Tag Archives: capitalism

Apple Inc. and the Betrayal of the American Dream

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Big week for Apple fanboys and girls. New iPhone. You better keep up with all the cool people and buy one. It will change your life. Well, maybe not, but you’ll be the envy of all those iPhone 4 losers. “Wow dude,” you can say to them, “that’s one short, thick, throwback phone.”

A recent book by two Pulitzer Prize winning investigative reporters titled, “The Betrayal of the American Dream,” criticizes Apple for outsourcing too many of its jobs. Here’s a National Public Radio story on the authors and their book.

Even though I’m an Apple fanboy and investor, I believe the bigger the company and the greater its influence in the world, the more we should hold it accountable for being transparent, honoring workers’ rights, and protecting the environment. Apple’s marketing, products, and momentum can bedazzle at the expense of critical inquiry.

I’ve been swapping emails with my friend—Dan, Dan, the Transportation Man—about driverless cars. The last one I sent him linked to an article that suggested, initially at least, driverless cars will cost around $300k. “Just do what Apple does” he wrote back sarcastically, “and outsource it (the manufacturing of the driverless car) to China.”

In the United States, especially during election season, knee-jerk criticism of outsourcing is legion. Few of the critics take any time to consider how much more they’d have to pay for their toothbrushes, clothes, iPads, bicycles, and cars if they were all completely manufactured in the United States. Heaven for bid if we connected a few dots.

In their critique of Apple, I wonder whether the “Betrayal” authors factor in the daily benefits of its products to users around the world. I made light of the newest iPhone, but you’d have to pry my MacBook Pro from my cold dead fingers.

Also, outsourcing is an abomination only when economic nationalism prevails. It’s possible, theoretically at least, to think more globally without sacrificing love of country, and therefore, to cheer job growth irrespective of political borders. Especially given global economic interconnectedness and the fact that most of Apple’s foreign-based employees buy some U.S. imports.

The authors would chuckle at my naivete. They’d point out we continue to run a tremendous trade deficit with China because international trade is conducted on a grossly uneven playing field. China has far fewer labor and environmental regulations, pays workers far less (even when adjusted for cost of living), and places protective tariffs on our imports. The uneven nature of the international trade playing field is a pressing problem.

But I wonder what the authors would say about the charitable giving the GalPal and I will be doing the next few years as a result of recently selling some Apple shares that had quadrupled over the last four years.

For me, the jury is still out on what kind of corporate citizen Apple is. I value critical analyses, but at present, I will continue to use its products and invest in it. I am not a model to follow. Apple’s fate will be determined by the individual and collective decision-making of technology users around the world.

For cutting edgers like me, there’s just one decision left. A black or white iPhone 5?

And The Medium Sized Fish Eats The Small Fish

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I often get frustrated with the Michael Moore’s and Rush Limbaugh’s of the world because their ideological analyses slight endless economic, political, and cultural subtleties that require deeper thinking and more tentative conclusions.

Peter Whybrow, in his excellent book American Mania, explains Adam Smith’s work in ways few conservative free-market zealots probably understand. “Smith favored private ownership, with capital being locally rooted,” Whybrow writes. “He distrusted large institutions—be they government or corporate—as forces that foster greed, distorting and suppressing the dynamic market exchange and social intimacy that are essential to fair dealing.”

“As businesses merge and increase in size,” Whybrow contends, “and as manufacturing and services become geographically remote from each other, the behavioral contingencies essential to promoting social stability in a market-regulated society—close personal relationships, tightly knit communities, local capital investment, and so on—are quickly eroded.”

In other words, your less likely to exploit someone you know.

It’s in this context that I recently read Alpine Experience’s dead-tree newsletter that arrived old school in the mailbox. Alpine Experience is a local independent retailer that specializes in high quality outdoor gear of all sorts. If their website wasn’t so poorly designed I’d link to it. Here’s their slightly less bad Facebook page. I used to have an Alpine Experience t-shirt that said, “Friends don’t let friends shop at chain stores.” I shop at AE once a year when they have their annual sale. When their prices are marked down 30-40%, they almost seem normal.

I like their irreverent, personal newsletter, but I’m sure it’s probably more expensive to produce than they can afford. Inside this issue was an honest, interesting reflection on Olympia’s newish REI store’s impact on AE’s bottom line. The author, I think the store’s owner/manager, said the new REI is definitely impacting their bottom line. Admitted they’ve fallen behind projections and need to have a good winter. I really hope I’m wrong, but given REI’s economies of scale and vastly superior on-line presence, I anticipate AE going out of business.

REI is a large national chain, but its progressive business practices give it a positive, medium-sized, community-based essence. Like AE, it’s a groovy store. It has been voted one of the Top 100 businesses to work for the last 14 years in a row. Read more about its enlightened business practices here.

Recently I was cycling with an acquaintance, an independent architect who has fallen on hard times. He’s taken a job at REI to get by, working as a cashier 16 hours a week. We were discussing the AE-REI tug-of-war. He told me he needed glove liners shortly before getting the job and they were $20 bucks at AE and $7 at REI. Probably an exaggeration, but I suspect comparable products are often 30-50% more at AE. That would be a huge headwind to building a reliable customer base even in a good economy.

Back to Whybrow. REI is not a megacorporation that fosters greed, nor does it distort and suppress the dynamic market exchange and social intimacy that are essential to fair dealing. But it’s not as small nor as local as AE and it doesn’t share it’s long history.

What to make of this capitalist case study?

Chelsea Clinton and the Meritocracy Myth

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Yes, I'd be happy to join your board.

After reading a few accounts of Chelsea Clinton’s recent appointment to the Board of InterActiveCorp (IAC), a company that runs sites including Match.com, Ask.com, and Dictionary.com, here’s what I think we’re supposed to conclude.

There’s one winner and one loser.

The obvious winner? C-squared herself. The Wall Street Journal explains. Ms. Clinton will receive an annual retainer of $50,000. In addition, she will receive a $250,000 grant of IAC restricted stock.  

IAC’s stock is up 41% this year. Say she serves for ten years. With stock appreciation that will be well over $1m in income for attending what I suspect are quarterly meetings. Winner, winner, several very nice chicken dinners. She’s currently working on a Ph.D at Oxford. Sure hope they reimburse her for her airfare.

The loser is actually losers. From Alyce Lomax in Daily Finance:

This new appointment is a big — and possibly bad — deal for IAC shareholders.

Boards of directors are charged with protecting shareholder interests, whether many investors realize it or not. These days, plenty of corporate problems — such as out-of-control CEO pay — can be correlated with dysfunctional or flimsy boards that have nothing near an independent spirit that’s willing to challenge management teams.

Now 31, Chelsea Clinton was in her teens during the dot-com bubble and only about 20 years old when it burst, for example. That was a make-or-break time for companies like IAC, but she was probably still pretty preoccupied simply with the process of growing up.

GMI’s Nell Minow commented on Clinton’s appointment on PBS’sNightly Business Report, arguing that the best directors have decades of achievement to speak for them. She also pointed out that IAC’s Diller has a tendency to populate his board with “cronies,” which is just one reason The Corporate Library gives that company a near-failing “D” grade for its corporate governance.

In addition, Diller supported both of Clinton’s parents’ campaigns, which gives shareholders no reason to believe this is the kind of independent director that helps make a robust boardroom. In fact, she sounds a bit dependent on her parents’ careers at this point.

Name-dropping “important” or “known” appointees instead of adding truly experienced directors indicates weak corporate governance and madly waving red flags for shareholders. 

The unreported loser is the notion of meritocracy that the right loves to trumpet. This is the idea that the relative work ethic of U.S. citizens determines their success instead of the color of their skin, their gender, or their parents’ connections. Ironic that a first family of the left disproves one of the right’s foundational ideas.

C-squared’s appointment proves the playing field, that is life in the U.S. in 2011, isn’t level, the starting line of life is staggered, and an individual’s personal capital sometimes trumps others’ smarts and work ethic.

Beer Summit

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I know, I know, I know, most over-reported story of the year. But there’s one element of the story still deserving of attention. Allegedly U.S. Brewery Distributor execs were very upset that the  beers of choice were produced by foreign owned companies. One was heard asking, “What does this phrase ‘globalization’ of which you speak mean?”

Now, picture these execs sitting in a country club restaurant after 18 holes of golf. I’m going to go be presumptuous and guess that as well-to-do business executives they’re pro free market, pro capitalism, pro Milton Friedman. But when the invisible hand slaps them in the face and foreign competitors erode their market share, they whine and seemingly seek privileged status. 

Why is it that U.S. business execs sing the praises of free markets until they end up getting their asses handed to them by foreign competitors?

The Limits of Self Interest

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The new Civil War. Foreign automakers based in southern states versus American automakers based mostly in Michigan. Southern Republican members of Congress were the key bloc that succeeded in defeating the proposed $14b loan to the OBT (Once Big Three).

The theoretical underpinnings of Congress seemingly parallel those that undergird free market capitalism.

Market fundamentalists like Milton Friedman believe that from a business and economic standpoint, it is only when each of us acts in our own self-interest that society advances. Applied to Congress this means the best interests of the United States are achieved when each member of Congress pursues his or her constituents’ self-interest. 

But is that true? Is individual self interest, absent some shared concern for the public commons and  some government involvement, a magic catalyst for the greater good? What if within our home, my wife, our two children, and I each pursue our own individual interests? Will our family advance without some agreed upon values, overlapping purpose, and common vision for the future?

A Congressman or woman would say they have to put their constituents first in order to get reelected. But isn’t that how we end up with bridges to nowhere and wasteful pork that benefits a few at the expense of the many. Is it completely unrealistic for me to think that someday citizens might pressure their members of Congress to also consider “What’s in the best interest of the country and world?” 

What does this mean in the context of  automobile manufacturing? Regionalism trumps nationalism. Given that reality, are we better or worse off? This saga also illustrates the subjective nature of patriotism. Some people are inspired by the history of the labor movement and take pride in the accomplishments of the United Auto Workers. Others are ahistorical and blame the UAW for the OBT’s lack of competitiveness. 

How do we get the officials we elected to take a longer, more national, and even international view? More specifically, how do we get the people of South Carolina to think not just about what’s best for BMW, and by extension, their job security, but also the job security of the Michigan autoworker? And how do we get the people of Michigan to think not just about government loans and their job security, but global environmental issues?