The book is called Apple and China: The Capture of the World's Greatest Company. I've got to tell you something. You know, I'm not much of a reader. I was going to wait for the movie to come out, but honestly, like, this is jaw-dropping. Yeah, this book is jaw-dropping and so well researched. It's not polemic, it's not hyperbole. It's the story of how China basically was built as a country by Apple. Is that right?
Yeah, that does sound, I say that sometimes and it sounds totally unhinged, and I get that. Right. And yet, like, what happened is I came across internal documents after speaking with 200 people, and I figured out that Apple was investing by 2015 $55 billion a year into China. So this is mostly like they spend loads of money, billions of dollars on machinery that they put on production lines that are sort of orchestrated by Apple but not owned by them. So they're building the machinery, yeah, but they're outsourcing that. They're hiring companies to build this. Like they, they like outsourcing is the word, and yet there's something so, they own the means of production with it. They own it. So I compare it to like the way Uber is the largest taxi provider in the world without owning any cars. It's the same thing for manufacturing. So none of the factories are owned by Apple, and yet they have like maniacal control over the machinery within those factories, right? And so they're doing like, I quote someone saying, 'We treat the workers like our arms and legs, like you do this and you do that.' And the number of people they've trained like that is 28 million. So larger than the labor force of California since 2008. And the number of billions of dollars they spend on machinery is, you know, $14 billion, I think, is the peak year. So some of that's public and other this material. These documents, the numbers seem fantastical, of course, and well they do and they don't. Right. So 55 billion is per year. That's the investment. A lot of that is training costs for the employees in China. And the number of employees, like per Tim Cook's public estimate, right, is 3 million people are assembling iPhones and other Mac products in China. But these aren't just low-level, like oh, it's a million people doing lots of unskilled jobs. The ones that Howard Lutnick wants to bring back to America, yes, and lots of PhDs at Foxconn, really sophisticated, right? But my point is, like, lots of times people think there's great vocational training in China. The vocational school in China is Apple. They've trained all these workers. Yes, they've done a huge job.
So, so let me just put the 55 billion in context. I could not find any corporate equivalent for how much someone is, would be, is investing in another country. So I had to go to government efforts. So you look at something like the Chips Act, right? Biden's flagship plan. Let's bring chip fabrication back to America. That's 53 billion over four years, right? Another way of saying that Apple is investing quadruple what the commerce secretary called a once in a generation investment in America. So that's nuts. And then you go back to the Marshall Plan and you're thinking, okay, so maybe it's like half of the Marshall Plan, something like that. Like that's going to be crazy. People are going to relate to that. So I take the Marshall Plan spending from 1948 to 1952, right? This is sort of like America saving Europe after World War II. And you convert it to $215 and it's half the annual spending of what Apple's investing in China. And this is $130 billion in 16 countries. 16 countries versus one country. Yeah. And it's not one, right? It's like the modern equivalent of the Soviet Union. Like it's our biggest adversary. And so, you know, I sort of ends the book, not to sort of like get so ahead of myself here. No spoilers. Yeah. Oh my god, does Apple die?
Well, paperback version. I don't want to tell people.
So, I say that as China's GDP eventually overtakes America and especially because they're doing so good in the advanced electronic sector, more people are going to ask how did they do it? Like, how did they go from such poverty 50 years ago into the world's greatest maker of like military weaponry and advanced electronics? And a big portion of the disquieting answer is year in, year out, Apple taught them. They do this. By the way, this is China, and this is not to single out. This was a decision that Apple made, not with this intention. No, not at all. It began, I guess, well, it began with shareholder capitalism, I guess, in the 80s. Yeah. I mean, it's very much in the book. Yeah. Absolutely. Right. I mean, it's that ethos of you do what's best for the shareholder. So you're searching out the cheapest labor, the lowest products, but it really seemed like Xi Jinping in, was it 2013, is what made this so fraught. Would that be correct to say?
Well, yes, because I would say so. My thesis is really that they sleepwalked into this crisis. I mean, you cannot blame Apple for moving into China in the early 2000s. For starters, the American consensus was that we're going to inculcate the next WTO. They came in, I mean there was broad political support to do that. The problem was when Xi Jinping really turns China in an authoritarian direction. It's not like Apple was on the sidelines not noticing. They were attacked within 36 hours of him ascending to the presidency. Tell them about Consumer Day.
Consumer Day is something that happens March 15th every year in China and basically it goes back to 1991. There's someone in the audience like, 'I know Consumer Day.' Yeah. I have read this. Beware the eyes of Consumer Day. Okay. So companies are called out for not living up to the socialist ethos. Okay. And it's increasingly western companies in the mid-2000s. McDonald's is 2012, and the book opens with 2013 Apple is attacked on Consumer Day, and it's for warranty differences of all things. The story, it turns out to be not actually true, right?
Well, it's okay. So little, little, how much time do we have? It's the most fascinating part of Central has no other program.
Is it chickens? Nothing. I'm going to give you the 30-second version, but this is four chapters in the book. Okay. Demand for iPhone in China after 2010 is wild. Okay. There are four stores for 1.4 billion people. Okay. So one store per 350 million people. And the iPhone becomes the most conspicuous status symbol imaginable in the country. And so what happens is these gangsters called yellow cows notice this imbalance and they begin paying migrants by the busload to come over to the store and snake around the store, 67,000 people at times, to buy as many iPhones as possible. And then they go to a city like Chongqing, population 32 million, number of Apple stores zero, and they find ways, legal and illegal, to sell iPhones at more money. They're making more money than Apple per iPhone, right? Okay. So it's absolutely wild what happens is Apple eventually catches on to this a little bit because they're doing nefarious things. They're buying phones in the US, they're using fake ID. They're buying phones for less than $100 so that they can make even more fat margins on them and stuff. And so they begin actually burning out the CPU of the phone, deliberately breaking it in the process, but rendering it so you can no longer see where it's come from, right? So they're masking the retail origin. Okay? So what happens is Apple catches wind of this and they begin refurbishing these deliberately broken units rather than replacing them. Right? By refurbishing it, they're doing something that they're not doing in other countries, right? So they take that as an insult to China. Yeah. Exactly.
So without probably knowing the full story, CCTV, which is like the state-sponsored CNN of China, attacks Apple for treating the Chinese in a way that's inferior to the rest of the world. Okay. That was 12 years ago, reported by every media outlet. And like they never figured out what the story was with the yellow cows and how it came to be. So that's why it's so significant. That's why it's the prologue. And so at that moment, shares of Apple then start to go down. It becomes less popular in China.
