There is a point in the life of all companies where they go from being truth machines to lie machines. The honesty necessary to succeed when times are difficult, either as a start-up or as a firm fighting off disaster, becomes a tendency to distortion when the cash is flowing freely and the profits seemingly endless.
Apple may not quite be there yet. But the firm regarded as the benchmark for elegant, popular technology is fast becoming one of the bad guys, a byword for the moral failings of global capitalism. While its profits soar, minor blips, like the recent news that the latest iPhone has a dodgy antenna, can be smoothed over. Last week, all it took was a presentation by its revered CEO Steve Jobs, and consumers were reassured. Apple looked like it cared and so the share price can spin ever upwards.
Yet Apple’s real problems are far bigger. The company has always whipsawed between a Californian counter-culture and the demands of the capitalist crucible that is Silicon Valley. One minute it wants to defeat Microsoft, the next to channel Mahatma Gandhi. For years, its emotional wanderings were a nice distraction and a useful marketing gimmick. You could buy Apple and not only get an elegant, well-functioning product, but feel good about it too.
The company reflected the contradictions of its founder, Steve Jobs. When he was 19 years old, a couple of years before founding Apple, Jobs, having dropped out of university, travelled with a friend to India, searching for enlightenment. He found India to be dirty and enlightenment elusive. As he put it later: ‘It was one of the first times that I started to realise that maybe Thomas Edison did a lot more to improve the world than Karl Marx and Neem Karoli Baba [a then fashionable guru] put together.’
Jobs has never favoured corporate philanthropy or buzzy terms like social entrepreneurship. Apple does not put its name or money behind museums or ballet companies. Jobs rightly believes that the most important social function a company can provide is to create innovative products, which in turn generate jobs and profits. Apple’s shareholders and employees can then do with that money what they will. This was all well and good until 26 May, when Apple officially became The Man, passing Microsoft to become the world’s most valuable technology company. Of all US companies, only ExxonMobil exceeds Apple’s market capitalisation.
There remain plenty of good reasons to buy Apple products, but to be part of the fashion-able fringe is no longer one. With this newfound status, Apple has also become a target — and a surprisingly easy one. All that highly styled grooviness, such a strength when it comes to selling iPads, becomes a weakness when critics cry hypocrisy.
You can start with the bloody civil war in the Congo. A key component of iPhones and iPads is a mineral called tantalum. One fifth of the world’s tantalum is mined in the Congo, the rest in Australia. Apple’s position on this has been to say it’s terribly hard to tell nice Aussie tantalum from the stuff mined at the expense of Congolese women and children by belligerent rapists and sold to fund their war. All Apple can do is try. The firm’s critics say that Apple can afford to do more than try. And they are right. With some $30 billion in cash on its balance sheet, the company should be able to buy ethically sourced components or make tantalum-free iPhones.
Then there is the feared link between mobile phone usage and brain cancer. Scientific research on the matter is divided. Apple spends tens of millions of dollars testing the radiation effects of its products, but besides clearing them for use, says nothing on the issue. Mobile phone radiation may be nothing more than a distraction. Or it may be the next nicotine. No one is better placed than Apple to say which.
Then we come to the most visible of Apple’s problems. Its factory partners in China. The tens of thousands of people who manufacture and assemble the products far away from One Infinity Loop, Apple’s Silicon Valley headquarters.
Earlier this year, 12 employees of Foxconn, which runs plants in southern China that make many of Apple’s products, either killed themselves or tried to kill themselves. On closer examination of Foxconn’s factory towns, it seemed obvious why. Workers come from rural China to these vast, industrialised plants, where they sleep, eat and work for around $1 an hour. They are told when to eat and when to go to the bathroom. They work at least ten hours a day, six days a week on production lines that run 24 hours a day.
Challenged by a blogger about the suicides, Jobs replied in an email: ‘Although every suicide is tragic, Foxconn’s suicide rate is well below the China average. We are all over this.’ When the blogger asked again what Apple was going to do about it, Jobs said: ‘You should educate yourself. We do more than any other company on the planet.’ He recommended the blogger read Apple’s Supplier Responsibility progress report.
It is a bustling document, which describes Apple’s efforts to monitor, educate and improve behaviours among its suppliers. Last year the firm conducted audits of 102 facilities outside America where its products are made. One quarter failed to meet Apple’s compliance standards for juvenile protection. Thirty-five per cent were not paying proper wages and benefits, 39 per cent failed the occupational injury prevention standard. Apple requires that its suppliers work their employees no more than 60 hours per week with one day of rest per seven days of work ‘while allowing exceptions in unusual or emergency circumstances’. Fifty-four per cent of its suppliers breached this standard. Yet startlingly, when it came to ethics, Apple’s suppliers were reported to be 100 per cent in compliance when it came to ‘business integrity’.
Then as Foxconn responded to labour unrest and the suicides with wage increases, the Financial Times reported that ‘Foxconn’s demands to pass on some higher labour costs had not been met favourably by Apple.’ Rather, Apple wanted to shift production to other parts of China where labour costs were lower. A few cents of wages and improved working conditions added on to the cost of a several-hundred-dollar device were evidently too much to bear.
Apple’s approach to business has long defied management stereotypes. But its success has brought the company into rarefied territory. Its policies and attitudes carry extraordinary influence, beyond those of most governments, and its power invites suspicion. The storyline for this kind of battle has been well-established. What begin as gnat-bites from the crunchy social fringe quickly become great bloody chomps from the market. Companies tend to respond far too late to these issues, deploying social responsibility experts to romance their critics, and lawyers to crush those who resist the wooing.
Unlike food, clothing and warmth, we have no need for iPhones and iPads. They are great, of course, but the world was not a conspicuously worse place without them. The more we learn about what it takes to make them, the less blinding their dazzle.