Sunday, October 30, 2011

Apple's Snow "Jobs"

“Write about what disturbs you, particularly if it bothers no one else” – Kathryn Stockett - The Help

Steve Jobs disturbs me. Specifically, it’s Apple, Steve Jobs, and the millions of strangers who didn’t know him but loved him.

Last week, my Facebook News Feed was covered with, “RIP Steve” and “Best CEO Ever” and “I’m actually crying right now” and articles of Steve Job’s success, and graphs of Apple’s stock price. Monotheism teaches of one G-d, but for Steve Jobs, most people made an exception. Jobs made it easier for you to listen to music, communicate with your friends, and be cool b/c you own a consumer product. Though a supposed minimalist Zen Buddhist, his company was the ultimate consumer product cult. Steve Jobs didn’t cure cancer, he didn’t fight poverty or inequality and though he touched many lives, he didn’t necessarily improve them or make America a “better” place. He took existing technology, repackaged it into consumer friendly formats, killed competition, and hoarded boatloads of money. Now that his biography has come out, many not so flattering facts are coming out. Discussing his missteps used to be taboo because he would blackball you and you’d never get an interview again. For example, no one would dare discuss his love child that he denied existed until positive paternity test.

Why Do You Love Him? You Don’t Even Know Him:
Why do all of my “friends” love someone they have never met? Because he has a sad story adoption/cancer? Because he is really good at marketing? Because he’s a hipster that used drugs and found a zen master to teach him Buddhism? Because they used Apple computers in elementary school and have Apple love deep in their brains? I don’t understand. Do these people actually know anything about this man besides the sweaters, speeches, and products? The answer is obviously, NO.

No one knows him, but everyone knows Apple:
Steve Jobs is notoriously secretive about his private life for such a well liked public figure. In reality, we don’t know anything about Steve Jobs the person. However, we do know an awful lot about his company, Apple. Through public filings, conference calls, and news articles, it becomes pretty obvious that Apple has the best PR team ever, and company is pure capitalistic EVIL. (actually, Apple is just like many other consumer products manufacturers, the point is, Apple isn’t G-d).

Apple creates amazing products and keeps its power by bullying competitors, suppliers, customers and somehow doesn’t get called out for it. You can only sync your Ipod/Iphone to Itunes and you can’t play your Itunes purchased music on other MP3 players. They pretty much told artists, if you don’t sell on Itunes for almost nothing, your music will just get pirated anyway. They told app creators, we get 30% of your sales for doing nothing. They have told competitors, you are not allowed on our operating system. Flash is by far the best way to watch video online, but Apple won’t allow anyone to use this competing tech on its device and is trying to drive it out of use globally. In the 90’s, Microsoft added internet explorer to Windows as a default browser for free, but still allowed competitors to run their applications on Windows. Yet MSFT still lost multiple antitrust lawsuits and was told it couldn’t bundle its software with its interface. IMHO Apple's violations go way beyond anything MSFT did.

Profitability & Outsourcing:
Anyone who follows Apple from a distance knows that Apple is extremely profitable. Apple’s equity value makes it the largest in the world and its profits, put it in the top few. In its most recent quarter, it reported $28B in revenue and generated $5.4B in cash. The company’s ability to convert revenue into cash has helped it build a warchest of over $80B.

How does the company make so much money? Overcharging and outsourcing. The company’s brand and monopolistic policies have created/brainwashed customer loyalty which allows Apple to charge $600 for products similar to the $200 products competitors. How much of that money is going into American pockets? Not much. Most of the company’s employees work at its retail stores in relatively low paying lower middle class jobs. All the manufacturing is outsourced.

Chinese Sweat Shops / Child Labor:
Almost all of the manufacturing is done in China, at a massive company called Foxconn. Foxconn employs over 400,000 people on a massive campus that houses those employees as well.

Foxconn forces employees to live in one-room dormitories with other coworkers. These workers work 15 hour days for as little as $50 a month. Employees aren’t allowed to talk to each other while standing for their 12 hour shifts and workers must sign pledges that they are not allowed to commit suicide. WHAT? Yes, suicide rates in Apple factories in China are so high, employees are banned from it. They are publicly humiliated in front of peers for mistakes and work undocumented, unpaid overtime. What did Steve Jobs have to say about this? He says that suicide rates were lower than the rest of China. That makes it ok?

Google “Apple China Suicides” and “Apple Child Labor” for some fun reading. An American researching how his favorite products were created (who has turned his research into a 1 man show), infiltrated a factory and interviewed “dozens of these workers. He interviewed girls as young as 12 who worked crushing hours; he interviewed a man whose hand had been twisted into a claw from overuse; he interviewed a woman who had been blacklisted merely for requesting overtime pay.”

Apple is Not Even a Good Corporate Citizen:
I thought Apple was a good corporate citizen? How could they let this happen? Apple isn’t a good corporate citizen; Apple is a greedy public corporation that acts entirely to “enhance shareholder value.” Apple cares about $$$$$$$$$$.

While all of the manufacturing is done in China, final assembly is done in Ireland. IRELAND?? Why Ireland? Oh right, because Ireland has low low low corporate taxes. So products sold to Europe and America are actually “manufactured” in Ireland. During the last 12 months, Apple has generated an amazing $34.3B in cash (CFO-Capex). Yet the company paid only $3.3B in taxes. So, to all of you buying Apple products thinking the company is a good American company… your products aren’t made in the USA, and Apple is using offshore corporate entities to avoid paying taxes. I’d argue that companies should have to pay taxes regardless of if those profits are brought back to the US, but that discussion is for another post. In any event, Apple has stated “foreign earnings are intended to be indefinitely reinvested outside the U.S.”

Money, It’s Mine, All Mine!
Apple’s $80B in cash isn’t technically theirs, it’s the stockholders. Most companies, especially ones that have more cash than they could ever use, need to invest that money for a positive return or give it back to shareholders. Yet the company would rather keep and accumulate cash than dividend it to stockholders. It doesn’t repurchase stock, it doesn’t buy other companies and grow inorganically, and it doesn’t spend that money on other growth projects. That cash just sits, doing nothing, while our economy also does nothing. Perhaps this is good tax management, but it’s completely shareholder unfriendly. During the last 12 months, the company (worth $370B) gave employees $1.2B in stock based compensation and issued $800M in shares, returning no proceeds of the profits to actual shareholders. When there aren’t profitable investments, don’t accumulate! Perhaps some of your shareholders have better things to do w/that money!

Maybe Apple/Steve Jobs Give to Charity?
Actually, Apple is so stingy, they don’t even have an employee matching program for donations. Steve Jobs is no different and was not a member of the Giving Pledge (Billionaires who pledge to give away half of their wealth). Instead, he will likely pass down his wealth to his family. When Jobs returned to Apple in 1997, he closed the company’s philanthropic programs and even though the company has $80B, those programs have not been reinstated. There are rumors that he gave money to his hospital anonymously, and gave money to create a liver registry. But those donations seem a bit self interested. It would have been nice if he gave to a charitable cause that didn’t directly keep him alive. If you asked a liberal who the most destructive and evil company in the US, Walmart would be close to the top. However, Walmart has a massive charitable foundation, matches employee donations, making it one of the top corporate charities in the world.

In summary, Apple has violated competitive ethics and perhaps laws, creating monopoly power and enabling them to overcharge customers for the same products. Though the company has absurdly high margins, to maximize profits, Apple manufactures almost exclusively in China, at factories that have extremely high suicide rates and child labor. Obviously, Apple can afford to pay American workers or at least demand better working conditions, but they’d prefer to underpay foreign workers in poor conditions to make more money. Most of Apple’s $80B in cash is offshore and considered a foreign profit, thus Apple can avoid paying taxes. The company does not reinvest that money, give it to its employees, or dividend it to its shareholders all so it can avoid paying taxes, how patriotic. Lastly, the company is one of the least philanthropic companies in the world, not having a CHARITY or even an employee matching program. As far as I'm concerned, Apple's pulled snow "Jobs" on all of you.


Doron said...

Agree wholeheartedly.

He was a lousy programmer and it was Wozniak that was the real brain. He impregnated his girlfriend and denied being the father, he broke contact with his own child for years, he was mean-spirited to all classes of people from his employees to restaurant servers.
It is not true that you have to be mean to be a successful entraupeneur. Many like Bill Gates and Larry Page have build up equally successful businesses are "great bosses" and very giving.
Apples technological advances are amzaing but so was Microsopf, IBM, Google, Facebook, Intel etc. that all made incredible advances to get to where we are.
They say that a true measure of a man is how he treats the people below him - and in that respect he was a failure.

Thanks for setting the record straight.

Anonymous said...

1. we should see that show 'agony and ecstasy of jobs' - is it still on?
2. as a recent member to the apple cult i wish there was an equally competitive product (especially one more pc aligned) but developed for the simplicity of use like the iphone. though i find it extremely obnoxious that NO manual is included presuming the device is so easy to use no one would possibly have questions. that is false

3. please don't talk about snow jobs in front of family - that's gross

Anonymous said...

fyi: anonymous = dan

Sherry said...

Great post. Thank you. In Thursday's NYTimes about the little guy wanting attention: "Another myopic financial genius is the subject of a one-man show by Mike Daisey currently at the Public Theater. It is called “The Agony and the Ecstasy of Steve Jobs,” and yes, it is about the recently deceased founder of Apple. Mr. Daisey, a longtime fan and user of Mr. Jobs’s products, is fascinated by the intelligence — and pure force of will and tunnel vision — that it took to develop them.

But in addition to charting the rise and rise of Mr. Jobs, Mr. Daisey chronicles his own journey to a Chinese factory town where many Apple products are made. And his monologue unfolds as portraits in counterpoint of the famous Mr. Jobs and of the unknown workers who manufacture his inventions under conditions that often cripple their bodies.

Mr. Daisey interviewed these Chinese workers himself (with a translator). He was surprised to discover how much they wanted to talk to him and how delighted they were by the prospect of an artist using his voice to give an international microphone to theirs. In other words, they were pleased that, finally, attention was being paid."

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