What the world needs now isn’t love, sweet love. It needs more companies like Apple.
Critics slam Apple for not giving more to charity. It’s a reasonable complaint. Apple should be more philanthropic. Under Tim Cook they probably will be.
However, Apple helps the world in a far more profound way than some annual contribution to United Way.
Apple represents an approach to business that “lifts all boats,” to quote a well known cliche.
Apple is the global economy’s single most powerful economic force opposing a great death spiral in which margins are squeezed, goods get shoddier, people make less money and our lives just get cheaper in every way.
Here’s how Apple does it.
Huge discount stores like Walmart are at the forefront of a global cheapening. As Walmart bulldozes mom-and-pop retail stores and erect massive new super stores, that company gains control over how manufacturing companies do business. They squeeze every drop out of the companies that make products of every description, forcing them to cut corners, lay off or offshore workers and seek out lower quality materials. Because everyone is either unemployed or making less money, they can’t afford to shop anywhere except stores like Walmart. This is the opposite of Henry Ford’s strategy, which was to pay workers so much they could afford to buy his cars.
The self-reinforcing economic death spiral continues until society resembles The Hunger Games, where the majority live as virtual serfs in District 12 shantytowns and a minority live in obscene luxury and leisure in gleeming, high-tech cities.
Internet powerhouses like Google do the electronic equivalent. Instead of paying a company like Microsoft for an office suite, Google wants you to use Google Docs free, or at a very, very low price. Instead of paying a fair price for a newspaper subscription, which employs reporters, editors, ad sales people, truck drivers, press operators, ink makers, lumberjacks and others, Google has us reading news free online. Journalists are forced to become conflict-of-interest entrepreneurs or homeless alcoholics, while the journalism is done by unpaid or underpaid semi-amateur bloggers.
It’s unfair of me to single out Walmart and Google. There are thousands of companies aggressively pursuing the cheapening of everything. And companies are merely responding to the public’s impulse to want more stuff rather than better stuff, more food rather than better food, more content rather than better content. People think they want cheap stuff. But nobody wants to live in the world that results from cheapness as the driving economic force for change.
And yet Apple stands in stark contrast to this trend. Apple sells super high-quality products and services at reasonable but profitable prices. More importantly, they don’t make their money by forcing other people to make less, contrary to reputation. In fact, people and companies who participate in the whole Apple iCosystem tend to make much better livings than people contributing to alternative platforms.
Apple is holding back the tide of cheapification, and represents an alternative future in which the following might happen:
Book authors, editors and publishers can make a living
The current leader in eBooks is Amazon.com, which uses what’s called a “wholesale model” for selling books. That means Amazon is in control of the price it charges for books, not publishers. Amazon often sells eBooks for less than the wholesale price it paid for them, losing money on the deal. By undercutting other sellers, Amazon has made itself the top seller of eBooks, which enables Amazon to force publishers to lower their wholesale price. It also forces competitors to slash prices, too.
As a result, it has become almost impossible to make a living writing eBooks. There’s just no money in it — unless you have a TV show like Bill O’Reilly or Snooki. Because great authors tend not to have TV shows, they have to find other ways to make a living.
Everyone in the book industry suffers. Agents have to find other work. Editors get laid off (and books don’t get edited well). The whole process of discovering new writing talent is broken. Nobody is making any money and the quality of books is suffering.
Apple, on the other hand, is actually being sued by the Department of Justice (DoJ) for using what’s called the agency model. Under Apple’s system, publishers can charge whatever they like for books, as long as Apple (the “agent”) gets its percentage. The DoJ is concerned because, in order for the agency model to work, Apple requires that publishers sell at the same price or more when selling the same titles through other “agents.”
The government calls this “price fixing.” Publishers call this “saving the publishing industry.” Under Apple’s model, but not Amazon’s, publishers can afford to pay writers and editors.
Apple’s model represents a future where books are well written and well edited, a future where publishing professionals can make a living.
Factory workers live better lives
It’s fashionable to diss Apple for abusing Chinese factory workers. And recently, Apple has instituted a series of “reforms” that pay workers more and gives them better working and living conditions.
But even before these reforms, the factories contracted by Apple were among the best places to work in China. Much of the outrage about Apple’s factories requires an almost perfect ignorance of the conditions of factories nationwide in China. Foxconn is a worker’s paradise compared with the miserable sweatshop conditions under which the vast majority of Chinese factory workers labor.
The existing relative superiority of these factory conditions combined with the new reforms are so revolutionary that it may case a ripple effect of humane working conditions throughout China. Building Apple products in China will become so desirable that workers at other factories are expected to quit and try to work at Foxconn and the like. As a result, those other factories will have to pay more and improve conditions in order to compete in the labor market against Apple’s contracted factories.
Apple’s (new) contract manufacturing model represents a world in which highly profitable companies improve the lot of low-paid factory workers who make the products.
App developers get paid more
Software developers who made iOS apps have made more than $4 billion since the iPhone first supported apps. Android app developers have made less than half a billion.
Some 210,000 software development jobs in the United States exist, theoretically, because of the iOS platform and app store system Apple created. Many more programmer jobs have been created internationally.
Apple’s ecosystem represents a world in which software developers can make a real living selling mobile apps.
Retail areas thrive
Companies like Amazon.com and thousands of other online retailers provide a compelling alternative to brick-and-mortar retail shops. Which is great — unless you want to imagine towns and cities with boarded up shops, tumbleweeds and packs of wild dogs roaming a post-apocalyptic formerly retail landscape. Like Greece.
BestBuy, the latest retail casualty, recently announced that it’s closing 50 stores and laying off 400 workers, for example.
Yet Apple has developed a highly profitable retail-store system that attracts customers to downtown areas and malls, beautifies every neighborhood it’s in, restores historical venues like Grand Central Terminal in New York City and employs thousands.
The Apple ecosystem represents a future in which downtown areas are bustling gathering places of shopping, dining and entertainment, a cure for urban decay and blight.
Consumers and investors have more confidence
We live in a perception-based economy, where the beliefs and attitudes held by investors and consumers can make or break an economy.
Apple is so successful that it actually boosts confidence single-handedly.
One leading yardstick of how the economy is doing is the S&P 500, which is Standard & Poor’s report on the top 500 companies and how they’re doing with their collective stock performance.
The most recent report showed that earnings-per-share grew by 13% in the fourth quarter. Which is pretty good coming out of a recession, a real confidence booster.
But a whopping 3% of that growth was Apple alone. Without Apple, the report would have shown just 10% growth.
Apple represents a world of consumer and investor confidence in the economy.
These are just a few examples that show Apple’s whole business model, its general way of doing business is really good for the economy — and would be great for the economy if other companies follow Apple’s lead. And not just in small, superficial or temporary ways. But in the biggest of possible ways: What kind of world will we live in?
Will we live in the Walmart, Google and Amazon world of scorched-earth policies that make everything shoddy and everyone poor? Or will we live in the Apple world in which high quality prices command reasonably priced products that enable everyone involved to make a good living?
Yes, Apple should give more to charity. But nothing it can give will be as valuable as Apple’s powerful contributions to high-quality products, living wages, thriving retail spaces and a robust economy.
