The Big 3: How Apple Built China's Manufacturing Empire

Apple’s decision to move manufacturing to China transformed not only the company, but the global economy.

This week’s episode of The Big 3 with CPA senior economist Mihir Torsekar features bestselling author Patrick McGee, whose book Apple in China documents how Apple’s search for manufacturing efficiency helped create one of the world’s most sophisticated industrial ecosystems. Beginning in the late 1990s, Apple outsourced production, eventually concentrating nearly its entire manufacturing base in China. But Apple didn’t simply purchase labor—it invested enormous resources training suppliers, improving manufacturing processes, and building technical expertise throughout China’s industrial base.

McGee argues that this transfer of knowledge became one of the most consequential business decisions in modern history. Apple taught suppliers advanced production techniques, developed engineering talent, and helped establish manufacturing capabilities that would later support Chinese champions across numerous industries—not just consumer electronics.

The conversation then turns to the geopolitical consequences. Under Xi Jinping, China’s relationship with Apple fundamentally changed. What began as a mutually beneficial manufacturing partnership gradually evolved into strategic dependence. Apple found itself deeply embedded in an industrial ecosystem that China increasingly viewed as a national asset, limiting the company’s flexibility while expanding Beijing’s leverage.

Mihir and Patrick also discuss how China’s industrial strategy differed from traditional Western assumptions about globalization. Rather than viewing manufacturing as a low-value activity to outsource, China treated production capacity as a strategic national capability worthy of long-term investment. That approach ultimately allowed Chinese firms to develop expertise that extended far beyond smartphones into electric vehicles, batteries, robotics, and advanced manufacturing.

The discussion concludes by examining Apple’s recent lawsuit against OpenAI. McGee argues the legal battle reflects a broader recognition that engineering talent, manufacturing expertise, and proprietary industrial knowledge have become strategic assets. The same questions raised by Apple’s experience in China—who controls production, where innovation occurs, and how industrial capabilities are developed—are now emerging in the AI era.

Throughout the conversation, McGee emphasizes that understanding China’s rise requires looking beyond simple explanations involving low wages or subsidies. China’s success also reflects decades of deliberate investment in manufacturing capability, workforce development, and industrial ecosystems. For policymakers seeking to rebuild American manufacturing, those lessons deserve careful study.


CHAPTERS:

00:00 — Introduction

02:03 — How Apple Moved Manufacturing to China

14:41 — When China Began Controlling the Relationship

25:16 — Made in China 2025 & Industrial Policy

42:16 — Apple’s Lawsuit Against OpenAI

55:44 — Lessons for America’s Industrial Future

58:30 — Final Thoughts & Book Recommendation


Get Your Copy of Apple in China Here!

Transcript

SPEAKER_00 0:04

This is the victory from the Coalition for a Prosperous America, with senior economist Matthew Torstencar and Andrew Restonger.

SPEAKER_01 0:16

In August 2022, Congress passed the CHIPS Act, and Commerce Secretary Gina Raimondo hailed it as a once-in-a-generation investment in American manufacturing. $52 billion spread over five years to bring semiconductor production home. But now consider this. By 2015, Apple was investing about $55 billion in China, it's roughly the same amount, every single year. One company was putting more into China annually than the entire CHIPS Act spent in five years. Congress debated its bill for two years, meanwhile, Apple's program never made the news. And today, China is the world's dominant manufacturing power, home to about 35% of global manufacturing. And more of that prowess than anyone wants to admit traces back to a single company in Cupertino. It is impossible to tell the story of China's rise without talking about Apple, and we have a special guest with us today to tell us that story. Welcome to the Big Three from the Coalition for a Prosperous America, where each week we break down the three biggest stories shaping US trade, industrial policy, and the American economy. I'm Mihir Torsakar. Andrew is off this week, but we have a special episode in store for you, so let's get to it. So our guest today is Patrick McGee. Patrick spent a decade at the Financial Times from 2019 to 2023. He led the paper's Apple coverage from San Francisco, and he spent two years interviewing more than 200 people, most of them former Apple executives and engineers, to write Apple in China. It's the most detailed account anyone has produced of how a m and one American company built the manufacturing backbone of our chief geopolitical rival. The book became an instant New York Times bestseller, won the Business Journalists Book of the Year Award, and made best of 2025 lists everywhere from the New York Times to Foreign Affairs. And these days he's a contributing writer at the free press. Last week he covered the story that gives this episode its third act, Apple's brand new lawsuit on open AI. Patrick McGee, welcome to the big three. Thanks, Mahir. Uh thrilled to be here. Great. Alright, so let's let's start at the very beginning about how this whole machine was built, how Apple, you know, was at the ground level of building up China's machine. Um take us back. So it's the late 1990s. Apple is roughly 90 days from insolvency, as Steve Jobs would later say. And at that time, China's not even on the list of suppliers. But today Apple is worth $4.6 trillion. The map is completely inverted, and everything, almost everything, comes out of China. Next to nothing gets built in America. Tell us how that happened.

SPEAKER_02 2:49

The first thing I would do is I might push back on the Steve Jobs line because Steve Jobs has a way of centering himself in the narrative. So in the traditional Apple narrative that follows from Steve Jobs, right, through Walter Isaacson and so forth, 1997 is the worst year, and that's the year that Steve Jobs takes control. I think the actual nadir for the company was 1996. Uh they're they're they're days away from bankruptcy. And um, you know, it's debatable how much credit one should give to Gil Emilio, who was CEO of five for 500 days uh of Apple before Steve Jobs comes back. But I sort of credit him with making three decisions. And indeed, the book begins with one of those decisions, which was to shut down manufacturing um in Colorado, uh right. This so to me, this is kind of a seminal event. I think in traditional Apple histories it's not even mentioned. Um, but the idea is that they close down their own manufacturing plants, and for the first time, they begin to look for a place to outsource the desktop computer. And then the book gives a little introduction to how Apple had been outsourcing and offshoring in the past, but basically they'd been making their own computers on three different continents. And out of financial necessity, out of financial desperation, they have to take a different decision. Now it's critical that this is happening before Steve Jobs comes back because once he's in the driver's seat, once he's the CEO, once he's met uh Johnny Ive and they've come up with the idea of what becomes the Bondi blue-colored iMac, um, Steve Jobs still wants to make the computer. And basically what he's told is we've already gutted all of our own manufacturing capacity. Like we're the last company standing that hasn't outsourced and hasn't offshored, but it's sort of too late in the game. We don't have the capacity to build this thing. And the question is, well, where do we go? And what's kind of fascinating is that it's a seven-year narrative before everything consolidates into China. So the answer for where do we go is um Korea, uh LG, a company that I think most people know, um, which interestingly is not a contract manufacturer, but Apple, with a certain swagger, just kind of turns their monitor supplier into a contract manufacturer. Um, that's that's that's where they go. And so what's really interesting is just to tell this seven-year narrative, which I call adventures and outsourcing, where Apple is basically coming to grips with what it means to orchestrate production, right? To own the process rather than to own the factory and to do the manufacturing themselves. And, you know, this is four or five chapters of the book. It takes place on three continents. They're manufacturing in Mexico, Wales, Singapore, Czech Republic. Um, and it's basically when China enters the picture and kind of wins out versus anybody else in terms of the cost, the ubiquity, um, not really the skill sets per se, but Apple begins to train the skill sets in China. And I should just sort of almost give a shout out to the Taiwanese. Um, the Taiwanese are instrumental in China's industrial rise in terms of having the expertise, bringing in foreign capital partners like Apple, and then we're kind of off to the races uh from from there.

SPEAKER_01 5:43

Well, you mentioned that that supply chain, and and it occurred to me there was a story in the book about the the phone call between Terry Gao and um Tim Cook. So maybe talk about that vignette really quickly, because that seemed really impactful.

SPEAKER_02 5:56

So LG is pretty successful in Korea, but what Apple does is tries to replicate their tri-continent strategy. So throughout the 80s and 90s, Apple had its own factories, um sort of local for the continent, if you will. They had factories in California that supplied North America, they had factories in Ireland to support Europe, and they had factories in Singapore to support Asia. So when they sort of get out of the manufacturing business and LG creates, or maybe doesn't create, manufactures their most successful product, the iMac, which becomes America's best-selling computer, right? It's basically the product before the iPod comes along that saves the company. Um, and you know, sort of reinvigorates Steve Jobs and and the share price and everything else. Um, LG is asked to do the same thing. So they set up major operations in Wales and major operations in Mexicali, just south of the border. Um, it's a good strategy, but it's a disaster. LG doesn't really have any experience uh doing the work outside of Korea. They have this great ambition and they just get it wrong. Um, the factory in Wales ends up having a problem with motherboards lighting on fire, so it's called the Toaster Line by the locals that I spoke to, uh, you know, more or less long since retired, but reminiscing about their days in the late 1990s, working for Apple. Um, and in Mexico, uh, the factory itself is actually on fire and production is halted for a month. So Terry Guo, the founder of Foxconn, a company that predates Apple by two years, founded in 1974, Taiwanese businessman, he's already working for Apple, but the reason the company's called Foxcon is because he likes Foxes and they supply connectors. They're not really a major player in contract manufacturing. But Terry understands Apple in a way that nobody else does at the time. I'm not even sure Apple really understood themselves at this time. He sort of understands the vision of the company. And he was a major supplier to groups like Compaq, which were in their heyday way bigger than Apple at the time. And so by having this diverse view of all these different brands in the West, he was able to discern that Apple was different. And that if you could please Apple, you could please anybody because this Compaq wasn't making the same demands. They weren't pushing what was possible in plastic injection molding or metal stamping. You know, I sometimes joke with audiences like, what's your favorite IBM or or Dell computer from the early 2000s, right? And your mind is blank because they had no sense of aesthetics or anything, right? So he just got that Apple was different, and so he see he had seen, it was public news basically, that LG was was failing. So he calls up Tim Cook, who he knew uh because Tim Cook had just joined Apple from Compaq, and Compaq was at the time Fox's biggest supplier. Um, or Foxon was, you know, Foxon and Compaq had the biggest partnership in the PC world. And he says, like, let me fix this. Like, give give me a chance kind of thing. And Tim Cook actually really gambled on Foxconn. Foxon's reputation at the time is not the Foxconn of today. It was considered a second, if not third tier, supplier that was best known for kind of mimicking others uh others' work and reverse engineering things in a sort of uh cheap fashion. And so um Terry Terry Guo um makes this bold gambit and um and and Tim Cook goes along with it. And uh it ends up being, you know, probably among the most important phone calls in tech history.

SPEAKER_01 9:09

Yeah. I mean, and even when the the supply chain eventually begins to pivot over into China, you know, I'm thinking back about what we hear, what we now know about Beijing and during that period was, you know, they're infamous for sort of the forced uh forcing foreign companies to hand over technology as the price of market access. But in in Apple's case, it doesn't seem like anybody was forcing them to do so. It it was, you know, Apple's the most secretive company, I think, in America, and they sent its best manufacturing mice to teach Chinese suppliers voluntarily. I mean, really just um, you know, just kind of gave it away almost. Like, talk talk a little bit about that, how that worked. Am I am I over characterizing that or am I kind of exaggerating?

SPEAKER_02 9:45

I mean, yeah, so what's worth knowing is that when we're telling this late 90s and early 2000s narrative, like geopolitics isn't remotely part of the narrative, right? My favorite quote from the whole book, uh, and and and I'm and I'm good at memorizing it, but I haven't said it in a few months, so I wonder if I can get this right. Was I'm talking to former VP of Apple over coffee, and he says to me after I asked him all these questions, are you sure you're not overthinking your thesis? Because you keep mentioning geopolitics, but I can tell you I was there when we were setting up the supply chain in China in the early 2000s, and we weren't thinking about geopolitics at all. And the next paragraph in the book is a single sentence, and it just said, absolutely, right? Or, or exactly, exactly is what it was. Right. And so it's funny that even in hindsight, he wasn't quite picking up that this was the whole narrative, right? And so I'm actually largely sympathetic to Apple. I think if you remember the late 1990s, this is when Charles Kraukhamer was talking about the unipolar moments, even the Francis Fukiyama book from almost a decade earlier. End of history, yeah, yeah, was still kind of fashionable. Like the sense was that we as like human civilization had kind of figured out the end path, like small L liberal democracy that all societies were going to get to. And so if you were a company um investing in China, you were probably accelerating their pathway to build up a middle class so out of get rid of communism um and become another liberal democracy in this big League of Nations, right? So it wasn't really all that contentious to be manufacturing in in China, right? If anything, um, Apple was late to the game. They were not by any means um doing something different by going to China. What was different was the context or content of what they were doing when they were there. So I would say the likes of Dell and HB were in China because they saw the ubiquity of labor and they basically said, wow, we can have higher margins and greater volumes. That was baked into the cake for Apple. But what they understood was if you have just like literal, well, maybe not literal, but armies of people line after line after line in these big factories that are basically being built and subsidized by the local governments and custom, you know, purpose-made for you, um, we can completely reinvent how products are built, right? How they come together, which means we can completely design them in a new way. You know, if you put Johnny Ive as a head designer in Dell, he wouldn't have been able to do any of the things that he ended up doing at Apple because they didn't have a system in place to let that happen. Um, so Apple kind of unlocked the secret of what was possible in China. My sort of 2026 analogy is that like you and I probably use ChatGPT or Claude, and because of our own lack of imagination, we're not at all exhausting the capabilities of these LLMs, right? Like what they're capable of is crazy. And then what you and I use them for is probably pretty basic, right? I don't, you know. Um, but but but that analogy is that's what Dell and HP were using China for, and Apple just sort of figured out like what was possible, right? They it was it was a win of imagination versus what other people were were were up to. And so the result of that is that um the biggest thesis of the book, in a sentence in a certain sense, is that Apple didn't go to China because it was attracted by the tech competence. There kind of was no tech competence. They were learning, they were sponges, they were willing to work hard. Um, it was more that um they decided this is the place to be. Um, let's start sending over plane loads of people to train up the competencies. And they're pretty small company at this time, right? I mean, they're almost bankrupt in 96, 97, and again after the dot-com crisis in 2000, but they knock it out in the park with the iPod, which is first made in Taiwan. And by the time it becomes a mini, by the time it becomes a nano, I mean, they're just sort of taking over, it becomes this status symbol all over the world. And then the iPhone comes out. And so more and more and more project managers within the company, regardless of what product they're looking at, they're beginning to say, well, from my perspective, for my product, China is where I want to build this, right? And if the suppliers themselves are all going there. So I have fun little anecdotes, for instance, where like a supplier in Singapore called Triple S had been working with Apple for quite some time. And to keep up with their competition that had just gone to China, they had to go to China, right? And it just snowballs. Everybody goes to China. And if you're not going to China, you you're just out of the game entirely. I mean, China's just wiping the floor with everybody. Actually, I'll give you one example that's not in the book that I think is really um great. I talked to someone um pretty senior at a at a PC maker who was also um moving operations to China, and he said that uh, you know, we basically put it on the spreadsheet how much it would cost to build products on in three continents. And in America, it was like $5 per unit, was the assembly. In Europe, it was about five euros. And um in China, it was negative $5. We were literally being paid, that's how big the subsidies were, to move to China. So you can just imagine, you know, you're a clog in the machine, you're maybe your CD vice president of manufacturing or lower, maybe your project manager of a certain project. Um, it just was in your interest. It just made you look good to consolidate and move everything to China. Right? So there's a line in the book where it's like in 1999, literally zero products uh for Apple were made in China. By 2009, virtually all of them were. And I consider this to be a geopolitical event like the fall of the Berlin Wall, but we don't know about it because all the action is taking place in a secretive countr country um and all the main players are are stuck under NDAs not talking about it.

SPEAKER_01 14:55

And that's actually you you touched on something I wanted to get to, which was that, you know, is historians like to hang these big, you know, eras, these these geopolitical moments on a single year, like 1919 and the Paris Peace Conference, 1945 and the Alta, and you mentioned the 1989 wall. And so reading your book, I kept thinking, and a lot of the research I do at CPA is is looking at 2001 and what it meant with the China, it it China's entrance into the World Trade Organization. But you also add in other factors as well, like the dot-com bubble bursting and then even the advent of the uh the iPod as well. And the confluence of these factors at the same time, I'm wondering if you can talk a little bit about that, because you know, in some way, all of those factors really pushed Apple into China, you know, even though I think that they had every intention of trying to build in in the United States.

SPEAKER_02 15:44

Yeah, I mean, you know, if if you had an alternative history, um, it would be, I mean, it really wouldn't be that they were manufacturing in the United States. I think that kind of died. And and you can sort of point to the flying yeast model if you're familiar with that, with how things went went through Asia. Like, like that's something that people hold on to. Like, what if they made $55 billion investments in Pittsburgh? And it's like you weren't getting the same return on investment. Like we like, I get it's a decent thought experiment. We can talk about it, but like at the end of the day, that's a total fantasy. But you might have had the Mexico project work out, right? Or you might have had, instead of the individual project managers, you might have had someone very senior, and this would basically, by definition, be Tim Cook, looking at it and saying, okay, I get that all of the underlings reporting to me are all consolidating their operations to China, and this is great for margins and everything, but for our overall resilience, we need to have some products uh or share of an individual product that isn't exclusively in one place, right? Anyone who's supplied who sorry has studied supply chain or experienced in the supply chain should know you don't put all your eggs in one basket. But again, the project managers, that's not really the job. It had to be someone at the level of a Tim Cook or a Steve Jobs to say there's something problematic here. And even before Xi Xin Peng enters the picture in 2012, 2013, that the logic would tell you that that's what you need to do. But Apple just didn't do that. They just were hyper focused on efficiency and what the company looked like through a spreadsheet level. And I think that was, in a sense, the major mistake. And actually, if I had one regret about the book, it's that I don't mention that around 2013, um, which is the year that they get into trouble with Xi Jinping, he he sort of comes into office, there's a new sheriff in town mentality, um, is also the period in which Tim Cook um uh bu builds up or creates a um a share repurchase and dividend program for Apple. And as of today, they spend more than a hundred billion dollars a year, Apple, on share buybacks and dividends. This is more than the seven biggest Wall Street banks combined. It's hard to fathom how much money Apple makes and at the margins that they make them at. Um, if they had been spending that kind of money over the last 12 or 13 years building resiliency in the supply chain, I wouldn't have a book to write, and Apple would have been the predicament that they were in.

SPEAKER_01 18:04

Yeah. No, I mean, and you mentioned 2013, so that's probably a good point to pivot to the second segment, which is what I'll call, I guess, the capture. So we went from, you know, Apple building the machine in China, but then all of a sudden that paradigm kind of shifts with Xi Jinping coming into power. And you open your book in the 2013 with that story about, you know, uh the this kind of the first rift that sort of started out. Um and it seemed kind of maybe uh innocuous at first, but it became a real issue. And then I think in 2015 and maybe 2016, there were there were subsequent events where Apple uh started to see that I mean China's starting to assert themselves, they're starting to kind of tighten the screws on Apple. Tell us maybe specifically about what those events were and what that said about the change of the relationship.

SPEAKER_02 18:46

So the fascinating context here, because I was living in Hong Kong at the time, was it was not clear who Xi Jinping was. Like his dad was famously a reformer who was like actually pretty instrumental in allowing Shenzhen to sort of uh, you know, be uh a part of China that wasn't subject to Marxist Leninism in a certain sense, right? Um and so uh people had hopes that he was going to fulfill his father's dreams, right? His father passed away at this point. Um, but it was not clear that he was going to be, you know, the the sort of the ruler with m the most power since Mao, like a real authoritarian, right? A sort of Putin and waiting kind of thing. And so arguably, uh Apple is the first company to have a front row seat as to like, oh shit, this guy is pretty different from Deng Xiaoping and his followers, right? And so um, without sort of going through the whole introduction, essentially what happens is that within 36 hours of Xi Jinping formally taking power, it's sort of a six-month process in China. So he becomes president in March 2013. Um, Apple is attacked on uh, you know, the equivalent of CNN, but of course state sponsored. And um they're attacked for warranty differences. And to be fair, like this was international news. This was widely covered, but there was never like the follow-up investigation that you might get in the New Yorker or something, like a few months after the fact. And no one ever really had put the pieces together as to like why they were attacked. And actually, the main narrative, if you go Google it and go find the coverage in the Associated Press or whatever, was that Apple had come out of this winning because essentially what had happened is Beijing went after Apple for alleged warranty differences. And then there were so many Apple fans in China that they took to the equivalent of Twitter and sort of defended Apple and said, like, this is a great company, da-da-da-da-da. And people thought that the communist power ended up kind of looking bad in this confrontation. Internally, in Cupertino, it was nothing like that. Um, it was a real recognition of like we have done more. Um we we we are the most successful manufacturer, like foreign manufacturer in the country, and we are the most successful um like foreign retailer in the country. And yet we don't understand China. We fundamentally don't understand why they're coming after us, why aren't they kind of grateful that we're creating these jobs and so forth? And so the result of this is that Apple, for the first time, sends senior people or or or I should say sends or hires senior people to live in China for the first time. So they've actually been in China in some sense since 1993. So two decades go by and you've never had a VP in China, which is kind of remarkable. Um and uh and so so so these eight people call themselves the gang of eight, and they are the eyes and ears of Cupertino trying to basically figure out how Chinese culture works, how the politics works, and they're in a certain sense taking over to some degree um what Foxconn had been doing for them. So Foxconn is uh, I think most people know, is kind of the main assembler of Apple products, but Apple hadn't just outsourced their manufacturing to Foxconn, they had outsourced some of their politicking to Foxconn. So Terry Guo would basically create these deals to move mass of production to a place like uh Zhangzhou or Chengdu, which is now known as iPhone City and iPad City, and he would get massive subsidies, right? So he would put in seven billion and the Local government within 3.5 billion. And when Apple would be asked about this, they'd say, like, we're actually not partners party to these negotiations. And in my research, I always thought, well, that that doesn't spell that like uh pass the SNF test. But I was able to talk to relevant people and it did pass the SNF test for them. Like Foxconn had been doing that kind of stuff for them, um, and it had been working out so well that they didn't see a need to sort of intervene. But Apple decides to really take control of how things are are um are coming to be in China. And to simplify, essentially what's gone on is that Xi Jinping and the top echelons of the Communist Party didn't understand the sort of investments that Apple was making, because in the same sense that I won't tell you who my sources are, because that's fundamentally like instrumental to my reporting. Apple doesn't want to go along telling who their suppliers are. That that's that's proprietary information that they don't want people to know. And they're a wildly secretive company. So not only did um suppliers not know which other suppliers were in the network, but the governments didn't know, right? I'm saying governments in plural because I mean the local, regional, and federal government. They didn't know the kind of investments that Apple was making. So they're getting in trouble for not being in China for China, for not supporting indigenous innovation, right? These are the terms that Xi Jinping uses. And so this all sort of like escalates where over the course of a few years, Apple's getting hit hit with things like not paying appropriate taxes and sort of having to kowtow and pay taxes and so forth, um, like additional taxes. Um, and and the CCP um has this meeting with uh with Tim Cook in May 2016, right? This is actually when um Donald Trump is going on about uh forcing Apple to manufacture in America, um, you know, being really uh vocal about Apple in particular, not just sort of Western companies in general manufacturing in America. And this is when um basically Tim Cook is is led to understand the political capital he's sitting on that, hey, wait a minute, our team has done the math and we're investing $55 billion a year in this country. The problem that we're getting in is that Beijing doesn't know. And so if we can just tell them in a in a secret meeting, here's what we're doing to your country, we're basically responsible for the rise of Huawei, Xiaomi, Apo, Vivo, um, and all these industrial juggernauts, let me let alone the the other other companies, um, we can have a major impact here. And and that's exactly what happened. So Tim Cook is actually photographed outside of Jiangnang Hai, the sort of uh citadel of communist power, um, just before going into this meeting and laying out the documents.

SPEAKER_01 24:27

Yeah, so I mean it feels like so y help me if I if we got the timing right on this. So so Apple responds to all of these kind of um either the allegations or the you know the the pushback that China is is putting on them with a uh an MOU, right? A memorandum of understanding, non-binding, never announced, and it pledges like $275 billion of investment in China over five years. And just to put that number in context for listeners, because I think that's really critical to this episode, like that's more than all American and Canadian private investment into Mexico uh from the signing of NAFTA in 1993 to two to 2020. It's more than double, uh, and you talk about this the the double the Marshall Plan in real terms concentrated in one country and 16 it as opposed to 16 countries that's the Marshall Plan covered. Uh and and the I think uh the man who who ran that original uh the original deal called called that one of the great uh the most generous act of any people, anytime, anywhere. Um so you know maybe maybe talk a little bit about the the significance of that, I guess that investment and what that did for this whole kind of relationship. Well, you've just done it, right? I mean, so there's that.

SPEAKER_02 25:34

But yeah, I mean, look, I would basically say that in 2015, Xi Jinping announced a plan called Made in China 2025. And my contention, which I think is easily defendable by the math, is that Apple, however, inadvertently becomes the biggest supporter of Made in China 2025. Now that alone is a remarkable claim, because uh when Made in China 2025 was sort of um circulated um in among policymakers in Washington, um, they kind of freaked out, right? Because the plan was, in a sense, um, we're going to sever our dependence on the West, right? We, as in China, are going to become self-sufficient in a number of key technologies, whether that's semiconductors and robotics or pharmaceuticals and so forth. And we're basically going to make the world dependent on us for those products. So it's remarkably distinct from the Pax Americana plan, where, hey, it's okay if certain countries like Taiwan specialize in semiconductors because um we're gonna sort of disperse knowledge and have commerce um, you know, run rampant around the world. In a way, this is how the Soviet Union fell. That the Soviet Union wasn't really competing against America, it was competing against America and her allies. And by having all these rising countries in Asia embracing globalization and specializing in their own things, um, the Soviet Union just wasn't able to keep up. And so um China was sort of supposed to be, you know, if you were talking to the Washington people, like the like the the the Larry Summers in the late 1990s, like the plan was that they were going to become like just a giant Taiwan that was integrated with the world. And really what that hadn't accounted for is that China is a really proud country with 5,000 years of history, with four times the population of America, and really had no desire to be part of a world order set up by someone else. Um but they just sort of did the hide and bide their time um thing, and then and then sort of you had Xi Jinping coming in later. To be clear, this is all hindsight 2020. I don't know how clear that was in the late 90s and so forth. And I also, even if you think it's clear in the late 1990s, history is so contingent. You know, it's not clear that uh Beijing sort of elected internally Xi Jinping to be the hardliner that he was. He ended up sort of taking advantage of a certain opportunity. I'm getting off topic, but my point is I'm not I'm I'm simplifying things, but uh, but I'm aware there's considerable nuance behind each of these, um, each of these things. Yeah, you might have lost the plot of my question of your question.

SPEAKER_01 27:50

No, no, not at all, not at all. I mean, it it just occurs to me, you know, like as we're talking, and we talk about I talk about we, you know, in our other our other episodes and some of the research that we do. You look at hindsight at some of the quotes from politicians who were telling us that what trade was going to do with China and how it was going to suddenly you know reform them into like a neoliberal kind of like order would take hold. And and you look back, it just seems so arrogant and naive. And I wonder what was the calculus for Apple? Because I it seems like they almost made that same determination that not necessarily they would become a market economy per se, but that there would be, you know, look, China would just say, look, you guys are doing so much for us, there's this benefit, like the symbiotic relationship that we have. You know, we'll just keep keep that this relationship. There won't be any geopolitical ramifications as well. I mean, is that kind of where Apple was thinking in this, or just there just was just naivete that just, you know, that's it.

SPEAKER_02 28:39

Yeah, you know, the Ian Bremer has used the term geopolitical recession, just to just to just to um sort of uh give a term for a sense that, you know, um shareholder first capitalism just thought of the bottom line. It just thought of how do you get things built. It's more short-term in nature, it's about balance sheets. It's not really about geopolitics. Um and you can see this very widely outside of Apple, like Anglo-America signing a deal to rely on Russia of all countries, um and Russian pipelines for a bunch of oil and natural gas and things like that. Like, yeah, in retrospect, you're like, how did you do that? Like, it's a terrible idea. Um, but geopolitics just wasn't really factoring into people's uh equations. Um, so yeah, I mean, I think going back to that favorite quote I mentioned, like Apple was just sort of thinking about the best deals and the best deals with the subsidies and the ubiquitous labor, that was just all happening in China. So it's a real wake-up call when they're sort of called out and then sort of pressed to operate differently. So, I mean, the grand irony, of course, um, to the point of cliche, I suppose, at this point, is that we thought China entering the WTO was a way of making China act more like us. And actually, they sort of so outclassed us with industrial policy that now even the likes of Condoleezza Rice will talk about industrial policy today. So we're becoming more like China. Um I mean, it's kind of wild. And in a certain sense, to be clear, we should. I mean, they they have so shown the absence of industrial policy is is is a is a problem that we should to some extent be embracing uh, you know, uh what have people have been calling this? Like that there should be like a Pentagon for industrial statecraft and things like that. Like I'm one of the people who are like, yeah, we there should be. Um so but so so yeah, so there's a great irony there, and I'm not trying to be flippant about it. Um uh they're a worthy adversary, let's put it that way. I, you know, I mean, I the I think the book has been really embraced by um by China hawks. And I think the more scared of China you are, the the sort of better the book is in a certain sense. But I'm not a huge China hawk in the sense that I don't sort of look back on the last 30 years and say that this is a totally like, I don't know, illicit regime who's just stolen their way uh to the top or whatever. Like they've got really good policies and smart people and um a system that sure it fails all of our tests in terms of you know individual rights and that kind of stuff, but uh it's got something going for it and and it's worth taking seriously because they're gonna have real impact in the rest of the world because a lot of other countries these days are looking up and saying, you know, the China model might actually be the one that we should embrace. And if you're not taking China seriously, you're gonna miss that because you'll assume, well, nobody's gonna want this system. But in fact, a lot of countries do.

SPEAKER_01 31:14

Yeah, no, and and what you in just hearing you talk just now, it occurs to me too that there was, you know, there was this profound uh misunderstanding of, you know, what China would the what their motivations were, you know, what their culture was. And it seems to me that we run the risk again when we look at at China and and how they're constructed, if we simply just say that like, oh, they're just uh, you know, mercantilists and they just they're just subsidies and cheating and theft, you miss a big part of what makes them successful. Because if you even look at their and you know, we're getting a little bit off topic, but if you look at their EV supply chain, for example, their electric vehicles uh largely uh the cost efficiency is largely owe to the vertical integration and and and over their battery supply chains as well. So, yes, that was largely the result of subsidies and things like that we would talk about. But you gotta also recognize the things that make them successful. So I agree. I mean, I think that there has to be, you know, for if we're really in the spirit of of how do we, you know, build back supply chains to some degree, uh, we need to actually look at some of the lessons as well. I can't just demonize, um, you know, be overly critical. We have to look at, you know, clear be clear-eyed about what we can do to kind of borrow from their playbook a little bit. Yeah. Um but one thing I wanted to pivot to, because you know, uh the well, the thing I love about your book is that if this were just a at its heart, we're talking about supply chains, sure. But this isn't just like a supply chain in that because you're you'd be having a much maybe different reception. Maybe we'd have a different conversation if this was just about supply chains, right? Um, you know, you probably you did a great job with this book and it would have been successful, I'm sure. But but we I think you really capture the drama of this story. And it's funny because I was thinking almost like a Greek tragedy, like big, big, uh, big picture here. And you actually bring up this Prometheus analogy, and I thought that was really apt. So mention that, talk a little bit about that and and how that plays in, that that metaphor plays into this story. It's funny.

SPEAKER_02 32:54

There's I think three lines in the book that I didn't write, but that uh, you know, if for in two instances my wife wrote, and this one was from my editor, and and and uh and and he was just sort of summing up the book and he brought in the Prometheus analogy, and I was like, Rick, that's a great line, and I'm gonna steal it, and it's going right here. So yeah, no, uh the you know, the in a sense, I guess what I'm pushing back against there is that um insofar as people had written about Apple and China's relationship in the past, um they had thought that there was like a quid pro quo where Apple was offering certain things and then China was giving them things back. And that's not untrue, but what was significant about Apple's $275 billion investment in the country was not that it was this novel thing. It was a recognition on the part of Apple that this is what we're already doing. Um, all they were doing was taking the $55 billion that their own team had estimated they had invested into China and then multiplying it by five years, right? So if anything, it's a lowball estimate of what they're going to invest because they're assuming no growth over the next five years. And actually the revenue like explodes during those years. So the $55 billion is a baseline. I'm sure that today it's closer to $70, $75 billion a year. And this is remarkable, right? Sometimes people think that, and I don't know how they think this, but if they've read the book, they think that like that was some five-year thing and then it ended. Like it's absolutely been renewed, right? Like, I don't know that there's a another MOU, but that's just the cost of business of or the cost of doing business in China for a behemoth with $414 billion, I think, of revenue these days that Apple has. Right. So my point was Apple was beginning to realize and trying to leverage the political capital of demonstrating to China we are playing the role of Prometheus handing you the gift of fire. We are responsible for orchestrating hundreds upon hundreds of suppliers in China, sort of bringing in the best expertise from Japan, from Korea, from Singapore, um, helping those companies operate here, and then um, you know, training up um millions upon millions of people, right? So, so so the the other sort of crazy statistic in the book is that Apple, since the advent of the iPhone, had trained 28 million people in China. The number is actually 30 million people now because it's been a year, right? And Apple updates the number. It's just a public number that they that they disclose. Um and uh and the other thing is that Apple has more of an impact on job creation in China than all of Chinese demand has on America. In other words, Apple has an estimated 2.5 or 3 million people churning on iPhones and iPads and stuff in the country every year. And if you look at all Chinese demand for American products and the number of jobs that produces in America, it's there's these are estimates, right? It's somewhere between 1.6 and I think 2.5 million, or maybe I might even be overestimating it there. So, like that was like the central sort of narrative tension or stuff that I was trying to figure out when I was beginning this. Like, how can one supercoration have more of an impact on job creation and our biggest adversaries uh populist than all demand from the world's most populous nation has on America? Like that's just that's it's so mind-boggling that I feel like am I missing a decimal somewhere? Like, right? Like it just feels like I'm off by an order of magnitude. Um, but so much of this, these parts at least, these are public numbers that you'd already be able to cite if you're an alcohol reporter. You just never digested it and really thought about what that means and and then unpacked it.

SPEAKER_01 36:40

Yeah, and and and what's funny is that um, you know, it because it the story isn't just confined, obviously, to smartphones, where China has obviously like they've built up their own, you know, obviously domestic capabilities and Huawei and Xiaomi and all the other companies that are doing so well. But now they've been able to pivot into uh you know, obviously EVs. And and now, you know, we talk about smartphones on wheels are basically the kind of cars that they're that they're producing. They've been able to completely bypass the whole you know ice process of like the the combustion engine. You know, they couldn't really get a foothold in autos and building that, but they've been able to completely leapfrog that. And so talk maybe a little bit about how you know Apple's know-how and that transfer allowed uh uh uh China to really just spread beyond just the simple, you know, you know, electronics, it's just into all the tentacles all over all these high-tech industries.

SPEAKER_02 37:29

Yeah, I mean, this is where you get into the problems of the asset-like corporation, where a company like Apple has decided, okay, what's the most valuable IP, the valuable stuff that we could be controlling, and then we'll own that and we'll orchestrate or rent everything else. And so this idea goes back to um something that Stanley Xi in the early 1990s, a Taiwanese businessman, called the smile curve of product development. So on the two ends of the curve are let's just put this in Apple terms, um, product creation and design. So let's just think about Johnny Ive. And then the curve dips, and when it dips, we're talking about value/slash margin, dips into logistics and manufacturing and all that stuff that you outsource, right? And then the curve comes back up to um retail and branding. So you can think of, you know, I'm a Mac versus I'm a PC ads, you can think of the Apple store at a fancy mall, et cetera. Apple is controlling those two ends of the curve because that's where the margin is, that's where the value is. I think China understood that at the state capacity level, that curve is inverted, right? It's a grumpy curve. Because if we embrace all those things that the Westerners don't want, uh, at the end of 20, 30, 40, 50 years, what skill sets do they have versus what skill sets do we have? In other words, there's a certain sense in which investing in all the manufacturing and all these huge industrial clusters and networks of how to make stuff is the most valuable stuff to the state. It's certainly valuable in the state in the state of war, but I even wonder if the value curve is going to be a little inverted just as semiconductors and uh, you know, memory and all these things that are fundamental for the 21st century become more and more valuable. And China has sort of unique and gargantuan um processes to build all of this stuff. And here we are in the West, just sort of doing the software designs and so forth. And of course, the the marketing. Now, we haven't reached that point yet. I mean, since I wrote the book, NVIDIA has become the world's most uh valuable company. NVIDIA doesn't even know how to make a chip, right? They design the hell out of them, but they don't build them. And and and so and so I worry that in the event of a blockade in Taiwan or something, companies like Apple, companies like NVIDIA who don't actually build their own stuff are in for a real reckoning. Whereas China, maybe they can't match TSMC and what's going on in Taiwan today, but they're certainly on a pathway to to to claim that territory. Um sorry, I'm not meaning territory meaning Taiwan. I mean the territory of ultra uh complex processes. And so that's my big worry that the Asset Light Corporation has taken what what could be a temporary period in history uh where software and branding um and design are the most valuable things. And my big worry, and of course I hope I'm wrong about this, is that in at the end of a certain period, it's actually the hard things, the manufacturing stuff, that is going to be where all the value is. And we've completely divested from that area.

SPEAKER_01 40:30

And that and that really touches on such a central piece of this this this dilemma that we face right now, because you talk about the smile curve and where we were focusing on the high value added components, and it all seemed to make sense, and it really fits with the traditional training in economics where we talk about comparative advantage and you focus and specialize in what you do best. And this was always what I learned in school as a young uh budding economist, where it was just like, oh, this all makes sense, right? Like they're there the China's advantage is low-cost labor. We do all the you know software engineering design. And it all seemed to make sense. And then all of a sudden you realize we're in this situation where China has these choke points in virtually, I mean, just every supply chain. I kind of look my head one way or another direction, and they've got they might not have the entire you know value chain, but they've got a critical component, you know, might just be a um, you know, think about how the uh the challenger was uh the air or the uh shuttle was destroyed by just a simple O-ring component, right? That just one little thing can can uh you know can uh undermine an entire operation. But China has those critical choke points of whether it's refining of critical minerals or or things like that, that they, you know, they don't care as much about value, right? They're not responding to shareholders, and that's such a core advantage that they have. And I'll also add, I mean, I think one of the biggest weaknesses of the lot of the trade agreements that we signed, uh, we didn't really care as much. Uh correct me if I'm wrong, but it seemed like we really overlooked labor uh costs or labor violations, labor rights violations, environmental costs, and things like that. China was able to kind of run past all that and and really uh engineered a lot of cost advantages, I think, through that that model, right? And they've been able to benefit from that. Yeah. Um so one thing, so you know, one thing I wanted to talk about, we talked about, you know, again, the ch you know, Apple's talking about like how they wanted to, their their IP and and really they're really sensitive about their their core technologies and things like that. Let's pivot to talking about the sort of the the um the the study that you talked about, or excuse me, the the case, the investigation that open AI and um the the Apple conflict that's that's in the works right now. So on July 10th, Apple filed suit in federal court in California against OpenAI and I. And so, you know, you covered this for the free press under a title called Um Why Apple Declared War on Open AI. So let's start there and maybe talk about that that title, that story that you just came out with.

SPEAKER_02 42:49

Well, it's funny. Um I don't get into this in the in the article that I wrote, but I should mention it just because it's topical for for this, which is that um as the writer of Apple in China, there's a hilarious amount of corroboration in Apple's own words, right, through what their lawyers say, um, for my own book. So in other words, they declare somewhere that like Apple's ownership of of how they do stuff is among like the gems of American business. Um, they acknowledge that they invested hundreds of billions of dollars over decades and how this stuff um all gets made, right? In other words, they're emphasizing all the stuff that my book is about, process, right? And the ownership and the orchestration of all of this. Now, what they're not mentioning is that it's all in China. Um so they're doing so for their own purposes, but for me, it's just like wildly corroborative. Now, what they're trying to say is that if open AI is able to just like poach more than 400 people from Apple, steal internal secrets from Apple, and then build their own hardware, it would, and I think I'm quoting here, immeasurably accelerate uh OpenAI's progress, right? So we'll come back to OpenAI in a second. That's my whole thesis. That by do by having all of that investment in China, they of course have immeasurably accelerated a rival. But the rival isn't a Little startup called OpenAI, the rival is America's biggest geopolitical adversary. So, first of all, just in terms of that, I loved reading that because Apple, in its own words, is just wildly validating my entire uh thesis. In terms of Open AI, um, I guess what's fascinating about this is just the person, um, the personal stuff. Um, the the big Apple book that was before mine is called After Steve by Tripp Meckle, who's now at the New York Times. It is largely a book about who has the soul of Apple. Is it Johnny Ive and the creatives, or is it Tim Cook and the operatives? And um Johnny Ive is is is like you know the main guy behind I.O. and and the guy who's you know sort of designing stuff with Sam Altman as to what's what what ChatGPT and OpenAI can do in hardware. And he has brought over what has been called to me the creme de la creme of creatives from Apple, you know, the people who wish they were doing, you know, breakthrough designs for the next product, but under Tim Cook's regime, they're finding ways to increase battery life and you know get the boca right on the camera, right? Like sort of small iterative things that play well for consumers, but isn't the most sexy thing if you're if you're uh if you're sort of at Apple in 2005, what you were able to do back then versus what you're able to do now is just a wholly different thing. So so the dream of going over to a company that's sort of kind of hoping to re-revitalize and re-uh-imagine what hardware can do, um, you can see why all those creatives are there. And so I think you're really bringing that tension to the fore of like this is kind of Tim Cook versus Johnny Ives. Um, and whether they have merit is hard to see. But I'm not sure of another skeptical media piece out there so far that said, you know, Apple's lawsuit isn't actually all that great. This is what Ben Thompson of Strikeary called a phishing license. They're using what they have, which is one guy who seems pretty clearly to be stealing some stuff from Apple, and then kind of saying uh the rot of this goes to the core. Like this is all of open AI. And so Apple's sort of trying to, I think, block open AI's attempts um to even get into the hardware business through a legal route rather than competing with them in the open market.

SPEAKER_01 46:08

Yeah, so I'm just wondering, you know, looking out ahead and and thinking about, you know, where does Apple go from here? I know they're trying to do some de-risking, you know, or at least uh some of this seems a little bit cosmetic, actually, because you you tell me what you think. Because, you know, we're hearing a lot of headline numbers coming out of Apple and the administration, the Trump administration is touting, yeah, I don't know how much it was, 500 billion, maybe some investment number, investment number that they're talking about. Um, you know, and and so you know, we're in this moment where we've seen the consequences of like this China all in on China strategy and what that's done. And so, yeah, so Apple's trying to claw back a little bit of that. Talk a little bit about that. Should we be skeptical about some of those investments and and how serious should we take that um investment in America, so to speak?

SPEAKER_02 46:50

Yeah, so it's it was 500 billion at one stage, and then Apple upped it by another $100 billion. And it's it's kind of difficult to parse out. So for starters, it's insane how little scrutiny there has been of these figures. And to be sympathetic to the reporters, well, Apple said this, the White House said this, Trump thanked him, they shook hands. That's kind of your story. And if you want to sort of do the second day, third day, or even you know, post-month investigation, there's not a whole lot to go on because Apple isn't at all transparent with where these numbers are coming from or anything. And when Tim Cook does an interview like on TV with Jim Kramer or something, where they go to like the headquarters of Corning to demonstrate their commitment, like it's such a basic thing to be like, well, right, but the Corning investment is $2.5 billion. Corning has already been a partner to Apple since 2007. So it's not remotely clear that anything they're doing is new. And even if the $2.5 billion is valid, which I assume it is, that's two and a half percent of the $100 billion, right? And a fraction of the $600 billion. And yet this was called, I think, by Bloomberg, like the cornerstone of the investment. And it's like, where's the other $597.5 billion investment? And so the numbers don't add up um at all. Um, and I've talked to you know, suppliers that are mentioned in the press releases and so forth, and they don't know where the numbers are coming from, they're at best fuzzy. And my only explanation that at least adds up, so I so I'm saying very clearly, this is an educated guess of mine, is that what Apple is counting as a quote unquote investment in America is the share buybacks and dividends that we mentioned earlier, because something like 70% of Apple investors are in America. And so if you're spending more than $100 billion a year on buybacks and dividends, which are effectively going to 70% of your investors, um, and you're multiplying that by the next four years, well, that's already more than $400 billion right there. And is that an investment in manufacturing or on touring? No. Is it an investment in America? Kind of. I mean, a lawyer can make that case if this were ever to go to a trial or something, right? And so I think that's the best guess as to where it's going. Because otherwise, if you're just looking at like how much revenue they generate and what they're investing here on the balance sheet, like none of it makes any sense whatsoever.

SPEAKER_01 49:05

I mean, is it is it fair to say that the proprietary knowledge and all of the know-how that that China or that Apple has seeded in China has made it has made a de-risking strategy really just all but not impossible, but just extremely difficult. I mean, you know, we're hearing headline numbers about, oh, they're investing in India or other countries, but it always strikes me as maybe just sort of marginal or it's maybe final assembly or something like that. But the like the real know-how sits still in China, all the machinery, all the the proprietary screws with just the things that you can't possibly tweak yourself, you know, all that stuff. Uh, you know, it where's your sense? Where do you stand on that?

SPEAKER_02 49:41

So look, I would love to be wrong about this, but I'm pretty bearish that India is going to be the next China when it comes to manufacturing, either writ large or for Apple in particular. So Apple is absolutely sending engineers to uh, you know, Karnataka and Tamil Nadu and sending them into uh plants run by Foxconn, run by Tata, which is sort of trying to be the local champion for India and all this. Like the stuff is happening. But there's a couple things. One, Apple isn't finding the same sort of return on investment. There's a lot of skepticism about having these people come over and train the engineers. My understanding is that the senior engineers in India can sometimes be a little like, you know, resentful that they're being taught because they think they already know how to do this kind of stuff. But then even if that stuff is going well, the question is who's building the eight-lane highways from the factory to the port? Who is building the world-class ports, right? Um, China has so many world-class ports uh versus a smaller country like Vietnam or something, but you're not really seeing the same um, you know, aptitude and investments going on in India. Um and uh is the state the same kind of partner that you get in Shenzhen or Chengdu? And of course, it's not. I mean, um, you know, in for India, manufacturing is like one thing. In China, it's the only thing. Um, you know, export-driven growth by luring in foreign capital is something they've been doing and perfecting essentially since Deng Xiaoping took over after Mao's death in 1976. You know, India's just not prioritizing manufacturing the way that China is. And if you're not doing that, I don't know how you're ever gonna compete. Now, I was in India a couple months ago, and one thing they made me really optimistic, which is that um India doesn't feel it needs to compete with China, it needs to compete with everybody else because so many corporations now have a China plus one strategy. In other words, China's gonna be part of the picture for Apple and everybody else, and then plus one. And is that gonna be Vietnam? Is that gonna be Mexico? In that competition, India feels good. And that's actually a really clever reframing where I can sort of share some of the optimism. But there's no sense in which investments into China on the part of Apple are actually going down as they put more money, right? In other words, the money that's going into India is expansion. It's not sort of coming at the expense of China. If anything, Apple's doubling down in China, whereby it used to be multinationals that happened to be in China. I shouldn't say happen to be, but were. So Korean, Japanese, US, Taiwanese, etc. And over time, more and more and more of that is Chinese companies operating in China. And you might say, well, what's the difference? Um, I think the difference is actually pretty unknown. But those companies can often win the orders because they are more likely to get the subsidies from the local jurisdictions. And by law, Chinese companies have people from the CCP on the board. And so I think China is just sort of, you know, putting a stranglehold over Apple, sort of tighter and tighter, whereby it's going to be more and more difficult for them to sort of operate like the free capitalist company that they want to be, because more and more of the decision making has to take account of politics.

SPEAKER_01 52:51

Yeah, and it just, I mean, the the sheer volume, the sheer um number of people that they can throw for even from the rural population as the China urbanized, and they were able to just draw on such this dynamic workforce at all times and just interchange the people and work them, you know, 14, 15 hours. And I remember reading about like the fox, the nets that had to be installed in some of these factories to prevent some of and I think just even the the deprivation that a lot of these workers face, but like that is something that the the government is able to offer. And I know that the a lot of the story was like, oh, Apple is exploiting the workforce, but I mean Chinese comp the Chinese government was essentially just like handing that as the model over to this company. I mean, you it's it's a really harrowing thing to think about, but how are you going to compete with that? I mean, how is any country going to compete with that without I mean, if you have any sense of like labor standards or anything like that, you're not gonna be able to replicate that model and you probably shouldn't want to either. But um, how much of that does that play into this? I know there's also a component to this story where China is investing a lot in robots and automation. And I don't know if that's an intention to try to like, you know, capture and retain some of that low, low-end, you know, parts of the value chain as well, if if there's something you have a thought of a thought on that as well.

SPEAKER_02 54:01

I mean, yeah, look, China's facing a demographic time bond to some extent of their own making, because this is the the the fruits, as it were, of the one child policy. Um, the one child policy is now over, but China is not succeeding in getting uh the birth rate to be to be much higher. And so, you know, sort of realizing this, um, they they know that they're they're kind of running out of of rural migrants in their own country to come take the jobs in the factories. So they're investing in a lot of roboticization to to you know carry on that work um uh you know with or without people. But the change that that's going to cause is huge, right? Because sure, machines can be more efficient than people in certain ways, but they also aren't part of society and they're not paying taxes, right? So, like who's going to take care of the old people as they become more and more of China's population and so forth. So, you know, the the the country could face all sorts of problems um as as that goes forward. The demographics in India and in Mexico are far better. And if it is a matter of replicating the China playbook, but in a new country, um, then you know, in a certain sense, I would be optimistic that Apple would be able to do things and and sort of build up that expertise from those other countries. The problem is if China is actually right about all this uh automation and optimization in the supply chain, then the era of labor intensity, um, sort of being the low rung on the globalization ladder that a country exploits before they move up uh might be over, right? In other words, it's hard to compete against China if you're if you've got, you know, tens of millions of people in the factories when actually their your competitor has now so invested in automation that they're running 24-7 with machines rather than three shree shifts of people whose movements they have to orchestrate, right? So I don't know if China's gonna be successful in that regard, but that would be the major threat. Um I could say more, but I yeah, yeah, I mean that's uh that's a big open-ended question at like a kind of civilizational level.

SPEAKER_01 55:59

Yeah. Well, so listen, I think this has been awesome. I mean, you've been so generous with your time. I really appreciate it. But I did want before you know we wrap up and let you go, I wanted to offer you an opportunity to say, like, you know, what's one thing you'd want listeners to take away from from the uh the book I have here with me? Um my trusted copy.

SPEAKER_02 56:19

Honestly, the one thing is I think that when I do podcasts, we do the natural thing, which is we talk about the high-level major investments, US China competition, da-da-da-da-da. And I think that might give a sort of aura of like, this is a difficult book to read, right? And um, you know, you can tell the audience better than I can. It's a really fun book. I don't know that it's a beach book, it's a good airport read. It's it's it's it's these it it it's sort of it sort of goes into these deep topics, but in a way that I think is a lot more like a fiction book than maybe it sounds. It's not sort of a boring textbook of numbers, it's told through characters, and the characters are really interesting, like how one of them has dyslexia and a learning disability in English, but when he begins to study Mandarin, he realizes that, oh, there's no sounding it out in Mandarin. Actually, I don't have dyslexia, and all the years that I put into focusing um are paying off uh better in China, and this this ends up being a very important executive um in Apple uh in China for Apple, right? So there's lots of people like that. There's all these gangsters in China that are controlling the supply of of iPhones, um, and it's how Cupertino responds to that as these groups sort of take apart iPhones uh with their factory connections, you know, replace the real parts with look-alike parts and then sell them on. And that's the sort of thing that's the basis of why Apple gets into trouble for warranty differences, because people are taking back uh phones that they didn't know had been tampered with. And where are they taking them back to? One of the many fake Apple stores where the employees think they work for Apple and they don't, because that's the sort of level of uh of of of I was gonna say ineptitude, but it's the the I don't know, the level of complexity and and opaqueness um in China. So my I the one thing I want to take what people take away is just that the book's a lot more fun, uh uh and and and hopefully gripping than than it is uh a sort of abstract uh numbers-based, you know, geopolitical, you know, book that you want to read one day, but it looks a little too daunting. It's I don't think it's daunting at all.

SPEAKER_01 58:24

Well, and it's a funny, fun fact here. So I was a couple of years ago, I was living in London with my family. My son was at uh trampoline park. I should have been watching him, but instead I had my copy of the Financial Times and I was reading, well, I think it was the first or second of your big reads on this whole Apple in China story. So it's actually really cool for me to be able to talk to you now two years later. So you the the story was so arresting and so uh captivating that I actually should have been watching my son, and um he seemed okay. He seemed okay. I was like, you know what, I got I got something I'm reading. This is too captivating. So you you carried through with that narrative through this book, and absolutely you all should read it. It's a must read. Um it's it's it's a really good story. Um, you know, not not the supply chain kind of book, uh, you know, that that maybe some folks were were thinking it might be. But uh anyways, Patrick, thank you uh so much uh for joining us on the big three. Um you can learn about our work at Prosperous America.org and be sure to find us on YouTube, and you can check us out, uh, check out the big three on Apple, Spotify, Google, or wherever you get your podcast, and make sure, whatever you do, pick up a copy of this book. You won't regret it. Thank you so much.