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How iPhones Built A Superpower With Patrick McGee | China Considered | Hoover Institution · China Considered

• 0:08
  - Welcome to China
• 0:09
  Considered a podcast that brings fresh insight
• 0:12
  and informed discussion to one
• 0:13
  of the most consequential issues of our time,
• 0:15
  how China's changing and changing the world.
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  I'm Liz Economy, Hargrove senior fellow
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  and co-director of the program on the us, China
• 0:21
  and the world at the Hoover Institution at
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  Stanford University.
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  Today we have a very special guest, Patrick McGee.
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  He's a technology journalist for the Financial Times,
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  and the author of the bestselling book, apple in China,
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  the Capture of the World's Greatest Company.
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  Welcome, Patrick. It's great to have you.
• 0:40
  - So good to be here, Liz. Thank you.
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  - So let me just start by asking you what prompted you
• 0:46
  to write this book?
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  I mean, what made you think this story
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  of Apple in China was really worth telling?
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  - I joke that the book idea came out of the failure
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  to cover Apple, well, as a reporter covering it
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  for four years rather than the success.
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  And I, you know, I mean, I'm saying it as a little bit
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  of a joke, but it was true.
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  I found Apple a really difficult company to cover, namely
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  because they're really controlling of their narrative.
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  And I guess I'm not really interested in like
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  gadget reporting.
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  I would think most Apple reporting is, is is the covering
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  of gadgets, right?
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  What's the next product gonna look like? How does it work?
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  That sort of thing. And I was interested more in like
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  how the sausage gets made, right?
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  Right. And so, I mean essentially it's, it's overdetermined,
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  there's three or four different origin stories for the book.
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  And so I'm always trying to think of which one do I tell.
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  But one of them is that I was profiling Christiano Oman,
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  the CEO of Qualcomm,
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  and I was asking him for some
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  anecdotes, right, some stories.
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  And he was telling me about being in Ty Taipei for 14 days
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  of quarantine during COVID trying to get to the fabs
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  where their chips were manufactured by TSMC.
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  And I was like, right, but you're not a fab company.
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  You, you just designed the chips,
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  so why do you have to go to the factory?
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  And he said, well, because we follow the Apple model.
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  I had been covering for Apple, apple for three years.
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  And I remember thinking like,
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  what's the Apple model kind of thing.
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  And so I think he was the first person to explain,
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  probably in the briefest sense,
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  well Apple doesn't just outsource, right?
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  They take huge control over their supply chain
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  and they're there sort of at all hours, you know,
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  making sure everything is up to speed.
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  And then so, so maybe he didn't say too much about it,
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  but then I, I just began looking on, on LinkedIn
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  and so forth and I quickly came across the position
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  manufacturing design engineer.
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  And these are the team of, you know, more
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  or less American engineers who travel around to factories
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  around the world, but increasingly with time just to China.
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  And they're the ones who are sort
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  of teaching engineering 1 0 1,
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  installing machinery on the production process,
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  even using proprietary software that's on the machines
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  and really training the capabilities rather than finding the
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  capabilities in China.
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  And the more I looked into that
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  and the more I talked to those people,
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  the more I realized I didn't have a story about
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  how Apple MA breaks products today.
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  I had a whole narrative,
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  or at least there was potential for a whole narrative as to
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  how they even got into this.
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  'cause of course, apple famously made their own products
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  for the first 20 years of their existence.
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  So it, you know,
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  getting all the sourcing was the most difficult thing
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  in the book by far.
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  But it was pretty easy
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  to figure out this hasn't been covered
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  and Apple's such an iconic company
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  that if I can figure out some narratives
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  and people around this,
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  people are gonna be interested in the narrative
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  and I would be interested in the narrative.
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  - Yes. And I was certainly interested in the narrative and,
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  and millions of other people were too,
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  since it made the New York Times bestseller list.
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  - Wow, the book world's so small,
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  I don't know about millions, you know, maybe
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  with the documentary or something,
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  - The success of it.
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  Well, if it's not millions yet, I'm sure,
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  I'm sure it will be with all of the,
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  with all of the reprints.
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  But, so I wanna get into exactly
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  what you were talking about, but for a second.
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  You know, you mentioned that it was difficult to sort
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  of get into Apple, that they controlled their narrative.
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  So you had over 200 interviews
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  and granted not all with Apple or former Apple employees,
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  but how did you actually break into that, the Apple sort
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  of, you know, dome?
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  - Yeah, actually, when I say more than 200,
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  I'm exclusively counting the people
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  that had Apple experience.
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  Okay. I spoke to other consultants and stuff and I,
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  and I don't actually account them.
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  So I don't know what the full number is for the,
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  for the tally of the book.
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  You know, I suppose some of it is just the, the,
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  the longer time it was ago that someone worked at Apple,
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  the more likely it is that they no longer care about their
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  NDA or they just don't think it's relevant, right?
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  If you're giving up the secrets as to how
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  to do the plastic injection molding for a computer in 1999,
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  the likelihood that Apple's gonna come after you
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  or that Samsung's gonna use that knowledge
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  to their own abilities, whatever, is pretty slim.
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  So in a certain sense, I was just doing the, the, the,
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  the lazy historical thing of looking chronologically,
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  probably not aware of what I just said,
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  that if you're talking to people in the eighties
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  and nineties, they're more open to speaking.
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  But then as you sort of build a foundation of knowledge
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  and a foundation of people, you're able to then sort
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  of break into new sources and sort of bring it closer
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  and closer to the present over the year
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  off that I took to write.
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  In other words, if I talked to someone in 2005,
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  if I just had them on the phone for a few minutes,
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  it was really easy to show them
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  that I was taking the issue really seriously.
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  I wasn't writing a hit piece
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  and I'd already spoken to people
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  that might've actually been their bosses
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  or more senior people on the team or whatever.
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  And so the knowledge just sort
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  of compounded with, with time.
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  What was difficult, I suppose, is
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  that the book doesn't just tell a supply chain story.
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  It sort of starts there
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  and then it changes into the retail industry
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  in China, right?
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  Which is just like a totally different geography.
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  It's a totally different set of sources.
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  Apple's pretty siloed.
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  So if you're in operations, the chances
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  that you know anything about the retail operations are
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  pretty slim and vice versa, right?
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  But across like eight different things within Apple.
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  And then, and then it goes more into the, the Chinese,
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  or sorry, maybe I should say the political dimension
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  within, within China, right?
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  And again, that that's a different set of people as well.
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  So I, I say it compounds,
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  but I'm maybe simplifying how easy it was to sort of build
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  and build because I sort of kept changing, you know,
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  what the topic of the book was.
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  - Yeah. I mean, and that is one of the things that made,
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  I think the book so Rich
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  and so fascinating is just the number of directions
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  that you came at this issue of Apple in China from, right,
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  the design people, the Foxcon people, the, you know,
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  apple manufacturing people, the senior people
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  who made the decisions to move manufacturing, you know,
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  from other countries, you know, from the US
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  but also from other countries to China.
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  So, you know, your main thesis, you know,
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  is basically China wouldn't be China today without Apple.
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  Okay, that's too big, you know, to tackle tackle.
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  But, but let's just think through sort of
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  what you think were the major inflection points in the
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  decision of Apple to move so much of their production,
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  so much of their manufacturing out
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  of the United States and to China.
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  'cause that's at some level the heart of the story.
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  So what do you see
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  as the major decision decision moments including, you know,
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  the other players from, you know, you know,
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  Terry go and others.
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  - So I guess it's worth knowing that, I mean,
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  the only reason Apple even gets into outsourcing
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  and offshoring is complete financial desperation.
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  The company is almost bankrupt in 19 96, 19 97.
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  And again, in 2000, especially when Steve Jobs comes back,
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  he wants to be making their own computers.
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  It just gets to a stage
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  where they literally don't have the
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  balance sheet to support it.
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  And when they do come up with the Bondi Blue iMac,
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  they can do the enclosure, you know, the shell
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  of the computer, but they don't have any experience building
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  A-C-R-T-A cathode ray monitor.
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  And so they turn to lg.
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  And so LG is their monitor provider,
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  not a contract manufacturer,
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  but Apple has such swagger that they just sort
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  of turn this company
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  that's not a contract manufacturer into one.
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  And then they actually have LG sort
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  of operate on three continents to sort of replicate
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  what Apple had been doing for, for two decades.
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  So, I mean, that's one inflection point,
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  and it's just worth knowing that Apple is
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  not early to outsourcing.
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  They are late to outsourcing,
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  but they just sort of figure out something
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  better than anybody else.
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  And the whole, the whole idea
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  of you build the competence in the factories,
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  I think is pretty novel.
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  I mean, certainly the degree of of, of minutiae
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  that Apple went after, totally novel.
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  Usually you come up with a product, you design it,
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  and there are capable factories willing to do the work,
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  and if they can't do the work, then you
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  designed it wrong, right?
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  There's something called DFM designed for manufacturing.
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  And the idea would be that from the earliest days of,
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  of doing the, the blueprints, you're figuring out things
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  that are possible on the manufacturing floor.
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  Apple basically threw out DFM
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  and said, we're gonna build things
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  or we're gonna design things sort of
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  however the hell we see fit.
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  And then we're going to figure out later
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  how, how to build them.
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  And, and if people don't know how to build them,
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  we'll train them how to build them.
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  So what's interesting about
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  that narrative is there's a seven year period from 1996
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  to 2003 where Apple is barely in China,
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  they're in like nine different countries.
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  You know, Korea, Singapore, Taiwan,
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  Taiwan being the most important,
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  really coming up with this model.
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  So I, I'm pointing this out
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  because it's not really like China
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  and Apple together figuring these things out.
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  And even when Apple does start manufacturing computers in
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  2000, but before they consolidate, it's not really China,
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  it's Shenzhen, right?
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  And obviously Shenzhen's in China,
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  I'm not saying it's not obviously,
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  but it's a totally different set of frameworks
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  and legal policies and outlook
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  and mindset and all sorts of things, right?
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  So the meet cute moment, if you will,
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  is a normal bankrupt company
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  and a particular jurisdiction within China.
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  It's not really like Apple
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  as like the multi-trillion
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  dollar company that we think it is.
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  And it's certainly not China in terms of a superpower.
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  So, so, so, so that's really interesting.
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  And then I give all sorts of credit to Terry Gu and Foxconn.
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  Yeah. And in particular the Taiwanese entrepreneurs
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  who play a massive role, even one
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  that Xi Jinping has acknowledged
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  and really building up the capabilities and the,
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  and the sort of super industrial clusters that,
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  that China has in multiple jurisdictions.
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  So, so Terry Glow is in my narrative,
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  really the first person to realize that working
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  with Apple is really complex
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  and while his Taiwanese compatriots don't want to work
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  with Apple because they don't like
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  how Apple engineers breathe down their neck
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  and sort of are obsessive about little details,
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  Terry Gu understands,
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  and I know this sounds like a high school poster,
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  the challenge is the opportunity.
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  - Yeah. - And that by taking on Apple as a client,
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  even though they're tiny volumes, right?
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  This is two or 3% of the market
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  and they already are supplying to places like Compact or
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  or Dell, they can learn so much from them.
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  And if they can please Apple, they can please anybody.
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  'cause nobody's making the same sort of demands.
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  So Terry go slash Foxconn, major inflection point for Apple.
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  And then, you know, I have a couple chapters
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  where they're building products out Taiwan,
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  and essentially it's a bit of a disaster
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  and it's a disaster at a time when, you know,
• 10:29
  the iPod is not a major success.
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  I mean, the iPod was a major success in terms of its design,
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  but it takes several years
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  before it's actually a, a, a well-known product or,
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  or well purchased product.
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  And it's because Steve Jobs made it open
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  to the PC market, right?
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  For the longest time he was hoping
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  that it was like the luring thing that you would wanna buy.
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  And if you didn't have an iMac,
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  you would go buy an iMac just to make it work for the iPod.
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  It's sort of a bizarre boneheaded strategy.
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  But they do that for two years before they,
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  before they eventually change t
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  and Foxcon again makes this big bet to, to work on
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  what becomes the iPod Mini, and then we're off to the races.
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  But essentially the iPod,
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  the iMac G four can't really be made at the, at the volumes
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  and at the sort of sophistication
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  that Apple needs it in, in Taiwan.
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  And so the factories, the Taiwanese are, are saying, well,
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  why don't we go replicate this in China?
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  And that just works so well
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  that eventually Taiwan just is removed from the equation
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  and it's not a replication strategy,
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  it's a let's let's do a Greenfield site in, in China.
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  And that just works so well that by the time you get
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  to the iPod Mini, the iPod nano, it's clear
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  that Foxconn's gonna be the partner for the iPhone.
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  And then the iPhone is obviously,
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  its its whole other narrative
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  where you go from 5 million units in 2007
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  to 230 million units by 2015,
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  and that requires hundreds of suppliers.
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  Not all of them are in China even today,
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  but most of them aren't in China in the early years.
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  But as you get into those volumes, apple has every incentive
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  to, to have everybody from
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  around the world set up their production in the same
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  industrial clusters to, to make everything smooth
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  and to not have to deal with customs
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  and tariffs and all sorts of things.
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  So, so that would be the other major inflection point.
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  - Yeah, I mean I think Terry Gu was his own kind
• 12:06
  of visionary, right?
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  In in many respects.
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  - I think he's the Henry Ford of Asia. I mean, absolutely.
• 12:11
  - Yeah. Yeah. So, you know, with all of the investment
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  and the training and the manufacturing, so the jobs
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  and everything else that Apple is bringing
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  to China at this point, in that sort of 20 12, 20 13 period,
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  you would think that China would be elated to have Apple.
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  And yet as you recount
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  the state media clearly instructed from on high kind
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  of goes after Apple.
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  What was that all about?
• 12:41
  - So there's a couple things going on.
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  So one, I would say, let's say thought experiment,
• 12:44
  your Xi Jinping's lawyer, and he comes into power
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  and he is like, I don't like this Apple company,
• 12:49
  the case against Apple that they're an exploitative company
• 12:52
  looks pretty strong.
• 12:53
  I'll argue why it's maybe not that strong in a minute,
• 12:56
  but there's this chart that I use in presentations
• 12:58
  that shows how in the first four years
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  of the Apple Foxcon relationship, so 2000, 2004,
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  Foxcon makes more margin than Apple, which is kind
• 13:06
  of astonishing and makes more absolute dollars, right?
• 13:09
  Not just with Apple, but writ large.
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  So like Fox One is actually the larger company here in
• 13:13
  those two key respects.
• 13:14
  And then things begin to really take off, right?
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  And by 2012, so, so the year
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  that Xi Jinping comes into power,
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  Apple's margins in a decade have gone from 1% to 26%.
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  These are their net margins.
• 13:28
  By the way, Foxcon have gone from double digits
• 13:31
  to about 2.5%.
• 13:33
  So this is what I end up calling the Apple squeeze
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  that in a sense, there's like an iron law, you know,
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  something like Moore's Law where the equivalent, or,
• 13:41
  or I'm sorry, the, the more closely you work with Apple,
• 13:44
  the the lower your margins will be,
• 13:46
  they will just squeeze you here, there everywhere.
• 13:49
  Understand the production processes
• 13:50
  and the costs better than you, they will dis
• 13:53
  disintermediate you from your suppliers to understand
• 13:56
  what the costs are so
• 13:57
  that the contract manufacturer doesn't have any sort
• 14:00
  of funny leverage contract manufacturers are famous
• 14:02
  for things like, it's called purchase price variance,
• 14:04
  where they'll say, Hey, we had to purchase such
• 14:06
  and such copper wire at a cost of, you know,
• 14:08
  a dollar a piece, but actually it was 60 cents a piece
• 14:12
  and they're just collecting that 40% margin.
• 14:15
  Apple would just sort of take control of
• 14:16
  that relationship down two tiers, three tiers, four tiers,
• 14:20
  so that the likes of Foxcon couldn't do that to them.
• 14:22
  Right? And that's why in a sense, you see the, the, the,
• 14:26
  the, the margins within Foxcon fall the more closely they
• 14:28
  work with Apple.
• 14:30
  So anyway, my point is, is
• 14:31
  that if you're Axi Jinping's lawyer, you would look at that
• 14:33
  and say, this company's just
• 14:35
  exploiting our companies, right?
• 14:36
  Because here's this massive success,
• 14:38
  but Apple's not sharing the wealth.
• 14:39
  And if you're already in the mindset
• 14:40
  of we want companies to be in China.
• 14:42
  For China, it looks like Apple is exemplary
• 14:45
  of not really doing that.
• 14:47
  And there's some other issues I could go into,
• 14:49
  but I think, I think that point is actually pretty strong.
• 14:51
  Then the other thing is that of course, you know,
• 14:53
  if you're a hardliner in Beijing, you hate that people are,
• 14:56
  are carrying around with them, these little five,
• 14:59
  six inch glowing rectangles, emblematic of capitalism
• 15:03
  and a sort of like idiosyncratic worldview, you know,
• 15:06
  modernity, western mindset, et cetera.
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  And not only are they carrying them,
• 15:12
  but they are lining up around the block to buy these things.
• 15:16
  And this is my favorite narrative in the whole book, right?
• 15:18
  Where the birth
• 15:19
  of the retail market in China sounds like it might be dull,
• 15:22
  but instead it's extraordinary
• 15:24
  because by 2010,
• 15:26
  there are only four stores official from Apple serving the
• 15:29
  entire country, right?
• 15:31
  That's one store per 350 million people.
• 15:33
  It would be like if a new iPhone came out tomorrow
• 15:35
  and there was one store in all of America, right?
• 15:38
  Where we would go get the phones, yes.
• 15:40
  And yes, what what was interesting
• 15:41
  but in is that instead of it being sort of like tech bros
• 15:45
  or fan girls that are outside the store, it were people
• 15:48
  that didn't look like they could really afford the phone.
• 15:50
  And so Apple kind of slowly figures out that, wait a minute,
• 15:53
  we're not sort of selling the phone to people
• 15:55
  that are in the store for the Steve Jobs experience of,
• 15:58
  you know, what the wood panel
• 15:59
  tables are like and everything.
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  It's, it's, it's migrants that are being paid to come in,
• 16:03
  sort of bust in from outside of Beijing
• 16:06
  and they're purchasing two phones
• 16:07
  each, which is the maximum.
• 16:08
  And then they're basically selling it on
• 16:10
  to someone who's ba basically able to put them up in, in,
• 16:12
  in a truck and, and, and go to some tier two city,
• 16:16
  tier three city and, and make extraordinary margins, right?
• 16:20
  I mean, I think this isn't in the book, but, but,
• 16:23
  but how I've recanted it sense is that these, these,
• 16:27
  the migrant overlords, sort of the yellow cows is,
• 16:29
  is is the Chinese are able to figure out how
• 16:31
  to make more money than iPhone than Apple per iPhone,
• 16:34
  which is kind of extraordinary.
• 16:36
  And there's so many complicated things here
• 16:38
  and it's hard to tell the narrative 'cause I'm trying
• 16:40
  to simplify in three minutes what's
• 16:41
  effectively four chapters.
• 16:43
  But essentially you get to this stage
• 16:46
  where the yellow cows, these, these, these sort
• 16:49
  of sometimes connected with, with the Asian mafia,
• 16:53
  gangsters are hollowing out the components
• 16:57
  after they purchase these phones,
• 16:59
  and then they're selling those components onto the
• 17:01
  markets in Shenzhen.
• 17:03
  And then they're either selling them on,
• 17:04
  so you have unhappy customers who think they have an iPhone
• 17:07
  but it, but it's been tampered with
• 17:08
  or they're returning them
• 17:10
  and it gets to such a stage of greed
• 17:12
  where they're actually using fake identifications purchasing
• 17:15
  the phones in, in places like Portland on, on a,
• 17:18
  on a 24 month contract,
• 17:19
  but they're only paying for the first month.
• 17:21
  And then that phone technically doesn't work in China,
• 17:25
  but they are taking it to China using factory connections
• 17:28
  to zap or burn out the processor,
• 17:30
  which renders the phone inoperable.
• 17:33
  But at the same time at masks where like the sort
• 17:36
  of digital footprint of where it was purchased,
• 17:39
  and these people end up having phones
• 17:40
  that are like literally like either in the suitcase
• 17:42
  or in in the backpacks
• 17:44
  and they're lining up at the genius store saying, Hey,
• 17:46
  I bought iPhones for everyone in my village
• 17:48
  and none of them work.
• 17:49
  Yep. And the genius bar is thinking, God, I can confirm
• 17:52
  that this is a new phone, I
• 17:53
  don't know why this doesn't work.
• 17:54
  But if you're seeing the same problem over
• 17:55
  and over, of course your natural assumption is we've got a
• 17:58
  supply chain issue.
• 17:59
  - Right? - Right. So they
• 18:00
  don't know that they're being scammed.
• 18:01
  Anyway, my point is, once they begin to this cat
• 18:04
  and mouse game where they're retaliating against them,
• 18:06
  the yellow cows have this political clout
• 18:08
  and they're basically able to complain, Hey,
• 18:09
  we're being treated unfairly by Apple.
• 18:11
  And that complaint sort of reaches up the echelons of the,
• 18:14
  of the communist power until within 36 hours
• 18:16
  of Xi Jinping really ascending in March, 2013.
• 18:20
  He goes after Apple.
• 18:21
  The issue is mindbogglingly complex,
• 18:23
  but it just tells you that Apple's really successful in
• 18:26
  China, both as an operator and as a retail company,
• 18:28
  but they don't actually understand the country,
• 18:30
  they don't understand the culture, the politics,
• 18:32
  and they have like this big like political awakening moment
• 18:35
  and, and then we're off to the races
• 18:36
  for sort of part five of the book.
• 18:38
  - Right. So let's move to the point
• 18:41
  where Tim Cook decides he's going to go all in, right?
• 18:46
  Yeah. Mounts a, what was it,
• 18:48
  $275 billion investment over five years.
• 18:51
  - Yes. - I mean that's extraordinary.
• 18:56
  It was that a, a peace offering to Xi Jinping
• 18:59
  or is that just a recognition that China is the place to be
• 19:03
  and we're gonna be all in without thinking about any
• 19:06
  of the other kind of potential implications in terms
• 19:10
  of the US China relationship in terms
• 19:12
  of technology transfer, in terms of anything else?
• 19:14
  What, what prompted that that move?
• 19:18
  - So essentially what happens in 2013 and
• 19:21
  and in the years afterwards is Apple fears its products are
• 19:24
  going to be blacklisted in the country.
• 19:26
  And of course this is at a time when Facebook
• 19:28
  and Google have recently been blacklisted.
• 19:30
  And so it doesn't feel like an idle threat
• 19:33
  and a number of things happen.
• 19:34
  But essentially what Apple is sort
• 19:36
  of gleaning when it begins to have these China experts
• 19:38
  who are in the country is realizing
• 19:40
  that the thing Beijing's upset about is technology transfer
• 19:42
  or, or the lack of it, you know,
• 19:45
  a company like Samsung I think has literally three dozen
• 19:47
  joint ventures in the country at the time,
• 19:49
  and Apple has zero.
• 19:51
  So it just looks like Apple is not in China.
• 19:53
  For China, they're not playing fair,
• 19:54
  they're earning enormous, you know, financial dividends.
• 19:58
  And Tim Cook, I think
• 19:59
  before this issue became a big deal was on conference calls
• 20:02
  saying things like, we have the mother
• 20:04
  of all balance sheets.
• 20:05
  Well, when Chinese companies are working for 1%, 2% margins
• 20:09
  and sort of making this whole thing even possible,
• 20:11
  it just begins to look really unfair.
• 20:13
  And so as Apple is being fearful or,
• 20:15
  or getting fearful about this, this team
• 20:18
  of specialists in the country that are sort of hired
• 20:20
  or named to be in China,
• 20:21
  and they jokingly call themselves the gang of eight,
• 20:24
  they sort of come up with a new strategy.
• 20:27
  Yeah. Any China historians gonna love that name? Yeah.
• 20:30
  They sort of come up with a strategy to realize like,
• 20:32
  we need to get the message to Beijing
• 20:34
  that it's true we don't have any joint ventures,
• 20:36
  but they don't seem to understand we are sending America's
• 20:39
  best engineers.
• 20:41
  This is the manufacturing design team that we spoke about
• 20:43
  to basically sleep on the factory floor
• 20:45
  of dozens if hundreds of factories
• 20:48
  to build 230 million iPhones a year.
• 20:51
  And that the competencies we sort
• 20:53
  of inculcate in these factories then pay dividends to China.
• 20:56
  So true the companies aren't making much margin from us,
• 20:59
  but once we've taught them those skills, they can give them
• 21:03
  to a xmi, an oppo, a avivo, et cetera.
• 21:06
  So my sort of paradigmatic example is there's a company
• 21:08
  called Shenzhen Lens, or just Lens Technology,
• 21:11
  and they're the ones who take Corning glass.
• 21:12
  It's sometimes made in America, it's at least made
• 21:14
  by an American company, but Corning
• 21:16
  makes glass in the meter, right?
• 21:17
  Like meters wide and meters tall
• 21:19
  and someone has to cut it, shape it, etch it, temper it.
• 21:22
  You have to, you know, introduce multi-touch electrical
• 21:25
  circuits that are invisible within in,
• 21:27
  into the glass in order to make multi-touch possible.
• 21:29
  And that's all happening in China.
• 21:31
  But if I've been taught by, by Apple
• 21:33
  and I should say there's this co-creation right, to to,
• 21:35
  to get this done, what am I gonna do
• 21:37
  with those skill sets sort of three months
• 21:39
  after the latest iPhone has come out when the volumes are no
• 21:41
  longer there, and Apple's basically specifically saying,
• 21:44
  we need you to go train and teach the Android market
• 21:47
  because we don't want you dependent on us, right?
• 21:49
  Apple's really concerned that if, that,
• 21:51
  if you're on the ground floor of the iPhone in 2007
• 21:54
  and you're, you're growing exponentially with Apple,
• 21:56
  but then they decide, hey,
• 21:57
  we're actually gonna use a different piece of glass
• 21:58
  or something like that, that if they obviate you
• 22:01
  or they, if they obviate the component,
• 22:03
  they're gonna obviate you and you're gonna go bankrupt
• 22:05
  after making all these investments.
• 22:06
  And that's gonna cause all sorts
• 22:07
  of political problems in China.
• 22:09
  So they're specifically saying,
• 22:10
  however fast you grow with us, please grow
• 22:12
  that fast with somebody else.
• 22:14
  So this message essentially gets to Tim Cook, he's convinced
• 22:17
  by it, realize as we're really sitting on some great capital
• 22:19
  here and we need to tell the CCP.
• 22:22
  And so he's photographed with Lisa Jackson,
• 22:24
  who is formerly the head
• 22:25
  of the Environmental Protection under agency under Obama
• 22:28
  and Jeff Williams who just retired
• 22:29
  as Chief Operating Officer.
• 22:30
  And they go to John Hai, the citadel of communist power
• 22:33
  and sense to deliver this message with a 1200 word
• 22:36
  memorandum of understanding to basically get the,
• 22:39
  the Chinese on their side.
• 22:41
  And the significance to me of this narrative beyond sort of
• 22:44
  what I've just said, is that as I said earlier,
• 22:47
  Terry Gu was the first person to understand
• 22:49
  that the learning was the value of
• 22:51
  of being in the Apple relationship.
• 22:53
  Once this message becomes clear at the political level,
• 22:57
  the understanding that Terry had had
• 22:58
  for the prior 15 years basically trickles down across this
• 23:02
  Chinese supply chain where a whole host of companies
• 23:04
  that always thought of Apple as overbearing
• 23:06
  and you don't wanna work with them suddenly understand,
• 23:08
  and obviously this is my language, not, not Apple's, no,
• 23:11
  that Apple is the great progenitor of Chinese innovation.
• 23:14
  They're the biggest supporter of made in China 2025.
• 23:18
  So irony of ironies, if you wanna support Xi Jinping's goal
• 23:21
  of introducing indigenous innovation, the, the, the sort
• 23:24
  of mother of all capitalist companies is the company
• 23:26
  that's willing to train you to get up to speed.
• 23:29
  - Right? So, and this is where we get to
• 23:30
  that China wouldn't be China without Apple.
• 23:33
  - Yeah. - Moment, right?
• 23:35
  So, you know, there is, as I'm sure you're aware,
• 23:38
  a big narrative in the United States among China experts,
• 23:42
  among politicians that, you know,
• 23:45
  all along the way the United States has made mistakes we
• 23:48
  shouldn't have let China into the World Trade organization,
• 23:50
  we shouldn't have let China, you know, take over all
• 23:53
  of the mining and processing of rare earth elements.
• 23:56
  We shouldn't have let China, you know, become the sort
• 23:59
  of choke point for active pharmaceutical ingredients.
• 24:03
  Do you, do you feel that way about Apple's
• 24:05
  trajectory in China?
• 24:07
  Is there a moment where we should have woken up
• 24:09
  and said, we shouldn't be enabling this, you know,
• 24:13
  US company to transfer this kind of, you know,
• 24:18
  intellectual product and capabilities
• 24:20
  and manufacturing, you know, knowledge?
• 24:23
  Or is this just, you know, the nature of globalization,
• 24:27
  the price you pay,
• 24:28
  and we can rely on Apple to move forward in a different way?
• 24:32
  - So first of all, I don't think Washington really had any
• 24:34
  idea the extent to which technology transfer on the part
• 24:37
  of Apple was taking place.
• 24:39
  And you know, one thing that's,
• 24:40
  I I think it's two paragraphs in the book,
• 24:42
  but it could probably be its own book, is
• 24:45
  that it wasn't just a transfer
• 24:46
  of technology from American companies
• 24:48
  or rather from Cupertino to China.
• 24:51
  Apple had had these SMEs, subject matter experts, people
• 24:54
  that were, you know, PhDs
• 24:55
  and material science and things like that.
• 24:57
  And they would go find capabilities that were cutting edge
• 25:00
  for, let's say building Rolexes in, in, in Germany
• 25:03
  or Austria, and then really sort
• 25:05
  of refashion those technologies to help
• 25:07
  with like a little pin or knob on, on the iPhone, right?
• 25:10
  And so they would discover these technologies in, in as,
• 25:13
  as I said, Germany, Austria, Japan, places like that.
• 25:15
  And then they would teach them in China
• 25:17
  and scale them, right?
• 25:19
  So I don't think anybody knew that was happening.
• 25:21
  I I was six months of research
• 25:22
  before I talked to someone who, who, who knew that that
• 25:24
  or who who's able to give me a narrative about that.
• 25:27
  So then, then the question is, well when did Apple sort
• 25:32
  of realize this and, and shouldn't they have done something?
• 25:34
  And you know, it's funny, I, I know
• 25:36
  that I can probably come across as a major critic of Apple,
• 25:38
  but actually a lot of people have said, I'm too generous
• 25:41
  to Apple here because as you know, as a reader of the book,
• 25:43
  I don't really have any villains in the book.
• 25:45
  I don't really vilify Apple.
• 25:47
  No, no, I'm pretty critical of Tim Cook when it comes
• 25:49
  to the conclusion of the book.
• 25:50
  But that in a sense, that's when my voice comes through.
• 25:52
  But otherwise it's a pretty neutral narrative.
• 25:55
  So what I would say about this,
• 25:56
  and I I think this is where possibly am being too generous,
• 25:58
  is that 2013 when Xi Jinping goes after,
• 26:02
  or maybe I should say CCTV, but through Xi goes after Apple
• 26:05
  and they have this moment where they're realizing, oh,
• 26:08
  like we've got a real political problem here.
• 26:11
  I mean, clearly that is the point in which they could have
• 26:14
  gone on a different trajectory
• 26:15
  and realized everything we're doing in China needs
• 26:17
  to be replicated someplace else.
• 26:18
  Maybe that's India, maybe that's Mexico,
• 26:20
  it's probably not the United States
• 26:21
  for some reasons we can get into, but we need to do that.
• 26:24
  In fact, it's the time that they double down in China.
• 26:28
  And it's the same time,
• 26:29
  and this is not in the book where Tim Cook sort
• 26:32
  of reverses Steve Jobs's policy
• 26:33
  and decides to introduce dividends to investors, right?
• 26:37
  So instead of using sort
• 26:39
  of excess capital into building resiliency
• 26:42
  and for supply chain, they reward shareholders instead.
• 26:44
  So look, with the benefit of hindsight, I do think
• 26:47
  that was a major mistake
• 26:48
  and they should have done something different.
• 26:50
  But this is where I'm gonna be generous.
• 26:52
  Steve Jobs has only died 18 months ago.
• 26:54
  Nobody thinks that Tim Cook is gonna be able
• 26:56
  to fill his shoes.
• 26:57
  Apple is under tremendous pressure.
• 26:59
  People think they're going to lose the market to Android,
• 27:01
  which has gone from basically zero
• 27:02
  to 80% market share in a matter of five years or so.
• 27:05
  And it's just not clear that Apple's going to be able
• 27:08
  to sort of keep the richest quintile of users on the planet.
• 27:11
  And so to say, oh, by the way, you know
• 27:12
  what you also should have done during that time
• 27:14
  of like complete stress,
• 27:16
  you also should have replicated the entire thing
• 27:18
  that you'd built up in China over the
• 27:19
  previous decade someplace else.
• 27:20
  I just don't know that that's a realistic thing to say
• 27:22
  and I'm using 2020 hindsight to make the point.
• 27:24
  So it feels to me like too cynical
• 27:27
  of a reading in a certain sense.
• 27:29
  - Yeah, I I mean I happen to agree with you.
• 27:30
  I think, you know,
• 27:32
  all along the way there was were pot there was always
• 27:35
  potential that things were gonna move in different
• 27:36
  directions and choices that were made,
• 27:38
  whether it was on the WT O or whether it was on Apple
• 27:41
  or whether it was on, you know, rare earth elements
• 27:44
  made sense at a particular moment in time.
• 27:46
  Yeah. And the question is, so when does the wake up call
• 27:49
  come, you know, for Apple?
• 27:51
  Is it, is it really just a function of,
• 27:54
  say the Trump administration, the Biden administration,
• 27:56
  and now the second Trump administration saying, Hey,
• 27:59
  you know, you need to start thinking about, you know,
• 28:02
  from a variety of perspectives,
• 28:03
  both your own supply chain resiliency,
• 28:05
  you have COVID, right?
• 28:06
  You have the, you have the Russian invasions of Ukraine,
• 28:09
  you have the potential for China take action against Taiwan.
• 28:13
  So what causes Apple to say, okay, yeah, maybe we ought
• 28:16
  to be doing more in India or Mexico,
• 28:19
  or maybe even we should be thinking about something more in
• 28:22
  the United States.
• 28:23
  - So it's kind of a multifaceted answer.
• 28:25
  So there have been iPhones assembled in India since 2017,
• 28:29
  but interestingly I can find no evidence
• 28:32
  nor speak to anyone who says that that had anything to do
• 28:35
  with like China's authoritarian turn, right?
• 28:38
  It's actually just a more simple thing, which is
• 28:39
  that Rera Modi had put tariffs on
• 28:42
  products coming from China.
• 28:44
  So as Apple begins to think, Hey, wait a minute,
• 28:46
  the next nation with a billion people
• 28:47
  and a growing middle class growing 7% a year, et cetera,
• 28:50
  is India, we need to supply this market.
• 28:53
  But Modi's making it
• 28:54
  where actually if you import the iPhones from China,
• 28:56
  they're 20% extra.
• 28:57
  And this is already a country where, you know,
• 28:59
  nine outta 10 people want the iPhone one outta 10 people
• 29:02
  probably at best can afford the iPhone a, a decade ago.
• 29:04
  And so Apple realizes, okay, we need
• 29:06
  to do the final step, right?
• 29:07
  Not the depth and breadth of the supply chain,
• 29:09
  but just the assembly in India so
• 29:11
  that the phone can say quote unquote made in,
• 29:13
  in India terra flaw really, I gotta say, isn't
• 29:15
  that strenuous about sort of
• 29:17
  where products are made if the final step is
• 29:19
  made in some if right?
• 29:20
  Basically there's a, a language here.
• 29:21
  If there's like a constructive step in the,
• 29:23
  in the final stage of the process,
• 29:25
  then it's made in that country.
• 29:27
  So those phones are not any less dependent on the China
• 29:30
  supply chain than anything else,
• 29:31
  but they are in fact made in India for,
• 29:33
  for, for law purposes.
• 29:35
  So they begin to do that in 2017.
• 29:38
  And then when Trump also imposes tariffs on China,
• 29:41
  then Apple gets the thinking of, wait a minute,
• 29:43
  why don't we just take what we're already building in India,
• 29:45
  scale that up in terms of the assembly
• 29:47
  and then phones coming from India
• 29:50
  to America won't be subject to China tariffs, right?
• 29:52
  So in other words, it's a tariff play rather than like a
• 29:55
  geopolitical strategic wake up call that,
• 29:59
  that you are sort of asking about.
• 30:01
  And so, you know,
• 30:02
  when I get asked all the time about when did Apple wake up
• 30:05
  to this threat, what I find interesting is the assumption is
• 30:08
  that they have woken up And I've had people within Apple
• 30:12
  read the book and say, you know,
• 30:14
  I always thought we had the power in the relationships
• 30:16
  'cause we could negotiate, we could get anything we wanted.
• 30:19
  The red carpet was rolled out to us, to wherever we went.
• 30:22
  I had never really taken into account like the siren call
• 30:25
  as, as, as, as I call it in the book, as
• 30:27
  to like why China was bending over backwards to,
• 30:30
  to get all this, you know, I, I mean frankly,
• 30:32
  I think going back to the paper
• 30:33
  that you just published in foreign affairs,
• 30:34
  I think we're just beginning to grapple with,
• 30:37
  with the implications of, of what a formidable foe China is.
• 30:41
  I mean, you know, when did Trump wake up to the idea that
• 30:44
  that China had a complete choke hold over rare
• 30:46
  earth magnets?
• 30:47
  I mean, I don't think it was in Trump 1.0 I think arguably
• 30:50
  it was about two months ago. Yes,
• 30:52
  - Yes.
• 30:53
  I think we, we see the evidence of that
• 30:55
  based on the negotiating strategy of the administration,
• 30:58
  which seemed to have been taken completely by surprise.
• 31:01
  - Yeah. And that was really considered like a break the
• 31:03
  glass moment I think it was called.
• 31:06
  And I, you know, I I I'm more in the vein of thinking
• 31:09
  that like China basically just thought about
• 31:11
  what did the US do in terms of realizing
• 31:13
  that certain semiconductor designs
• 31:15
  and processes were part of choke points either in America
• 31:18
  or in allied nations like Japan and the Netherlands.
• 31:20
  What can we do? Where are our choke points
• 31:22
  and how can we flex our muscles on these things?
• 31:24
  - So, but even COVID, even COVID
• 31:26
  and the Russian invasion of Ukraine didn't actually factor
• 31:29
  into the thinking of Apple, about the need maybe
• 31:32
  to do some things differently.
• 31:33
  - So I'm glad you asked about this. So, so, so yes and no.
• 31:36
  So the early months of COVID,
• 31:38
  I don't think we're a wake up call.
• 31:39
  This is actually when a bunch of articles were written
• 31:41
  saying like, oh my gosh, like Apple is so exposed to China,
• 31:44
  they're gonna have real difficulties here.
• 31:46
  And in a certain sense, I think Apple actually
• 31:48
  demonstrated the capabilities
• 31:51
  and capacities of its supply chain.
• 31:52
  So 2020, I think it is,
• 31:54
  ends up being a year when Apple revenues go up
• 31:55
  by 30%, right?
• 31:57
  This is at a time when they've been growing by single digits
• 31:59
  or even having revenue falling
• 32:00
  and all of a sudden they have their best year in like seven
• 32:03
  or eight years during COVID.
• 32:05
  I mean that, that, I mean you have to remember
• 32:07
  that like every store in China was
• 32:08
  closed for a number of weeks and stuff.
• 32:09
  So you would not expect great financial success.
• 32:12
  But the reason why, and this sort of goes back
• 32:13
  to the 50% rule, is Apple is number one, maybe number two
• 32:17
  for any of its suppliers.
• 32:19
  So if a supplier of anything in the supply chain, right,
• 32:22
  there's a thousand components within the iPhone,
• 32:23
  has their capacity cut in half, guess
• 32:25
  what doesn't impact Apple, right?
• 32:27
  Apple's still getting their share.
• 32:28
  That's the sort of clout that they have.
• 32:30
  If you can build anything at reduced capacity,
• 32:32
  Apple's the first person you're gonna get whatever you have.
• 32:35
  And so, so they were really able to sort of feed the market.
• 32:37
  Plus you had so many people, you
• 32:39
  and I I'm sure together working from home and what'd we do?
• 32:42
  We decided to spend some of the excess money
• 32:43
  that we wasn't going through our social life on new
• 32:45
  MacBooks and iPhones and stuff.
• 32:46
  So there was, there was a newfound demand for Apple.
• 32:49
  So, so for let's say the first two years of COVID,
• 32:54
  it was actually a demonstration on Apple's part
• 32:56
  of the resiliency of its supply chain.
• 32:57
  And that being in China was not a mistake.
• 32:59
  All of that changes,
• 33:01
  I think this is April, 2022 when Shanghai, you know,
• 33:04
  basically greater Shanghai population
• 33:05
  of some 25 million people goes into lockdown
• 33:08
  and this is the center of Apple's operations in terms
• 33:12
  of vet's where their headquarters is and so forth.
• 33:14
  And they couldn't get things made.
• 33:15
  They couldn't, you know, move the machinery from one factory
• 33:19
  to another supply basically just comes to a standstill.
• 33:22
  And even companies like Huawei are vocally saying like,
• 33:25
  we can't deal with this policy.
• 33:27
  And so what I was told was that that was when plan B we need
• 33:31
  to build an India got approved.
• 33:33
  So you had someone named Priya Ballas Supermanium,
• 33:36
  she's been leading, she's the VP of iPhone production
• 33:39
  and she'd been a huge advocate of we need
• 33:42
  to be doing stuff in India for years.
• 33:44
  And I'm told that once Shanghai goes into lockdown,
• 33:46
  basically everything Priya had been saying
• 33:48
  for the prior five years was like, okay,
• 33:49
  you, you've got clearance to go do it.
• 33:51
  - Okay. So maybe just say a couple of words about
• 33:54
  where Apple is today in China.
• 33:57
  Clearly it's facing enormous competition from Huawei
• 34:02
  and which I understand has a phone
• 34:04
  that can turn into an iPad can be folded twice, you know,
• 34:07
  all sorts of miraculous things.
• 34:09
  - You know, I should buy this phone just
• 34:11
  to have in presentations and
• 34:12
  - Stuff to test it out. Yeah.
• 34:13
  - Like it's $2,600.
• 34:14
  I'm like, it genuinely might be worth the investment.
• 34:16
  Oh, I played with it, I've tested it out.
• 34:18
  I mean it's, it's a marvel, but I just mean like is people
• 34:20
  don't know it because it is not at T-Mobile or something.
• 34:21
  Right. You can't go get it at the mall. Right.
• 34:23
  So like I should have it just as a demonstration.
• 34:25
  - Yeah, I mean it does sound very cool.
• 34:28
  So what, what, so there's that element of it,
• 34:31
  there's the element coming from the US
• 34:33
  and Secretary Lutnick, you know, making some comment about
• 34:37
  how, you know, all the jobs are, you know,
• 34:39
  the Apple jobs screwing, screwing screws into iPhones.
• 34:43
  You know, there will be, what was it, hundreds of thousands
• 34:45
  of jobs, I don't even remember exactly,
• 34:47
  but basically these are good jobs
• 34:48
  and they need to come back to the United States.
• 34:51
  What do you think is the calculus right now in Apple?
• 34:53
  Is it just we're gonna keep doubling down on
• 34:55
  what we're already doing because it's worked for us
• 34:58
  and Huawei's competitive obviously,
• 35:00
  but you know, we, we still have a, you know, a prize sort
• 35:04
  of product or is it, we've gotta start rethinking our model
• 35:08
  'cause we're getting squeezed in China
• 35:10
  and we're getting, you know, a pull factor from the us
• 35:13
  - I remember saying to a pretty senior person at Apple,
• 35:16
  you know, Tim cook's a pretty smart guy.
• 35:17
  Why, why isn't he putting more money in
• 35:18
  investment into India?
• 35:20
  And they said it's because Tim cook's a smart guy
• 35:22
  that he is not putting more money on
• 35:23
  investment into India, right?
• 35:25
  Sort of, he knows better than anybody else that
• 35:28
  what China factories are capable of,
• 35:30
  - Right?
• 35:31
  - I mean you're talking probably a two decade investment
• 35:34
  and, and on, on behalf of someone like India
• 35:36
  with the assumption that they also introduce a sort
• 35:38
  of nietzche and will to power through manufacturing
• 35:41
  that China has demonstrated for four decades.
• 35:42
  Nobody else has that, right?
• 35:44
  It's like you don't get to LeBron James' level of basketball
• 35:47
  by doing something, by doing some part-time
• 35:48
  basketball lessons, right?
• 35:49
  Like you devote your entire life to it.
• 35:51
  And that's what China's been doing in manufacturing,
• 35:54
  you know, and, and and, and,
• 35:55
  and developing all these toeholds,
• 35:57
  I mean even something in semi like semiconductors, like no,
• 36:00
  they don't have the cutting edge that TSMC has,
• 36:02
  but my oh my, do they have the lagging edge in,
• 36:05
  in in real dominance, right?
• 36:06
  And, and you can just go down the list
• 36:08
  of all the things that they do really well.
• 36:09
  And you know, where I was really hoping
• 36:11
  that the book might have a policy impact was not
• 36:13
  actually America, but India.
• 36:15
  I mean I I I want India to really take on and lure
• 36:18
  and incentivize, do whatever they can
• 36:20
  to pull in Apple orders.
• 36:21
  And I have had conversations with Indian ministers at the,
• 36:24
  the, the provincial level.
• 36:26
  But I, you know, I don't wanna get into controversy here,
• 36:29
  but like, I think there's a, a pride elements
• 36:32
  that you often encounter in India
• 36:33
  and frankly that Apple engineers in India often encounter,
• 36:35
  which is that a, they don't wanna be told what to do.
• 36:38
  They don't, they're not as reception,
• 36:39
  they don't have the same absorption capacity
• 36:41
  to use the language of Kyle Chan
• 36:43
  that the Chinese demonstrated in terms of willingness
• 36:45
  to accept the lessons and do anything that Apple wanted.
• 36:50
  The Indian engineers just just don't have
• 36:52
  that at the minister level.
• 36:55
  They don't want to sort of be seen as a haven
• 36:58
  of low value labor intensive jobs.
• 37:00
  They want to compete with the Koreans where the doing things
• 37:03
  that are sort of sexy
• 37:04
  and you know, ministers wanna be seen
• 37:06
  as bringing in the high value components and stuff.
• 37:09
  Totally get it. I totally understand it.
• 37:10
  But unless you have a do it all strategy,
• 37:13
  you're not really diversifying from China.
• 37:15
  So one Apple former VP said to me that like,
• 37:19
  even if you're 1% exposed to China, when you develop your,
• 37:23
  your, your, your supply chain, someone else,
• 37:25
  all you've done is pissed off China
• 37:27
  and you haven't really diversified.
• 37:29
  So it's multiple tiers down the supply chain you
• 37:33
  where you'd have to really replicate the depth
• 37:35
  and breadth in India, probably even involving, you know,
• 37:38
  mineral extraction in places like Africa and so forth.
• 37:41
  And so I just don't think that Apple has the will,
• 37:43
  they don't have the same hunger today.
• 37:45
  I mean, they're a $4 trillion company.
• 37:46
  Things are going well that, you know, sources
• 37:48
  that I would speak to in the late nineties
• 37:49
  and two thousands had.
• 37:52
  So yeah, I honestly just don't think Apple really
• 37:53
  has what it takes.
• 37:54
  I don't think they have the political will
• 37:56
  and Trump, I mean clearly is the most sort
• 37:59
  of expressive, what do I want to say?
• 38:01
  Like antagonistic press person on this issue in terms
• 38:05
  of executives, right?
• 38:06
  I mean he literally came to power saying
• 38:07
  China's raping our country.
• 38:09
  I mean, you don't get that sort
• 38:10
  of language from other people.
• 38:11
  And yet I think he's also shown a, a sort
• 38:14
  of short attention span on these issues
• 38:16
  and an inability to really follow through
• 38:18
  or understand the complexities.
• 38:20
  And so, you know, it was basically like a, a caricature of
• 38:23
  how you appease Donald Trump.
• 38:24
  What, what Tim Cook did in the Oval Office
• 38:26
  where he literally just brought a hunk
• 38:28
  of 24 karat gold attached a little glass emblem
• 38:32
  with his signature on it and Donald Trump's name.
• 38:35
  And that basically was able enough to get, you know,
• 38:38
  apple exempted from, from tariffs.
• 38:41
  So I'm writing my epilogue about this, right?
• 38:43
  And, and my my sort of quip about this is like,
• 38:45
  well Apple iPhones aren't gonna be made in America,
• 38:47
  but its bribes will be ouch
• 38:50
  - And di well, wasn't there a little bit more to it?
• 38:52
  Didn't, didn't Tim Cook also showcase a factory that
• 38:56
  had already been sort of underway?
• 38:59
  - Yeah, that was Trump 1.0
• 39:00
  - Something in response to Oh
• 39:01
  really? That was Trump 1.0 I thought
• 39:02
  - Around Yeah, that was 2019.
• 39:04
  Oh, okay. Where a flextronics
• 39:05
  or flex factory that had been up and running for 2013
• 39:09
  and interestingly within China was basically
• 39:10
  seen in its embarrassment.
• 39:12
  Like it was the whole signal of like,
• 39:14
  why we can't do this in America.
• 39:16
  And it basically got rebranded as like part
• 39:18
  of the America first strategy
• 39:19
  that we were gonna build stuff in in the us So
• 39:22
  that was a sort of a dog and pony show.
• 39:24
  - So you're telling me that there really isn't an incentive
• 39:27
  for Apple either a pull factor from India
• 39:30
  or from the United States that it's gonna make,
• 39:32
  it's gonna be strong enough
• 39:33
  to actually have them do a significant amount
• 39:36
  of diversification
• 39:38
  and there's no squeeze factor then from China
• 39:40
  because of course what many technology companies face in
• 39:44
  China is a squeeze, right?
• 39:46
  Where China through made in China 2025,
• 39:48
  where China's putting in place all sorts
• 39:50
  of new regulations at the local provincial level
• 39:53
  that make it much harder
• 39:54
  for foreign made products to compete.
• 39:57
  But I guess because Apple is
• 39:59
  so deeply embedded in the manufacturing, you know,
• 40:02
  supply chain in China, that it doesn't fall prey
• 40:06
  to this kind of squeeze.
• 40:07
  Is that fair?
• 40:09
  - Yes. I mean this is sort of what Apple figured out in 2014
• 40:13
  to 2016 when China introduced a law that basically said,
• 40:17
  Hey, no factories can have more than 10% temp labor.
• 40:20
  And Apple does an internal study
• 40:22
  and realizes that they've got literally like hundreds
• 40:24
  of factories that rely on, you know, 50% temp labor,
• 40:27
  80% temp temp labor, especially
• 40:30
  for something like iPhone production, which is not sort
• 40:33
  of like, you know, a certain number of units per day, right?
• 40:35
  It spikes in September through December
• 40:37
  and then it sort of falls away.
• 40:38
  And so all of a sudden,
• 40:39
  every iPhone launch you need hundreds of thousands
• 40:42
  of new hires that are only gonna work at the company for,
• 40:44
  you know, 12 weeks maybe, maybe three months.
• 40:46
  And then, and then they move on to something else.
• 40:48
  And so they're deeply reliant on temp labor.
• 40:50
  I mean that's like the secret sauce of, of why sort of China
• 40:53
  and Apple work so efficiently together.
• 40:56
  And so what Doug Guthrie sort the China expert
• 40:58
  that's probably crossed yes, understood, was
• 41:02
  that this is a national law, but the enforcement is local.
• 41:06
  So if Apple works with the local cadres invests makes r
• 41:10
  and d centers and et cetera, the local law
• 41:13
  or the, the federal law isn't going to be locally enacted
• 41:16
  because essentially you have a wink wink arrangement.
• 41:19
  So I mean, technically every single year for iPhone launch,
• 41:22
  apple is violating or breaking the, the, the law,
• 41:25
  but it's never been a problem for them
• 41:27
  because that's how the Chinese rule of law system works
• 41:30
  or rule bylaw system works.
• 41:32
  And,
• 41:33
  - And just sort of in terms of American products, I mean,
• 41:37
  is there a danger ever that Apple falls prey to, you know,
• 41:41
  Chinese nationalism
• 41:42
  or frankly that that Huawei phone is just much better than
• 41:46
  a, an iPhone.
• 41:47
  So, you know, does the market stay, you know,
• 41:50
  open for Apple iPhones?
• 41:52
  Does it say robust inside China?
• 41:55
  - So I was surprised
• 41:56
  how well the iPhone 17 did in, in China, right?
• 42:00
  Because you, you do wonder about Chinese nationalism
• 42:02
  and the idea that, you know, the more
• 42:04
  that Apple pushes into India, the more that they'll be seen
• 42:07
  as the corporate poster child
• 42:09
  of Western decoupling from China.
• 42:10
  And if I'm living in Beijing thinking, well why don't I,
• 42:13
  I'm gonna buy the latest Shammi the latest Huawei.
• 42:15
  'cause I don't wanna be sort of be supporting that.
• 42:17
  I I do think that's probably gonna play out in the
• 42:18
  next two to five years.
• 42:20
  And, but I, but I also, you know, but to be clear,
• 42:22
  I would've said that in the summer and then the
• 42:23
  iPhone 17 did quite well.
• 42:24
  So, you know, perhaps I'm wrong about
• 42:26
  that, predicting the future stuff.
• 42:29
  The other thing of course is that, you know,
• 42:30
  Huawei phones aren't sold in America.
• 42:33
  I mean, back when I was living in Germany in the late 2000
• 42:34
  tens, I had a Huawei, right?
• 42:36
  It had this monochrome lens developed by Leica.
• 42:37
  It was a dev, it was a, it was a phenomenal
• 42:39
  camera, phenomenal phone.
• 42:41
  But Huawei's in a different place now
• 42:44
  where they don't have access
• 42:45
  because of Trump 1.0 to 5G chips, you know,
• 42:48
  designed by the likes of Qualcomm.
• 42:49
  And crucially, they don't have Google services.
• 42:51
  Now Google's already banned in China, so it doesn't matter
• 42:53
  for their local market, but it does mean
• 42:56
  that someone living in Germany in 2025 isn't gonna buy
• 42:59
  a Huawei phone because it doesn't have Gmail,
• 43:01
  it doesn't have YouTube,
• 43:02
  it doesn't have the Google Play Store.
• 43:04
  And so Huawei's coming up with their own operating system
• 43:07
  to rival Android and iOS.
• 43:09
  And my expectation,
• 43:10
  maybe this is pure just speculation on my part, is, is that
• 43:14
  that becomes the defacto operating system
• 43:17
  for all smartphones in China at, at some stage.
• 43:21
  I mean, in a sense, why wouldn't you do that?
• 43:23
  Why would you continue to rely on Western operating systems
• 43:25
  when you can take full control?
• 43:28
  And so yeah, that's that's that that's the thing
• 43:30
  - There, that's coming.
• 43:31
  - Yeah. So, but then the question is does India adopt that,
• 43:34
  you know, as No, probably not.
• 43:35
  Are they comfortable with that? Well, I don't know.
• 43:37
  No, I mean, I, look, I,
• 43:38
  I wouldn't have thought no render Modi was gonna link
• 43:40
  arms with Putin, but he did.
• 43:41
  So I mean, it's, it's, it, it, it's hard to,
• 43:43
  and there's too many factors for me to make sort
• 43:44
  of plausible predictions,
• 43:47
  but I do think the hardware coming out of China is superior
• 43:49
  to what's coming out of Apple these days.
• 43:52
  And I do worry that, you know,
• 43:53
  the student has become the master
• 43:55
  that Apple actually doesn't have much, if anything,
• 43:57
  to be teaching the Chinese factories these days, right?
• 44:00
  All the shop floor knowledge, all the tacit knowledge is,
• 44:03
  is coming out of China these days.
• 44:04
  And the iteration that they're doing at speed
• 44:06
  and at scale is tremendous.
• 44:08
  And you don't have people coming out of Apple
• 44:10
  that have spent decades on the factory floor the way
• 44:12
  that you did in the two thousands.
• 44:13
  'cause Apple had been making stuff
• 44:14
  and so had the PC industry for, for decades.
• 44:17
  So yeah, it's, it's hard to predict,
• 44:18
  but what I don't see is what the lay person assumes,
• 44:21
  which is that each year there's more
• 44:24
  and more stuff built out of India
• 44:25
  and that apple's slowly bifurcating its supply chain.
• 44:28
  I think actually it's the opposite,
• 44:30
  where within China you're seeing more and more investments,
• 44:33
  but more and more of the,
• 44:34
  those investments are going towards the local supply chain,
• 44:36
  the, the red supply chain homegrown companies at the expense
• 44:39
  of the Taiwanese, at the expense
• 44:40
  of the Koreans, the Japanese, the
• 44:42
  - Americans.
• 44:43
  Okay, that's depressing. So let me,
• 44:45
  - Yeah, - Let me,
• 44:46
  - I know, and we don't know each other that well,
• 44:48
  but I'm such a golden retriever optimist,
• 44:50
  and yet I've written this terrible pessimistic book. I
• 44:52
  - Don't remember.
• 44:53
  Yeah, I don't remember feeling that depressed.
• 44:54
  I mean, I was depressed as I was reading your book,
• 44:56
  but I don't remember ending and feeling that depressed.
• 44:59
  I just remember thinking, this is a really great book.
• 45:01
  But, but okay, so let's, let's say, you know,
• 45:04
  president Trump calls you to the Oval Office
• 45:07
  and says, you know, Patrick, what do I do about this?
• 45:11
  Yeah. You know, what do you tell him?
• 45:12
  Like what should the United States be doing differently?
• 45:15
  What are the lessons, even if Apple isn't taking all the
• 45:18
  best lessons from an American company perspective,
• 45:21
  or, you know, it's trying sort of halfheartedly, like
• 45:24
  what are lessons that you take
• 45:25
  that you would want us policy makers to take on?
• 45:28
  Because, you know, technology is one of the areas
• 45:31
  that this administration has said,
• 45:32
  you know, they wanna compete.
• 45:34
  Yeah. You know, we're not just gonna take our marbles
• 45:36
  and walk off, you know, the stage.
• 45:39
  We do wanna compete, we wanna export our, you know,
• 45:41
  AI tech stack and all of this.
• 45:43
  What do we need to be doing differently?
• 45:46
  - Okay. So I wrote a master's thesis close
• 45:48
  to a decade ago called Allies and ideals.
• 45:51
  - Okay? - And it still frames my thinking today.
• 45:53
  So, so if you look back at like the earliest years of Reagan
• 45:56
  and even before the CIA
• 45:58
  and others had come up with a strategy
• 46:00
  with the Soviet Union, which is like, hey, we really need
• 46:02
  to emphasize our military might,
• 46:05
  because if the Soviet Union tries to keep up with us
• 46:08
  as we predict they will,
• 46:09
  they're basically gonna accelerate their own demise
• 46:12
  because we have the more dynamic economy
• 46:14
  and we're gonna sort of do better in that respect.
• 46:16
  I think we're way too often thinking about that sort
• 46:19
  of framework today,
• 46:20
  but against the nation that is itself more
• 46:22
  dynamic and much larger.
• 46:23
  Right. What's the population? Four times the size?
• 46:25
  Yeah, I mean, so we're using sort
• 46:26
  of like a 1980s cold war one mentality
• 46:29
  or paradigm against, against a very different partner.
• 46:32
  And so allies and ideals was my answer to, well
• 46:34
  what are our advantages specifically
• 46:37
  that are disadvantages to China?
• 46:39
  And one of them is, you know, people look up
• 46:41
  to America from around the world, right?
• 46:43
  You think of what is a border crisis?
• 46:44
  Other than that, like millions more people want
• 46:46
  to actually live in this country.
• 46:48
  If they can't, China doesn't have
• 46:49
  that kind of border crisis.
• 46:50
  You don't have loads of people from
• 46:51
  around the world wanting to move to China.
• 46:54
  So that's sort of one major advantage.
• 46:56
  And the other one is just the ideals that, that, that,
• 46:58
  that are, are, are promulgated by, or sorry, sorry.
• 47:01
  That was, that was the first one is, is the allies. Right?
• 47:03
  I mean, how, how you'll, you'll know this better than me.
• 47:05
  How many official allies does China have?
• 47:07
  When I was writing my thesis, it was
• 47:08
  only North Korea and Russia. North Korea.
• 47:09
  - It's still only North? No, it's only North Korea.
• 47:11
  - Okay. Official allies. Well, they've done substantial work
• 47:13
  with the Belt and Road Initiative and things like that,
• 47:15
  but, you know, but America has far more allies.
• 47:17
  And so where I'm sort of taking this is,
• 47:20
  I think there's too much in the MAGA worldview
• 47:22
  that things have to be built in Pittsburgh, right?
• 47:25
  So Tim Cook was expressly told by Donald Trump,
• 47:28
  I hear you're building in India.
• 47:29
  I don't want you building in India.
• 47:30
  I want you building here. And I think that's a fantasy.
• 47:33
  So I think this, the, the, the, the problem is not
• 47:36
  that we trade with China, not
• 47:37
  that Apple has a retail presence there,
• 47:39
  it's the consolidation into China.
• 47:41
  And it's the fact that they're dependent and
• 47:42
  therefore they're vulnerable.
• 47:43
  And, and if Apple's vulnerable, America's vulnerable.
• 47:46
  So I think the, the policy has to be framed
• 47:48
  as our problem is the exposure
• 47:51
  or vulnerability directly to China.
• 47:53
  So the solution to that is replicating the depth
• 47:56
  and breadth of the supply chain outside of China.
• 47:58
  And because of the allies
• 47:59
  and ideals thing that can be in India,
• 48:01
  that can be in Mexico, that does not have
• 48:03
  to be in Ohio, right.
• 48:05
  For that strategy to thrive.
• 48:06
  Icing on the cake if Corning continues
• 48:08
  to make glass in Kentucky and things like that.
• 48:10
  But really it just has to be in a series of allied nations.
• 48:13
  It can be a little bit more complicated.
• 48:15
  'cause obviously TSMC in Taiwan,
• 48:16
  that would be an allied nation, but actually it's vulnerable
• 48:18
  because, you know, Xi Jinping thinks of it
• 48:20
  as a rogue province and that kind of thing.
• 48:21
  So the more distance there is, the better.
• 48:23
  But for a whole host of reasons, the density
• 48:25
  of our population, the wages that we have,
• 48:27
  frankly the unwillingness to work in a sort
• 48:29
  of decadent culture, it's not gonna happen in the us.
• 48:31
  - Just wanted to slip that last one in, didn't
• 48:33
  - You? I did,
• 48:34
  - Yeah.
• 48:36
  Yeah. I mean, I, I do think having worked in the Commerce
• 48:38
  department for a couple of years where, you know,
• 48:41
  secretary Raimundo was advancing this idea of tech hubs.
• 48:45
  And I just watched the governor from Oklahoma at the
• 48:50
  Bloomberg, the New Economy forum in Singapore,
• 48:53
  and I was watching his discussion online
• 48:56
  and he was talking about,
• 48:57
  'cause he got $50 million from the US government,
• 49:01
  and this is just a couple years ago now.
• 49:03
  And he talked about how, you know, the original, you know,
• 49:06
  sort of plan has now blossomed into a whole other array
• 49:10
  of technologies that Oklahoma is pursuing in terms
• 49:14
  of both the education and the manufacturing.
• 49:16
  'cause these tech hubs are everything from, you know, going
• 49:19
  to junior colleges, it's getting trades, it's, you know,
• 49:21
  the university education, you know, up through attracting,
• 49:25
  you know, using universities and scientific capabilities
• 49:28
  and then, you know, building manufacturing capabilities.
• 49:31
  I do think we shouldn't discount, right, the potential
• 49:35
  for any new manufacturing to happen in our country.
• 49:40
  I take your point that you're not gonna replicate, you know,
• 49:43
  the Apple supply chain in China, in the United States,
• 49:46
  certainly not, but I think it's not a bad idea
• 49:49
  to think about how we can do better from the, you know,
• 49:53
  innovation through, you know,
• 49:54
  the manufacturing element of it.
• 49:57
  Because of course, in manufacturing right process,
• 50:00
  you also get process innovation, which is important.
• 50:02
  And that's something that China just, you know,
• 50:04
  basically owns that space as far as I can tell.
• 50:07
  So I don't wanna toss that back at
• 50:09
  - You.
• 50:10
  Yes, it's okay. I wasnt clear on us Supportive. Yeah.
• 50:13
  Anytime I hear about Reindustrialization efforts,
• 50:16
  I'm, I'm thrilled about it.
• 50:17
  I do wanna see more of that. Okay.
• 50:18
  I just think we have to have a realistic understanding
• 50:20
  of what's possible here, what's not.
• 50:22
  And of course the major unknown is whether, you know,
• 50:25
  artificial general intelligence applied to machinery, right?
• 50:28
  Or even just some other form of AI applied
• 50:29
  to machinery is able to completely upend
• 50:32
  how things are, are built.
• 50:34
  And you know, sometimes I think pe two people, sorry,
• 50:38
  too often people are sort of, I don't know sanjo about that.
• 50:41
  They just think that's gonna happen.
• 50:42
  So we'll be okay, but, you know,
• 50:44
  China installed more industrial robots than the rest
• 50:46
  of the world last year.
• 50:47
  So even if that happens, it's not clear why
• 50:49
  that's immediately somehow our advantage.
• 50:52
  But I mean, among the things I worry about is, you know,
• 50:54
  in the book I talk about with the Taiwanese in the nineties
• 50:56
  called the smiley curve of product development, right?
• 50:59
  So America sort
• 51:00
  of was dominant on the two ends of the curve.
• 51:02
  So like the product design, the product conception,
• 51:04
  and then the low ends, the low value end
• 51:06
  of the curve was the logistics, the distribution,
• 51:08
  the manufacturing, and then it curves back up just
• 51:10
  before you sell it into the branding, right?
• 51:12
  The Apple store, the retail, that kind of stuff.
• 51:14
  And the two ends are the high margin stuff
• 51:16
  that has been true the last like, say 3, 4, 5 decades
• 51:20
  and perhaps throughout most of history.
• 51:22
  But it's possible that in a world of humanoid robots, right,
• 51:25
  which Elon Musk has said is gonna be the most ubiquitous
• 51:27
  product ever, that actually the design, the conception is
• 51:31
  that, and the branding,
• 51:32
  that's gonna be the commoditized aspect.
• 51:34
  And what's going to be really difficult is actually
• 51:36
  making these stuff.
• 51:38
  And so you, instead of the smiley curve, you would have more
• 51:41
  of like a frown where actually it's the Chinese factories
• 51:43
  that are in control of the most dominant high margin,
• 51:46
  you know, value part of, of, of, of that, of that shape.
• 51:51
  I don't know that that's gonna happen,
• 51:52
  but I talked to someone from Apple the other day
• 51:54
  and they said like, that's a nightmare scenario for us.
• 51:56
  - Yeah. Well, I mean, that suggests to me that it's time
• 51:59
  for us to, to get moving.
• 52:00
  And I, I mentioned to you earlier
• 52:02
  that I was just in China a few weeks ago
• 52:05
  and we visited the Xiaomi one, XMI EV factory.
• 52:08
  - Oh wow. - Been up and running for 18 months
• 52:11
  and has, you know,
• 52:12
  750,000 square feet in like only 200 people on the floor.
• 52:16
  And the fuller was spotless, you could put off of it.
• 52:19
  Everything was automated, it was incredible.
• 52:24
  And just the range of the, you know, the products
• 52:27
  and the colors of the cars
• 52:29
  and all the technology
• 52:30
  that they're embedding in these cars
• 52:32
  is really extraordinary.
• 52:34
  Now I will say some of it is, you know,
• 52:35
  you're just gonna attach your phone
• 52:37
  and you're gonna be able to close, you know, your curtains,
• 52:40
  you know, at home from your phone in the car.
• 52:42
  I mean, I, I, you know, believe that we can easily develop
• 52:47
  that kind of technology, nor do I think it's that important,
• 52:49
  but that's just me nonetheless.
• 52:52
  I think, yeah, there is something about, you know,
• 52:54
  they're doing 300,000 EVs out of this factory a year now.
• 52:58
  It it's really extraordinary.
• 53:00
  So yeah, if we're gonna get compete, we're gonna have
• 53:03
  to get, we're gonna have to get moving,
• 53:05
  - But Well, and one place where I'm stuck is,
• 53:07
  let's say Xme said, Hey, we'd like
• 53:08
  to build this in Pittsburgh.
• 53:10
  - Yeah. - Should we be open to that or not?
• 53:12
  And I understand there's national security implications when
• 53:14
  you're talking about, you know, what is an ev it's a
• 53:16
  smartphone on wheels, it has all kinds of data.
• 53:18
  Is that going back to Beijing, et cetera, et cetera.
• 53:21
  But I think that can be mitigated.
• 53:22
  I would be in favor
• 53:23
  of technology transfer in reverse, right?
• 53:26
  - Yes, yes, yes.
• 53:27
  - One of my favorite reviews of the book said,
• 53:28
  if Washington plays their cards right,
• 53:30
  someone's gonna write BYD in America in 2040.
• 53:33
  - Yeah. I think, I think, you know, the challenge is,
• 53:37
  are you going to be able to get the Chinese companies
• 53:39
  to do in the United States
• 53:41
  what the US companies did in China, you know,
• 53:43
  in the early 1990s, beginning in the early 1990s.
• 53:46
  And you know, as you demonstrate with Apple all the way up
• 53:49
  until now, you know, when you have Xi Jinping basically,
• 53:52
  you know, telling the Chinese factories like, you know,
• 53:55
  CATL, you know, you are not going to be, you know,
• 53:58
  transferring technology abroad.
• 54:00
  Yes. And so I think, you know, they, they understand
• 54:03
  how much they benefited from their strategy.
• 54:06
  I don't think they're interested in replicating
• 54:09
  their strategy.
• 54:10
  That's not, are the entrepreneurs are,
• 54:11
  don't they wanna export their strategy to the United
• 54:13
  - State?
• 54:14
  Yeah. The political class isn't so you're right.
• 54:15
  I mean, and, and, and yeah, and someone like Howard Lutnick,
• 54:17
  I think has done such a bad job, for instance,
• 54:19
  in the chip sector by openly saying like,
• 54:21
  we want Chinese companies stuck on Nvidia chips so
• 54:23
  that they're dependent on us, right?
• 54:25
  And it's like, sorry, it's fine strategy,
• 54:26
  but why are you telling everybody that's a terrible idea?
• 54:29
  And so, yeah. So for the same reason, like obviously if, if,
• 54:31
  if China understands sort of, you know, its its own sort
• 54:34
  of contributions and choke holds over the last 20 years,
• 54:36
  which one assumes they do, then yeah.
• 54:38
  Why would they want to give that up?
• 54:39
  The sense, on the other hand,
• 54:41
  involution should probably be the word of 2025,
• 54:44
  and the Chinese competitors can make so much more margin
• 54:48
  and money in other markets than they can within China.
• 54:51
  And I just feel like
• 54:52
  that's gotta have some political weight to it.
• 54:55
  - Yeah, well, you know, it may be worth the
• 54:56
  test case, right?
• 54:57
  A very, very, you know,
• 54:59
  concentrated specific targeted test case of whether
• 55:02
  or not, given the challenge of involution in China,
• 55:05
  they have their own ways
• 55:06
  that they're planning to deal with it, right?
• 55:08
  Simply by controlling localities
• 55:10
  and where the investment is going.
• 55:12
  But let's assume this is remains a significant issue.
• 55:15
  Would they be willing to make that trade off?
• 55:17
  That would be an interesting, an interesting test case.
• 55:20
  - Yeah. - All right. We are running up against time.
• 55:22
  I've kept you for, for long
• 55:24
  and it's been incredibly enjoyable.
• 55:27
  Let me just, I always ask, you know, my interviewees,
• 55:31
  you know, what you think the American people don't know
• 55:34
  about China that we need to know,
• 55:36
  what are we missing about China?
• 55:39
  - This is gonna be such a basic point to say
• 55:40
  to a China scholar, but I think basically people still think
• 55:43
  of China as like the, the cheap goods country, right?
• 55:48
  They don't know maybe 60 Minutes should do an episode on,
• 55:51
  on the Shami factory, right?
• 55:53
  I don't think they see it as like this hugely sophisticated
• 55:56
  company that turns out iPhones,
• 55:58
  even though obviously they've been doing it
• 55:59
  that since 2007, right?
• 56:01
  So you think of what did Donald Trump say a few months ago
• 56:04
  that okay, there's gonna be these big tariffs, so it means,
• 56:06
  you know, your, your daughter's gonna get two
• 56:07
  dolls instead of 30.
• 56:09
  I mean, that's portraying China as, as the purveyor
• 56:12
  of cheap dolls for your kids,
• 56:14
  rather than essentially every electronic item in your house
• 56:17
  and, you know, in your driveway.
• 56:18
  So, so I, that's such a basic point to make.
• 56:22
  I want to give you something sophisticated,
• 56:24
  but like right, as y'all know, pr far better than me, the,
• 56:27
  the gap of knowledge between, or maybe not the gap,
• 56:32
  but just like, I think that the lay person's understanding
• 56:34
  of sort of what China is, how it works, what its history is,
• 56:38
  you know, not ancient, but just modern history,
• 56:40
  I think is really slim, right?
• 56:43
  I mean, I, as far as I know, the only two books
• 56:46
  to be like on the New York Times bestseller list dealing
• 56:48
  with China, were Dan Wong's breakneck fantastic book.
• 56:52
  And, and mine, I mean, that's not
• 56:53
  to say there weren't other great China books this year, like
• 56:55
  by Joseph Riggin, but like, those aren't best sellers.
• 56:58
  You also don't have China really in the media, right?
• 57:00
  I mean, you know, you basically can't
• 57:03
  - Have as that's true.
• 57:04
  - Well, you can't have China in like a James v film, right?
• 57:07
  There can't be a a a a bond villain that's, that's Chinese
• 57:10
  and for a host of, host of reasons, right?
• 57:13
  But, but there's sort of host, anyway, we don't need
• 57:15
  to get into it, but its a book about this, right?
• 57:17
  No, no, no. Right by Eric Schwartzman
• 57:18
  called, called Red Carpet.
• 57:19
  Brilliant title. I don't know,
• 57:21
  I it is just not really in the political
• 57:23
  or the, the lay person, let's say consciousness.
• 57:26
  And I think it's tough to also have a pretty
• 57:27
  nuanced view of China.
• 57:29
  So like on the one hand, I think I can be pretty like,
• 57:33
  you know, hard against what it means to really be grappling
• 57:36
  with this competent foe
• 57:37
  and yet open to BYD investment, right?
• 57:39
  - Right. - Politically it takes the, you know, the,
• 57:42
  the skillset of someone like Pete Buttigieg to actually sort
• 57:44
  of get people nodding their heads to that.
• 57:46
  'cause I think it sounds like a contradiction in terms
• 57:49
  - Yeah.
• 57:50
  Or it takes people like Gina Raimondo, my former boss,
• 57:52
  because she's also very good at understanding the, you know,
• 57:56
  need both to run faster, you know, protect your flank,
• 58:01
  but, you know, continue to trade.
• 58:03
  So she's, she definitely has that, I would say
• 58:06
  - Shout out to Gina - Skillset as well.
• 58:08
  Hey, and I gotta do it, I gotta do it.
• 58:10
  So, no, and, and actually, you know what,
• 58:12
  as you were speaking, I was thinking to myself, you know,
• 58:14
  part of the reasons that, part of the reason
• 58:16
  that Americans probably don't appreciate just
• 58:19
  how far China has come is
• 58:20
  because we don't actually have access to a lot
• 58:23
  of the technology products they produce, right?
• 58:26
  We're not getting Shomi cars.
• 58:27
  People aren't using, you know, the most advanced Huawei,
• 58:30
  you know, phones.
• 58:32
  So that may also, you know, limit our understanding of
• 58:36
  what this country is now capable of,
• 58:38
  which is radically different from what it was doing,
• 58:42
  you know, even just a decade ago.
• 58:44
  So, Patrick, let me just say a huge thank you,
• 58:48
  thank you for the book.
• 58:49
  Thank you for your time. Do you have a next project in mind?
• 58:53
  I know you, you probably, you're just still consumed.
• 58:56
  I know you've got a, the paperback edition is coming out
• 58:59
  and I think it's being updated a little bit, so maybe
• 59:02
  that's where your focus is. But
• 59:04
  - I, I have a few things that I'm interested in,
• 59:05
  but I'm still a real amateur in them.
• 59:07
  So they strike me as book length projects.
• 59:09
  One is just defense and tech.
• 59:12
  I'll just sort of leave it as vague as that.
• 59:13
  I do have some more, you know.
• 59:14
  - Great. No - Particular ideas
• 59:16
  - I, super important.
• 59:17
  - Yeah. And the other one is I, I'm trying
• 59:18
  to think about like where, where is AI going to things most
• 59:22
  and the life sciences biotech.
• 59:23
  It just strikes me as a clear answer, right?
• 59:26
  So you've got a colleague, drew Endy, who seems
• 59:27
  to be doing fantastic work.
• 59:28
  I'm really interested in that sort of thing.
• 59:30
  - Amazing. - But I am returning to journalism next month,
• 59:32
  so I'm sort of going to a sort of freelance model
• 59:35
  where I'll be contributing to the Financial Times,
• 59:37
  the free press and CBS news.
• 59:39
  - Okay. Well, we'll I'm hoping for you in all those places.
• 59:42
  - Yes, sounds good. Please, please,
• 59:44
  - All thank you. Thank you again.
• 59:46
  - Cheers Liz. Appreciate it.