Apple of discord

When Jon Stewart does a segment on international politics or economics, you pay attention. My apologies for the double negative in the next sentence, but it conveys my sentiment adequately: there is nothing not to like there. Stewart and John Oliver both remain prescient in their comedic timing, activism and political acumen.

Recently, Stewart hosted a segment with author and journalist Patrick McGee, who has written a book on the relationship between China and Apple. It is called Apple in China: The Capture of the World's Greatest Company.

The explosive book claims Apple accidentally built China into a tech superpower while trapping itself in the process. Based on 200+ interviews with former Apple executives, it posits that Apple's $275 billion investment in China exceeded the Marshall Plan that rebuilt Europe.

Starting in 2003, Apple's pursuit of cheap manufacturing evolved into something unprecedented under Tim Cook. The company trained 28 million Chinese workers and transferred cutting-edge knowledge through what McGee calls "the Apple Squeeze" — sending thousands of engineers to educate suppliers like Foxconn. This massive technology transfer inadvertently supported China's plan for technological independence.

Ironically, Apple created its own competition. Chinese companies it trained now outcompete Apple domestically, while Apple has discovered it can't easily leave — replicating operations elsewhere would cost hundreds of billions.

As Apple grew more successful, it became politically captured, removing VPN apps and storing Chinese data locally to maintain access. McGee believes the world's most valuable company became trapped by its own success, transforming from a symbol of innovation into the unwitting architect of its biggest rival's rise.

The book doesn't outright present a solution or reset to fix this paradox. The reason I mentioned the Jon Stewart interview at the outset rather than the book itself is that, in that interview, McGee seems to offer some alternatives.

They discuss President Trump's desire to reshore the industrial base — agreeing with the principle, but noting it may not be possible given business bottom lines and balance sheets. McGee goes on to say: "I'm a big fan of friend-shoring rather than reshoring. Right, we should be doing what we did in China, but with allied nations like India, like Mexico."

I'll get back to the idea of "friend-shoring" in a bit. But you have to appreciate that his timing is perfect. The world was still taking stock of the "deepseek moment" when more surprises were sprung: Chinese advances in quantum computing; the tough competition Tesla is facing from BYD and other Chinese EV companies; and, last but not least, the short-lived India-Pakistan war which tanked Dassault's stocks while skyrocketing Chengdu's.

It's definitely a question on every analyst's mind: how did we end up here? Wouldn't it be nice if we lived in a world of magical realism and some twist of fate presented you the 'culprit' on a platter? I find McGee's quest to do just that. But the real world doesn't work that way. In fact, I remain highly sceptical of people who come bearing gifts of simplistic explanations.

You are entitled to question my assertion that the explanation here is simplistic. This, of course, is a very well-crafted and documented book, full of internally consistent nuances. But there lies a problem too.

Despite so much neatly packed information, the book has a broader contextual deficit. Remember, there is a very effective strategy to influence a reader's mind if you are a clever writer — and it involves the exploitation of the cognitive load theory.

The theory states that our working memory can only hold a small amount of information at any one time, and that instructional methods should avoid overloading it to maximise learning.

This method does the opposite. You subject the reader's mind to information overload. While too many details build your credibility, shock, horror (depending on the nature of information), and confusion can break your mental defences and leave you prone to the author's manipulations.

Even if we want to put a positive spin on this, McGee's work has a context problem, an agency problem, and a resolution problem.

Context problem — because there is hardly any in-depth inquiry into why other markets in the same price range (India, Mexico) lost this opportunity to China. India's case is quite interesting, by the way. It's not as if India wasn't in competition.

In fact, an entire book can be written on how Maruti Suzuki and the service industry built India's economy today. But in the end, it's a matter of priorities: automobiles over smart technology; services over manufacturing; low-hanging fruit over strategic planning; training over immediate profit. We know who chose what.

Agency problem — because at least its central thesis robs China of its agency. A cultural distinction has to be made. Perhaps a better rebuttal of this two-dimensional image of China is presented by Kai-Fu Lee in his brilliant book, AI Superpowers. It tells the story of original, intense entrepreneurial competition and innovation, strategic planning and investment, cultural factors that drive rapid iteration and risk-taking, and indigenous innovation capabilities. You can see why I'm suspicious.

Resolution problem — because third-world problems are presented both as the diagnosis and the resolution. Friend-shoring, so to speak. This is what I hear: "Hey, this idea didn't work the first time. Let's do it all over again in similar situations and not learn anything from the mistakes. We invested in a third-world country and now it's giving us tough competition. Let's now pick another one with an emergent democracy deficit and replicate the model. What could go wrong?"

I'm not a big fan of decoupling, but even if a de-risking effort has to be made, here's what I would have done: brought Apple's infrastructure to Canada near the US border. Canada has a lot of land and a smaller population.

Then, in consultation with the Canadian and US governments, I would have brought in foreign, cheaper labour to the new plants and cities. This way, high-paying jobs like designing and engineering could be kept in the US, while building a product and labour value chain with total customisation options.

This way, the US regains control of its technology and reshoring becomes feasible. Canada and the US move closer, talent from third-world countries gets a better life even in these anti-immigration times, and Canada adds to its working population. But for some reason, these guys won't tell you such solutions exist. India has an even stronger lobby than I originally thought.