs, Nvidia, with its dominance,
Speaker 5: has has managed to slowly shift the low end into
Speaker 5: the mid range in terms of pricing, and the mid
Speaker 5: range into the high end in terms of pricing, but
Speaker 5: not in terms of necessarily performance scaling. And so you're
Speaker 5: already paying disproportionately more for what you're getting versus several
Speaker 5: years ago. And this is beyond inflation. This is beyond tariffs.
Speaker 5: You stack something massive tariffs on top of it, and
Speaker 5: people who are already kind of struggling to justify a
Speaker 5: purchase of an expensive GPU. I was looking at RTX
Speaker 5: fifty nineties, which are supposed to be about a two
Speaker 5: thousand dollars video card, about a week or two ago.
Speaker 5: I haven't checked today, but and the cards were typically
Speaker 5: in the twenty nine hundred to three hundred three thousand dollars.
Speaker 6: Rane of Jesus.
Speaker 5: Yeah, that includes on shelves at microcenters, and and some
Speaker 5: of that's going to be a tariff impact, and some
Speaker 5: of it is just kind of price creep.
Speaker 4: It does kind of feel like, well, to the title
Speaker 4: of the to the title of the video, it's like
Speaker 4: the end of affordable computing has already kind of happened,
Speaker 4: because it doesn't seem and for our less technical listeners,
Speaker 4: when we say fifty seventy fifty eight fifty night, you're
Speaker 4: referring to in videographics cards on the consumer side, so
Speaker 4: the things you put a computer so you can see
Speaker 4: what's on your monotone also play games. Stephen, sure you
Speaker 4: love that technical explanation.
Speaker 2: Yeah, it's great, but.
Speaker 4: It's I nearly said three DFX there for a second,
Speaker 4: aging myself, but it feels like those lower end ones
Speaker 4: aren't even anywhere near as good as you did a
Speaker 4: video on this as well, that the fifty seventy, fifty eighty,
Speaker 4: the lower end or mid range ones just on nowhere
Speaker 4: near as good as mid range and lower end used
Speaker 4: to be.
Speaker 5: Yeah, it's the I think the most understandable version of
Speaker 5: this in terms of when we were trying to figure
Speaker 5: out how do we communicate what's happening to people was
Speaker 5: we came to the word shrinkflation, which people are familiar with,
Speaker 5: except instead of a bag of chips, where you get.
Speaker 4: Well, maybe you should explain what it means?
Speaker 5: Just sure, yeah, yeah, So the concept being that, and
Speaker 5: again to breakface this, you know we're experts on hardware,
Speaker 5: not economy, but like this, this is that it all
Speaker 5: kind of bleeds together in a way we get familiar
Speaker 5: with it. But trinkflation being the concept of you go
Speaker 5: to a store to buy your bag of chips or
Speaker 5: your bundle of toilet paper or whatever, and you get
Speaker 5: fewer items for minimally the same cost as it used
Speaker 5: to be, right, So it sort of disguises the change
Speaker 5: in value, the cost per unit or whatever that you're getting.
Speaker 5: Then you apply this to electronics, and the version of
Speaker 5: it is you buy the video card or the CPU,
Speaker 5: and maybe you have fewer lower performance relatively speaking, than
Speaker 5: you would have had in previous generations, while still spending
Speaker 5: at least the same but likely more. And one of
Speaker 5: the things that you know, this kind of deviates from
Speaker 5: the tariff's discussion. But one of the things I'm concerned
Speaker 5: about is as cost for consumer electronics goes up, especially
Speaker 5: things like computers, and especially as caused by things like
Speaker 5: the current tariffs, there's an opening for companies like on
Speaker 5: Video to push for more of a lack of ownership model.
Speaker 5: So like they have services where you can play games
Speaker 5: over the internet streaming kind of like Netflix, that's right, Yeah,
Speaker 5: And this creates a great opening for these companies to
Speaker 5: step in and say, we're so sorry, you can't afford
Speaker 5: our cheapest model five hundred and fifty dollars video card
Speaker 5: to play games or to render videos, you know, or
Speaker 5: do three D modeling. But good news, we have something
Speaker 5: for you, and it's fifty dollars a month and you
Speaker 5: can use it for you know, this many hours and
Speaker 5: in between, maybe we'll do ads, or maybe we turn
Speaker 5: on and off the different services you have access to.
Speaker 5: And so that's one of my concerns is it's it's
Speaker 5: another step in furthering that you own nothingness of the
Speaker 5: current consumer economy.
Speaker 4: Yeah, it kind of feels as well. And you hint
Speaker 4: it hinted at it earlier as well, where it's like
Speaker 4: these companies are Microsoft's raising the price of the Xbox,
Speaker 4: I don't imagine that's coming down. I don't get this.
Speaker 4: I don't get the sense that Microsoft is going to say,
Speaker 4: don't worry everyone that everyone on Wall Street, by the way,
Speaker 4: they the markets love it when we charge less, so
Speaker 4: we're going to bring this down as an ethical company.
Speaker 4: It just feels like a that there are the immediate
Speaker 4: near term effects where its prices are going to increase,
Speaker 4: but just no one is going to like, no one's
Speaker 4: going to bring these prices back down at the end
Speaker 4: of the tariffs. No one really understands what's going on,
Speaker 4: so they it almost feels like they'll be able to
Speaker 4: kind of push it under the rug and obfuscate what
Speaker 4: they've actually done as well.
Speaker 5: Yeah, I think there's there's a couple of things going
Speaker 5: on where there's.
Speaker 2: It's interesting.
Speaker 5: Normally we as in GN we're in a very cynical
Speaker 5: mindset for a lot of our coverage, and that's just
Speaker 5: the nature of it. It's not necessarily adversarial, but it's untrusting,
Speaker 5: i would say, of what companies are saying. And so
Speaker 5: part of that in this situation is Okay, there are
Speaker 5: avenues here for companies to get the price increases they've wanted,
Speaker 5: but they've needed an opportunity to do it. But at
Speaker 5: the same time, unlike most the other stories we cover,
Speaker 5: this one is so wide reaching an industry impacting with
Speaker 5: the sort of sporadic nature of the tariff's application and
Speaker 5: also the high percentage of them that there are real
Speaker 5: consequences and it is hurting companies. So you've got this
Speaker 5: mix right where it's like, we can't be too cynical
Speaker 5: this time because there are real world impacts, like with height,
Speaker 5: where they were just going to lose money for computer
Speaker 5: cases that they sell if they continued to sell them
Speaker 5: into the US market.
Speaker 2: So they've abandoned it.
Speaker 5: They decided we don't need to sell the US, We'll
Speaker 5: send them somewhere else, which.
Speaker 4: Is crazy that's a large part of their business.
Speaker 2: Yeah, it was.
Speaker 5: I want to say the number the product director Rob
Speaker 5: Tyler shared during the interview, I think he said sixty
Speaker 5: five percent revenue was from the US.
Speaker 2: Yeah.
Speaker 5: But at the same time, you know, so that's a
Speaker 5: real That's where it's it's not helpful to be cynical
Speaker 5: because this is a real impact to this company. We've
Speaker 5: seen their numbers. But then on the flip side of that,
Speaker 5: back to the cynesism, you look at a company like
Speaker 5: Microsoft where they've increased not only the cost of their
Speaker 5: physical hardware, which is impacted by tariffs because it's a
Speaker 5: lot of it does come from China, but also they've
Speaker 5: increased the price of their digital downloads like video games,
Speaker 5: where they're saying they're going to start moving towards an
Speaker 5: eighty dollars per game model from typically sixty and digital
Speaker 5: video game downloads are not currently as far as I
Speaker 5: understand it, are not tariffed.
Speaker 4: No, in fact, but that's the whole point of digital downloads.
Speaker 4: That why they hate dollars. You're saving money selling this, right.
Speaker 5: And I think what's happening here is they have one
Speaker 5: real reason to increase the price, which is their cost
Speaker 5: has gone up on the hardware, and that is giving
Speaker 5: them sort of cover fire to also increase the price
Speaker 5: of things that haven't gone up. Maybe you could make
Speaker 5: an argument for inflation affecting development costs or something like this,
Speaker 5: but packaging it all together and doing it at the
Speaker 5: same time.
Speaker 2: I think it's also it sort of exhausts the.
Speaker 5: Consumer's attention where it eases the acceptance of this higher price,
Speaker 5: because at some point you get hit with this news
Speaker 5: so frequently, like I just I don't care anymore.
Speaker 2: I get it.
Speaker 5: It's all expensive, and you lose the capacity to be
Speaker 5: mad at a specific company.
Speaker 4: It's just I truly, I'm learning about this in real time.
Speaker 4: So Microsoft is raising the price of first party games
Speaker 4: to seventy nine to ninety nine. That's completely insane. And
Speaker 4: I think that there is a delineation of cynicism here
Speaker 4: where you can be cynical about a company. But all
Speaker 4: of the companies you talked to in this video were
Speaker 4: very much I mean, you had competitors hanging out with
Speaker 4: each other to tell you stuff. It feels like there
Speaker 4: is a marked difference between a company saying yeah, we
Speaker 4: are Every two minutes a wheel spins and we pay
Speaker 4: more on staff and having a real reason to do that,
Speaker 4: and a company just saying, yeah, games are eighty bucks. Now,
Speaker 4: I don't know what to tell your mate.
Speaker 2: Yeah.
Speaker 5: I think the companies we spoke to and they range,
Speaker 5: like I said, from someone with six employees who's a
Speaker 5: sort of true small business owner like that you think
Speaker 5: of an American small business owner, and that's exactly the
Speaker 5: representation you think of all the way up to multi
Speaker 5: billion dollar publicly traded course hair Components, which makes memory, keyboards, computers.
Speaker 5: They even have some assembly in the US, and all
Speaker 5: of them feel the impact in comparable ways, but where
Speaker 5: they differ is their ability to cope with it. And
Speaker 5: so I think it's these smaller companies that are going
Speaker 5: to get hit particularly hard. And as actually came up
Speaker 5: a couple times in the interviews as well. One of
Speaker 5: them that we didn't we didn't include was a comment
Speaker 5: that someone from Coursair made. I think we weren't filming yet,
Speaker 5: but we were talking about gn and my goal with
Speaker 5: this wasn't to insert ourselves into this story, so we
Speaker 5: kind of kept anything about gamers Nexus out of it.
Speaker 5: But the tariffs impact us too, and one of the
Speaker 5: comments he made. I asked him who do you think
Speaker 5: this affects the most? And he said, well, it's guys
Speaker 5: like you, right, Like, it's small businesses and medium size
Speaker 5: businesses because the big ones are large enough to have
Speaker 5: levers to.
Speaker 4: Pull, right. And I guess I'm going to ask you
Speaker 4: one of the most annoying questions that I possibly could,
Speaker 4: which is, and you do cover this in the video,
Speaker 4: why can't they just make in America? And I know
Speaker 4: that the answer is it's going to be very obvious,
Speaker 4: but still people are gonna want to hear it.
Speaker 5: Sure, Yeah, it's really It is actually a great question.
Speaker 5: It's obviously very common. It's complicated. So the easiest answer
Speaker 5: to that, I think if you try to boil it
Speaker 5: down into kind of like two components. There's cost, which
Speaker 5: are one's familiar with, and we can kind of get
Speaker 5: into that. So there's things like labor costs, real estate costs,
Speaker 5: all this, and there's maybe some greater social discussions to
Speaker 5: have there with regard to labor cost. But then there's
Speaker 5: also supply chain and so if we ignore the cost
Speaker 5: component for a moment and just assume it costs exactly
Speaker 5: the same amount of money to make it in China
Speaker 5: or Vietnam or Thailand as it does in the US,
Speaker 5: which will cost which it doesn't. It's the global manufacturing
Speaker 5: average cost in terms of wage per hour is, according
Speaker 5: to Courser's CEO and our interview, is two to four
Speaker 5: dollars per hour. Because it's obviously not even close. Yeah,
Speaker 5: and so if we just assume it's equal though for
Speaker 5: take conversation, the new challenge is in China in particular,
Speaker 5: but just that part of Asia in general, there's already
Speaker 5: a huge factory presence. They have the tooling, they have
Speaker 5: the people, they have supply chain, and so what that
Speaker 5: really means is you can go to Wachambai and Shenzhen
Speaker 5: right now and you can go talk to someone to
Speaker 5: get tell them you have this brilliant idea for a
Speaker 5: new electronic device. You can have someone designed the PCB,
Speaker 5: you can have someone print the PCB. The printing can
Speaker 5: be delivered same day for a prototype. And you can
Speaker 5: also start sourcing factories for the capacitors, the inductors, the semiconductors,
Speaker 5: the mos vats, the shell or case if there's going
Speaker 5: to be one. All of that can happen in the
Speaker 5: same spot and it can all be sourced from sort
Speaker 5: of the same, say fifty mile radius for the most part,
Speaker 5: and that doesn't exist in the US. And if you
Speaker 5: want to make a motherboard, as an example, that count
Speaker 5: in the video in the US. We didn't get too
Speaker 5: deep into it in the video, but there's probably ten
Speaker 5: to thirty major component complete component suppliers for that board.
Speaker 5: So if you want to make that motherboard in the US,
Speaker 5: which your CPU and your GPU go into, it's sort
Speaker 5: of the brain stem of the computer. You bring that
Speaker 5: over here. And what you might have first is the
Speaker 5: assembly line. It's an automated line. It's primarily done by
Speaker 5: machine these days. So you bring over the SMT line,
Speaker 5: the Service Amount Technolology line. That line has machines that,
Speaker 5: first of all, are made all over the world. Yeah,
Speaker 5: so that's already a different thing. And then those machines
Speaker 5: have reels of components like capacitors. The capacitors come from
Speaker 5: a factory in China, so you'd have to bring that
Speaker 5: factory over. That factory to make the capacitors has factories,
Speaker 5: so it uses factories for maybe ceramics or for aluminum
Speaker 5: or steel or copper whatever.
Speaker 2: They may use.
Speaker 5: Copper coil for inductors, you have someone doing the winding
Speaker 5: for the coil. For things like going power supplies and
Speaker 5: all of that is downchain factories. So this one motherboard
Speaker 5: quote unquote factory, what they're doing is effectively equivalent to
Speaker 5: someone assemblying a pre built computer and a pre built
Speaker 5: computer assembly plant in the US like Lenovo, they're doing
Speaker 5: the same thing. They're putting all the parts together, but
Speaker 5: they're buying them from elsewhere, and that's fine, that's how
Speaker 5: it works. But to just bring that over, it's not
Speaker 5: something you can flip a switch on.
Speaker 4: And it seems like a big part of it as
Speaker 4: well is that China already has this infrastructure to manufacture
Speaker 4: these things. To your point that they have someone who
Speaker 4: can do the prototype that they have someone I don't know,
Speaker 4: like I assume they were like screw factories and things
Speaker 4: that don't exist in America, or if they do, they
Speaker 4: are geographically inefficient in comparison.
Speaker 5: Yeah, I think that's a big part of it is
Speaker 5: there are factories in the US that can do various things.
Speaker 5: I mean, certainly you get down to physical hardware like screws.
Speaker 5: I'm absolutely certain there's factories that make screws in the US.
Speaker 5: There's factories that make cardboard boxes in the US, but
Speaker 5: like you said, these things are not on the same block.
Speaker 5: And while that can be reconciled, making a company eat
Speaker 5: an extra cost is basically impossible. And so if the
Speaker 5: approach is to do some form of taxes, it would
Speaker 5: have to be so extreme that there really has no
Speaker 5: other choice but to start building factories in the US.
Speaker 5: But the problem then is that this takes years. So
Speaker 5: some of them hey, M right, yeah, it just it
Speaker 5: just takes forever to start building.
Speaker 2: I mean, then if.
Speaker 5: It's also just it's an enormous amount of money, you
Speaker 5: can't just have it, you know, you need to plan
Speaker 5: for it. So so that's a big challenge.
Speaker 4: It kind of feels like that on the cynical side,
Speaker 4: I mean, it kind of feels like it is the
Speaker 4: case where it's so much of our economy is based
Speaker 4: on just cheap labor that we've outsourced, are entire manufacturing
Speaker 4: to other countries that and it all relies upon a
Speaker 4: certain kind of discount labor that just doesn't exist and
Speaker 4: probably can't exist in America.
Speaker 5: I think it not only can't exist in America, but
Speaker 5: the amount of available people is probably not high enough
Speaker 5: to create that many manufacturing jobs, especially instantaneously. One thing
Speaker 5: that's interesting, though, I don't think I've really spoken in
Speaker 5: anywhere about this side, but something that's interesting with contract manufacturing,
Speaker 5: especially in China is, at least for the factories we've
Speaker 5: toured and visited over the years, a lot of the
Speaker 5: contract factories they shut down for Chinese New Year for
Speaker 5: a while. It's it's their biggest holiday, so similar to
Speaker 5: Christmas in the US, you have several weeks off for
Speaker 5: a lot of people, and there it lasts pretty long.
Speaker 5: The one factory work with and we've toured, they shut
Speaker 5: down for nearly a month for Chinese New Year. And
Speaker 5: when I want to ask them, when it was my
Speaker 5: first time over there, you know, I asked the factory owner.
Speaker 5: It was basically, hey, no, absolutely, no disrespect, don't take
Speaker 5: this throng way. I'm just curious why such a long time,
Speaker 5: Like as an American, right, you come from work culture
Speaker 5: in terms of just you're always at work for four
Speaker 5: weeks is a big stretch of time. Doesn't that effect
Speaker 5: to your production? And he said something really interesting to
Speaker 5: me where that factor in particular, a lot of their
Speaker 5: laborers come from all over in China. China is very large,
Speaker 5: and they come from all these different provinces, and so
Speaker 5: they sort of migrate out to do the work locally
Speaker 5: at the factory, and then they might go back and
Speaker 5: maybe they're going back to work at home, or they
Speaker 5: just bring the money home and spend time with the family.
Speaker 5: And the interesting thing there is that kind of opened
Speaker 5: my eyes to how can a place like sheen Gen
Speaker 5: exist where almost everything you need to make a product
Speaker 5: is in like one city. That seems insane, right, Like
Speaker 5: the amount of people that you would need for that
Speaker 5: is crazy. And I guess that's part of it. And
Speaker 5: I don't you know, obviously don't claim to be an
Speaker 5: expert in it, but just from personal experiences talking to
Speaker 5: people and visiting these places, these are kind of the
Speaker 5: pieces that have really clicked for me to help me
Speaker 5: better understand how manufacturing works.
Speaker 4: Yeah, it's just every time I think about what these
Speaker 4: tariffs are meant to do, I feel insane because it's like, Okay,
Speaker 4: we're going to charge more for things to the people
Speaker 4: shipping them in, which will cause them to build things
Speaker 4: in America which they can't do but they should. Like
Speaker 4: that feels like most of the logic here, but we'll
Speaker 4: just factories will spread out to the ground like weeds.
Speaker 4: Like it's just bizarre.
Speaker 5: Yeah, and even the companies that do make stuff here.
Speaker 5: This is what's interesting too, is that.
Speaker 4: Yeah, because you spoke to one an actual manufacturing company
Speaker 4: in America.
Speaker 2: That's right.
Speaker 5: Yeah, So we spoke to three companies that we spoke
Speaker 5: to have sort of different levels of manufacturing here. So
Speaker 5: there's one of them. The one you're probably referring to
Speaker 5: is called Proto Case and they stamp cases, so they
Speaker 5: assemble servers and network attached storage devices and then they
Speaker 5: can stamp their own cases for those they take the medals,
Speaker 5: they put them in a big press with their own
Speaker 5: tooling and they press it and then they can kind
Speaker 5: of bend the metal into a server case. So they
Speaker 5: do some manufacturing here and they do a lot of
Speaker 5: it in Canada. The other two companies we spoke to
Speaker 5: are a different type of manufacturing where it's assembly, and
Speaker 5: actually course here to their credit has assembly as well,
Speaker 5: so I guess three and the assembly groups they so
Speaker 5: CyberPower PC makes pre built computers mostly for gaming, and
Speaker 5: they employ hundreds of people in the city of Industry
Speaker 5: California area to assemble computers. And so those people take
Speaker 5: about eight to ten components that CyberPower does not make.
Speaker 5: They buy them from other companies and they assemble them
Speaker 5: right into a computer. And it's really that straightforward. But
Speaker 5: this is effectively a factory job. It's an assembly job,
Speaker 5: and the PC that's made ultimately it's branded a CyberPower PC.
Speaker 5: But just like any PC on the market Dell HP
Speaker 5: as US, it doesn't matter. They don't make the CPU,
Speaker 5: they don't make the GPU that's probably Intel and Video AMD.
Speaker 5: They often don't make the cooler, the storage device, the memory.
Speaker 5: So all this stuff, yeah, it's got to come from
Speaker 5: other people. And for the most part, the places it
Speaker 5: ends up coming from are going to be China, Vietnam, Thailand, Singapore, Malaysia,
Speaker 5: Taiwan I don't think I named yet, and some stuff
Speaker 5: from Japan, but that's kind of the that's where the
Speaker 5: stuff comes from, and then they assemble it in the US.
Speaker 5: But those companies that assemble the computers in the US,
Speaker 5: they still get hit by tariffs because they're bringing stuff
Speaker 5: in to complete the products. But what's interesting is it's
Speaker 5: almost like the components like cps and GPS. You can
Speaker 5: think of them as raw materials where the products the
Speaker 5: computer can't exist without those raw materials, but they're not
Speaker 5: blanket exempted as raw materials.
Speaker 4: Yeah, and it feels like you can't actually exempt any
Speaker 4: particular industry because of the amountifold different parts. I think
Speaker 4: Lewis Russman made the point as well, where it's customers
Speaker 4: are going to get pissed off about the price increases,
Speaker 4: and it's kind of like, well, you're the one buying
Speaker 4: these things that will make with Chinese pots. It's not
Speaker 4: like you can avoid that, right.
Speaker 6: Yeah.
Speaker 5: No, I mean that that was an excellent point by him,
Speaker 5: where he's he's a repair shop, and as he was saying,
Speaker 5: for the device to even get to him, someone else
Speaker 5: has to exist before him, and that's going to be
Speaker 5: the customer buying from the original manufacturer. If the original
Speaker 5: manufacturer chooses to make their products let's say entirely in Detroit,
Speaker 5: and they use parts and time from Detroit, than Lewis
Speaker 5: the repair shop will probably buy replacement parts from Detroit, right,
Speaker 5: because that's that's where they come from. And so it's yeah,
Speaker 5: I think like him just as much as the assembly
Speaker 5: plants that put a product together the consumer's familiar with.
Speaker 5: They're affected by the same thing, which is there's force
Speaker 5: is so much larger than you. You can't you don't
Speaker 5: have the option to move it because it's not yours,
Speaker 5: and so what do you do?
Speaker 3: Right?
Speaker 4: Yeah, one thing as we come to the end here,
Speaker 4: one thing that did strike me is how did you
Speaker 4: get all of these competing companies to actually hang out
Speaker 4: and talk to you quite candidly at the same time.
Speaker 5: Yeah, it's I've known a lot of the people in
Speaker 5: that video.
Speaker 2: I've known for.
Speaker 5: Pretty close to some of them, like twelve to fourteen years. Fortunately,
Speaker 5: like we've run across each other at conventions a lot,
Speaker 5: and so for like the backstory, I guess Sorry Power
Speaker 5: and Irapower two competing pre built companies, and I pained
Speaker 5: to them both and I was like.
Speaker 2: Hey, it would.
Speaker 5: It would be it would really send a message if
Speaker 5: you guys agree with each other on this particular issue.
Speaker 5: I think it would help people understand that it is
Speaker 5: impacting both of you in similar ways, because these are
Speaker 5: companies that they're fighting for the same market share for
Speaker 5: the same customers, and you know, if you can get
Speaker 5: them together in a room and they were even sharing
Speaker 5: numbers with each other, how many employees they have, how
Speaker 5: many units per year they make, Like this is crazy
Speaker 5: information to share, but I think it was. It was
Speaker 5: sort of a solidarity moment where the read on the
Speaker 5: situation I had was the companies were all looking at
Speaker 5: this as this is our opportunity to try and explain
Speaker 5: why the prices are going to go up, and whether
Speaker 5: or not it's for legitimate reasons or for the more
Speaker 5: cynical reasons we've discussed to them. It was an opportunity
Speaker 5: to talk about that, and I think our timing was
Speaker 5: a big part of that, where we booked our tickets
Speaker 5: as soon as the pause went into effect on some
Speaker 5: of the international tariffs, or actually.
Speaker 2: It was just before that.
Speaker 5: It was like a day before that, so we booked
Speaker 5: the tickets a day before the pause, right around when
Speaker 5: they went into effect. We landed, and then some of
Speaker 5: these changes like pauses and exemptions and non exemptions were
Speaker 5: happening already, but because of the chaos and that four
Speaker 5: day window, I think everyone was willing to talk to
Speaker 5: us on record because nobody knew what was going on.
Speaker 4: And just to close us off, you mentioned it clost
Speaker 4: a ton of money and a ton of time, how
Speaker 4: long and how much money?
Speaker 3: Roughly?
Speaker 4: Because this was I do not watch videos at these
Speaker 4: Lanth Casey Casey friend of the show case Kagawa knows
Speaker 4: this well. But I watched the whole thing like how
Speaker 4: much like roughly, I want to make the video?
Speaker 5: You wook to make the video.
Speaker 2: So it was probably.
Speaker 5: If you count my time at zero dollars, then we
Speaker 5: should have been over ten grand in total costs. So
Speaker 5: that's travel plus editing time. There's a lot of editing
Speaker 5: time because we had over eight hours of footage and
Speaker 5: the way it kind of came together and it was
Speaker 5: interesting where you know, we got the news down the
Speaker 5: wire about the new The word the government has officially
Speaker 5: named them is reciprocal tariffs. So when those came out,
Speaker 5: that was when we started booking the flights. And like
Speaker 5: I said, it was right before the pause on some
Speaker 5: of them, and so we booked the flights with no
Speaker 5: return flight. It's a twelve hour twelve hours away till
Speaker 5: we got on that first plane. We had the first
Speaker 5: hotel booked and then vitally and I'm a camera operator,
Speaker 5: we flew out there and we played it day by
Speaker 5: day and for you know, I used the hotel I knew,
Speaker 5: so it was basically like, hey, yeah, we need to
Speaker 5: extend one more day, you know. And and then we
Speaker 5: just kept booking them based on who I could get
Speaker 5: in touch with. And I was just on the phone
Speaker 5: constantly calling every company I knew, and they're they're kind
Speaker 5: of on the you know, they're either in San Francisco
Speaker 5: or they're in LA for most of them.
Speaker 4: Steven, it's been such a pleasure having you on the show.
Speaker 4: Where can people find you?
Speaker 5: They can check out gamersaxis dot net if they want
Speaker 5: the written adaptation of videos, or the YouTube channel. Gamers
Speaker 5: and Axus is where everything goes, and.
Speaker 4: You can find me on the internet. You were listening
Speaker 4: to Better Offline. Of course, following this will be an
Speaker 4: extremely old line of the I swear all update one day.
Speaker 4: Thank you for listening, and Steven, thank you for joining us.
Speaker 6: Thank you, thank you for listening to Better Offline.
Speaker 4: The editor and composer of the Better Offline theme songs, Metosowski.
Speaker 4: You can check out more of his music and audio
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