Saturday, January 28, 2012

Grading and Gating Gadget Guilt

I've had a long moral struggle about where and how my gadgets are manufactured.  A couple of recent stories from This American Life and the New York Times has shifted the focus to Apple, largely because it coincides with Apple earnings announcement that they've made over $13 billion in profit, in one quarter, and after taxes.  This is on gross sales of about $46.3 billion.  Which is to say, after taxes and every other expense, Apple's profit margin is about 28%.

If that margin worked equally on all products, the after-tax profit on the cheapest iPad available would be about $140.

Molly Wood issued a call for Apple to take the lead in improving working conditions at Foxconn, Apple's primary manufacturer in China.  It appears, after all, that they can afford it to spend a little.  They charge more for their products than competitors, and clearly this hasn't hurt them in the market.  Apple can hardly say competitive forces are to blame for their decisions to force overtime and other difficult working conditions in China.  They are currently the most valued, publicly-traded company in the United States, worth more than even the oil giants.

Let's unpack that last thought.

Oil, which is really to say gasoline for most Americans, is something we buy at least once a month, very often once a week, and often for more than one car.  One 2011 study put the average family investment in gasoline at $368 per month, or roughly $4,400 per year.  How many people do you know that spend this much per family each year on phones and tablets?  Nevertheless, Apple is far more profitable - and hence more valuable - than the leading oil producer.

So there is no economic argument for Apple not do better by its contracted labor.  Heck, with profit that high, they could perhaps even afford to pay Americans and still eke out a little for stockholders.  But they don't.  And people still buy their products.

I don't personally own any Apple products (though there are some in my household).  This wasn't a principled stand against using Chinese labor, as the Asus computer I am using to write this was manufactured  in China.   I own a Samsung phone from Korea, and a Kindle Fire tablet that was "assembled" in China (presumably from some imported parts).  One of the reasons I own each of these devices is because they are considerably cheaper than owning Apple counterparts, and I am price conscious just like most consumers.

The primary reason I don't own Apple products is I don't like being locked in to their controlled world.  I want to be able to do ugly hacks and break things on the machines I own, and Apple doesn't make that easy so I just avoid their stuff.  I have both Linux and Windows boots on my laptop, and both my phone and my tablet are rooted Android devices that I regularly mess up because I find that fun.

So, Apple is the most highly-valued company on the exchange because they produce a controlled, pretty experience that many people will pay a premium to use.

I admit a great deal of mixed emotions in this debate.  I'd perhaps consider buying American-made gadgets (I've always bought American-made, union-made cars, for example) but that means there needs to be some in the market that are at least competitive.  There aren't, so I own cheap electronics from places which likely have poor working conditions.  In the cases of my tablet and laptop, at well under half what I would have had to pay for Apple products.

Does this make me less culpable?  Maybe not.  Does it make Apple more culpable when they have huge profit margins and still support conditions that would be illegal in their home country?

Yes.  I think it does.

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