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Speaker 1: Hello, Odd Lots listeners.

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Speaker 2: I'm Joe Wisenthal and I'm Tracy Alloway.

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Speaker 3: Tracy.

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Speaker 1: We're doing another live show and it's right here in

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Speaker 1: New York City.

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Speaker 2: Yeah, this one should be our biggest yet, and we're

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Speaker 2: going to have a bunch of Odd Lots favorites and

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Speaker 2: do something maybe a little different to some of our

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Speaker 2: previous live podcast recordings.

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Speaker 1: When the guests are revealed, the show is going to

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Speaker 1: sell out right away, so you should really just go

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Speaker 1: get your ticket right now. It's June twenty sixth. It's

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Speaker 1: at Recket, NYC, and you can find a ticket link

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Speaker 1: at Bloomberg dot com slash odd Lots or Bloomberg Events

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Speaker 1: dot com slash odd Lots Live and.

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Speaker 2: Why we hope to see you there.

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Speaker 4: Bloomberg Audio Studios, Podcasts, Radio News.

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Speaker 1: Hello and welcome to another episode of the Oudlots podcast.

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Speaker 2: I'm Joe Wisenthal and I'm Tracy Alloway.

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Speaker 1: Tracy. I'm gonna confess something I've kind of hinted it.

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Speaker 3: It's not that big of a confession, and.

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Speaker 1: I've kind of hinted it already, which is that if

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Speaker 1: Trump wants to impose a bunch of terrorists on a

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Speaker 1: bunch of cheap, random plastic goods from China.

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Speaker 3: I'm fine with that. That's cool.

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Speaker 1: Fifty one hundred percent, one hundred and forty nine percent.

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Speaker 1: I'll consume less. I'll be a little bit more of

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Speaker 1: a monk or something like that.

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Speaker 3: I'm fine with that.

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Speaker 2: Okay, But isn't the argument not necessarily the cost, although

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Speaker 2: there is a cost on individual consumers. But the argument

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Speaker 2: is why do we want to focus on shifting plastic

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Speaker 2: production and toy manufacturing to the US. That's the criticism, right, Like,

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Speaker 2: why specifically focus on cheap goods in factories?

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Speaker 3: Yeah?

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Speaker 1: No, you might be right, Like, I don't think there's

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Speaker 1: much value in safe, you know, moving a plastic stepstule

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Speaker 1: factory or a stroller factory or whatever to the US.

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Speaker 3: I don't.

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Speaker 1: I don't really see the point. I want there to

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Speaker 1: be affordable strollers obviously, just buy and large a lot

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Speaker 1: of this stuff.

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Speaker 2: Yes, fine, this is not much of a confession, Okay, but.

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Speaker 1: I will confess too that if the price of a

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Speaker 1: new iPhone went up a lot, I would be pretty annoyed.

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Speaker 1: I tend to notice these things. I tend to replace

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Speaker 1: mine every two or three years or something like that.

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Speaker 1: There are areas that we do import significantly from China

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Speaker 1: that are not cheap child skis, cheap junk is. People

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Speaker 1: like to fantasize that that's all China produces. There are

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Speaker 1: areas that I would be very upset to pay a

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Speaker 1: significantly higher price.

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Speaker 2: Well, getting back to the goal of tariffs and protectionist

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Speaker 2: trade policies, I assume, you know, putting tariffs on iPhones

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Speaker 2: would be about moving some of the production closer to home,

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Speaker 2: and I think there there's an open question about whether

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Speaker 2: we want that as well, because for most of our lifetimes,

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Speaker 2: the stories we've been hearing about iPhones in China are

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Speaker 2: all about how terrible the labor conditions are and how

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Speaker 2: difficult it is to actually make these things. So right,

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Speaker 2: I can see, you know, some strategic argument. Obviously, semiconductors

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Speaker 2: are considered a very important strategic goal nowadays, but the

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Speaker 2: actual manufacturing, you know, there is that China story out there.

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Speaker 1: Anyway, I think the administration is very sensitive to people

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Speaker 1: like me. One of the first things, even in the

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Speaker 1: midst of the heat of the trade war, and I

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Speaker 1: should note we're recording this May twenty ninth, it could

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Speaker 1: be that the whole trade war is illegal. There was

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Speaker 1: that court ruling made last night. We really don't know

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Speaker 1: where things got to end up. They're clearly sensitive to

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Speaker 1: the iPhone thing, and so there were some carve outs

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Speaker 1: specifically related more or less related to that. I think

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Speaker 1: during the first Trump administration, Apple got some reprieve. These

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Speaker 1: are sensitive areas. Yes, we want to build up the

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Speaker 1: capacity to expand technological production, high tech things, high value

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Speaker 1: add things, and so forth, but we don't want the

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Speaker 1: sticker shock. This explains, of course, some of the sort

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Speaker 1: of multiple personalities administration, if you will.

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Speaker 2: Well, there's also the added complexity of building up these

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Speaker 2: very very advanced supply chains, right, and if you look

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Speaker 2: at Apple and what they did in China, that was

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Speaker 2: built over the course of many, many years, decades even,

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Speaker 2: And the idea that the US is suddenly going to

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Speaker 2: flip a switch, a terriff switch and move all that

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Speaker 2: production elsewhere seems a little optimistic, right.

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Speaker 1: And then there might be flipping a switch, but not

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Speaker 1: in the full direction. Maybe there are multiple dials on

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Speaker 1: the switch. Sure, so then one possibility that you hear

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Speaker 1: is okay, maybe move more to India. But I don't

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Speaker 1: think Trump likes that. But maybe that would be a

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Speaker 1: little bit better from the US perspective, in the sense

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Speaker 1: that we're not contributing as much to Chinese economic development,

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Speaker 1: and so, okay, it's not bringing jobs back, and Trump

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Speaker 1: said moving to the US. From time to time you

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Speaker 1: hear about maybe they could be built in Brazil or something.

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Speaker 1: But all of these raised the question. There's two things.

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Speaker 1: It's like, hey, is this realistic at all? If door

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Speaker 1: is switch that you could pull is move to the US,

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Speaker 1: move to India, that switch would have been moved. And

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Speaker 1: then the other thing, too is what does it even

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Speaker 1: mean to build the iPhone in India or the US,

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Speaker 1: because there's final assembly, et cetera. But of course component

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Speaker 1: parts within the iPhone themselves. Also, much of it is

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Speaker 1: actually made in China. And you know, I'm sure there's

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Speaker 1: thousands of tiny pieces of various things doing things, and

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Speaker 1: there many of them are built in China. So even

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Speaker 1: the idea of like we're going to move X production

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Speaker 1: to X country is not a clear statement because it

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Speaker 1: could just be the final packaging or whatever, and that's

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Speaker 1: not really where the value add lies, which means we

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Speaker 1: really have to more deeply understand how and what gets

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Speaker 1: built in China and what it would mean to even

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Speaker 1: move that. Well, we're even talked about when we're talking

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Speaker 1: about moving these things, let's do it. Well, I'm very

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Speaker 1: excited to say we do indeed have the perfect guest.

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Speaker 1: We're going to be speaking with Patrick McGee. He's at

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Speaker 1: the FT but he has a new book out came

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Speaker 1: out May thirteenth called Apple in China Like the Capture

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Speaker 1: of the World's Greatest Company, And it is a book

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Speaker 1: about the history of Apple's deep relationship with the state

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Speaker 1: of China, with the economy of China, the sort of

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Speaker 1: co evolution of these entities. So much of the iPhone

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Speaker 1: story we know is sort of inextricably connected with the

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Speaker 1: rise of Chinese manufacturing. This is what Tim Cook is

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Speaker 1: known for in the very beginning. So Patrick, thank you

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Speaker 1: so much for coming on outlaws my pleasure.

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Speaker 3: Hi Joe, Hi Tracy.

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Speaker 1: What does it mean if Apple says, oh, we're moving

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Speaker 1: more production to India or we want to what does

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Speaker 1: that term mean to you?

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Speaker 3: Ah? Well, cleverly, they don't say that. They say they're

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Speaker 3: moving assembly because they they know, but the reader probably doesn't,

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Speaker 3: the lister probably doesn't. There's a massive distinction between assembly

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Speaker 3: and production. So I think Apple is sort of orchestrating

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Speaker 3: this effort. Right, There's no press release that says anything

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Speaker 3: from Apple, so you can't quote Apple. But insofar as

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Speaker 3: the word got out, you know, my money's on Koupatino

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Speaker 3: being behind this. So yeah, I mean put it this way,

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Speaker 3: if there are a thousand steps in making an iPhone

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Speaker 3: and the final one is now being done in India,

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Speaker 3: that's enough to have a quote unquote substantive change to

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Speaker 3: the product, and therefore the box can say made in India.

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Speaker 3: Nothing about that phone is any less dependent on the

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Speaker 3: China centric supply chain than any other phone you have

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Speaker 3: ever purchased.

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Speaker 2: Okay, so on this note, maybe a good place to

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Speaker 2: start is walk us through your typical iPhone, the one

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Speaker 2: that Joe is buying every two or three years. What's

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Speaker 2: its I guess birth process, Like, where do iPhones come from?

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Speaker 2: And what is the actual supply chain that creates them.

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Speaker 3: That's such a funny question. I'll tell you one funny answer,

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Speaker 3: which is that I asked, you know, a very senior

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Speaker 3: person at Apple how an iPhone is made, and he said,

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Speaker 3: have you seen the I Love Lucy clip of them

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Speaker 3: making chocolate have you ever seen that? Yeah, of course

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Speaker 3: I actually hadn't. So Okay, so picture of its conveyor

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Speaker 3: belt and the chocolate is coming so fast that eventually

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Speaker 3: they just start heating them rather than packaging them up. Okay,

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Speaker 3: So there's a method to the madness here. I mean,

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Speaker 3: Apple is able to take Adam Smith's idea the division

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Speaker 3: of labor and put it to the hilarious degree that

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Speaker 3: out does Nathan Field with the comedian trying to do

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Speaker 3: this with house cleaning two decades after the fact. So

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Speaker 3: it is often the fact that on a conveor belt

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Speaker 3: you have nine to eleven seconds to perform your task,

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Speaker 3: you know, putting a module in the left hand corner

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Speaker 3: or whatever, before the next iPhone comes over. So that's

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Speaker 3: the final assembly process, and that's really what is taking

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Speaker 3: place now in India ramping that up to avoid tariffs.

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Speaker 3: But the actual production we're talking one thousand components and

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Speaker 3: Apple works with the tightest engineering tolerances possible, only high

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Speaker 3: quality materials. That you put this in car terms, they

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Speaker 3: are making ten million porsches a year rather than ten

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Speaker 3: million volkswagons, right, and the numbers are just staggering. Right.

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Speaker 3: So if you're doing one thousand components a day, and

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Speaker 3: you're shipping one million iPhones a day. That means at

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Speaker 3: peak season, you were doing the manufacturing, the logistics, the

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Speaker 3: just in time production of one billion parts per day.

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Speaker 3: So find me an American factory that can do one

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Speaker 3: of those parts, because China has factories that can do

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Speaker 3: it for all one thousand. That's why nothing is moving

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Speaker 3: here anytime soon. It's the combination of Apple's imperfection for

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Speaker 3: defects quality and Apple's gar gantu and titanic like quantity.

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Speaker 1: There is producttion of Apple products and I believe iPhones

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Speaker 1: in India or sorry, assembly of Apple products in India.

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Speaker 1: What do we know about the efficiency or the relative

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Speaker 1: efficiency because obviously the company has been thinking about these

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Speaker 1: risks for years and years and years, and I'm sure

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Speaker 1: would love to not be this tightly linked to one country,

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Speaker 1: which we know, for all the reasons we don't need

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Speaker 1: to get into is risky. What do we know about

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Speaker 1: the efficiency of its assembly in India?

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Speaker 3: Let me just give you sort of objective numbers and

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Speaker 3: then we'll go from there. So the first iPhones made

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Speaker 3: in India were actually in twenty seventeen, OK, and by

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Speaker 3: twenty twenty three, India was assembling about twenty five million iPhones.

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Speaker 3: Go back a decade. The first iPhones were made in

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Speaker 3: China in two thousand and seven, and by two thousand

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Speaker 3: and fifteen you had two hundred and thirty million iPhones

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Speaker 3: being built. So roughly speaking, the quote unquote diversification in

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Speaker 3: India is happening at one tenth the pace of the

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Speaker 3: original creation and scale of the iPhone, and even that

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Speaker 3: vastly over the speed of development in India because, of course,

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Speaker 3: in the early years of the iPhone, I mean you're

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Speaker 3: literally inventing things like multi touch glass, right, you were

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Speaker 3: inventing and redesigning the iPhone every single year, whereas India

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Speaker 3: is basically just having to do the final steps in

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Speaker 3: the process, and it's still not happening very quickly. Now, really,

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Speaker 3: what changes is that in Shanghai twenty twenty two, the

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Speaker 3: city enters lockdown, and that's a city of more than

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Speaker 3: twenty five million people. It really is the first time

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Speaker 3: in Apple's two decade history in China where did the

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Speaker 3: government provincial officials in this case, really had made a

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Speaker 3: decision diametrically opposed to Apple's interests and that's when Plan

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Speaker 3: b Let's really ramp up in India went into effect.

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Speaker 3: But it's been almost three years since then, and even

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Speaker 3: so you don't have a whole lot going on there.

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Speaker 3: And yeah, I've talked to the engineers. They're called manufacturing

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Speaker 3: design engineers. These are the people who sort of do

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Speaker 3: the handholding the engineering one zho one in different countries,

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Speaker 3: and they've been ramping up in India, and what they

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Speaker 3: find is that the ecosystem isn't there, the industrial clusters

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Speaker 3: aren't there. You don't have eight lane highways to and

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Speaker 3: from the factories. You often sometimes don't even have stable

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Speaker 3: Wi Fi in the taxi the cab on the way

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Speaker 3: to the factory. Engineers are sometimes staying two hours away,

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Speaker 3: which means four hours of their day is just going

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Speaker 3: to and from the factory. And if they don't have

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Speaker 3: a stable cellular connection along the way, it can be

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Speaker 3: a little bit maddening. So many things you don't have.

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Speaker 3: And the other thing you just don't have is the

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Speaker 3: sort of Nietzschean will to power on the part of

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Speaker 3: New Delhi to make manufacturing their thing. And you don't

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Speaker 3: have what engineers call quote unquote China speed, which is

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Speaker 3: just like this inexplicable, speedy development that would wow Apple

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Speaker 3: engineers in the earliest years. So, just to give one

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Speaker 3: example that's not in the book, there was this example

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Speaker 3: where these engineers from Apple are in this factory that

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Speaker 3: needs to be sort of retooled for the Apple line,

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Speaker 3: and it's the size of a football field. It's enormous,

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Speaker 3: and they estimate, okay, it's going to take two to

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Speaker 3: three weeks to get this machine removed. They come back

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Speaker 3: the next day it's all been moved, and it's totally

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Speaker 3: blows their minds. All they've done is gone to sleep,

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Speaker 3: head breakfast, and come back and everything is complete. And

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Speaker 3: that which is happening in China all the time, and

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Speaker 3: it just is not happening in India.

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Speaker 2: I like the idea of just one more lane bro

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Speaker 2: will solve our domestic iPhone assembly production problems. That's pretty funny. Okay,

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Speaker 2: So I want to back up a little bit, but

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Speaker 2: can we talk a little more about Apple strategy in

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Speaker 2: China specifically, So how much of that was a deliberate,

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Speaker 2: conscious decision versus something that just kind of happened alongside

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Speaker 2: I guess the wave of outsourcing and globalization that we

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Speaker 2: saw in the late nineteen nineties early two thousands.

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Speaker 3: Yeah, great question. And what I like about your intro

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Speaker 3: tracy is that I really do think the story of

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Speaker 3: Apple and China over the last twenty years has really

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Speaker 3: just been about the tedium of assembly. A journalists have

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Speaker 3: won prizes for this kind of thing, right, and it's

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Speaker 3: set into motion this cat and mouse pattern where a

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Speaker 3: journalist goes into a factory and says, all these workers

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Speaker 3: are working too hard, there's underage employees, et cetera. And

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Speaker 3: then Apple is shame into making changes and it sort

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Speaker 3: of plays the role of White Knight improving factory conditions

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Speaker 3: across China's supply chain, and then journalist win's an award,

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Speaker 3: and then two years later someone does the next thing

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Speaker 3: in a different factory, and so on and so forth.

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Speaker 3: But we're totally overlooking questions of Apple strategy, like what

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Speaker 3: did they quote unquote discover in China that nobody else discovered?

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Speaker 3: And so really the book is an attempt to do that.

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Speaker 3: So the first thing I'd push back on is Tim

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Speaker 3: Cook is very often called the architect of the China strategy,

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Speaker 3: and it's not to discredit him to say that he

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Speaker 3: is not the architect. Nobody is the architect. Basically, what

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Speaker 3: happens is really the supply chain itself, with or without

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Speaker 3: Apple was moving to China. And so the basic history

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Speaker 3: of the eighties and nineties PC boom, like predating Windows

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Speaker 3: ninety five and then coming after, is that the fight

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Speaker 3: for computer dominance is exclusively based on things that are

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Speaker 3: boring logistics, manufacturing, distribution, right, because everybody's using Windows, everybody's

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Speaker 3: using Intel chips, and nobody's thinking about design. There is

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Speaker 3: no equivalent of Johnny I've at Dell, at Compac, at

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Speaker 3: any of these companies, and so it's really this mundane war,

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Speaker 3: and it's driven by largely American and later Taiwanese contract manufacturers,

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Speaker 3: and so they are the ones who, in competition with

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Speaker 3: each other, start going to Asia to sort of oust

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Speaker 3: each other right and gain market share, and eventually they're

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Speaker 3: the ones who really find China. So when Apple is

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Speaker 3: doing their own outsourcing moves, they're working in multiple countries

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Speaker 3: before the armies of flexible, ubiquitous, low paid labor in

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Speaker 3: China really win out. So my story has this five

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Speaker 3: part chapter called Apple's Long March to China. It really

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Speaker 3: tells you that the candy called iMac that I'm sure

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Speaker 3: both of you and all of your listeners remember, like

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Speaker 3: that was made out of Korea by LG who then

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Speaker 3: expanded to Mexicali and Wales. Fox Con is brought on

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Speaker 3: as a second supplier, and that's in China, but it's

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Speaker 3: also in the Czech Republic, and it's also curt in California.

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Speaker 3: But when you've got these operations in multiple countries, especially

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Speaker 3: once China enters the World Trade Organization two thousand and one,

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Speaker 3: all you have to do is look at an Excel

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Speaker 3: sheet and realize that the efficiency, cost, the scale and

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Speaker 3: anything China is winning. And so Apple begins to really

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Speaker 3: consolidate everything into China. And around two thousand and three

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Speaker 3: when the iPod Mini becomes the most ubiquitous product Apple's

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Speaker 3: ever created, and then there's just no question that when

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Speaker 3: the iPod nano is invented, that's where it's going to

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Speaker 3: be built, and when the iPhone comes out, that's where

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Speaker 3: it's going to be built. So it really is just

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Speaker 3: like stumbling into greater and greater volumes and success in China.

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Speaker 3: And I give all sorts of credit to China. I mean,

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Speaker 3: people think it's an anti China book. If they haven't

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Speaker 3: read it, it really isn't. There's only one place that

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Speaker 3: Apple could have succeeded the way they did, and it's

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Speaker 3: because China had tailor made policies. We're leading industrial clusters,

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Speaker 3: we're leading industrial policy and hardworking people that would do

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Speaker 3: this for twelve hours a day, six days a week.

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Speaker 1: Is the book an anti Apple book? I mean you

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Speaker 1: say it's not an anti China book. Apple who's created

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Speaker 1: literally trillions of dollars in value for Americans. It's created

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Speaker 1: thousands and thousands of amazing, high paid jobs that are

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Speaker 1: much better than the jobs that are at the assembly

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Speaker 1: or factories that exist in China. Is it an anti

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Speaker 1: Apple book?

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Speaker 3: No. Anyone thinking it's an anti Apple book will be

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Speaker 3: in for a rude awakening because you'll quickly realize that

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Speaker 3: for starters, when I say I spoke to more than

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Speaker 3: two hundred people, I'm only counting the people with Apple experience.

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Speaker 3: Then I spoke to other people as well, in supply chain, academics, journalists,

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Speaker 3: that kind of stuff. But it is told through the

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Speaker 3: eyes of the people in the weeds on the grounds,

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Speaker 3: you know, directing Apple's success. Right, So the first chapters

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Speaker 3: in particular, I mean, the first part is called Saving

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Speaker 3: Apple is really just a story of Apple's genius in

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Speaker 3: pulling off these maneuvers and coming off the brink of bankruptcy.

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Speaker 3: They are literally days away from missing payroll. In nineteen

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Speaker 3: ninety six, I think I reveal for the first time

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Speaker 3: they'd even hired a Chapter eleven lawyer. And then as

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Speaker 3: the sort of hail Mary move, once they've got a

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Speaker 3: bit more money after selling a factory in Colorado, they

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Speaker 3: bring back Steve jobs. And really the first narrative is

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Speaker 3: just like this raw raw, go Apple, Can they do it?

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Speaker 3: And even in two thousand with the dot com bust,

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Speaker 3: like they're close to bankruptcy again and Gateway literally tries

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Speaker 3: to acquire them. So the story is one of sleepwalking

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Speaker 3: into a geopolitical reality. Really, as China changes, I mean,

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Speaker 3: I don't criticize anyone at Apple for moving to China

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Speaker 3: in the early two thousands. That's what everybody was doing.

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Speaker 3: I would even say there was an American consensus rather

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Speaker 3: than some bipartisan effort, that going to China was good

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Speaker 3: because you were going to inculcate the next great democracy,

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Speaker 3: you know, and maybe in a hubristic or arrogant way.

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Speaker 3: But like Americans would have said, that's what we did

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Speaker 3: for Taiwan, that's what we did for Korea, Germany, et cetera.

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Speaker 3: I mean after World War Two. So there was all

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Speaker 3: sorts of reasons to move to China. The problematic decision

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Speaker 3: was that once Xijinping comes into power, Apple is not

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Speaker 3: an innocent bystander. As Xixhinping hardens his tone and becomes

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Speaker 3: more belligerent, he attacks Apple within thirty six hours of

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Speaker 3: taking the reins in March twenty thirteen, and that was

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Speaker 3: the point at which Apple could have made a strategic

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Speaker 3: decision to diversify its supply chain to India or something. Instead,

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Speaker 3: they ramp up their rewards for shareholders in the form

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Speaker 3: of buybacks and dividends, and they doubled down in China,

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Speaker 3: appointing a team to basically understand Chinese culture, understand Chinese politics,

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Speaker 3: and come up with a way of demonstrating to the

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Speaker 3: country and it's efficial. Look, we're really really in this

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Speaker 3: for China, as it were.

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Speaker 2: What exactly was Apple's pitch to Chinese leadership? And I

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Speaker 2: guess how did it change over time? How much of

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Speaker 2: it was about, Oh, we're going to create jobs that

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Speaker 2: will pay more than agricultural wages, better standards of life,

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Speaker 2: maybe relatively, versus the strategic value of building up China's

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Speaker 2: tech sector and all this strategic semiconductor technology and things

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Speaker 2: like that. How did it shift over time?

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Speaker 3: So it's a fascinating narrative, And really the first four

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Speaker 3: parts of the book leading up to twenty thirteen are

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Speaker 3: just foundation buildings, so you sort of understand the history

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Speaker 3: of Apple and what sort of problems they're having. Essentially,

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Speaker 3: what happens is when chies in paying at tax Apple,

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Speaker 3: you can understand why he's upset with the company. It

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Speaker 3: looks like an exploitative power because their margins. Apple margins

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Speaker 3: have gone from something like one percent in two thousand

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Speaker 3: and three to twenty five percent in twenty twelve. But

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Speaker 3: at the same time, if you look like a company

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Speaker 3: like Fox con foxhon in absolute dollars made more money

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Speaker 3: than Apple for each of the first four years of

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Speaker 3: the twenty first century. But as they get more involved

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Speaker 3: with Apple, their margins collapse from double digits to about

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Speaker 3: one or two percent. And so you can just do

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Speaker 3: this with really any company working with Apple, and it

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Speaker 3: looks like they're not in it for China, right, They're

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Speaker 3: not doing anything for the country. And Apple it takes

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Speaker 3: them two or three years, but they totally flip this

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Speaker 3: narrative on its head. So out of fear that Beijing

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Speaker 3: is going to force Apple to operate a bunch of

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Speaker 3: joint ventures, right, these fifty to fifty companies where China

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Speaker 3: owns the other half, and then they mimic the technology

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Speaker 3: and eventually oust you. I mean, this is what happened

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Speaker 3: in high speed rail for instance. Beijing has advocated joint

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Speaker 3: ventures for decades, really going back to the nineteen eighties.

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Speaker 3: So this is where a Western company is allowed to

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Speaker 3: be in the Chinese market. But the quid pro quo is, look,

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Speaker 3: if you want access to our operational efficiency, if you

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Speaker 3: want access to more than a billion people, you have

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Speaker 3: to operate in a joint venture where the Chinese half

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Speaker 3: of the company is going to learn everything they can

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Speaker 3: and then thrive on their own. Apple doesn't have any

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Speaker 3: joint ventures, and so they look like this anti China

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Speaker 3: model that's just exploiting the country. Is able to really

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Speaker 3: flip this on its head and say, look, it might

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Speaker 3: be the case that Samsung has three dozen joint ventures

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Speaker 3: and we have zero. But you need to understand we

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Speaker 3: work with hundreds of factories across the country. And the

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Speaker 3: reason they're only getting paid one percent margin, two percent margin,

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Speaker 3: the reason they're sometimes even losing money on their partnerships

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Speaker 3: with Apple is that we are offering them the equivalent

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Speaker 3: of Ivy League hardware engineering training. We are sending people

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Speaker 3: over by the literal planeload to China America's best engineers,

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Speaker 3: where they train, audit supervised, install hundreds of millions of

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Speaker 3: dollars worth of machinery. They train the line, they supervise

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Speaker 3: the line. And once those companies have these skills that

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Speaker 3: Apple gives to them, they are basically able, at least

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Speaker 3: after some time of exclusivity, they are able to supply

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Speaker 3: somebody else. So who's just like Apple, but in China, Huawei, Apo, Vivo,

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Speaker 3: Chaome and so those companies today have fifty five percent

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Speaker 3: global market share of the smartphones. And the reason that

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Speaker 3: they're so good is that Apple trained all of their suppliers.

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Speaker 3: So that's the message Apple gives to Beijing, and essentially

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Speaker 3: they've they sort of had a free ride ever since.

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Speaker 3: It would be insane for Beijing to go after Apple

433
00:21:04,400 --> 00:21:07,240
Speaker 3: in some direct way because Apple is the great teacher

434
00:21:07,320 --> 00:21:09,760
Speaker 3: of China. They offer way too much and the numbers

435
00:21:09,800 --> 00:21:11,439
Speaker 3: we can get into are staggering.

436
00:21:11,840 --> 00:21:14,720
Speaker 1: Tracy real quickly before we move on. So Apple has

437
00:21:14,720 --> 00:21:16,800
Speaker 1: a three trillion dollar market cap. Do you want to

438
00:21:16,840 --> 00:21:19,760
Speaker 1: take a stab at what the market cap of Hanahei,

439
00:21:19,920 --> 00:21:23,200
Speaker 1: which is the company that owns Fox Hanhai Precision Industry.

440
00:21:23,400 --> 00:21:25,439
Speaker 1: Do you want to get guess what its market cap is?

441
00:21:25,560 --> 00:21:27,800
Speaker 2: No, I absolutely do not. Just tell me so I

442
00:21:27,800 --> 00:21:29,360
Speaker 2: don't want to embarrass myself.

443
00:21:29,200 --> 00:21:32,679
Speaker 1: Seventy two billion, three trillion versus Now, granted they're not

444
00:21:32,720 --> 00:21:35,119
Speaker 1: the only company that makes them, but yeah, these are

445
00:21:35,160 --> 00:21:38,800
Speaker 1: not as these are nowhere near as profitable industries use

446
00:21:38,880 --> 00:21:41,399
Speaker 1: this term. Apple is the great has been a great teacher,

447
00:21:41,400 --> 00:21:43,560
Speaker 1: and I want to get into what people have learned

448
00:21:43,560 --> 00:21:46,879
Speaker 1: from Apple development and then built competitive companies. But you

449
00:21:47,040 --> 00:21:50,560
Speaker 1: mentioned those old and I hadn't thought about them in

450
00:21:50,600 --> 00:21:53,639
Speaker 1: a long time, those old iMacs that were multicolor, that

451
00:21:53,720 --> 00:21:56,520
Speaker 1: called a lot of attention. Some of them were really

452
00:21:56,640 --> 00:21:59,960
Speaker 1: not trivial at all to build with the existing man

453
00:22:00,000 --> 00:22:03,280
Speaker 1: manufacturing technology that existed in the world at the time.

454
00:22:03,520 --> 00:22:05,720
Speaker 1: And I remember sometimes they would announce a new one,

455
00:22:05,920 --> 00:22:07,719
Speaker 1: and they're like, but we're really sorry to tell you

456
00:22:07,720 --> 00:22:09,960
Speaker 1: we're not going to be able to produce this one

457
00:22:10,040 --> 00:22:13,480
Speaker 1: in the emerald green yet because we haven't perfected how

458
00:22:13,520 --> 00:22:16,720
Speaker 1: to bend the plastic or whatever the material was, the

459
00:22:16,760 --> 00:22:19,800
Speaker 1: glass of emerald green, whatever that color is. It creates

460
00:22:19,840 --> 00:22:21,440
Speaker 1: an issue and all the people in the audience will

461
00:22:21,440 --> 00:22:21,879
Speaker 1: go boo.

462
00:22:22,320 --> 00:22:23,119
Speaker 3: But then they'd get.

463
00:22:22,960 --> 00:22:25,639
Speaker 1: There like six months later. And then you mentioned the

464
00:22:25,760 --> 00:22:28,680
Speaker 1: multi touch glass, which didn't originally exist at the time.

465
00:22:29,119 --> 00:22:31,240
Speaker 1: How much is it co learning? You know, we have

466
00:22:31,320 --> 00:22:34,040
Speaker 1: this divide of there the designers and coopertinos and the

467
00:22:34,040 --> 00:22:39,040
Speaker 1: assemblers and the builders somewhere in Asia. But something also happens,

468
00:22:39,040 --> 00:22:41,720
Speaker 1: And there's a theme repeatedly on the show where innovation

469
00:22:41,880 --> 00:22:44,760
Speaker 1: happens at the shop floor, and the idea of cleanly

470
00:22:45,320 --> 00:22:48,240
Speaker 1: drawing the line between the designers and the building is

471
00:22:48,280 --> 00:22:50,600
Speaker 1: a fallacy. It must be the case that at least

472
00:22:50,640 --> 00:22:53,639
Speaker 1: in some of these realms, whether we're talking about the glass,

473
00:22:53,680 --> 00:22:56,680
Speaker 1: whether we're talking about the ability to bold plastic green

474
00:22:56,720 --> 00:23:02,280
Speaker 1: plastic into a pretty iMac that innovation also happens in China,

475
00:23:02,359 --> 00:23:04,560
Speaker 1: and the Apple benefits from that learning as well.

476
00:23:05,280 --> 00:23:07,280
Speaker 3: Yeah, I'm wondering if the right analogy would be something

477
00:23:07,359 --> 00:23:10,399
Speaker 3: like a graduate student at Harvard writing a paper with

478
00:23:10,520 --> 00:23:13,320
Speaker 3: their professor. Right, it is something along those lines, like

479
00:23:13,320 --> 00:23:15,720
Speaker 3: the Apple engineers by the planeload are going over there,

480
00:23:15,720 --> 00:23:18,680
Speaker 3: but they're absolutely co inventing something. Right. So I was

481
00:23:18,760 --> 00:23:22,280
Speaker 3: told that like the ideal manufacturing design engineer right would

482
00:23:22,320 --> 00:23:24,480
Speaker 3: look at what Johnny I had come up with and say,

483
00:23:24,560 --> 00:23:27,040
Speaker 3: I have no idea how to build that, but I'm

484
00:23:27,080 --> 00:23:29,119
Speaker 3: going to do my best to find out. Right, So

485
00:23:29,320 --> 00:23:31,359
Speaker 3: they would have a certain skill set and with a

486
00:23:31,400 --> 00:23:33,119
Speaker 3: whole team of people, of course, and they would go

487
00:23:33,119 --> 00:23:35,600
Speaker 3: to the Chinese factories and they find the suppliers who

488
00:23:35,680 --> 00:23:38,360
Speaker 3: might have some background in multi touch glass, let's say, right,

489
00:23:38,480 --> 00:23:41,360
Speaker 3: or we're adding electrical circuits to the glass, and then

490
00:23:41,400 --> 00:23:44,960
Speaker 3: they would train and co invent the next processes. So

491
00:23:45,000 --> 00:23:47,800
Speaker 3: they're not just co inventing the parts, they're co inventing

492
00:23:47,840 --> 00:23:50,440
Speaker 3: the processes that make the parts. Right, what Elon Must

493
00:23:50,480 --> 00:23:53,320
Speaker 3: sometimes calls the machine that creates the machine. So I'm

494
00:23:53,320 --> 00:23:55,440
Speaker 3: glad you brought this up, just because in no way

495
00:23:55,480 --> 00:23:57,879
Speaker 3: am I saying like the Chinese offered them nothing or

496
00:23:57,920 --> 00:23:59,800
Speaker 3: something like that, right, Like, it's not like to say

497
00:23:59,800 --> 00:24:01,800
Speaker 3: that Carvard it's a great school. Isn't to say that

498
00:24:01,840 --> 00:24:04,000
Speaker 3: like the students that go there don't deserve loads of credit.

499
00:24:04,040 --> 00:24:06,040
Speaker 3: Of course they do. And the same way like Apple

500
00:24:06,160 --> 00:24:08,240
Speaker 3: is a teacher of the Chinese and to be fair,

501
00:24:08,280 --> 00:24:11,000
Speaker 3: like the founder of Huawei has called Apple the teacher.

502
00:24:11,400 --> 00:24:12,920
Speaker 3: But that's not to say that they could have done

503
00:24:12,920 --> 00:24:15,159
Speaker 3: this anywhere. In fact, if anything, I think Apple has

504
00:24:15,160 --> 00:24:17,360
Speaker 3: a bit of hubris, believing that they can replicate their

505
00:24:17,359 --> 00:24:19,760
Speaker 3: twenty five year investment into China and go do it

506
00:24:19,800 --> 00:24:22,679
Speaker 3: in India. And it's like, guys do not understand like

507
00:24:22,720 --> 00:24:25,000
Speaker 3: the degree to which China was a once in a

508
00:24:25,119 --> 00:24:28,800
Speaker 3: century partner with all these tailor made policies, they would

509
00:24:28,840 --> 00:24:31,359
Speaker 3: just build factories at the time that you and I

510
00:24:31,400 --> 00:24:34,120
Speaker 3: would still be doing the environmental paperwork. I just don't

511
00:24:34,160 --> 00:24:35,880
Speaker 3: think you see that in India, and you don't see

512
00:24:35,880 --> 00:24:38,240
Speaker 3: that in America either. So China is not just like

513
00:24:38,280 --> 00:24:40,879
Speaker 3: a blank slate with lots of people. They offer all

514
00:24:41,000 --> 00:24:43,160
Speaker 3: kinds of things to Apple and Apple, and to be fair,

515
00:24:43,160 --> 00:24:45,160
Speaker 3: they offer all kinds of things to anybody. But Apple

516
00:24:45,320 --> 00:24:47,640
Speaker 3: understands the opportunity just better than anybody else.

517
00:25:03,840 --> 00:25:06,240
Speaker 2: So you make the point in the book that there's

518
00:25:06,600 --> 00:25:10,919
Speaker 2: I guess a tension between a company like Apple and

519
00:25:10,960 --> 00:25:15,520
Speaker 2: they're very very sharp focus on shareholder returns and quarterly

520
00:25:15,640 --> 00:25:19,760
Speaker 2: profits and continued growth and just throwing off loads and

521
00:25:19,800 --> 00:25:23,960
Speaker 2: loads of cash. There's a tension with I guess nationalism

522
00:25:24,400 --> 00:25:28,159
Speaker 2: and economic and strategic development. And so Apple's focus on

523
00:25:28,240 --> 00:25:32,600
Speaker 2: growth has been to China's strategic and developmental benefit and

524
00:25:32,640 --> 00:25:36,920
Speaker 2: maybe less or so to America's at least in terms

525
00:25:36,960 --> 00:25:42,040
Speaker 2: of strategic things. And what's funny is right after this interview,

526
00:25:42,040 --> 00:25:44,800
Speaker 2: we're actually going to speak to Avadao, who wrote a

527
00:25:44,800 --> 00:25:48,119
Speaker 2: book on Huaii, and she makes the point. Yeah, she

528
00:25:48,240 --> 00:25:50,840
Speaker 2: makes the point it really dovetails with your book, but.

529
00:25:50,840 --> 00:25:51,920
Speaker 1: We didn't mean to schedule like that.

530
00:25:51,960 --> 00:25:56,320
Speaker 2: Yeah, yeah, But she makes the point that stock prices

531
00:25:56,359 --> 00:26:00,280
Speaker 2: and balance sheets can't fully capture the societal value of

532
00:26:00,320 --> 00:26:03,960
Speaker 2: a nation's technological competency. And this is something that maybe

533
00:26:04,040 --> 00:26:08,320
Speaker 2: Huawei understands better than an Apple. Where do you see

534
00:26:08,359 --> 00:26:11,400
Speaker 2: I guess the key differences in sort of corporate culture

535
00:26:11,760 --> 00:26:14,399
Speaker 2: between a Huawei and an Apple.

536
00:26:15,440 --> 00:26:17,080
Speaker 3: So I might be taking this in a slightly different

537
00:26:17,080 --> 00:26:19,800
Speaker 3: direction than you're thinking. So if I need to re

538
00:26:19,920 --> 00:26:22,200
Speaker 3: answer in a second, let me know, but the Chinese

539
00:26:22,200 --> 00:26:25,360
Speaker 3: don't prioritize profits or margins the way that we do.

540
00:26:25,720 --> 00:26:29,600
Speaker 3: They prioritize control of the industry because if the Chinese

541
00:26:29,640 --> 00:26:32,840
Speaker 3: can take over something like electric vehicles, they in effect

542
00:26:33,000 --> 00:26:36,480
Speaker 3: de industrialize all their rivals and really gain dominance. The

543
00:26:36,520 --> 00:26:38,840
Speaker 3: place that you can see this most clearly is solar panels.

544
00:26:38,920 --> 00:26:42,000
Speaker 3: Nobody in China is making thirty percent margins on solar panels,

545
00:26:42,080 --> 00:26:44,120
Speaker 3: but more than ninety percent of solar panels are now

546
00:26:44,119 --> 00:26:47,000
Speaker 3: made in China. This is a technology that America invented

547
00:26:47,040 --> 00:26:49,240
Speaker 3: in the nineteen fifties and itself had eighty to ninety

548
00:26:49,280 --> 00:26:52,320
Speaker 3: percent market share of in the eighties, but we cannot compete.

549
00:26:52,520 --> 00:26:55,280
Speaker 3: That is basically what's happening with electric vehicles right now. Hence,

550
00:26:55,359 --> 00:26:58,199
Speaker 3: even before Donald Trump became president, Joe Biden put one

551
00:26:58,320 --> 00:27:01,040
Speaker 3: hundred percent tariffs on Chinese made evs, and I think

552
00:27:01,080 --> 00:27:03,240
Speaker 3: it was just a few days ago that BYD slashed

553
00:27:03,240 --> 00:27:06,520
Speaker 3: the prices of their evs in a bid for greater competitiveness.

554
00:27:06,600 --> 00:27:09,120
Speaker 3: So look, I think China has a state sponsored form

555
00:27:09,160 --> 00:27:11,960
Speaker 3: of capitalism. I'm emphasizing that it is a form of capitalism,

556
00:27:12,200 --> 00:27:15,960
Speaker 3: but it's not a shareholder maximization form of capitalism. It's

557
00:27:16,000 --> 00:27:18,600
Speaker 3: a command and control form of capitalism.

558
00:27:18,440 --> 00:27:20,639
Speaker 1: You mentioned, and I had never I had either forgotten

559
00:27:20,640 --> 00:27:25,320
Speaker 1: about it, didn't realize that Shujinpin called out Apple very early,

560
00:27:25,640 --> 00:27:29,160
Speaker 1: within thirty six hours of taking power in twenty thirteen.

561
00:27:29,720 --> 00:27:31,639
Speaker 1: Can you talk a little bit about the sort of

562
00:27:31,880 --> 00:27:36,680
Speaker 1: evolution of the CCP and Apple's relationship with it over time.

563
00:27:36,760 --> 00:27:40,960
Speaker 1: There is obviously this perception then she specifically has taken

564
00:27:40,960 --> 00:27:47,280
Speaker 1: on this more nationalist, ambitious edge versus his predecessors. Can

565
00:27:47,320 --> 00:27:49,640
Speaker 1: you talk a little bit just more about that specific

566
00:27:49,880 --> 00:27:55,080
Speaker 1: relationship with Apple and the CCP itself, beyond just the

567
00:27:55,320 --> 00:27:56,879
Speaker 1: economic capacity on the ground.

568
00:27:57,920 --> 00:28:00,600
Speaker 3: So Apple gets in a sense a misleading picture of

569
00:28:00,640 --> 00:28:03,000
Speaker 3: what it's like to operate in China because when they

570
00:28:03,040 --> 00:28:06,640
Speaker 3: really consolidate production, it's two thousand and three, and that's

571
00:28:06,680 --> 00:28:10,000
Speaker 3: the beginning era of Hu Jintao. Key later is nicknamed

572
00:28:10,040 --> 00:28:13,160
Speaker 3: the Woman with bound feet. His presidency is sometimes called

573
00:28:13,160 --> 00:28:16,239
Speaker 3: the collective presidency because there was really an inability for

574
00:28:16,359 --> 00:28:19,080
Speaker 3: just him alone to make decisions, and so it ends

575
00:28:19,160 --> 00:28:21,960
Speaker 3: up being this like ten year period of China being

576
00:28:22,040 --> 00:28:25,760
Speaker 3: a multinational playground where rules aren't really enforced, just like.

577
00:28:25,720 --> 00:28:29,280
Speaker 1: This Honeymoon, this Honeymoon Golden Era, where like sort of

578
00:28:29,359 --> 00:28:30,600
Speaker 1: China on easy mode.

579
00:28:31,080 --> 00:28:34,280
Speaker 3: Absolutely, yeah, and so Apple's really taken aback to the

580
00:28:34,280 --> 00:28:37,560
Speaker 3: point of just total confusion and having an inet response

581
00:28:37,760 --> 00:28:40,360
Speaker 3: when Xijinping really comes in and as I said, what

582
00:28:40,440 --> 00:28:43,080
Speaker 3: happens is like CTTV, which you could think of as

583
00:28:43,120 --> 00:28:45,920
Speaker 3: like a state sponsored CNN of the country, attacks Apple

584
00:28:46,000 --> 00:28:49,360
Speaker 3: for warranty differences of all things. It basically excuses Apple

585
00:28:49,760 --> 00:28:53,280
Speaker 3: of treating the Chinese customers in an inferior way by

586
00:28:53,400 --> 00:28:56,480
Speaker 3: refurbishing phones rather than giving them new phones when certain

587
00:28:56,520 --> 00:28:58,760
Speaker 3: problems are happening with them. And I have to say

588
00:28:58,800 --> 00:29:01,040
Speaker 3: this is the prologue to the book because basically opened

589
00:29:01,040 --> 00:29:03,400
Speaker 3: the book and in the first paragraph apples and crisis.

590
00:29:03,480 --> 00:29:05,120
Speaker 3: And so I'm trying to go for like a white

591
00:29:05,120 --> 00:29:07,080
Speaker 3: lotus opening, if you will, before it becomes like this

592
00:29:07,240 --> 00:29:09,760
Speaker 3: nice beach read with the overhang of suspense that you

593
00:29:09,800 --> 00:29:11,240
Speaker 3: know that you know it's going to hit the fan

594
00:29:11,440 --> 00:29:14,200
Speaker 3: by twenty thirteen. But I have to say the narrative

595
00:29:14,240 --> 00:29:17,280
Speaker 3: leading up to it is wild, which is that in

596
00:29:17,320 --> 00:29:20,720
Speaker 3: two thousand and eight, for the Beijing Olympics, Apple opens

597
00:29:20,720 --> 00:29:23,920
Speaker 3: its first store in China, purely as a marketing opportunity

598
00:29:23,920 --> 00:29:26,120
Speaker 3: for the Olympics. I mean they're actually happy that the

599
00:29:26,160 --> 00:29:28,640
Speaker 3: site they've been given is small, because everybody assumes it's

600
00:29:28,640 --> 00:29:30,400
Speaker 3: going to lose money. You have to remember that for

601
00:29:30,440 --> 00:29:33,960
Speaker 3: the first iPhone, Steve Bomber, Microsoft's CEO, laughed at the price,

602
00:29:34,000 --> 00:29:35,960
Speaker 3: and he's referring to American buyer saying, no one's going

603
00:29:36,000 --> 00:29:37,920
Speaker 3: to pay six hundred dollars for an iPhone. So if

604
00:29:37,920 --> 00:29:39,520
Speaker 3: you can understand like that, nobody thought it was going

605
00:29:39,560 --> 00:29:41,440
Speaker 3: to work in America. Why would there be a retail

606
00:29:41,640 --> 00:29:44,920
Speaker 3: sector in China, a country with developing wages and no

607
00:29:44,960 --> 00:29:48,360
Speaker 3: appetite for such an expensive product. Well, by twenty ten,

608
00:29:48,880 --> 00:29:52,280
Speaker 3: the iPhone just becomes the most conspicuous symbol of I've

609
00:29:52,280 --> 00:29:54,960
Speaker 3: made it in China, and to such an extent that,

610
00:29:55,040 --> 00:29:57,880
Speaker 3: like the lines outside what are now four stores in

611
00:29:57,960 --> 00:30:00,760
Speaker 3: China at the time, there's thousands of people. They're snake

612
00:30:00,840 --> 00:30:03,640
Speaker 3: climbing around these stores. But the thing is they're not

613
00:30:03,760 --> 00:30:06,440
Speaker 3: like Joe and Tracy excited for the next iPhone and

614
00:30:06,480 --> 00:30:08,720
Speaker 3: just camping out overnight because I have to have it.

615
00:30:08,720 --> 00:30:12,160
Speaker 3: It's migrants that have been trucked in like by the

616
00:30:12,200 --> 00:30:15,240
Speaker 3: bus load to buy as many iPhones as possible. So

617
00:30:15,320 --> 00:30:18,920
Speaker 3: these quasi gangsters, these scalpers known as yellow cows, can

618
00:30:19,000 --> 00:30:21,200
Speaker 3: a mass, let's say, ten thousand phones and go to

619
00:30:21,200 --> 00:30:23,360
Speaker 3: a city where there is no Apple store, and they

620
00:30:23,400 --> 00:30:26,200
Speaker 3: sell them at hawked up inflated prices because it's such

621
00:30:26,200 --> 00:30:28,760
Speaker 3: a conspicuous status symbol. I don't want to go on

622
00:30:28,800 --> 00:30:30,640
Speaker 3: and on about this, but essentially what happens is you

623
00:30:30,680 --> 00:30:33,320
Speaker 3: have to understand these gangsters are connected with the triads,

624
00:30:33,640 --> 00:30:36,400
Speaker 3: and they begin finding ways to make more money per

625
00:30:36,400 --> 00:30:39,720
Speaker 3: iPhone than Apple, but they're illegal ways. They're buying phones

626
00:30:39,720 --> 00:30:42,080
Speaker 3: in the US using fake IDs, so they're buying them

627
00:30:42,080 --> 00:30:44,200
Speaker 3: for less than one hundred dollars because they're buying a

628
00:30:44,200 --> 00:30:46,440
Speaker 3: twenty four month contract but only paying the first month.

629
00:30:46,560 --> 00:30:49,880
Speaker 3: They're smuggling them into the country, they're zapping the processor,

630
00:30:50,000 --> 00:30:53,200
Speaker 3: rendering the damn thing irre inoperable, but at the same

631
00:30:53,240 --> 00:30:56,160
Speaker 3: time masking that it's a stolen phone essentially, and Apple

632
00:30:56,240 --> 00:30:58,640
Speaker 3: is totally flum mixed, not understanding what's going on, not

633
00:30:58,800 --> 00:31:02,280
Speaker 3: understanding Chinese culture, certainly not understanding Chinese politics. And this

634
00:31:02,360 --> 00:31:05,120
Speaker 3: is the origin story of the warranty differences. It's because

635
00:31:05,120 --> 00:31:07,720
Speaker 3: Apple was trying to clamp down on these illegal practices,

636
00:31:08,040 --> 00:31:10,480
Speaker 3: and that story sort of gets lost in translation. But

637
00:31:10,560 --> 00:31:13,000
Speaker 3: that's why China's so upset with Apple in twenty thirteen.

638
00:31:13,400 --> 00:31:13,880
Speaker 1: I want to.

639
00:31:13,800 --> 00:31:16,200
Speaker 2: Correct the record here, which is I do not, in

640
00:31:16,240 --> 00:31:18,680
Speaker 2: fact camp out in front of an Apple stores waiting

641
00:31:18,680 --> 00:31:20,680
Speaker 2: for the latest iPhone. I think my iPhone is like

642
00:31:20,760 --> 00:31:23,560
Speaker 2: seven or eight years old. It works so well these days,

643
00:31:23,560 --> 00:31:25,560
Speaker 2: you really don't want to play exactly. I am the

644
00:31:25,680 --> 00:31:29,400
Speaker 2: customer that Apple hates because I am very satisfied with

645
00:31:29,520 --> 00:31:30,680
Speaker 2: my ancient phone.

646
00:31:31,200 --> 00:31:33,160
Speaker 3: Okay, seriously, what model of iPhone you have? Is it

647
00:31:33,160 --> 00:31:34,040
Speaker 3: really an eight? Or well?

648
00:31:34,120 --> 00:31:35,960
Speaker 2: This is I really don't I don't know either.

649
00:31:36,000 --> 00:31:38,680
Speaker 1: If you had asked me ten years ago, what model

650
00:31:38,720 --> 00:31:40,960
Speaker 1: iPhone do you have? I would have been able to

651
00:31:41,000 --> 00:31:43,400
Speaker 1: answer right away. If you asked me right now, I

652
00:31:43,440 --> 00:31:44,280
Speaker 1: have no idea.

653
00:31:44,360 --> 00:31:44,800
Speaker 3: I bought it.

654
00:31:45,040 --> 00:31:48,680
Speaker 1: That's years ago. It's been so long since I've thought

655
00:31:48,720 --> 00:31:51,400
Speaker 1: that it was important to know the differences. You know,

656
00:31:51,400 --> 00:31:53,360
Speaker 1: at one point I was like, oh, that's a lot different.

657
00:31:53,560 --> 00:31:56,920
Speaker 1: Now it's like, there's the game seems so marginal at

658
00:31:56,960 --> 00:31:59,800
Speaker 1: this point from each generation, at least as someone.

659
00:31:59,600 --> 00:32:01,600
Speaker 3: That's not you know, it's just cringing right now, I

660
00:32:01,920 --> 00:32:03,040
Speaker 3: hear that. Yeah, I don't care.

661
00:32:03,120 --> 00:32:06,840
Speaker 1: Yeah, you said something interesting that at the time of

662
00:32:07,760 --> 00:32:10,400
Speaker 1: the rush to China, there was this sort of consensus

663
00:32:10,440 --> 00:32:12,240
Speaker 1: in the West that this was a good thing because

664
00:32:12,520 --> 00:32:16,640
Speaker 1: it would accelerate the process of democratization of liberalization, the

665
00:32:16,760 --> 00:32:20,280
Speaker 1: likes of which maybe we've seen in Korea, Taiwan, so forth.

666
00:32:20,400 --> 00:32:23,240
Speaker 1: On the other hand, in theory, one of the things

667
00:32:23,280 --> 00:32:27,040
Speaker 1: that business leaders really liked about doing business in China

668
00:32:27,280 --> 00:32:30,880
Speaker 1: was the fact unions aren't legal. There's this heavy hand

669
00:32:31,040 --> 00:32:34,000
Speaker 1: of the state that keeps wages in check, and keeps

670
00:32:34,080 --> 00:32:37,520
Speaker 1: organizations in check, and probably keeps environmental groups in check,

671
00:32:37,560 --> 00:32:38,000
Speaker 1: et cetera.

672
00:32:38,240 --> 00:32:39,040
Speaker 3: How much was this.

673
00:32:39,040 --> 00:32:42,560
Speaker 1: Tension not appreciated that this phenomenon that we may be

674
00:32:42,720 --> 00:32:45,160
Speaker 1: expected to see play out in China of liberalization and

675
00:32:45,200 --> 00:32:49,360
Speaker 1: democratization would have been explicitly not what the business leaders

676
00:32:49,400 --> 00:32:51,200
Speaker 1: going to this country would have wanted to see.

677
00:32:51,720 --> 00:32:54,560
Speaker 3: I mean, there's absolutely a sense that business people had

678
00:32:54,600 --> 00:32:56,760
Speaker 3: just like agreed sense of why they wanted to be

679
00:32:56,880 --> 00:32:59,160
Speaker 3: in China. But I guess what I'm trying to push

680
00:32:59,240 --> 00:33:02,760
Speaker 3: back against is because it's like obviously a strategic error

681
00:33:02,880 --> 00:33:05,720
Speaker 3: in retrospect and obviously we experienced the China shock and

682
00:33:06,200 --> 00:33:08,520
Speaker 3: our own industries got hollowed out. I feel like now

683
00:33:08,560 --> 00:33:11,120
Speaker 3: there's just like a revisionist sense that like, we were

684
00:33:11,240 --> 00:33:13,560
Speaker 3: never doing this for valid reasons. There was never a

685
00:33:13,600 --> 00:33:17,760
Speaker 3: sort of like real geopolitical strategic sense, right that Bill

686
00:33:17,760 --> 00:33:20,840
Speaker 3: Clinton or Larry Summers were just like in the pocket

687
00:33:20,920 --> 00:33:23,600
Speaker 3: of business people and so forth. I just don't really

688
00:33:23,680 --> 00:33:26,800
Speaker 3: find that convincing. Taiwan was under martial law until the

689
00:33:26,880 --> 00:33:29,280
Speaker 3: late nineteen nineties, effectively, maybe it was the nineteen eighties,

690
00:33:29,320 --> 00:33:30,760
Speaker 3: but then in the late nineteen nineties they had their

691
00:33:30,760 --> 00:33:34,280
Speaker 3: first democratic elections. This is of course an ethnically Chinese island,

692
00:33:34,680 --> 00:33:37,000
Speaker 3: and you know, it was very much used. I mean,

693
00:33:37,040 --> 00:33:39,680
Speaker 3: however problematically, it was used as an example of we

694
00:33:39,720 --> 00:33:43,040
Speaker 3: could export democracy through capitalism. I do think there was

695
00:33:43,080 --> 00:33:45,640
Speaker 3: a track record and people made that argument in good faith,

696
00:33:46,040 --> 00:33:48,040
Speaker 3: in addition to business people who saw it for their

697
00:33:48,040 --> 00:33:48,760
Speaker 3: own purposes.

698
00:33:49,920 --> 00:33:54,080
Speaker 2: So one way of describing that Apple China relationship is

699
00:33:54,120 --> 00:33:57,120
Speaker 2: they're sort of frenemies, right. There is a tension built

700
00:33:57,160 --> 00:34:01,160
Speaker 2: into the relationship, but both sides got something out of it.

701
00:34:02,080 --> 00:34:06,000
Speaker 2: If we fast forward to today's environment, we have tariffs

702
00:34:06,000 --> 00:34:09,000
Speaker 2: in the US obviously, although no one knows what's going

703
00:34:09,040 --> 00:34:12,480
Speaker 2: to happen with those. You have China making a very

704
00:34:12,480 --> 00:34:16,799
Speaker 2: conscious decision to build up its tech sector. Who has

705
00:34:16,920 --> 00:34:20,279
Speaker 2: the upper hand in the relationship right now? Who is

706
00:34:20,320 --> 00:34:20,840
Speaker 2: the power?

707
00:34:20,960 --> 00:34:23,200
Speaker 3: So I would push back, I would not call them frenemies.

708
00:34:23,200 --> 00:34:26,040
Speaker 3: Tim Cook and Chiesiping, broadly speaking, have the same interests,

709
00:34:26,040 --> 00:34:28,880
Speaker 3: which is to say, the more that Apple is allowed

710
00:34:28,880 --> 00:34:32,399
Speaker 3: to have its production consolidated into China, the better their

711
00:34:32,440 --> 00:34:35,600
Speaker 3: scale is, the better their margins are, et cetera. That's

712
00:34:35,600 --> 00:34:38,680
Speaker 3: what Chijinping wants as well, because he understands, basically because

713
00:34:38,680 --> 00:34:41,560
Speaker 3: Apple taught him that having Apple production in the country

714
00:34:41,640 --> 00:34:44,640
Speaker 3: engenders a form of technology transfer that helps the rest

715
00:34:44,640 --> 00:34:48,160
Speaker 3: of the electronic sector, which is a quote China scholar

716
00:34:48,160 --> 00:34:50,400
Speaker 3: an economists very not and that is the most important

717
00:34:50,400 --> 00:34:53,200
Speaker 3: thing that Chijinping wants, right. I mean, I compare Apple's

718
00:34:53,680 --> 00:34:56,280
Speaker 3: presence in China to something like that of the Marshall Plan,

719
00:34:56,520 --> 00:34:58,640
Speaker 3: something that sounds insane until you look at the numbers

720
00:34:58,680 --> 00:35:01,200
Speaker 3: and you realize that it's bigger than Marshall Plan. So

721
00:35:01,920 --> 00:35:04,680
Speaker 3: the problem is actually that Donald Trump and Tim Cook

722
00:35:04,719 --> 00:35:07,520
Speaker 3: have diametrically opposed interest which is to say that if

723
00:35:07,520 --> 00:35:10,680
Speaker 3: Donald Trump could move all production out of China, he will. Well,

724
00:35:10,719 --> 00:35:13,840
Speaker 3: Apple doesn't want that. That's an existential threat quite. I

725
00:35:14,120 --> 00:35:15,879
Speaker 3: really mean that that's an existential threat to a three

726
00:35:16,000 --> 00:35:18,239
Speaker 3: trillion dollar company. So that's where the tension is. The

727
00:35:18,239 --> 00:35:20,799
Speaker 3: tension really isn't between Cook and she, as strange as

728
00:35:20,800 --> 00:35:21,959
Speaker 3: that is, it's between Cook.

729
00:35:22,120 --> 00:35:26,040
Speaker 2: You really don't think there's tension between Apple and China,

730
00:35:26,160 --> 00:35:30,080
Speaker 2: even with the tech crackdown, even with Xijinping coming out.

731
00:35:30,160 --> 00:35:32,000
Speaker 2: One of the first things that he says is that

732
00:35:32,040 --> 00:35:35,880
Speaker 2: criticism of Apple, and clearly he's trying to like extract

733
00:35:35,960 --> 00:35:39,400
Speaker 2: some things from the company that the company is maybe

734
00:35:39,520 --> 00:35:40,560
Speaker 2: reluctant to give up.

735
00:35:40,600 --> 00:35:43,600
Speaker 1: And the rise of really good Chinese competitors that are

736
00:35:43,600 --> 00:35:46,319
Speaker 1: winning market share all around the world, maybe outside the US.

737
00:35:47,200 --> 00:35:50,120
Speaker 3: Yeah, so Tracy's examples are historical, right, So I'm not

738
00:35:50,120 --> 00:35:52,040
Speaker 3: saying there's never been tension. Of course, there's been loads

739
00:35:52,080 --> 00:35:54,719
Speaker 3: of tension, but the way that Apple responded was in

740
00:35:54,719 --> 00:35:58,560
Speaker 3: effect to playcate federal and provincial officials so that they

741
00:35:58,600 --> 00:36:03,759
Speaker 3: haven't really had any problem. Right. So there's a tension relationship,

742
00:36:03,840 --> 00:36:06,120
Speaker 3: let's say, But insofar as it's a marriage, I think

743
00:36:06,120 --> 00:36:08,400
Speaker 3: it's actually a pretty it's a Catholic marriage. There's not

744
00:36:08,400 --> 00:36:10,920
Speaker 3: going to be a divorce. It's going pretty well. The

745
00:36:11,160 --> 00:36:14,680
Speaker 3: problem isn't really between Apple and China. The problem is

746
00:36:14,760 --> 00:36:18,719
Speaker 3: to use the economic jargon, the negative externalities of the relationship. Right.

747
00:36:18,760 --> 00:36:21,400
Speaker 3: So the problem is that for everybody else this is

748
00:36:21,400 --> 00:36:26,120
Speaker 3: actually deeply problematic because if you have America's top engineers training,

749
00:36:26,520 --> 00:36:29,919
Speaker 3: a manufacturing supply chain that in effect can be weaponized,

750
00:36:30,000 --> 00:36:33,760
Speaker 3: and world's dominance, that's not a great place for Washington

751
00:36:34,040 --> 00:36:36,360
Speaker 3: or just your average American citizen. It's nice that this

752
00:36:36,440 --> 00:36:41,239
Speaker 3: relationship gives us relatively sophisticated and affordable iPhones, but the

753
00:36:41,320 --> 00:36:44,719
Speaker 3: downside here is that China is absolutely dominant in high

754
00:36:44,840 --> 00:36:47,640
Speaker 3: end electronics, and you can use those skills to build drones,

755
00:36:47,719 --> 00:36:50,560
Speaker 3: you can use those skills to build military weaponry. And

756
00:36:50,880 --> 00:36:53,360
Speaker 3: Apple would frankly be training their chip makers if it

757
00:36:53,360 --> 00:36:55,719
Speaker 3: weren't for a Senate coming down on them pretty hard

758
00:36:55,760 --> 00:36:58,359
Speaker 3: a couple of years ago. So that's the problem, right.

759
00:36:58,360 --> 00:37:01,640
Speaker 3: The problem isn't that something stops in the relationship between

760
00:37:01,680 --> 00:37:03,799
Speaker 3: Apple and China. The problem is that it continues.

761
00:37:04,719 --> 00:37:06,919
Speaker 1: Just good to push back on this framing a little

762
00:37:06,960 --> 00:37:09,960
Speaker 1: bit and I certainly there is much that I find

763
00:37:10,360 --> 00:37:11,719
Speaker 1: very compelling.

764
00:37:11,320 --> 00:37:12,560
Speaker 3: About this story.

765
00:37:13,080 --> 00:37:15,839
Speaker 1: But you talk about the beginning of when the US

766
00:37:15,920 --> 00:37:18,760
Speaker 1: and Chinese economies really got integrated in the late nineties

767
00:37:18,800 --> 00:37:23,240
Speaker 1: early two thousands, sometime around Chinese ascension into the WTO,

768
00:37:23,880 --> 00:37:26,960
Speaker 1: Like everyone recognizes in retrospect that it's been a mistake,

769
00:37:27,400 --> 00:37:28,520
Speaker 1: and has it been?

770
00:37:28,640 --> 00:37:30,560
Speaker 3: I mean again, the other thing is.

771
00:37:30,480 --> 00:37:34,280
Speaker 1: That Apple is worth three trillion dollars. Almost every American

772
00:37:34,320 --> 00:37:38,080
Speaker 1: with any investment probably has some exposure to it. It's

773
00:37:38,120 --> 00:37:41,719
Speaker 1: been incredible for the development and the alleviation of poverty

774
00:37:42,200 --> 00:37:45,840
Speaker 1: in China. We've never gone to war with China. It

775
00:37:45,840 --> 00:37:48,480
Speaker 1: doesn't seem like you know, in the modern era, it

776
00:37:48,560 --> 00:37:51,480
Speaker 1: hasn't come close to happening, at least so far. Like,

777
00:37:51,600 --> 00:37:54,279
Speaker 1: isn't there a version of this story that as long

778
00:37:54,320 --> 00:37:57,600
Speaker 1: as we trust each other, Chinese students could come to

779
00:37:57,640 --> 00:38:00,120
Speaker 1: the US and we could have the good jobs of

780
00:38:00,160 --> 00:38:06,480
Speaker 1: like professorships at schools and so forth, and designers in California.

781
00:38:06,719 --> 00:38:09,040
Speaker 1: And isn't there a story where this has made the

782
00:38:09,040 --> 00:38:10,960
Speaker 1: world wealthier and more peaceful.

783
00:38:12,160 --> 00:38:14,640
Speaker 3: So let me start just by completely agreeing with most

784
00:38:14,680 --> 00:38:16,720
Speaker 3: of the points you just made. I think the poverty

785
00:38:16,719 --> 00:38:19,279
Speaker 3: alleviation in China has been really important and a net

786
00:38:19,280 --> 00:38:21,800
Speaker 3: good for humanity, and I think we have over the

787
00:38:21,880 --> 00:38:24,279
Speaker 3: last twenty years been a sort of golden age of

788
00:38:24,600 --> 00:38:26,759
Speaker 3: you know, Silicon Valley works on the software, works on

789
00:38:26,800 --> 00:38:29,120
Speaker 3: the design, and China takes care of the hardware. And

790
00:38:29,160 --> 00:38:32,239
Speaker 3: insofar as there's like a mutually symbiotic relationship, there no

791
00:38:32,280 --> 00:38:35,560
Speaker 3: one fits that build better than Apple. So look, a

792
00:38:35,560 --> 00:38:36,879
Speaker 3: lot of good has come out of it. I mean

793
00:38:36,880 --> 00:38:40,279
Speaker 3: that that's absolutely true. I would totally disagree that we're

794
00:38:40,320 --> 00:38:43,400
Speaker 3: not seeing harbingers of war coming right. I mean, Chijinping

795
00:38:43,480 --> 00:38:45,560
Speaker 3: has literally said we will not leave the question of

796
00:38:45,600 --> 00:38:48,440
Speaker 3: Taiwan to the next generation. I think he's gone so

797
00:38:48,920 --> 00:38:51,160
Speaker 3: specific as to say that twenty twenty seven might be

798
00:38:51,200 --> 00:38:53,680
Speaker 3: the year that Beijing and exes Taiwan. I mean, that's

799
00:38:53,760 --> 00:38:56,840
Speaker 3: really troubling, especially if you're Taiwanese. But it's really troubling

800
00:38:56,840 --> 00:38:58,960
Speaker 3: if you understand the chip sector, because ninety percent of

801
00:38:58,960 --> 00:39:01,640
Speaker 3: advanced chips come out of the country, and American military

802
00:39:01,640 --> 00:39:04,239
Speaker 3: officials have said that like in the event that somehow

803
00:39:04,400 --> 00:39:07,640
Speaker 3: Beijing was able to take control of the FABS in Taiwan,

804
00:39:08,000 --> 00:39:10,080
Speaker 3: like we would go bomb them. We would bomb the FABS.

805
00:39:10,120 --> 00:39:12,600
Speaker 3: I mean they would like if somehow TSMC survived the war,

806
00:39:12,640 --> 00:39:15,040
Speaker 3: which is basically untenable, but if somehow they did, the

807
00:39:15,120 --> 00:39:17,560
Speaker 3: American military would see fit to destroy them, because the

808
00:39:17,560 --> 00:39:20,280
Speaker 3: idea that they would be in Chinese hands without exporting

809
00:39:20,320 --> 00:39:24,399
Speaker 3: to America would be existential. So there's that, and then

810
00:39:24,440 --> 00:39:26,600
Speaker 3: there's just you don't have to be anti CCP, you

811
00:39:26,600 --> 00:39:28,960
Speaker 3: don't have to be anti China to recognize that this

812
00:39:29,080 --> 00:39:32,080
Speaker 3: is clearly America's biggest rival really since the founding. It's

813
00:39:32,120 --> 00:39:35,640
Speaker 3: the USSR was never such an economic rival, never sort

814
00:39:35,680 --> 00:39:39,239
Speaker 3: of like rivaled America in terms of high end electronics.

815
00:39:39,239 --> 00:39:41,960
Speaker 3: I mean absolutely there was like a nuclear arms battle,

816
00:39:42,320 --> 00:39:44,920
Speaker 3: but the Chinese are far more sophisticated. And like I

817
00:39:44,920 --> 00:39:47,840
Speaker 3: wrote my thesis on a Grand Strategy in America, and

818
00:39:47,880 --> 00:39:49,160
Speaker 3: what I would point out is that like in the

819
00:39:49,239 --> 00:39:52,920
Speaker 3: nineteen eighties, America started spending more or on its military,

820
00:39:53,200 --> 00:39:56,560
Speaker 3: understanding that the Soviet economy was not as dynamic, right,

821
00:39:56,600 --> 00:39:58,640
Speaker 3: and so it wasn't growing as quickly, and so you

822
00:39:58,680 --> 00:40:00,719
Speaker 3: were going to accelerate their own dem eyes if you

823
00:40:00,880 --> 00:40:03,320
Speaker 3: sort of set up a military in which the Soviets

824
00:40:03,320 --> 00:40:05,440
Speaker 3: were likely to respond to the same vein. You cannot

825
00:40:05,440 --> 00:40:07,279
Speaker 3: apply that strategy to a country that is three or

826
00:40:07,320 --> 00:40:09,759
Speaker 3: four times the population and has literally been growing faster

827
00:40:09,840 --> 00:40:12,360
Speaker 3: than America for the last four decades. So it really

828
00:40:12,440 --> 00:40:15,040
Speaker 3: is a massive threat. And the idea that in the

829
00:40:15,080 --> 00:40:17,120
Speaker 3: event of some sort of battle, we're not able to

830
00:40:17,200 --> 00:40:19,640
Speaker 3: make stuff because we outsourced it all to China over

831
00:40:19,680 --> 00:40:22,160
Speaker 3: the last twenty five years is pretty dramatic. I just

832
00:40:22,160 --> 00:40:25,600
Speaker 3: think of World War two. Hitler was really concerned about

833
00:40:25,640 --> 00:40:28,000
Speaker 3: the US coming in because of their industrial capacity. We

834
00:40:28,080 --> 00:40:31,080
Speaker 3: used to call it Detroit, the arsenal of democracy. We

835
00:40:31,120 --> 00:40:33,880
Speaker 3: don't have an arsenal democracy anymore, but we have trained

836
00:40:33,920 --> 00:40:37,239
Speaker 3: up China to be an arsenal of communism. That's I

837
00:40:37,239 --> 00:40:39,080
Speaker 3: don't think you have to be hyperbolic to realize that

838
00:40:39,080 --> 00:40:40,080
Speaker 3: that's a big deal.

839
00:40:41,000 --> 00:40:43,400
Speaker 2: I have just one more question, and I'm going to

840
00:40:43,480 --> 00:40:45,960
Speaker 2: ask it very very briefly, because we're getting squeezed for

841
00:40:45,960 --> 00:40:49,600
Speaker 2: a time. But to what degree does AI and the

842
00:40:49,680 --> 00:40:54,600
Speaker 2: rise of this new technology complicate the Apple China relationship.

843
00:40:55,040 --> 00:40:58,040
Speaker 3: Really complicates it? So for two reasons. One is that

844
00:40:58,320 --> 00:41:00,560
Speaker 3: I would argue, or actually I could just demonstrate with

845
00:41:00,640 --> 00:41:03,400
Speaker 3: internal documents and some public documents that the iPhone has

846
00:41:03,440 --> 00:41:06,239
Speaker 3: become more Chinese with time. In other words, the number

847
00:41:06,280 --> 00:41:09,239
Speaker 3: of Chinese suppliers involved in the process is now much

848
00:41:09,280 --> 00:41:12,840
Speaker 3: greater than the number of Taiwanese or American multinationals operating

849
00:41:12,840 --> 00:41:15,359
Speaker 3: in the country or operating in their home countries. That

850
00:41:15,480 --> 00:41:18,239
Speaker 3: is put on steroids in the AI era because Chat,

851
00:41:18,239 --> 00:41:20,960
Speaker 3: TBT and other Western AI clients are not allowed on

852
00:41:21,000 --> 00:41:23,719
Speaker 3: the iPhone in China, and so Apple has to work

853
00:41:23,760 --> 00:41:26,200
Speaker 3: with the likes of bayd or Ali Baba to have AI,

854
00:41:26,360 --> 00:41:30,120
Speaker 3: let's say, displacing Siri or augmenting Siri. So that I

855
00:41:30,120 --> 00:41:32,799
Speaker 3: think is quite problematic because that means that Apple will

856
00:41:32,840 --> 00:41:35,360
Speaker 3: be in effect doing what they did for hardware, but

857
00:41:35,480 --> 00:41:38,040
Speaker 3: for AI. In other words, you'll have Apple software engineers

858
00:41:38,080 --> 00:41:41,120
Speaker 3: helping by Do, helping Ali Baba whoever their Chinese partner is,

859
00:41:41,120 --> 00:41:43,480
Speaker 3: to make sure that they have cutting edge AI in

860
00:41:43,560 --> 00:41:46,120
Speaker 3: the country. If it wasn't bad enough that Apple was

861
00:41:46,160 --> 00:41:48,640
Speaker 3: training up their hardware engineering to be world class, we're

862
00:41:48,640 --> 00:41:50,920
Speaker 3: now in a situation where Apple software engineers are going

863
00:41:50,960 --> 00:41:53,080
Speaker 3: to be training Chinese AI to be best in class.

864
00:41:54,000 --> 00:41:57,319
Speaker 1: Very interesting stuff. Patrick McGee, thank you so much for

865
00:41:57,400 --> 00:42:00,719
Speaker 1: coming on Oline. That was a fantastic really fascinating conversation.

866
00:42:00,920 --> 00:42:03,319
Speaker 1: Urge everyone to check out the book. Appreciate you coming

867
00:42:03,320 --> 00:42:20,000
Speaker 1: on my pleasure, Tracy. I thought that was really good,

868
00:42:20,040 --> 00:42:23,480
Speaker 1: and I agree with that last point in the fundamental

869
00:42:23,520 --> 00:42:28,120
Speaker 1: sense that you know, I think arguably the relationship definitely

870
00:42:28,320 --> 00:42:32,160
Speaker 1: has been win win on multiple fronts, from the US,

871
00:42:32,239 --> 00:42:34,759
Speaker 1: from the Apple shareholders, from the Apple workers, from the

872
00:42:34,840 --> 00:42:38,400
Speaker 1: Chinese workers' perspective. But this idea there are now so

873
00:42:38,560 --> 00:42:42,480
Speaker 1: much risks concentrated under a specific dimension. Yeah, I take

874
00:42:42,520 --> 00:42:43,360
Speaker 1: that pretty seriously.

875
00:42:43,520 --> 00:42:46,879
Speaker 2: Yeah, the negative externality point makes a lot of sense,

876
00:42:46,920 --> 00:42:49,760
Speaker 2: although I still think there are some tensions between Apple

877
00:42:49,800 --> 00:42:52,759
Speaker 2: and the CCP itself. The other thing I was thinking

878
00:42:52,800 --> 00:42:56,400
Speaker 2: about was, I guess we're hearing this repeatedly on the show,

879
00:42:56,560 --> 00:42:59,080
Speaker 2: and I probably don't even need to say it at

880
00:42:59,080 --> 00:43:01,680
Speaker 2: this point, but it is. It's so difficult to replicate

881
00:43:02,120 --> 00:43:06,840
Speaker 2: China's industrial strategy and its industrial management in other countries,

882
00:43:07,040 --> 00:43:10,000
Speaker 2: and I kind of at this point I wonder if

883
00:43:10,360 --> 00:43:11,319
Speaker 2: we'll ever get there.

884
00:43:11,560 --> 00:43:14,160
Speaker 1: No, I don't think anyone will ever get there. In

885
00:43:14,200 --> 00:43:17,319
Speaker 1: some sense, what I suspect is the story is that

886
00:43:17,760 --> 00:43:22,240
Speaker 1: some of the Chinese industrial behemoths will slowly develop ecosystems

887
00:43:22,320 --> 00:43:26,160
Speaker 1: in other countries, but the companies are downstream from China,

888
00:43:26,600 --> 00:43:29,240
Speaker 1: and so I imagine, you know, you see more foreign outbound

889
00:43:29,360 --> 00:43:33,560
Speaker 1: investment from Chinese giants into Vietnam, into Cambodia, into Brazil,

890
00:43:34,080 --> 00:43:36,799
Speaker 1: et cetera. That might pose other risks and they're never

891
00:43:36,840 --> 00:43:39,560
Speaker 1: going to be the next China in some sense, but

892
00:43:39,760 --> 00:43:44,120
Speaker 1: you still get that capital deepening and wealth creation outside

893
00:43:44,160 --> 00:43:48,040
Speaker 1: of China, but likely driven by Chinese industrial giants.

894
00:43:48,400 --> 00:43:51,839
Speaker 2: Also, Joe, yeah, I looked up my iPhone. Yeah, oh

895
00:43:51,880 --> 00:43:54,759
Speaker 2: it's an iPhone eleven. So I guess it's what are

896
00:43:54,760 --> 00:43:56,000
Speaker 2: we all years old?

897
00:43:56,120 --> 00:43:58,239
Speaker 1: I have no idea what we're even on now, like

898
00:43:58,360 --> 00:44:01,319
Speaker 1: only the biggest iphe nerds. And I don't mean that

899
00:44:01,360 --> 00:44:05,160
Speaker 1: pejoratively maybe like I have. I just I used to

900
00:44:05,160 --> 00:44:06,920
Speaker 1: know these I think it's really important. I used to

901
00:44:07,000 --> 00:44:08,200
Speaker 1: know these things, and I don't at all.

902
00:44:08,320 --> 00:44:12,120
Speaker 2: Where are at all iPhone sixteen.

903
00:44:12,400 --> 00:44:13,600
Speaker 1: And iOS eighteen.

904
00:44:14,000 --> 00:44:15,319
Speaker 2: Do you think one day we're going to get to

905
00:44:15,400 --> 00:44:18,640
Speaker 2: like iPhone two hundred and ninety eight, it'll just keep going.

906
00:44:18,800 --> 00:44:20,760
Speaker 1: I don't know, but I think I saw our colleague

907
00:44:20,760 --> 00:44:23,600
Speaker 1: Mark German, who is And now you say again, say

908
00:44:23,600 --> 00:44:26,680
Speaker 1: this lovingly and Apple NERD. I think apparently, at least

909
00:44:26,719 --> 00:44:29,400
Speaker 1: with the software, they're going to change their naming conventions

910
00:44:29,520 --> 00:44:31,640
Speaker 1: at some point. Yeah, so that it doesn't end.

911
00:44:31,719 --> 00:44:32,200
Speaker 3: That makes sense.

912
00:44:32,320 --> 00:44:34,080
Speaker 1: Yeah, I think I saw him tweet that last night.

913
00:44:34,280 --> 00:44:35,759
Speaker 2: Okay, well, shall we leave it there.

914
00:44:35,840 --> 00:44:36,520
Speaker 3: Let's leave it there.

915
00:44:36,680 --> 00:44:39,120
Speaker 2: This has been another episode of the Add Thoughts podcast.

916
00:44:39,239 --> 00:44:42,600
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway.

917
00:44:42,360 --> 00:44:45,000
Speaker 1: And I'm Jill Wisenthal. You can follow me at the Stalwart.

918
00:44:45,239 --> 00:44:49,080
Speaker 1: Follow Patrick McGee He's at Patrick McGee Underscore and check

919
00:44:49,080 --> 00:44:52,480
Speaker 1: out his new book. Follow our producers Carmen Rodriguez at

920
00:44:52,520 --> 00:44:55,440
Speaker 1: Carman armand dash, Ol Bennett at Dashbot and kel Brooks

921
00:44:55,520 --> 00:44:58,040
Speaker 1: at Cale Brooks. From our odd Lots content, go to

922
00:44:58,080 --> 00:45:01,000
Speaker 1: Bloomberg dot com slash odd Lots, where the daily newsletter

923
00:45:01,040 --> 00:45:03,399
Speaker 1: and all of our episodes, and you can chat about

924
00:45:03,440 --> 00:45:05,600
Speaker 1: all of these topics twenty four to seven in our

925
00:45:05,719 --> 00:45:08,800
Speaker 1: discord Discord dot gg slash odlock.

926
00:45:09,160 --> 00:45:11,640
Speaker 2: And if you enjoy odd Lots, if you like it

927
00:45:11,680 --> 00:45:14,640
Speaker 2: when we talk about Apple in China, then please leave

928
00:45:14,680 --> 00:45:18,560
Speaker 2: us a positive review on your favorite podcast platform. And remember,

929
00:45:18,640 --> 00:45:21,239
Speaker 2: if you are a Bloomberg subscriber, you can listen to

930
00:45:21,440 --> 00:45:24,560
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931
00:45:24,600 --> 00:45:27,160
Speaker 2: to do is find the Bloomberg channel on Apple Podcasts

932
00:45:27,239 --> 00:45:30,040
Speaker 2: and follow the instructions there. Thanks for listening

933
00:46:00,040 --> 00:46:01,080
Speaker 3: And