Why Apple Can Never Leave China - Patrick Mcgee

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Patrick McGee is a business journalist who has spent over a decade uncovering the stories behind the technology we use every day. Since 2013, he's written for the Financial Times from Hong Kong, Germany, and California, covering everything from Apple's inner workings to the rise of electric vehicles and the Volkswagen diesel scandal.

From 2019 to 2023, Patrick led the FT's coverage of Apple, earning a San Francisco Press Club Award in 2023 for his investigation into the company's HR problems. His work has also appeared in The New York Times, The Wall Street Journal, The Times of London, and several other major publications.

His first book, Apple in China, draws on more than 200 interviews with former Apple executives and engineers to tell the story of how Apple's decision to build its supply chain in China has increasingly left the company exposed in an age of increased geopolitical tensions between the US and china.

Spanning three decades and featuring new details and vivid characters, the book offers a sobering look at Apple's future and the broader state of play in tech and geopolitics.

What I like about Apple in China is that it goes beyond the usual executive biographies and fleshes out the increasing convergence between economics, technology and geopolitics. It's both a detailed historical account and an exciting read.

TIMESTAMPS:
00:00 - Intro & Trailer
01:42 - Why Apple's Manufacturing Legacy Is Misunderstood
06:21 - A Message From Revolut
07:46 - How Steve Jobs Lost Manufacturing Control
11:35 - The Dot-Com Crisis And Its Impact On Apple
18:49 - America's Post-WWII Economic Transition
27:52 - Foxconn: The Unsung Partner Behind Apple's Success
33:52 - Apple Was Ignorant About China
38:02 - Beijing's Strategy Towards Apple
40:48 - Apple's Economic Weight In China
46:46 - Addressing Critiques of Patrick's China Numbers
49:42 - US-China Interdependence
53:37 - Why China's Scale Created Unique Challenges
57:51 - Can Apple Ever Escape China Dependence
01:01:40 - Advice To A Fresh Graduate

This is the 56th episode Of The Front Row Podcast

Patrick 00:00:00

I think too many Apple reports are basically just trying to press fast forward on the official press releases. In other words, it's getting ahead of Apple's own narrative, but it's stuck in Apple's narrative. It's not outside the narrative.

Just to give the listener a sense of how obsessed Steve Jobs was, and you know, his obsession could be great, but his obsessions could also be really stupid. He wanted those machines to match the colors of the rainbow. I mean, it's just an absurd request, the kind of thing that doesn't matter at all. He wanted the floors to be so white and clean that you could eat off of them.

The big argument that Tim Cook wins is an ability to show Steve Jobs that you can retain the control, but we just won't have the factories on our balance sheet and we won't technically own them.

I sort of call Apple and China the marriage of skill and scale. You had a lot of people within Apple that knew how to do this stuff or at least had the sort of wherewithal to figure it out, but there was no factory base in America in the early 2000s to actually get it done. And China could just build at a scale that nobody else could, at a cost that nobody else could match.

Keith 00:01:00

Today I'm joined by Patrick McGee. He wrote this bestselling book, Apple and China, alongside Steven Wiz, The Thinking Machine. These two are my favourite books right now on the American technology ecosystem. In the book, it details the unlikely rise of Apple as America's most dominant consumer tech company, how America contributed greatly to China's emergence as a technology superpower, and perhaps the cost of Apple's grand bargain with China. So it is with my great privilege that I welcome Patrick on the show. Patrick, thank you for coming on.

Patrick 00:01:39

Thanks, Keith. My pleasure.

Keith 00:01:44

I want to first start with this quote that I think perhaps illuminates Apple's DNA as the world's most valuable consumer tech company, and I think that's something we take for granted is that its emergence is historically contingent. So this comes from a book from Ken Cosineda. I think he wrote this book called Creative Selection, and he says that the most significant strand of Apple's product development DNA is to meld technology and the liberal arts, to take the latest software and hardware advances, mix them with elements of design and culture, and produce features and products that people find useful and meaningful in their everyday lives.

My first question to you is that you know everyone kind of knows Apple as a cultural icon, but how come in America, in the world, most people don't really understand Apple's role as a manufacturing revolutionary?

Patrick 00:02:34

I have theories about that answer, but I don't totally know. I mean, that was sort of the whole realisation. The book didn't come out of four years of successively reporting on Apple and then sort of patting out my reporting and making it into a book. It came out of four years of failing to cover Apple. You know, more or less realising that I didn't care about most Apple coverage.

I think too many Apple reports are basically just trying to press fast forward on the official press releases. In other words, it's getting ahead of Apple's own narrative, but it's stuck in Apple's narrative. It's not outside the narrative. And I think the quote about how the sausage gets made goes back at least a hundred years, and yet we just don't really apply that to Apple.

Where if we do, it's the same narrative over and over, which is that Chinese workers are treated poorly. And they are, to be clear. It's an important narrative. But that's the only question we've really asked. And if it was so obvious that Apple was exploiting Chinese workers, an authoritarian regime in Beijing just wouldn't let that happen. This is a really basic question to ask: well, why did they let that happen? Which leads you to a story of technology transfer, which leads you to a story of how do they actually make their products?

Apple's 50 years old as of next May, and for the first 20 years, I think there was a decent amount of reporting on their manufacturing. There's actually some famous Harvard business case studies about Apple adopting just-in-time production, and some of the books in the '90s go on about Apple as a manufacturer.

But really strangely, nobody ever really covered the shift they undertook out of desperation before Steve Jobs comes back, where they basically find a way to work with a series of suppliers to retain the control of manufacturing as if they're doing it themselves without actually doing it themselves. And I think what they came up with is a form of outsourcing that we don't even have a word for. At best, you could maybe call it the Apple way.

So I have some ideas as to why we haven't covered it that way. It might just be that the stranglehold of Apple's own vision of the company is so significant that we all sort of follow into it in one way. But I think it's pretty clear that we really have failed to cover this company as a manufacturer, and they're the world's greatest manufacturer. So it's a stunning dichotomy.

Keith 00:04:52

I went to revisit Walter Isaacson's biography with Steve Jobs, and he mentions China twice in his book.

Patrick 00:04:58

That's right. And Foxconn zero times. And that is amazing.

Keith 00:05:04

There's no mention of Foxconn.

Patrick 00:05:04

Yeah. So I have to remember that. There's no mention of Foxconn, I should say, because look, the guy's writing a biography, and he's writing a biography not of Tim Cook, where that would be a major omission, but of Steve Jobs, who just came up with the products, right, had the ideas for them and sort of gave it to somebody else to actually make. So I think it's a failure of other Apple books more so than Walter Isaacson's biography.

Keith 00:05:26

The point I took away from reading the biography was how in the background the role of China was. It was kind of seen as really not as instrumental, whereas your book kind of contrasts that, which is that you know, while Apple has all the great designs coming out of their campus, there was also another element of their greatness, which was their relentless focus on manufacturing.

Patrick 00:05:46

Yeah, there's definitely an arrogance there, right? A hubris, a sense that someone else gets this done for us and it doesn't have to be part of our narrative. Which I maybe dabble in, but I don't think I've given a full exploration of. And I think that's bound to be written about more in the next five to ten years as more people realise just how ill-equipped the West at large, or America specifically, is to actually build anything in the electronics world at quality and in mass quantity. We've really lost that ability if indeed we ever had it.

Keith 00:07:46

Jobs was known to be this person who was obsessed with handling or having control over the manufacturing process. So at the start of Apple's journey, they really did everything in-house. So what was kind of that moment that shifted, that caused that strategic pivot, if one might call it, to embrace contract manufacturing, which seems to go against his original principles?

Patrick 00:08:12

Just to give the listener a sense of how obsessed Steve Jobs was, and you know, his obsession could be great, but his obsessions could also be really stupid, right? So one of his stupid things that he focused on is he wanted the machines within the factory making the Macs in Fremont to match colour-wise the logo that, if you can remember the 1980s logo, the sort of rainbow-coloured apple, right? He wanted those machines to match the colours of the rainbow. I mean, it's just an absurd request, the kind of thing that doesn't matter at all. He wanted the floors to be so white and clean that you could eat off of them. That stuff just doesn't matter to Terry Gou, the founder of Foxconn, who sort of revolutionises the way Apple products get made.

Anyway, the simple answer to your question is, well, he is kicked out of the company in 1985, and you know, the book goes into some narrative as then what happens. But regardless of those 12 years while he's gone, the company is just totally desperate, out of cash, nearly acquired by three different companies in the 1995-1996 period, and then is days from missing payroll, probably weeks from bankruptcy, in 1996.

It's out of complete desperation that they have to sell a factory that most people probably have never heard of in Fountain, Colorado, just to sort of fight another couple months. And then in that period, they begin to make a little bit of progress, and it's also in that period that they throw the Hail Mary pass to acquire Steve Jobs's company Next. And we'll just avoid the narrative here, but you know, Steve Jobs basically comes back to the company.

But the key thing is that in the months before he comes back are the months in which Apple makes the decision to adopt a global outsourcing strategy. So it is not a Steve Jobs decision, and that's really crucial. Most people think it's a combination of Steve Jobs and Tim Cook, but it's not. The decision had already been made before either of them were at the company, for Steve Jobs obviously the second time, but for Tim Cook the first.

So the simple answer to your question is that it wasn't a Steve Jobs thing. He wanted to retain the control, and even after the candy-coloured iMac came out and was a big success and it was made by LG in Korea, he still wanted to retain control. And in the early 2000s, he probably would have got that wish, except that the dot-com crisis blows up, and in a single day, Apple stock drops by 50%. And at that point, Apple's stock goes back to where it had been before Steve Jobs had come back. In other words, three years of gains all get wiped out in a single day.

So once again, they're just close to bankruptcy. Gateway, of all companies, actually considers purchasing them at the time. So once again, out of sheer desperation, Steve Jobs just loses the argument. So he's unable to have the control that he wants.

And the big argument that Tim Cook wins is an ability to show Steve Jobs that you can retain the control, but we just won't have the factories on our balance sheet and we won't technically own them. And he's basically able to be so convinced that by 2005, when I talked to somebody who proposed building a product in the US, he basically said to them, "I tried that, it didn't work."

So he never wanted to move away from the idea, but he got convinced that it could be done without it. But yeah, it's crucial that it wasn't Steve Jobs that made the decision.

Keith 00:11:38

One of the through lines of your book, which I found fascinating, was that the dot-com boom and bust actually did reshape the manufacturing landscape in the US tremendously. And I think most people today understand that dot-com is maybe a time of irrational exuberance within the internet companies, but there was another story happening within the US, which was that manufacturing was fundamentally being reshaped. There's a silent hollowing out during that period. Can you expand on that a little bit more?

Patrick 00:12:05

Yeah, I'm glad you bring that up because I think you can often have a sense that, you know, stock markets go up and down, and so maybe there's a sense in which, yeah, the dot-com crisis was a big deal. Some companies went out of business, but after some years, you know, stock prices went back up again, and so we can wipe our hands at it. It's like nothing happened. Couldn't be further from the truth.

You know, we're still dealing in a certain sense with the impact of the dot-com crisis because anyone who had manufacturing as their skill set recognised that once there was a massive downturn and people were not buying all the sort of dot-com products and, you know, hardware, well, they had too much inventory on their hands, which meant they had too much labour, which means they had to cut that labour. And then when they wanted to ramp up again, they chose to go to outsourcers.

So it's a big moment of just like American loss, and we weren't really thinking about the consequences of it at the time. And I have some chapters that go into some detail here where in the '80s and '90s, you know, if IBM had their computers built by SCI, which you could sort of think of as the Foxconn of its day, born in Alabama in the '60s and becomes a massive contract manufacturer in the '80s, well then the knowledge transfer is really going from IBM to SCI. So it's going from company to company.

And I don't think we quite realise that when the likes of SCI began competing with Jabil and Flextronics and other companies, those companies are the ones who started going off to Asia, and then from within Asia they began to choose China. And that's sort of how the consolidation into China happens.

I always get asked the question, "Who at Apple chose to go to China?" And the answer is nobody at Apple chose to go to China. The suppliers did, for their own reasons, to win those orders. And that's important because then if it's not Apple manufacturing the products, it's these suppliers and contract manufacturers. The knowledge transfer taking place isn't just from company to company, it's from country to country.

And so it's not just a loss of jobs, it's a loss of know-how. And so America sort of willingly gives up, using sort of 2020 hindsight, the ability, the know-how, the tacit process knowledge of how to actually build stuff, and sort of gives it over to, in effect, China, to shorten the narrative here.

So, you know, I sort of call Apple and China the marriage of skill and scale. You had a lot of people within Apple that knew how to do this stuff or at least had the sort of wherewithal to figure it out, but there was no factory base in America in the early 2000s to actually get it done. And China could just build at a scale that nobody else could, at a cost that nobody else could match.

And so you just get more and more consolidation into the country, and, you know, most of that we all know. I think the light that the book sheds is just the knowledge transfer that takes place when that process, you know, goes on for 25 years. The investments and the people trained are extraordinary.

Keith 00:15:02

If you look at the rise of the multinational company that came about maybe post the Nixon shocks, where I think we started to have a lot more international mobility of capital, what doesn't get captured is usually that transfer of knowledge in a very real and tangible way. And I think your book kind of illustrates that really well.

And you wrote this very wonderful line on page 111 of your book. You said that when Apple sold its factory, most of its 1,100 employees simply got a new uniform, but the result was a huge transfer in practical knowledge from the computer brands to the contract manufacturers. And that seemed like that pivotal moment where you're talking about where it's no longer just within, say, the US companies, but the knowledge really transferred to these contract manufacturers who are already thinking about going to Asia.

Patrick 00:15:52

Yeah. And to be clear, there's nothing passive about it, right? It's extremely active in terms of how the knowledge is passed on. I mean, I think people understand generally, let's say if we're talking about apparel or the way Nike shoes are made, that contract manufacturers will chase price, right? So they will go wherever is cheapest in terms of the labour or something.

But Apple doesn't chase price. Apple chases quality. I mean, they really care about quality in a way that other electronics brands 25 years ago just did not. I know that you could say that now. I think there's a lot of brands that do care about the levels of quality, but I mean, they cared about it to just hilarious extents, right? Where people would come out of a manufacturing school, spend two weeks at Apple and realised that none of what they studied was relevant because Apple just did things in such a different way.

They were never really like making life easy for manufacturers. Designers would design things however they saw fit, and it was up to manufacturers to figure out how to do it, even though what they were being asked was just absolutely absurd.

And so the difference there between price and quality in terms of what you're emphasising is that low-cost stuff can sort of just be made anywhere. But high-quality stuff really has to be taught. You really do have to be there in the factory training hand-and-glove, using cutting-edge machinery and making these massive investments.

And what's interesting about the sort of business model that develops here is that it's hard to emphasise just how small Apple is in the late '90s and early 2000s. But the decisions they make form the basis for them becoming wildly successful and then eventually building more than 200 million iPhones a year.

So it's not like they're this Goliath who comes over to China and has a plan to like build up the nation's manufacturing know-how. It's not that strategic. They're just too small to have that sort of like grandiose vision. But they sort of lay the basis for their own success and they lay the basis for China's success.

And then with the iPod and especially the iPhone, just become like the world's most iconic products. It just has a massive impact on both company and country. And I think people well know the narrative of how the iPhone changed Apple, and there's something intuitive about how it changed China, I think in retrospect. But until I had done the research, I wasn't really familiar with it. And I think until people read the book, they haven't really been familiar with it.

But there's, right, but like in hindsight, there's almost something kind of obvious, right? If you take the Hollywood image of Steve Jobs sort of berating all the people around him, but in doing so, bringing their perceptions of what's possible sort of up to sort of his level, my story is basically just doing that same thing but in an entirely different country, right? That goes from pretty impoverished as little as 30 years ago to the second world's largest economy and knowing quality and electronic scale just better than anybody else.

Keith 00:18:49

If you look at the US when it came out of the World War II, it emerged as really the world's largest manufacturing power. And much of its economic dominance came from its ability to produce things. And over time, obviously made a transition into services, which is now today, America is the largest exporter of services. But it seemed to me that, you know, why wouldn't the policymakers there, you know, thinking, "Hey, you know, we got rich by being a great manufacturer, let's not fully transit into services." Are there any policy stop-gaps that we could have done to kind of retain the critical manufacturing capability?

Patrick 00:19:31

I'm mildly obsessed with this question, so I'm glad that you've touched on it. You know, part of me wants to move on to the next project, and part of me still wants to know more about the very thing you talked about.

So Apple's of course not founded until 1976. A lot of the decisions you're talking about were for the prior three decades. And I largely sympathise and maybe even highly support the ideas that were coming out of post-World War II America.

So just to put some stats on it, I mean, yeah, America was manufacturing more than 50% of basically the world's goods at the end of World War II. I think what they realised is that there was no market to sell it to if Europe remained impoverished, if Asia remained underdeveloped.

And so the idea was that they sort of took this idea that Alexander Hamilton had, that you could cement your independence through manufacturing. And instead, the idea was that America could help cement the world's interdependence through manufacturing. And so the free trade ideas really developed wherein if America helped Europe and helped Japan after being, you know, fierce enemies during World War II, well then maybe there wouldn't be so much war.

So if you actually helped develop economies and young men in particular had factory jobs to go to and a big thriving consumer market in America to sell to, that you would create peace. And that is not an absurd notion. That's largely successful. I mean, you think of West Germany, Taiwan, Korea, Japan. I mean, all of those are autocracies for quite some time, and then by building up a middle class and inculcating liberal values, small-L liberal values, they become thriving democracies in their own right.

So yes, it comes at the cost of America giving up her manufacturing, but it's like a net good where you get this sense that America can focus on the design, the product conception, the branding, the marketing, and other countries are sort of moving up the value chain by taking care of the manufacturing. That's actually a pretty solid model.

But we got arrogant with it in the '90s in what was called the unipolar moment right after the Cold War, and we tried to apply it to China. And China's a proud nation with a 5,000-year history of civilisation. It's four times the size in terms of population of America, and it has no real ambition to stay within a system designed by a relatively small country. It wants to be number one.

I find it difficult to begrudge them for that, but nevertheless, we have to contend with it. So I think that was probably the big mistake in retrospect, taking the solid idea of trying to fit an extremely big puzzle piece into a picture that couldn't really afford it.

Keith 00:22:39

Yeah, Singapore, to a certain extent, really did enjoy the benefits of the creation of the global value chain, probably more than anyone else.

Patrick 00:22:45

Sure. Absolutely amazing. Eventually they moved out because Singapore just couldn't compete. But maybe us being a small state, we were a price taker of sorts. So we couldn't really like do much about it other than find other niche areas we could go into. But within the government here, there's always been an effort to kind of keep some form of manufacturing capability, and they've designed policies around that.

So that was interesting for me just to read a little bit about how something like a company like Apple would, to a certain extent, shape our economic history in this small tiny island state.

Keith 00:23:17

It doesn't seem probable. It doesn't seem obvious to anyone that Apple would eventually end up manufacturing in China, right? And you detail in the book actually it's a long march to China. They did work with other partners, and one of the famous examples that you point out was the LG example, right? They shifted to LG where they, after they flirted with the outsourcing model, I think in 1998, and they saw that it worked with iMac, so they kind of doubled down to really managing the outsourcers rather than building itself. Tell me about the relationship with LG and how LG tried to squeeze them but they kind of failed spectacularly.

Patrick 00:23:59

I loved finding this narrative, by the way. I mean, I'm not familiar with a single Apple book that even mentions LG as a partner. And yet they're absolutely instrumental. And yet, as instrumental as they are, Taiwan is by far the most important country for the first five years of Steve Jobs's comeback where, you know, the candy-coloured iMacs are built.

But the candy-coloured iMac, the first one being Bondi Blue before candy colour, I mean, it is an absolutely make-or-break product for Apple. I quote several people throughout the narrative on that chapter that if for whatever reason it wasn't a success or they couldn't sort of actually make them and sell them, I mean, that was the end of the company, just straight up. There would be no iPod, there'd be no iPhone. And Steve Jobs basically would be known as a guy who failed at Apple twice. I mean, it's that simple.

And so for that computer to be wildly successful means that the partnership with LG is critical. I mean, it deserves so much more ink than my couple chapters on this.

So essentially what happens is LG is their monitor supplier, and the iMac is just a very sexy monitor with a computer stuffed inside. And so Steve Jobs is convinced that we're going to work with LG because we have an existing relationship.

And, you know, sort of to take a tragedy and make a happy thing out of it, Korea was like on the brink of default, or at least a number of banks were, because of the Asian financial crisis and exposure to US dollar-denominated debt. So they were willing to kind of do anything to win orders, right? I talk about this factory in Gumi, Korea, where it just said "survive," and workers were going back and forth all day long seeing this sign. So they knew that they too were on the brink.

And so you have this partnership that ends up being really successful. And you mentioned Singapore, right? So Apple had and still has a facility. I don't know exactly what they're doing. It's logistics, but they've had operations in Singapore since 1981. And they also had similar operations around the same time in Cork, in addition to what was going on in California.

And I'm mentioning that because Apple had this like tri-continent model of building stuff. And so when they go over to their first major contract manufacturing partner LG and the iMac becomes successful, they ask them to expand to the three continents as well. And so LG ends up building plants in Wales and in Mexico. So some iMacs were made in Mexico, which again is another narrative I don't think people are familiar with.

It's a great strategy, but it just, it's a total disaster. I mean, the Mexico one's probably more interesting, and it's where you had sort of Americans setting the specs, but then Koreans trying to get it done, working with Mexicans, and just a clash of culture between these three different proud countries and cultures with really no experience and no clear sense at times of who was in control meant that it really just didn't work at all.

So it's a good strategy, but it doesn't work out. But Terry Gou from Foxconn sort of pounces on this idea and calls up Tim Cook essentially and says, "I can fix this. Give me a chance." And so Foxconn ends up being the company that really thrives with the iMac.

And I've got to shorten some of the narrative here just because it's in the book, but we don't have time for it. But, you know, essentially they just like impress the hell out of everybody. And it's worth knowing they're really like a third-rate supplier at the time. They are not an obvious choice to go to, but Terry Gou is able to just demonstrate a hunger that nobody else really has, and he's willing to do things at like a real bare-bones price. He's probably even losing money on the deal, making the investments, because he recognises that what Apple is asking for is sorts of things that nobody else is asking for.

And that's why most companies don't want to work with Apple. But whereas Terry Gou sees the challenge as an opportunity rather than as a reason not to get involved.

Keith 00:27:54

I highly recommend people read the book because for me, I think it was one of the best books I've read this year. And to a certain extent, it is a history of Foxconn as well. It's a smaller, maybe more abbreviated history.

Patrick 00:28:06

Well, it is. But there's almost something sad about that because, you know, we're coming up to Apple's 50th anniversary. Foxconn's already had their 50th anniversary, right? They were founded in 1974. And I don't know if the Singapore bookshelves are any different, but there is no widely read, you know, well-written history of Foxconn. And there is no biography of Terry Gou.

I'm not saying there aren't any books at all, but in terms of like well-written books, you know, after years of research or anything like that, nothing exists. And that's astonishing. I mean, Terry Gou is like the Henry Ford of Asia. For there not to be a book about this man who's now run for president of Taiwan twice, I mean, just a hugely consequential figure, it's just like a tragedy that we don't know more about him.

So you're right that the book is sort of a mini-history of Foxconn and Terry Gou, and yet he is so deserving, and Foxconn is so deserving, of so much more than the couple chapters that I wrote about them.

Keith 00:29:06

If you talk about, you know, the Apple and China, that doesn't happen without Foxconn. It pretty much is a marriage between Foxconn and Apple. So I'd like for you to take me through how Foxconn at this point, still a third-rate manufacturer according to you, how did they impress the executives at Apple to give them the order?

Patrick 00:29:31

Let me give you a couple answers. The first one's complicated, but I'll just keep it really short, which is that they weren't trying to get into the more lucrative area of what's called ODM work, original design manufacturer work, and instead they were doing the lower-end sort of third-rate work, OEM, original equipment manufacturing.

The difference is that to do the design, you need sort of higher-paid engineers. And if you're a PC maker in the West and you're already giving up your manufacturing for somebody else to do, it's amazing in a certain sense for them to say, "By the way, we'll also do the R&D for you. We'll also do the design for you." And it gets to the point where a computer company in the West can actually just like look in a catalogue that the Taiwanese, someone like Quanta, has come up with and just say, "Pick which design you want," right? And then they'll just stamp like an HP or a Compaq logo on it without the company having to have any real design sense in order to do it, right?

So they're really making it easy for you as a Western PC company to sort of continue to come out with new models. But, of course, this is the total antithesis of the way Apple operates. And so the fact that Foxconn's not interested in that kind of work is what sort of makes it appealing to Apple as well.

So Foxconn's difference is that they'll sort of move heaven and earth for your designs, but they're not going to compete with you. And that's kind of the problem of the ODMs, because once they know how to build computers, they start branding them themselves. And if there's a shortage of components, well, who gets it? Their own brands or their clients? And the answer, of course, is their own brands.

So the companies that go in that direction and rely on the ODMs, in hindsight, I think make a big mistake, whereas Foxconn does something where they want to do the assembly, but they only want to do the assembly as a sort of gateway drug, if you will, for the company to sort of get hooked on that. And then Foxconn will source more and more of the components themselves. Either they'll do it themselves, so they'll get involved in things like metal stamping and plastic injection moulding and stuff like that, or they will start just purchasing the components and working with the companies.

And the clever thing there is they'll often purchase components at one price, and then they'll tell Apple that they cost a different price, and they make money on the difference between those two things. This is called PPV, I think, purchase price variance. It's part of the business model.

So there's a couple things going on there, but essentially the fact that Foxconn won't be their competitor and will move heaven and earth to get things done. That's one thing, and there's a little more detail there, but I won't go into it.

The second thing, though, that I don't think anybody's really familiar with, and I think it's wildly important, is that Apple didn't just outsource their assembly to Foxconn, they really outsourced their like politicking. And Terry Gou isn't just a genius in terms of how to get things built and how to manage a client like Apple, but really how to work with the like emerging sense of state-backed capitalism in a place like Shenzhen, where the local cadres are really incentivised to bring growth to their areas almost at the expense of other cities and places, right?

So like the Chinese sense of communism is that it's almost grassroots in the sense that, you know, Keun Jin, for instance, in a book called The New China Playbook, has talked about the mayor economy, really giving credit to the idea that China is able to come up with this model where Hangzhou is in competition with Shenzhen, Shenzhen's in competition with Suzhou in a way that you just don't really have in America.

So I quote someone, for instance, talking about, well, there's a couple different things, China being an RDA, a regionally decentralised authoritarian model. So yes, things are coming down from the top, but the way that they're actually enacted are happening at the city, state, and even local cadre level. And so Foxconn is able to master that.

The reason that matters is that going back to my first answer, if you're doing vertical integration, what you really need is land and machinery and local migrants. And if you work with the state, you can get all of that stuff. You can either get it subsidised, you can get it paid for, etc. If you're focused more on the design and the engineering, that's not what you're thinking about.

So Terry Gou just has a total approach that I don't know that it would have worked without Apple, but it worked ridiculously well with Apple.

Keith 00:33:52

Him being the outsourced point of contact for the Chinese government essentially also meant that in Apple's mind, they didn't really think much about China. So going back to the point I made earlier about when I was reading about Steve Jobs, like China is like literally not even in the picture because I think to a certain extent it's kind of taken care already by Terry Gou.

Patrick 00:34:14

Yeah, totally. I mean, you know, at the end of the book, I compare Tim Cook to Jack Welch, the one-time CEO for 20 years of GE, and he once said that the perfect manufacturing site would be on a barge, meaning an enormous ship that would just travel from one jurisdiction to another, wherever labour rates were lowest and demands on environmental standards and stuff were lowest.

And there's a certain sense in which that's how Apple was treating Shenzhen. They didn't particularly care that it was in China per se. It was this special economic zone sort of excluded from the normal laws of the rest of China, and Terry Gou was just able to sort of move heaven and earth and get things done for them and build factories whenever was needed and really just like custom build for them.

So the fact that it was in China, that was something that Terry took care of for them. So the people that are familiar with Apple's political awakening in the 2010s, I mean, they were just stunned by how little Apple as a company really understood about China. I mean, you had people entering the company that assumed logically because of how successful they were and how large their operations were that of course Cupertino had a, you know, deep understanding of China, and like, they knew nothing. That had just been outsourced. They really didn't get China at all, and that really comes back to bite them, to sort of give away some of my narrative.

Keith 00:35:37

I'll share a little interesting story from Singapore, which is that, you know, when Singapore companies are going to China because we're small, there is a huge reliance on the trade officers, the diplomats, to really get you up to speed. So if you're a Singaporean company, you want to go to China and you want to expand there, you want to do any kind of business, like the first thing you do is always to like speak to the trade representative there, to talk to the diplomats. There's this almost instinctive reaction that you have to do that, whereas like in your book, I realised that actually like Apple was just kind of taken for granted. This was taken care of, and I felt like there was a huge contrast for me within just within our own working culture here as well.

Patrick 00:36:14

Yeah. I mean, this isn't in the book, but there, I'd hear a bunch of examples where as late as 2012, 2013, the executives in Cupertino would think that they just had to have, you know, a cocktail party or a dinner with the right people in Beijing, really just not understanding that Beijing didn't quite have oversight of how things were taking place in Shenzhen.

I think this might have been in the pre-edited version, so I had to cut this for words, but the equivalent for me would be like if Elon Musk was dealing with Washington instead of like the California governor's office when he was building electric cars in Fremont. As a rough analogy, I think that sort of works. Right. That would obviously be wrong in an American context, but I think it sort of works as an analogy to understand how wrong it also is in China.

But people just didn't get that. I mean, they wouldn't get basic things that, to be fair, I wouldn't have known, but should have been known had they been operating there for a while. Like, for instance, that in Pudong, which is, you know, technically part of Shanghai, it's governed as a different municipality. It's got its own mayor and so forth. And I say Pudong because that's where Apple's headquarters for operations were, is in Pudong, and somehow they didn't know that.

So the China people that they eventually hire in the mid-2000s are stunned at the state of ignorance on Apple's part and really the naivety.

Keith 00:37:45

If you look at the emergence of Apple as the most valuable consumer tech company and how Foxconn and China play a role in it, help me understand what is the cover story that people, what is the story that people don't get, that people miss when they read the cover stories?

Patrick 00:38:02

I think for the prior 25 years has been that Apple exploits Chinese workers, and we write stories about how the jobs aren't very good. And the narrative just sort of flips out on its head and says that's not incorrect, but it's just missing the biggest piece of the puzzle, which is that Beijing allows Apple to exploit its workers so that China can exploit Apple. So I think that's the thing that people don't get. I mean, there's a lot more, but in terms of the broadest message, it's that.

And if you're asking specifically about Foxconn, Foxconn's just the first company to understand that working with Apple is not about the profits, it's about the learning. Because for Apple to build the products it wants, because it chases quality rather than price, the consequence of going to a place like China, which 25 years ago was synonymous with low quality, you had to build the tech competence, which means that Apple has to fly out America's best engineers to begin training, auditing, supervising, and installing hundreds of millions of dollars' worth of machinery in the factories to get everything done.

It's the same thing they're trying to do in India right now to not much success. But India doesn't have the quality levels of China right now. And so who's going to change it? Apple. Apple's going to go into the factories in India and change the nature of education in manufacturing on the ground.

Keith 00:39:29

As I was reading the book, the key stat that jumped out at me was that, you know, in 1999, none of Apple's products were made in China, and within a decade, virtually everything was, right? So you really do kind of highlight how this supply chain literally moved to China, and now because of their ability to, to a certain extent, exploit the labour force that they were able to make record profits off of that as well.

Patrick 00:39:54

Yeah. And, you know, if I'm to add a little more context there, in 1999 and 2000, there are contract manufacturers making Apple products in I think nine different countries. And by 2011, if I skip forward a little bit, it's all in China. As late as 2009, you've still got some work going on in the Czech Republic and so forth, but by 2011, you don't. So it's an extraordinary consolidation in a fairly short period if you're sort of, you know, looking at a multi-decade lens.

Keith 00:40:23

Yeah. I wanted to point out two statistics, and this is when I would like for you to help us understand a little more on Apple's impact on China. So the two numbers that often, you know, come out in your interview is the $55 billion and the 28 million workers, right? So $55 billion in terms of investment, I think annually, that Apple makes in China. Help me understand, that's the internal figure that they use. What's behind that figure in Apple's like kind of the way Apple accounts for the investment?

Patrick 00:40:55

I have to give like 15 seconds of narrative just to answer the question. So essentially what happens is when Xi Jinping comes into power late 2012, early 2013, hardliners in Beijing are beginning to see Apple as this exploitative force that doesn't give back to China. And he really emphasises what he calls "in China for China." In other words, if you're going to be in the country as a foreign entity, you best well be helping us. And Apple looks like it's not.

I've got a chart that I could show you that shows Apple and Foxconn margins side by side. And in the earliest years of the relationship, you know, in year 2000, let's say, Foxconn's making 10% plus margins, and Apple's making less than 2 to 3% margins. They're really struggling. And then the iPod and the iPhone take off. And by 2012, Foxconn margins have basically fallen by three-quarters to 2 or 3%, and Apple's have soared from 1% to 25%.

So if you look at that, it just looks like Apple is just exploiting this Foxconn company, taking out all of the wealth that comes out of the iPod and the iPhone. And so Apple begins to fear when they begin to have real problems at the highest levels of China that they could be the next Facebook, they could be the next Google. In other words, their products could be blacklisted from the country.

So to flip the tables a little bit or to turn this logic on its head, they're able to emphasise to Beijing just how much they invest in the factories. And so their internal study comes up with a figure that they invest $55 billion a year. This is a stunningly large figure, although it makes a lot of sense even if you don't have the internal documents, which is to say that Tim Cook has repeatedly said that they have 3 million workers in China.

And if you just sort of take what factory wages are at an average level but take into account that they also have cutting-edge PhDs at Foxconn and some other places, and you just multiply that sort of annual wage by 3 million people, you easily get into the tens of billions of dollars. And then in addition, it's counting machinery. And by this point, Apple was spending more than 10 billion dollars on machinery that was placing in hundreds of factories across the country.

So it's a very, like the number's not that opaque. I can sort of figure out where they get it. I don't have the Excel sheet that adds it all up, but I'm partly getting ahead. I'm anticipating a little bit that we might talk about some of the investments that they've pledged for America, which are actually significantly higher. And those are ludicrous. I mean, they're just bullshit numbers that don't really have a good logic behind them. I wouldn't be able to tell you sort of the basis as to how they get there. I think those are purely for politics because of the way President Trump operates.

Anyway, I'm just getting ahead there. So the numbers are so extraordinary that I mean, I compare it to like the Marshall Plan where America invested just vast sums into supporting 16 countries in Europe after World War II. Just consider that, you know, it's first of all in the same similar period, five years instead of four, it's dollar-wise by 2015 dollars, um, double that of the Marshall Plan, and it's one country instead of 16, and it's one area, high-end electronics, instead of, you know, agriculture and highways and railways and a whole host of stuff else.

So as imperfect as that analogy might be, I think the more you look at it, the more it favours how large the investment is in China on behalf of one company.

The other figure has actually been updated, and I didn't realise this. It got updated in March. So I've been saying for a long time that Apple has trained 28 million people in China. It's now 30 million. It's gone up by 2.5 million. This is a figure that I just pulled from Apple's annual report. That's since 2008.

Keith 00:44:48

That's just incredible. I mean, that's larger than Apple's labour force. You'll have to remind me the population of Singapore. I assume it's larger than the population of Singapore by quite a while.

Patrick 00:44:58

By quite a bit. Yeah, it's larger than the population of Taiwan. I mean, it's hard to overstate Apple's impact. Because it's not just that it's 30 million people, it's that it's 30 million people in a single sector, high-end electronics. And if I'm quoting the China scholar Barry Naughton, that is the most important thing to Xi Jinping.

So the political points, the political capital they are able to win by demonstrating how much they're investing to China, I think is extraordinary, and it's largely paved the way for them to sort of remove obstacles to their production. And again, getting ahead of myself, but when Washington goes after Huawei in 2019, I think it's a totally natural question to ask, "Why didn't Beijing retaliate by going after Apple?" Right? The sort of closest thing, you know, Huawei and Apple are sort of comparable companies in a certain extent.

And the answer is that, well, Tim Cook had made it immensely clear to Beijing leadership how much it meant for their country for Apple to be operating there in terms of training all of their suppliers. And the chief beneficiary of their suppliers is Apple, but the second line of chief beneficiaries are Huawei, Xiaomi, Oppo, Vivo, etc. And those companies have 55% global market share of the most iconic device of the 21st century, the smartphone.

Keith 00:46:19

If Apple was to implement that kind of Marshall Plan, they made a very good return on their investment, right?

Patrick 00:46:26

Oh, yeah. And whether it's the headline figure of the 55 billion or the 30 million workers, it stands to me at least that, you know, that's how they kind of became the world's most valuable tech company as well. Then what are some of the common pushbacks against your kind of like your representation of these numbers, and then I would like to hear, you know, where do you think you disagree with them?

So I have not seen any major pushback in the form of let's say a book review or an essay, you know, actually published anywhere. I've only gotten pushback, not even to the book, but to the way that I've conveyed it through interviews. That it sounds like an oversimplification or that someone goes through the official documents submitted to the SEC and says, "These numbers don't exist." And that's true. Of course, they don't exist to the SEC.

First of all, it wouldn't have been a like a scoop to put into the book if these numbers were just publicly available. Of course, they're not publicly available. And I've never claimed that they're publicly available. The whole point is that I uncovered private documents.

So I don't know that there is pushback. So, so yeah, by all means, you know, quote something that you've got, but I think it'll be from social media relying on a video, something I said in a video, but it's not, I've never seen anyone taking on like paragraph by paragraph the description of those dollars in the book, for instance, like that scale.

Keith 00:47:49

I mean, just coming from a small country, right, you were talking about Singapore size. We're like 5 million people. So it's like six Singapores essentially of people being trained, and that's such a huge number that even I struggle to compute.

Patrick 00:48:02

I should mention one thing, which is that in the book I make it clear that it's 28 million people in the supply chain. In interviews, I have sometimes misspoken and said 28 million Chinese people, or sometimes someone interviewing me says that. So it is inclusive of China but it goes beyond that. It includes, I don't know, Japanese, Korean, and so forth. And so Apple has actually, you know, responded to media outlets and said it's not just China. And that's true, but what they won't tell you is what percentage are in China, because of course it's, I don't know if it's 85% or 90%, but it's the vast majority are in China.

So it's interesting that they correct that one figure, but they don't correct the $55 billion figure, and I'll let your readers or listeners guess why.

Keith 00:48:49

And this is where maybe we can talk a little bit about the geopolitical implications of it, of Apple being so heavily concentrated in China, was that, you know, when you look at it from my perspective is that, you know, when China and the US are so vertically integrated with each other, you reduce the risk of a cold war or a rerun of the Cold War to a certain extent in the US and Soviet Union in the 20th century, because you're not economically dependent on each other. You could think about nuclear war and things like that, but when you're so kind of codependent on each other, I mean, as a Singaporean, we think that that's actually a good thing.

When you have an iconic company like Apple embedded in China's economy, it's a constraint to a certain extent on how far their strategic competition could go. I wanted to ask you, you know, what do you think about this view of interdependence? Is that necessarily a bad thing?

Patrick 00:49:44

Yeah. No, that's a really good question. And one thing I should just make clear is that the book is just a narrative of how it happened, and I'm not really pushing a particular view of China. Or, I mean, so in other words, I'm happy to answer the question, but in a certain sense, if like the listener doesn't care for my answer, like the book isn't infused with like whatever biases that I have for this answer.

Yeah. I mean, look, there's an answer that Elon Musk gave a few years ago, which is that China and the US are basically like Siamese twins. If you were to perform surgery to decouple, both would probably die. It would be bad for both.

The trouble isn't that the US and China trade with one another or that Apple build some products there. The problem is just the extreme overdependence because of the consolidation. So for instance, when China wants to impose its version of the internet onto Apple products, Apple, because it has no Plan B, is not in a position to argue with them or sort of uphold what Americans would just consider basic American values and freedoms that American companies should adopt even when they're in other parts of the world.

So the reason why Apple didn't put up a fight when they were asked to get rid of the New York Times from the Chinese App Store, get rid of 600 VPNs, or get rid of something like encryption apps like WhatsApp, or house all their data for Chinese users in a joint venture data centre, they just had to cede to all of these things and in effect cut off Chinese users from a sort of more full version of the internet. Because what else are they going to do? They cannot plausibly threaten, "If you do that, we're going to move all our investments to India." India just can't do what China does. And it's because Apple hasn't been funding their investment for the last 25 years, or anybody else's.

So I think that's where it matters. Apple could have had a certain amount of leverage to push back and had a sort of net positive impact on the way things operate in China. They could have had, you know, had they sort of had more of a Plan B that they could actually execute. I think you might have the iTunes Store operating in China, but it's banned. You might have something like ChatGPT allowed to be operating there on the iPhone, but it's banned. So I think that's why it matters.

Keith 00:52:11

And there's probably a lot more, but that's the first answer that kind of comes to mind. It's not necessarily that they couldn't do it. It's just that they literally had no leverage because they're overly concentrated in China. And there's no real kind of process of negotiation. Is that what you're kind of trying to say?

Patrick 00:52:23

It's a nation state versus a company. It's like, I mean, you know, if you wanted a visual image, just think of all the major CEOs. I think collectively their companies were worth four or five trillion dollars in the White House the other day, all talking to President Trump and just fawning praise, heaping praise on him. You know, I think that's embarrassing and kind of disgusting.

At best, you could say hate the game, not the player. In other words, they've just been forced into that position. And that's a tragedy of its own making. Fine, we don't have to get into it. But that's the sort of position that Apple's in, in China. They just have no political cards to play.

Keith 00:53:07

If you look at the China model, one would argue that maybe it's like an East Asian model, but the problem is that it's unsettling because of its scale, right? It's pretty much what the South Koreans did, what the Japanese did to a certain extent, and maybe it was because of the China scale, and that's what creates the anxiety. Is there something more to that, or is this like just the fundamental concern about Apple and China?

Patrick 00:53:36

I think the scale is the thing to emphasise. Certainly, if you get a China scholar on the podcast, they can go into more detail into all the ways in which China adopted, adapted, but also deviated from the East Asian miracle or the tigers. So there, you know, there are things that China has sort of innovated in terms of how they got things done rather than just sort of like copied but made larger, the advances that you see in South Korea and Japan or whatever. So I'm, you know, familiar with that literature but not sort of an expert on it.

But yeah, I mean, I like this question actually because, you know, maybe it's because there's a dragon biting an apple on the cover, I don't know, but the general perception of the book is that it's more anti-China than I think it is. I treat China as a big adversary more so because of their competence and their scale than that I have some dark foreboding image of, you know, China as world ruler or something.

And I point that out just because I suppose the scarier you think China is, then the more sort of on point the thesis will feel. But even if you don't have the view that China is big, bad, and scary, the fact that they're just so large really does mean that when they declare something to be a strategic priority, every other nation wanting to compete risks being deindustrialised.

And not just because they're competent and operate at large scale, but because they exercise a form of state-backed capitalism that of course has abundance of subsidies. It allows them to operate in a way that doesn't prioritise profit or shareholder dividends or something like that. And so it can be hard to compete if your form of capitalism emphasises those things to please shareholders, and you're competing against someone that has the backing of a major and generous state where the goal is really command and control of certain industries.

And I think you can see that story play out in smartphones certainly, solar panels and batteries, you know, even more obviously. And we're witnessing it in real time with electric vehicles.

Keith 00:55:57

If Apple wanted to retain manufacturing, if there was a government programme that kind of subsidised them when maybe at their vulnerability or in their moment of kind of weakness because of the financial markets, maybe things could have turned out very differently as well.

Patrick 00:56:09

I wish that were the case. I push back against this pretty constantly that some people will say, "Oh, why didn't Apple just put $55 billion a year into the United States, and then we could just have iPhones built in America?" That's not giving China the credit for what it pulled off. What China was offering in terms of the ubiquity of labour, the abundance of labour, the cost, but the dynamism of that labour, that wasn't going to happen in Pittsburgh. Didn't matter how much money you sprayed at it.

Might have happened with a sort of NAFTA on steroids. You know, might have happened in a scenario in which Mexico became this manufacturing Goliath, didn't have enough people, and so you had a similar sort of migration, but instead of it being internal to China, you had people fleeing Honduras to get to Mexican factories or something. I mean, just a sort of like spitball of fantasy. Like, maybe that would happen.

But it's just too simple a read to say China wouldn't have got where it got, but we still would have had everything in terms of the iPhone and everything else if we had just invested it here. No, China was a once-in-a-century partner. Nobody else has been building eight-lane highways to the ports, world-class ports at massive scale, high-speed rail. I mean, there were just so many things that China deserves credit for doing, and Apple was able to be a big beneficiary of it.

You'd have to totally rewrite history. There's just no chance that if you had a time machine that you could have convinced Tim Cook to invest in America and that we'd still be holding the same products we do now and yet in control or whatever. It's just, unfortunately, it's a total fantasy.

Keith 00:57:54

Maybe it wouldn't be like a complete rewrite of sorts, but to a certain extent, it would be much more diversified. Do you think that there could have been a reality where maybe it's not necessarily 100% all in China, but like they could have achieved a much more balanced outcome where they had much more diversified manufacturing operations, or you think that concentration in China is kind of an inevitability?

Patrick 00:58:17

Yeah, it's a great question. I mean, look, the original model Apple had for almost three decades was that you build on three different continents. And some of the reasoning going back to the '80s was that, you know, the Bay Area was like an earthquake zone, and Apple was concerned about having all of their manufacturing in a place like Fremont. So that's actually why they moved some stuff to Colorado. And obviously, the same logic applies for Singapore and so forth. So they did have a sort of clearer sense of a resilient supply chain and risks of overexposure back then.

The trouble was, if you were doing that in the early 2000s and you just had the spreadsheets in front of you of how much it cost, how quickly you could scale, etc., and you were comparing the cost and all those things on three continents, China was just winning every time. I mean, on every product you could think of.

And so again, nobody was really making the decision at Apple that everything should be built in China. But it's like every individual product manager for whatever product was being built, if they wanted to score the most points and do the best job and retain the quality and get the lowest cost, every one of them independently would have been choosing China.

So you would have had to have a really long-term play to say, "Okay, I understand that it's more expensive to be doing this in Ireland, but we're going to do it for the long term anyway." And that's essentially why I'm sympathetic to the view that you have to understand how close to the brink of bankruptcy Apple was in '96, in '97, in 2000. People were still laughing at them in 2005. Like, there was this one-hit wonder of the iPod when, you know, Apple was concerned that once someone just takes the best of the iPod and puts it into a Nokia, we're finished, right?

If you understand the precarity of Apple's situation, you can be more sympathetic of how they got there. The last one I would point out is a question I think about often is, if Steve Jobs had lived, Xi Jinping obviously still would have come to power in China and still would have had the view that Apple was exploiting the country. So what would Steve Jobs have done in response?

And I do like to hold out hope that he would have, you know, found another home for Apple products and realised our overdependence could be our ruin and make some major changes. But even though I, it's fanfiction on my part to think about what he would have done. Even though I hold out some hope for that, it's at the same time unfair to expect Tim Cook, who had just taken the reins some 18 months before, who wasn't a founder of the company, who was trying to please Wall Street and millions of consumers, none of whom really believed in him at the time. It's unfair to think that he should have made different decisions.

Because to understand the magnitude of his challenge already to scale at a time of just insatiable demand for Apple products, it's, it's, it's not a, it's not, you can't really critique him for it. I mean, you can, but it's a cheap shot. I don't think it's necessary to go.

Keith 01:01:20

Now Apple's pretty much caught in a rock and a hard place like what you said, because the intensifying US-China rivalry is going to happen. I think it's a structural trend. But they're still one of the world's most valuable companies. Are there any possible alternatives they could explore, or is it pretty much just stuck with this?

Patrick 01:01:40

Well, I state pretty forcefully, I mean, the reason why the subtitle is "The Capture of the World's Greatest Company" is I do not see any scenario in which they have somehow derisked from China in the next five to eight years, let's say.

But as forceful as I want to say that, you know, I'm just a journalist. Apple has access to the smartest minds on the planet and can hire them and pay them, you know, certainly more money than I'll ever make in my career to solve that problem. And so, look, I hope I'm wrong essentially. I mean, you know, me being wrong, or maybe the best scenario is that the book is some sort of galvanising force for people to recognise the challenge, whether they're the Apple level or the government level or whatever. You know, to sort of make some changes.

But I don't see it. I mean, look, I do reporting today on what's going on in India. It's not an inspiring picture. It's not like I'm being proven wrong and that loads of stuff is going on in India. A lot of people think a lot of stuff's going on in India, but you talk to people on the ground and it's not happening. So yeah, no, I think they're really stuck.

And the most perceptive reviewers of the book have said more clearly what I sort of hesitate to say in the book, which is that Apple hasn't just created a problem for itself in training up its own competitors. It's created a problem for America. It's created a problem for the West at large. Our dependence on China for high-end electronics and a whole host of other things is extreme.

I do think there's some merit in this. You know, there's some silver lining in your argument that codependence between countries can create peace. I mean, that's actually my sort of argument for Pax Americana. But I think the dependence between Apple or sorry, well, yeah, but I meant to say America and China. It's not looking good right now. It's a little bit toxic. So, yeah, I hope for a favourable outcome, but unfortunately, I'm pretty pessimistic about it all.

Keith 01:03:45

There's another question I wanted to get to, which is you feature this huge cast of characters in your book. You have this guy called John Ford. He's a Chinese-speaking Mormon who set up China's first Apple Store to Vinnie Chieco, who gave us the name iPod. I wanted to ask you, you know, which character in your mind do you think kind of plays a disproportionate role in Apple's emergence but kind of remains underrated or remains in the fringes?

Patrick 01:04:10

I think you just named him. John Ford. He was at Apple for 10 years. He'd never been written about before. As far as I know, he never even spoke to a journalist before, and yeah, he heads the Apple Store in 2008. So he's not, to be clear, I mean, the story is mostly about production, supply chains, engineering challenges and so forth. And that whole part, Part Four, is really like a detour in a certain sense, but it's a detour to explain the birth of the iPhone as a retail product within China.

Because Apple now has, I think, 56, maybe 60 stores at this point across the country, and, you know, it's some of the most valuable sort of real estate in the world in terms of, you know, how many products are being sold per square foot, that kind of thing. And he's the de facto head of China retail for five entire years, taking it from zero stores to God knows how many by the time he left.

And he hadn't been written about before, and he's a fascinating person, but his narrative, what he gets put into, is wild. And as you'll know, but we'll just tease the reader, it involves organised crime, you know, networks across the country. I mean, I talked to people well beyond John Ford. John Ford was happy to go on record, but the sourcing goes so far beyond him.

I mean, I talked to somebody who was at Apple for a number of years. I'm trying to keep it opaque because I don't want to sort of give away anything. And they said the problem with the yellow cows, these scalpers that he had to deal with, and how to sort of finally win the cat-and-mouse game with them that lasted some eight years was the biggest accomplishment of their entire career. And I mean, nobody knows these stories.

And so I think he's, until the book, completely unheralded and a huge figure for Apple history. I hope I've put him in the, you know, definitive Apple guide to history that gets written over the coming decades. I mean, there is a book coming out for Apple's 50th anniversary this March. And yeah, I really hope John's in it.

Keith 01:06:14

With that, I have one last question for you, which is, if you had one piece of advice for a graduate entering the working world today, what would that be?

Patrick 01:06:20

Oh, I don't know. That's a fair question. I'm not sure I'm good at answering those questions. Maybe it would just be, and this is maybe a little bit banal, but I think sometimes if you're at a university and you're just writing essays on whatever you feel like and going to whatever classes you want, you get a certain sense of, you know, freedom and autonomy that frankly you're not going to get, or at least I didn't get, upon entering the workforce at the lowest rung of the corporate ladder or whatever.

And so I would just say like the slow grind towards success is the way to do it. I mean, I was a municipal bond reporter for years, and that was never like, you know, a sexy thing to say at a cocktail party or whatever, but it was a nice little venue to learn the ropes of reporting and to figure out how to do things in finance.

And, you know, if I'm to sort of put this in book form, a book I would recommend is called Range by David Epstein. And the subtitle is something along the lines of, you know, how to be a generalist. No, what is it? It's about being a generalist in a specialised world. And I think too many of us want to be specialists, and it's sometimes, I would say it's too easy to be a specialist. I mean, if you really get interested in something when you're 22 and it's all you've thought about by the time you're 40, yeah, you'll probably be like a world-leading authority on that topic. But what a bore.

I mean, I would so much rather talk to someone who's got their hands in 16 different things and can sort of dabble from one to the other. You know, I get asked all the time, "You could write Tesla in China or Microsoft in China." Can you imagine how stupid that would be of me to do for the next two to three years? Like, what a boring thing. I hope my next book has nothing to do with Apple and has almost nothing to do with China. So I don't know. Stay interesting. Do a bunch of things. Don't just focus on one thing just because it's easy.

Keith 01:08:06

With that, Patrick, thank you so much for coming on. So that was Patrick McGee with his latest book, Apple and China. I hope you guys will catch it and go read it. It's a fantastic read. Thank you for listening to today's episode. If you are watching this on YouTube, please consider subscribing and turning on notifications for whenever new episodes are out. If you're on Spotify or Apple, it would help us greatly if you could leave a five-star review on those platforms. Once again, thank you for tuning in to The Front Row.