Apple, Inc: Slice the Fruit, Find the Cyanide
It has been about twenty years since Apple, Inc. released its “Think Different” marketing campaign. The advertisement beamed with reverence for figures such as Albert Einstein, Bob Dylan, Martin Luther King, Jr. and Mahatma Gandhi. It encouraged viewers to challenge the status quo, rebelliously question authority, and push the human frontier forward. The connection between executing difficult acts of defiance and buying consumer electronics was not clarified. No explanation was necessary. The success of the ad campaign, as measured by the boost in Apple’s brand value, presumably did not rely on how many free thinkers it actually generated. I just watched the minute-long clip again a few moments ago, and I too ballooned with glorious purpose to expose the first atrocity that came in my sights: Apple, Inc.
With a value of $1.06 trillion, Apple is the largest corporation in the world by market capitalization. This makes it a richer entity than all but 16 countries on the planet. It is what smaller corporations aspire to rival. Corporate boards around the world ponder over its success techniques. LinkedIn users vicariously celebrate Apple’s wealth through memes. Even outsider executives gleam at this monument of our global economic order, while business managers tenderly clutch copies of Apple’s innovation stories in their beds (citation needed).
Economic, Political and Intellectual Hegemony
As can be attested by those in the tech industry, Apple directly or indirectly controls many industry-wide decisions made by various companies. This sway is not limited to consumer electronics only. It spans branding and marketing, venture investments, and practices in supply chain and operations. Hence, the company owns an intellectual monopoly within various industries, influencing domain experts, policy-makers, media members, and other agents of business society. Entire countries and communities are tied to great shifts caused by the moves of mega-corporations like Apple.
Further, corporations like Apple cumulatively operate political and economic monopolies in a supposedly democratic society. The public’s only role is to consume the outputs of their business and tolerate all associated externalities, so that the $1.06 trillion can grow boundlessly, as in Apple’s case. As Walter Lippmann, a leading political commentator in the 20th century remarked,
“The public must be put in its place, so that the responsible men may live free of the trampling and roar of a bewildered herd, ignorant and meddlesome outsiders whose function is to be interested spectators of action, not participants, lending their weight periodically to one or another of the leadership class (elections), then returning to their private concerns.” (Year 501, Chomsky)
For Apple and its owners, “living free” fundamentally means the unopposed ability to cheaply extract raw materials around the world; manufacture, package, and hawk products to make limitless profits; and continue to appreciate that capital in investment markets. This paragraph captures their life’s work and meaning.
Despite lofty PR claims about thinking differently, and the tasteless juxtaposition of Martin Luther King, Jr. while peddling electronics, the very existence of Apple’s concentrated wealth sufficiently proves the absence of democracy. Like all corporations, Apple will stop at nothing in its quest to maximize profit and market capitalization. Quaint constructs like democracy of wealth and decision-making are of immense concern, but only to the extent that they need to be stomped by influencing the state.
Evidence was provided in a 2014 Princeton Study, which showed that the US is decidedly an oligarchy. As the study describes,
“Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic-Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism.”
At the behest of corporations, political and economic democracy is obliterated. From 2017 to date, Apple has poisoned the veins of the electoral process with $10.9 million in campaign contributions to various political representatives. 35 out of their 42 lobbyists have previously held government jobs. This is only symptomatic of a much larger epidemic, as explained by Professor of Political Science at University of Massachusetts Thomas Ferguson in Golden Rule: The Investment Theory Of Party Competition And The Logic Of Money Driven Political Systems. In summary, Ferguson compellingly shows, with high predictive success, a truth that citizens instinctively know — that US elections are occasions in which coalitions of private capital invest to control the state. Simply put, elections are bought and the buyers expect to be rewarded.
The Secrets to Apple’s Wealth: Spark Notes For All You Executives Out There
With all those unimportant details out of the way, let us discuss what really matters on this planet: creating a rich corporation like Apple. This section is required reading for all the “responsible men”, who aspire to construct new titans of industry for the obviously benevolent goals of serving mankind, changing the world, or something like that.
It is not controversial to say that obeying the rules of the market is required to obtain Apple-level success. However, what exactly are these rules? The conventional story speaks of the creation of innovative products that enrich lives. Once coupled with some very creative branding, the market will recognize your brilliance and reward you with ungodly wealth.
This is the conventional version, and these are not the market rules that get you to $1.06 trillion. At the end of the day, only profits will lead to higher valuations. ‘Innovation’, ‘game-changers’, ‘love and care for products’ and ‘disruption’ can all come along for the ride, but the market algorithm often requires more specificity than flowery pretense. It requires concrete numbers. To increase profits, all costs of doing business must be minimized, and revenues must skyrocket.
Let’s rub the magic lamp.
There are various costs of doing business, such as research and development, manufacturing, payroll and taxes. Corporations like Apple have mastered the art of cost reduction, as detailed below.
Research and development
As previously covered in The Free-Market Fraud: Tech Innovation and Alternatives,
The science and engineering of new inventions and discoveries are not so trivial that they can be spearheaded by a few capital cowboys in a Wild Wild West of technical orgy. The basis for our high-tech economy lies in the state, with very long timeframes and large costs no venture capitalist with a requirement for a quick return can tolerate. These are R&D programs funded by various state agencies and its branches, including the Pentagon, NASA, EPA and so on.
Examples are too numerous to state. Some include space technologies, GPS, self-driving cars, cameras, indeed the internet itself. A closer look reveals that the military and war is intrinsic to high-tech research. While a large section of the US Defense (doublespeak for Offense, or Invasion) budget includes Operations and Maintenance, contained within it lies a tiny slice ear-marked for research and development (~84B for 2018, out of ~700B with the recent increase under Trump).
After the long and expensive road to discoveries and inventions is paved by public funds, corporations and other private entities are invited to waltz down the road to productize and monetize. Intellectual property, belonging to the public and built off of years of research, engineering and test work, is pushed to private markets to be developed into products, often with little differentiation.
Huge profits are reaped and transferred to a few hands from the commodification and sale of many scientific and engineering breakthroughs. For instance, nearly every component in the iPhone, including wireless services such as GPS, and various manufacturing processes can be traced back to publicly funded research and development largely for the purposes of technological warfare, and wartime manufacturing.
There are exceptions to this rule. One such instance was AT&T Bell Labs, a corporate-funded research laboratory with origins in the late 19th century. It was responsible for breakthroughs such as the transistor (and hence, indirectly computers), lasers and the development of information theory. However, AT&T was only able to sustain long and expensive technical projects, which often do not have a positive IRR, because it had a government guaranteed monopoly on the telephone market — a form of state intervention.
In this case, the exception proves the aforementioned rule: private capital, despite its grandiose claims of pushing the human frontier forward and working hard to invent utopia, is too impatient and intellectually bankrupt to push fifteen or twenty-year research and engineering projects. After the hard, long and dirty work has been done, it swoops in to commodify, package and brand various products and services for a singular purpose — profit.
Further private research and development can include pushing various technologies to the commercial domain, built on a publicly-funded foundation that continuously sprouts promising technologies and techniques in the field of electronics, photonics, software and artificial intelligence, battery technologies, among many other domains. The risks and costs of immense magnitude that yield these technologies are socialized, and profits are later privatized. If the actual investors received their dividends, taxpayers would see checks in the mail from corporations like Apple.
Outsourcing manufacturing, familiar to many Americans on the receiving end of the off-shoring bludgeon, is not sufficient to cut costs. Once outsourced, horrendous contractor labor conditions and slave wages that strip all humanity and personhood from the workers ensure that the contractor can pass savings to Apple, resulting in a nice boost in profits and hence, market capitalization.
In addition, extraction of raw materials such as cobalt presents another opportunity. Is child labor abhorrent? Is slavery despicable? Irrelevant questions for the “responsible men” in their quest for cheap raw materials to cut costs. The civilized, educated elites would rather combine both detestable institutions in one — child slaves.
As Harvard Business Review explained,
Over the years. U.S. taxpayers have been very good to Apple.
Many of the revolutionary technologies that make the iPhone and other products and services “smart” were funded by the U.S. government. Take, for instance, the Internet, GPS, touchscreen display, as well as the latest voice-activated personal assistant, Siri. And Apple did not just benefit from government-funded research activities. It also received its early stage finance from the U.S. government’s Small Business Investment Company program. Venture capitalists entered only after government funding had gotten the company to the critical proof of concept.
Apple set up a subsidiary in Reno, Nevada, a state without a corporate income or capital gains tax, and channeled a portion of its U.S. sales there, reportedly saving $2.5 billion in taxes. And Apple and Google have both made use of a convoluted tax structure known as the Double Irish With a Dutch Sandwich to avoid paying taxes on overseas earnings. Google chairman Eric Schmidt is reportedly “very proud” of this. “It’s called capitalism,” he said last year.
An even bigger question for the American taxpayer is whether such support leads to a “parasitic” innovation eco-system. Consider Apple. Despite benefitting directly from taxpayer-funded technologies, it has strategically “underfunded” the tax purse on which it has in the past directly depended.
When the European Commission announced in 2016 that Apple will have to repay as much as $14.5B in back taxes due to illegal Irish tax breaks it received, US lawmakers breathlessly defended the corporation, and public relations propaganda kicked off in full swing. As the Guardian reported at the time,
The facts of the Apple case are straightforward: with the blessing of the Irish government, Apple created a byzantine network of subsidiaries to shelter its profits in an entity that was a tax resident of no country. As a result, billions of dollars of Apple’s income have flowed almost tax free through Ireland’s tax system. The European Commission estimates that in 2014, one of Apple’s Irish affiliates paid a tax rate of just 0.005% on its Irish profits.
Given that any income statement must subtract taxes to calculate net income (profits), is it surprising that global capital markets compel companies to avoid paying taxes? It is an algorithmic requirement, and if one finds the facts above disagreeable, it is not Apple you find disagreeable, it is capitalism. Eric Schmidt is correct.
Payroll appears on the liabilities section of the balance sheet, despite lofty orientation keynotes depicting employees as assets. Payments made are costs, and are not desirable. Hence, we see outcomes such as underpaying and understaffing at Apple retail stores. Again, this is codified in the economic system. Capital loves consumers, but despises labor, as evidenced by the highly immoral and bloody labor history of the US.
As seen above, there are many mechanisms of cost reduction that go far beyond purchasing teams haggling with a supplier over bulk pricing for various components on PCBs. Those are grains of sand compared to the beach. However, cost minimization only gets you half-way. Revenue needs to be maximized. There are several techniques that can be used.
Planned obsolescence and superficial innovation
If reliable, long-lasting and sufficiently capable devices are made and sold, there would be a business winter in the intervening years, during which devices work well and serve their purpose. Instead, devices must fail routinely to stimulate more demand. Reliable failure. The externalities of tremendous raw material and energy waste are all insignificant details. Recently, the Italian government fined Apple and Samsung for deliberately slowing down phones to stimulate upgrades. In addition, superficial ‘innovations’ such as shaving off a millimeter from the cell-phone body, or adding a quarter of a megapixel on the camera are all amplified to create further demand from a consumerist population fixated on the new. This ensures unfathomable revenues.
Suppressing public repairs
Another technique to ensure new sales is to suppress repairs. Tech companies like Apple make their devices extremely difficult to open and mend. In addition, they exercise their crushing influence on environmental and industry standards groups such as IEEE to slash requirements which would allow for easy repairs and reuse by the owners of the devices.
Propagation of the technopoly, consumerism
Propaganda, or in polite society, public relations, not only allows for boosting sales and revenue but also serves as the glue that holds corporate power in place. Exuberant pronouncements of changing the world with new gimmicks not only sell the product but mask all the aforementioned truths. As covered previously,
A company requires a story to enlist customers and its own employees into its loyal army to consume its product/service and advocate for it. Publications and other media are critical in this mission to generate the “uninformed consumer making irrational choices.” (Chomsky, Manufacturing Consent). If the consumer is convinced that making a purchase is much more than trading their dollars to obtain some item manufactured in the millions; rather, a critical piece of their savior-identity for example, it can lubricate the movement of those dollars from pockets to registers.
For instance, resources, time and energy are directed to shallow technologies such as Apple Health, as the health and wellness industry booms even as it does not put a dent in systemic causes of poor public health. Nevertheless, the manufactured demand for wearable fitness-trackers is sufficient justification for the incineration of resources that fan the flames of profit.
The Apple Does Not Fall Far From the Tree
Maximizing revenue and minimizing costs are not conspiracies. These are programmatic requirements from corporations like Apple. Their profit-oriented operations operating under capitalist rules are fundamentally incapable of making sound engineering, planning and distribution decisions. Morality and ethics are not even in the same universe, barring cheap PR stunts. Lighting up scarce resources, wasting limited energy and exploiting creative human energy to generate immense profits for a few owners is the central commandment. These are not mistakes, oversights or errant behaviors, but the predictable outcomes of a state-sponsored capitalist economy.
Political democracy and communal self-ownership of economies are threats to this commandment. Rejecting the notion of privatizing profits and socializing risks and costs is a step towards building alternatives. Much can be said to break the intellectual chokehold of corporations, raise spirits in the age of such titanically oppressive institutions, and encourage imaginative combat against tyranny. For now, two words should suffice: