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Back in the day, my international economics professor told me corporations will set up, and base their business out of the countries that they see as the most s
by gentran 7y ago
Back in the day, my international economics professor told me corporations will set up, and base their business out of the countries that they see as the most stable. Because of this, it scares me when I see headlines like this, even though it is only production. If anyone has a counterpoint to what he said, I am very interested in hearing it
- fouc 7y agoI guess it depends on how easy or hard is it for apple to move its production around. If it's easy, then stability isn't the concern here. There's probably lots of other factors too, so realistically it wouldn't boil down to "Oh, US must be less stable"
- EpicEng 7y agoThat seems far too simplistic. At some point other factors (e.g. cost) outweigh "stability".
- floppycode 7y agoFar lower wages and fewer regulations seem to be much more important when it comes to production. As long as they do not want to move their headquarter I guess a little bit of instability and underdevelopment is actually desirable.
- muzani 7y agoWhy do you say China is unstable? The US is talking about starting a war, had government shutdown issues recently, and has a president that is abrasive on foreign affairs. UK is dealing with brexit. China may have the issue with HK recently, but to an outsider, they look more stable. Of course, something like Japan or Australia seems better, but China isn't a terrible choice.
- mfatica 7y agoThe US is not talking about starting a war. President Trump has been very clear he wants to avoid war.
- 1986 7y agoTrump may not want to go to war but he's surrounded himself with people (e.g. Bolton) who do.
- Majestic121 7y agoI think the parent agree with you, and tried to imply that China is indeed more stable than the US, and that was scaring him.
- deleted 7y ago[deleted]
- JumpCrisscross 7y ago> Why do you say China is unstable? It's now a dictatorship, with a single man ruling for life. The history of dictatorships shows, for fundamental reasons, stability in the short term and chaos in the medium. (The fundamental reasons include not being able to back away from bad decisions, eliminating competent rivals, and as a result bumbling into crises that seem to escalate themselves.)
- esoterica 7y agoThat’s a very ahistoric perspective. Many of the longest-lived and most successful empires throughput history have been monarchies and dictatorships. The current popularity of broadly democratic regimes is a very recent development in human history. Even the US was very undemocratic for most of its history (remember when only white male landowners could vote?), and that didn’t stop its ascendancy to world superpower.
- Retric 7y agoThat’s less true the deeper you dig into history. Major political change doesn’t always make a big splash into history. New leadership in a dictatorship often means a quiet realignment at the top. China tends to use the corruption excuse, but look at the upper leadership after such transitions and you find many new faces.
- Barrin92 7y ago>It's now a dictatorship, with a single man ruling for life. This is a cartoon take on China. Yes, China is led by a fairly Leninist party structure in nominal terms, but in terms of management China is relatively decentralised. Politically but in particular fiscally regional and local authorities manage day-to-day operations with significant leeway depending on the region, anything else would be unfeasible in a country with 1.4 billion people. The bureaucratic nature of the Chinese state (which is really thousands of years old) makes comparisons to Western strongman dictatorships impossible. There's a reason the communist state has survived Mao, market reforms under Deng and now Xi, and it's not because it's run by some big brother figure who gets assassinated and then everything collapses.
- gentran 7y agoI'm not saying China is unstable. My implication was that maybe these massive USA based corporations might see China as more stable for business continuity. I know production is totally different, and understand some of the reasons for moving it to China. While I do not imagine them leaving, what do you think would happen if America lost these massive, global corporations to their biggest rival?
- muzani 7y agoOh, I see. I interpreted the comment differently, as many others were saying it's done to save money.
- ZanyProgrammer 7y agoStability at the cost of cultural genocide (Uighyrs).
- tnolet 7y agoChina is stable because it is a totalitarian dictatorship that jails critics, has no free press and no real elections.
- majia 7y agoNo. Chinese people overthrew many kings and dictators far more oppressive than CCP in its long history. China is stable because CCP delivered economic results, lifting hundreds of millions of people out of extreme poverty. So a stable but oppressive CCP gov has been tolerated so far.
- duxup 7y agoPerhaps stability is less a concern when "everyone else is doing it" and you are worried about quarter to quarter results... not longer term.
- nexuist 7y agoApple has enough money in the bank at this point to not really care about what is or what isn't the most stable. They could make the worst decisions possible and it would take years before the consequences of their actions come back to bite them. While I'm sure they had genius analysts crunch and ultimately approve this move, the rules are different for them.
- sokoloff 7y agoDid they get to that enviable position by making a long series of good or bad decisions on balance?
- gaze 7y agoBasing your business and basing your production are quite different. Apple has likely done the math on the cost of their relations with their manufacturer going belly up against the additional savings from having their production done in china. I don't know that you could say Apple is based anywhere. Their offices are in the US, they have finances in Ireland (I think?), and their production is in China. They just put stuff where it's cheapest and drawdown is minimized in the event of a catastrophe. It's all thought out, I'm sure.
- pinkfoot 7y agoHave you been following what China does to entire population groups that threaten their stability? Name one country that is more stable for mass production than China? Its just not the leafy vision of stability you had in mind.
- Sherl 7y ago>Name one country that is more stable for mass production than China? India
- NTDF9 7y agoNot really. Lack of basic infrastructure still plagues vast parts of India. But yes, India is perhaps the most interesting consumer market outside of US and China. Interesting enough to set bases there
- whatshisface 7y agoDesperately trying to keep stability isn't evidence of stability, it's evidence that the leadership thinks they aren't stable.
- Lambdanaut 7y agoThe only thing in your statement that provides evidence of instability is your arbitrary inclusion of the adjective "desperately" to describe China's actions. All governments work towards stability in their own ways. I don't see desperation in Chinese strategy, but I do see a lot of energy.
- whatshisface 7y ago>I do see a lot of energy You are free to use any word to describe it, you could also call it "expense." China is spending time and energy on suppressing dissent proportional to their fear of their own people. The CCP has decided that the risk of being deposed is high enough to justify the cost and effort required to implement all of those nightmarish schemes.
- draw_down 7y agoWell, what exactly is the argument for US stability, at this point? If it's anything other than our track record, I'd be interested to hear. We have gone nuts.
- deleted 7y ago[deleted]
- rossdavidh 7y agoI think that is giving CEO's and corporate boards way, way more credit for long term thinking than they deserve. Corporations base their business out of whatever gives them the best result over the time period when they expect to be involved. If it's a founder, that is a lifetime commitment, probably, unless the founder is intending to sell to a larger business. But in any other case, the CEO and all of the other high-ranking types are thinking about this year and next, for the most part.
- throwaway5752 7y agoI don't think that is true of Apple given the scale of their operations.
- Krasnol 7y agoWhat special scale would that be?
- AdamJacobMuller 7y agolargest-ish company in the world scale?
- Krasnol 7y agoAnd how is this related to the argument above now? Is it some kind of monarchy? PS. It's not the largest. Neither by market cap nor by employee number.
- killjoywashere 7y ago> Is it some kind of monarchy? Bueno de Mesquita makes a compelling case for modeling most corporations as dictatorships in The Dictator's Handbook. So as long as succession is planned at the Corp, then yes, I suppose monar hy would be the correct model.
- pfranz 7y agoI'm not surprised. I figured when they announced the Mac Pro would be produced in the US it was a test with a low volume product with high margins. That experiment failed (on many fronts), so they're reverting back to what they do for the rest of their products. Tim Cook has been pretty explicit about why they do production in China and it's not just the cost. What's ironic is that only a week ago reports were that Apple is looking to move production /out/ of China (which is mentioned in the article): https://www.wsj.com/articles/apple-examines-feasibility-of-shifting-some-production-out-of-china-11561030751?mod=article_inline https://www.wsj.com/articles/apple-examines-feasibility-of-s...
- webmobdev 7y agoWhat other reasons are there apart from low cost and lax environment regulations and weak labour laws?
- tcpekin 7y agoSome interesting quotes (can be found in other accounts as well): For Mr. Cook, the focus on Asia “came down to two things,” said one former high-ranking Apple executive. Factories in Asia “can scale up and down faster” and “Asian supply chains have surpassed what’s in the U.S.” The result is that “we can’t compete at this point,” the executive said. “The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.” So, from what I've read, there is also the huge factor of being able to easily source parts, much easier than in the US, and also much easier to change a factory. [1] https://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html https://www.nytimes.com/2012/01/22/business/apple-america-an...
- pfranz 7y agoThank you for pulling a source and some specifics! I also remember Apple talking about expertise. The number of people experienced in running a large factory exist in the US, but at a much smaller number. Which means they're harder to hire and likely warrant a higher salary. I also think people greatly over emphasize the role of assembly. I believe it's less than 10% of the cost of each phone. But, in light of all that, it was good to see attempts to onshore more of the production.
- phaus 7y agoI think its more a matter of setting up in a country that's stable vs most stable. This is balanced out by the entire cost of doing business vs other stable countries they could have selected.
- gandalfian 7y agoAs you said its production going to china. When its their headquarters and management moving they go to Singapore and the like. So I think your professors theory holds out.
- OBLIQUE_PILLAR 7y agoI think the old Jack Welch quote is more revelevant https://www.economist.com/leaders/2013/01/19/welcome-home https://www.economist.com/leaders/2013/01/19/welcome-home “IDEALLY”, said Jack Welch in 1998, when he was chief executive of General Electric, “you’d have every plant you own on a barge to move with currencies and changes in the economy.” Reality followed vision for Mr Welch, who was a pioneer of offshoring, setting up one of the first offshore service centres in Gurgaon on the outskirts of Delhi.
- nswest23 7y agoBA in finance here. There are many factors that companies weigh when choosing countries to base their manufacturing from, only one of which is "stability" although there are many dimensions to this as well. Availability of labor force, costs, proximity to markets for product(s), etc. also determine where a company might base manufacturing. In the case of China, companies also might choose to place part of their supply chain there b/c it encourages the Chinese middle class to purchase their products.