The root cause of the Mississippi fraud seems to be the same as the root cause of the Minnesota fraud: state officials allowed to make decisions about how to spend federal money. The author says that Clinton administration technocrats in D.C. were concerned that they’d destroyed the Black American family. Children born to “single mothers” went from roughly the same percentage as in the white population to over 60 percent (current data: 25 percent for whites; 65 percent to Blacks) in response to the Great Society “marry the government” programs introduced under Presidents FDR and Johnson, e.g., Aid to Families with Dependent Children. The Clinton geniuses implemented Temporary Assistance for Needy Families (“TANF”) in which states would get block grants and then could do whatever they wanted to with the money. They could, for example, give cash directly to “families” that didn’t work, but could also give money to nonprofit organizations that purported to assist those who didn’t work, e.g., by helping them write resumes or delivering other nebulous services.
The Mississippi DHS folks decided to give roughly 10 percent of the TANF funds to poor people and then 90 percent to friends’ nonprofit orgs whose executives spent the money on new houses, luxury vacations, kickbacks to state bureaucrats, etc. Only about $100 million was stolen from federal taxpayers, but the mechanism seems to be the same as in the much larger Minnesota fraud. The core prerequisites are (1) letting state officials decide how to spend federal money, and (2) the ability of officials to hand over taxpayer funds to nonprofit orgs.
There are some other good insights into the bureaucratic lifestyle. Some families in Mississippi living in $1 million houses and with six-figure incomes were enjoying Medicaid (an angel/VC-investor friend in a $2 million (pre-Biden dollars) house Maskachusetts was doing this about 15 years ago; he answered all of the questions on the Mass Health Connector accurately and the system kicked out that he was entitled to superlative MassHealth (Medicaid) coverage at $3/month). When the auditors pointed this out to the Medicaid bureaucrats their response was to push back rather than admit any bureaucratic errors or shortcomings. Even the people in the welfare bureaucracies who were corrupt or personally benefitting had a powerful desire to obstruct auditing and to preserve business as usual.
I’m almost done with the book and so far there isn’t a single example of a person who lost his or her job as a consequence for incompetence. A handful of people suffered criminal convictions, but nobody lost a day of wages as punishment for taxpayers losing $100 million.
Loosely related, a thoughtful perspective from U.S. Senator John Kennedy of Louisiana:
If you’re one of the crooks in Minnesota who took a giant Great Dane whiz down the leg of every taxpayer, you ought to be in JAIL. pic.twitter.com/kXAGwUXiWC
How does hiring and firing work in a company that isn’t passionate about DEI?
On January 28, 1996, Ren Zhengfei held Huawei’s first “mass-resignation ceremony.” Each head of a regional sales office was told to prepare two reports: a work summary and a written resignation. “I will only sign one of the reports,” Ren said. “Dear Chairman,” the resignation letter said, “I have fought for the company’s sales development and sacrificed my youth. But in the few years that I’ve worked on the sales front lines, my technical and business ability may not have kept up…. If through the process of examination and selection, the company identifies a more suitable person for sales work, I will sincerely resign from my current position.” Huawei had started out in rural markets, and many of its early sales managers were provincial in their experience and network of contacts. As Ren sought to go national and international, he decided to make the entire sales staff resign and reapply for their jobs. “The mountain goat must outrun the lion to not be eaten,” he had told them ahead of the event. “All departments and sections must optimize and eat the lazy goats, the goats that do not learn or progress, and the goats with no sense of responsibility.” Now Ren took the podium. “Being an executive at Huawei should be understood as a responsibility, a choice to sacrifice personal happiness,” he said. The resigning sales managers were allowed to speak in turn, some choking back tears. “As a Huawei person, I’m willing to be a paving stone,” one said. “If I can’t keep up with the pace of the company’s development, I’m willing to let new people, and higher-level people, take over my job,” another offered. “My youth and ability are limited, and Huawei’s future is long,” a third said. “I can’t hold back the company because of me.”
Maybe sales will be one of the few jobs left to humans after Elon Musk gets Optimus to do everything?
Ren had grown up in the Mao years, when there was no such thing as private-sector sales. Now he presented sales to his young followers in rousing terms, almost as a mystical vocation. “Sales work is special, complex, and noble,” he told them. “You need the intelligence of a scientist, the insight of a philosopher, the eloquence of an orator, the ambition of a social reformer, and the optimism and persistent spirit of a religious man.”
Polite protocol for a business dinner involved breaking out the baijiu, a clear sorghum spirit that has an eye-watering 120-proof kick, and pouring out round after round of shots over a rotating parade of exquisite dishes. The protocol also involved getting drunker than your clients to show your respect for them. One early Huawei executive wrote about having to excuse himself for a vomit break while entertaining customers—not an uncommon occurrence. Others developed stomach or liver ailments. This seemed to happen particularly often in the far northeast, which had a reputation for heavy drinking. “The key staffer for this account is currently suffering hepatitis but refuses to come back to Shenzhen for medical treatment and insists on fighting on the front line through the ice and snow,” Ren said in 1995 about a Huawei salesperson based in Yichun, close to the northeastern border with Russia.
The story of Huawei is definitely not as simple as “it was a planned economy and the planners picked Huawei”:
Despite the interest that Huawei had received from government officials, it was only one among many contenders, and not even the most favored one. In 1995, officials had set up a state-owned switchmaking champion called China Great Dragon Telecommunication in an effort to combat the foreign switchmakers. Great Dragon was built around the military engineer Wu Jiangxing’s breakthrough 04 switch and had been formed by merging eight smaller telecom companies. The government was pouring some $2.2 billion a year into the venture. Also in 1995, the Xi’an Datang Telephone Co.—a venture set up by a state-run research institute and several Chinese graduates from US universities—began mass production of its new switch, the SP30. And across town in Shenzhen, the Zhongxing Telecommunications Equipment Company—which would later be known as ZTE—had developed its ZXJ10 switch. People called them the Big Four of China’s domestic switchmaking, and they made quick work of eating into the foreign vendors’ market share. Within a few years, the price of telephone switches in China had dropped from $300 per line to $70 per line. With so many contenders, and such thin margins, companies were always flaming out. In early 1996, a dozen of Great Dragon’s 04 switches abruptly failed due to a software problem. The company never recovered.
Huawei had started out as an underdog compared with its state-owned rivals. Now it was emerging as the frontrunner, so much so that the state-owned companies were crying foul. “They sell cheaply to get market share,” an executive at Datang complained. Great Dragon’s Wu Jiangxing griped to Shenzhen’s Science and Technology Bureau that the local government shouldn’t just support privately owned companies.
Despite the shortage of PhDs in DEI in China and overt sexist sentiments, women are able to rise to top executive positions.
The executive who rose the highest was Sun Yafang, who was elevated from marketing and sales president to Huawei’s vice-chairwoman in 1994. She was an intense woman of around forty, with a hawkish nose and a stately bearing. She had overseen Huawei’s “marriage” to the state through the joint ventures with provincial telecom bureaus and had led the mass resignation of the sales managers. People whispered that Madam Sun had worked for the Ministry of State Security, or the MSS, China’s powerful civilian intelligence agency, before joining the company. Perhaps that had something to do with her rapid rise through Huawei’s ranks, or perhaps not.
Sun ran a tight ship, cracking down on excessive golfing among the managers. “Huawei’s sales staffers all know that if Madam Sun sees you without a tie on a convention floor, your fate will be a miserable one,” a member of her team wrote about her. “Not to mention her fiery temper. The hurricane of her criticism will leave you with no possible hope to find an escape.”
Ren had proved willing to promote capable female executives, even as he sometimes expressed old-fashioned views on women in the workplace. “Many companies don’t like hiring female employees, because female employees are inefficient and can’t achieve the goals when they do things,” Ren said in a speech to Huawei’s secretaries around this time. “Female employees have a big shortcoming, which is they like to gossip and nag, which undermines unity. Originally, the purpose of hiring female employees was to add a lubricant to the management team. The main characteristic of male employees is their rigidity, and they are prone to producing sparks when they collide. With a layer of elastic sponge in between, there won’t be sparks.”
A lot of Huawei’s management and corporate practices were modeled on IBM’s and with IBM consultants’ help:
IBM’s consultants started arriving at Huawei’s headquarters in August 1998. They would remain in residence for a decade. Gary Garner, one of the early IBM consultants, recalled that his first impression of Huawei was that it was a vibrant but undisciplined company where things were sometimes just scrawled on sticky notes instead of being filed properly. “President Ren had a whole bunch of bright young PhDs,” he said, “but it was disorganized. It wasn’t ready to go to the international market.” Some of Huawei’s managers protested the new systems, which they found burdensome. Ren insisted they follow the IBM way. If the shoes didn’t fit, Ren told them, they had to “cut their feet to fit the shoes.” IBM’s output was fifty-five times Huawei’s that first year, 1998. Ren set a goal of shrinking the difference to thirty-five to forty times greater by 1999. “We are making big strides forward,” he told his staff. “We’re narrowing the gap.”
One place that Huawei didn’t follow IBM was onto a public stock exchange. The company remains privately owned, mostly by employees, to this day.
Imagine if U.S. politicians would follow Ren’s example of voluntary semi-retirement at age 67:
In December 2011, Ren, sixty-seven, announced he was stepping back to allow younger hands to steer the company. “I increasingly don’t understand the technology, increasingly don’t understand finance, and only half understand management,” he told his staff. “If I can’t treat our group kindly and democratically, and fully unleash the talents of all our heroes, I will have achieved nothing.”
Much of the rest of the book is about Huawei’s entries into various foreign markets and tussles with the U.S. and other Western intelligence agencies that either (1) wanted a back door to tap into communications, or (2) were worried that their Chinese counterparts had a back door into Huawei’s gear. I won’t cover that here because it is too involved, but I will have another post about this House of Huawei: The Secret History of China’s Most Powerful Company.
The book covers the modern history of China as well as the history of Huawei. The book should be inspiring to us older folks because the founder of Huawei was born in 1944 and, at age 81, is still involved in corporate management:
In Guizhou, Ren Moxun met a seventeen-year-old named Cheng Yuanzhao. With big brown eyes,[15] round cheeks, and a broad smile, she was also bright and good with numbers. They married, and Cheng Yuanzhao soon became pregnant. Their son was born in October 1944, and they named him Ren Zhengfei. It was an ambiguous name. Zheng meant “correct,” and fei meant “not.” “Right or wrong” would be a fair translation.
We are reminded that China is a multi-ethnic empire:
Mao’s officials believed they were extending a civilizing influence to the nation’s frontiers—Guizhou in the south, Inner Mongolia in the north, Tibet and Xinjiang in the west. The residents didn’t necessarily see it that way. They had lived for centuries with their own languages and customs, and they were now being compelled to assimilate. There were those who did not like Ren Moxun and his school either. After someone threatened to kill him with a hand grenade—the precise reasons are unclear—the school was issued four rifles to protect the staff and students. One of Ren Moxun’s objectives was to inculcate his students with the right beliefs. “Principal Ren, your guiding ideology must be clear,” a visiting official instructed him. “You must make clear who the enemies are, who we are, who are our friends.” Ren Moxun organized rallies for the students to denounce their enemies. The enemies at home were the oppressive landlords. The enemies abroad were the Americans, who were waging war against North Korea, one of China’s allies. Ren Moxun reported that the “scoundrels” hidden among the teachers were successfully caught through these criticism sessions, which were often intense, with students bursting into tears. In the anti-America sessions, students offered up secondhand accounts of atrocities committed by US troops in the area, presumably when they had passed through during World War II. One student said a US soldier had shot a farmer for sport near the Yellow Fruit Waterfall. Another said a classmate’s sister had been dragged into a jeep and raped. It was hard to say what, exactly, had happened years ago with US soldiers, but the resentment against America was certainly real.
and that the Cultural Revolution wasn’t a great time to be an educator or a student who wanted to learn
Ren Moxun was hauled onto a platform in the school cafeteria, his hands tied, his face smeared with black ink, the tall hat of shame denoting a counterrevolutionary placed on his head. “Studying is useless!” people shouted. “The more knowledge you possess, the more reactionary you are!”
One of Ren Moxun’s students demanded the principal admit that he’d instilled feudalist thinking in the students, such as by quoting Confucius. According to a recollective essay by Feng Jugao, a different student, when Ren Moxun tried to deny the accusation, the accuser rushed forward with a wooden stick and beat him until the stick broke.[53] “I can’t say if the wooden stick was weak, or if Principal Ren’s backbone was strong,” Feng wrote. “But the wooden stick broke in two across Principal Ren’s back.” Feng recalled his mother being aghast, saying that the students who beat the principal would get their karmic punishment.
Universities nationwide were banned from matriculating any new students between 1966 and 1976. Ren Zhengfei’s younger siblings were shut out, but through the random luck of his birth year, he’d been able to eke out a college education. In 1968, Ren graduated with a major in heating, gas supply, and ventilation engineering.
At age 42, Ren started Huawei:
Shenzhen legalized the establishment of “minjian” (unofficial or, more literally, “among the people”) private technology companies in February 1987 under a pilot program. Applicants poured in from across the country—professors and engineers from Beijing to Kunming. The idea of running your own company in the SEZ was exciting—and risky. Seventy-five percent of the first batch of entrepreneurs asked their state employers for temporary unpaid leave, with the option of reprising their old jobs if their startups didn’t work out. Ren founded Huawei as a minjian company on September 15, 1987, with twenty-one thousand yuan pooled between himself and five investors.
Wuhan was the source for more than SARS-CoV-2 and coronapanic:
Ren arrived in the inland city of Wuhan in the spring of 1988 in search of engineers. Dubbed “the Chicago of China,” Wuhan was a bustling industrial city on the Yangtze River. The Huazhong Institute of Technology had been founded here in the 1950s, and three decades later, conditions at the university were still spare: Students bunked six to a room in the dorms and took cold-water showers.[38] There was no air-conditioning or heat. But there was a professor who was knowledgeable about telephone switching, and Ren hoped he could help Huawei build a switch.
The book covers the 1989 protests and power struggles, then returns to the early days of Huawei:
Ren’s team had been making simple analog switches that could handle forty, eighty, or, at most, a couple hundred phone calls at once. Their early attempt at a more complex one-thousand-line switch was a failure, suffering from serious cross talk, dropped calls, and a tendency to catch fire from lightning strikes. Now, in 1993, they were trying to build a digital switch that could handle ten thousand telephone calls at once. This would catapult them into the big leagues. They would no longer be selling to hotels and small offices; they would be selling directly to the telephone switching centers for entire cities.
Ren had rented the third floor of an industrial building on Shenzhen’s outskirts for his fledgling R&D team. There was no air-conditioning, only electric fans, and they took cold showers to try to keep cool. They rigged up nets to try to escape the ferocious mosquitoes. A dozen cots lined the wall. The engineers worked day and night, flopping down on mattresses to sleep for a few hours when they reached exhaustion, which led to the saying that Huawei had a “mattress culture.”[9] One engineer worked so hard that his cornea detached, requiring emergency surgery.
It wasn’t as simple as going to the state’s web site and forming a corporation or LLC:
By 1991, Huawei had ten million yuan in fixed assets and was churning out eighty million yuan worth of switches a year. It had 105 employees, the majority of whom were shareholders. That year, Huawei’s shareholders did something curious: after proudly launching themselves in 1987 as one of Shenzhen’s first wave of “minjian” private tech companies, they voted unanimously to stop being one. From 1992 to 1997, Huawei would be a jitisuoyouzhi, or a “collectively owned enterprise,” something that was neither “private” nor “state-owned” in the modern senses of the words. Indeed, such companies were most similar in spirit to the Mao-era communes: Beijing defined them as “socialist economic organizations whose property is collectively owned by the working people, who practice joint labor, and whose distribution method is based on distribution according to labor.” While collectively owned businesses had been used in the countryside to mixed success, China’s national government had, in 1991, just formalized guidelines for urban collective companies. Putting on the “red hat” of a collective was popular among startups then as a way to obtain political protection. The Stone Group—hailed as “China’s IBM” in the 1980s—had been a trailblazer in this regard, successfully switching to a “collectively owned enterprise” in 1986. The 1991 national guidelines stipulated that collectively owned enterprises could enjoy preferential treatment in national policies and apply for loans from specialized banks. The guidelines also ordered government authorities nationwide to incorporate the companies into their economic plans in order to ensure the success of the urban collective economy. It remains unclear why Ren and his team decided to switch to a jitisuoyouzhi, though it’s likely that the broader financing opportunities were attractive.
Like Jeff Bezos, who married a secretary at D.E. Shaw while he was a VP (Wokipedia says that MacKenzie Scott had “an administrative role” at D.E. Shaw, implying that she might have been a top manager; the New York Times says that she held the job of “administrative assistant” (i.e., secretary)), Ren might have married his secretary:
While the precise timeline is unclear, Ren Zhengfei had remarried at some point and was building a new family in Shenzhen. This second marriage may have taken place around 1994, according to a speech Ren gave in January 2009, in which he praised his second wife, Yao Ling, for “fifteen years of silent devotion to the family.” Yao Ling was a petite and graceful young woman, much younger than Ren, with almond-shaped eyes and a winsome smile. Some news reports referred to her as Ren’s former secretary, though this has not been confirmed by the company. Ren had called Meng Jun “very tough”; he called Yao Ling “gentle and capable.”
The company prospers partly because the Chinese government imposed a “Buy Chinese” mandate similar to the U.S.’s “Buy American” mandates:
Since Ren’s meeting with Jiang in 1994, much more government support had been pledged. At the end of 1994, Zhang told Ren that in the next five-year economic plan, half of telecom operators’ switch purchases would be reserved for purely domestic companies like Huawei. “The way I look at it,” Zhang said, “it’s not that important what type of ownership structure a company has. The important thing is if it’s Chinese. So we at the Electronics Ministry want to support a business like yours.” China would have 84 million telephone lines’ worth of switches in operation by 1995, and officials planned to more than double that to 174 million lines’ worth by 2000.
Maybe some of you will join me in reading False Dawn: The Mirage of Recovery, an economist’s book about the Great Depression, which is when Americans came to accept the idea that every problem should be met by a larger federal government. FDR is almost a god for today’s Democrats (in a debate Ayatollah Mamdani identified FDR as the best modern-day U.S. President and then Florida Realtor of the Year 2020/2021 Andrew Cuomo said FDR would be his pick as well if FDR could be considered “modern”). If nothing else, False Dawn would make an awesome last-minute Christmas gift for anyone with insomnia (384-page work by an economist).
The Wall Street Journal selected this book as one of 2025’s ten best. Some excerpts from their review:
In 1932 Franklin Delano Roosevelt won the presidency with the promise to restore prosperity. But he and his advisers had no clear explanation for the collapse and his subsequent New Deal would amount to a series of experiments. FDR admitted to the nation that some of his proposals took the nation down “a new and untrod path.” If they failed to “produce the hoped-for results, I shall be the first to acknowledge it.”
George Selgin’s “False Dawn” asks if the New Deal’s varied experiments produced the promised recovery. In dispassionate, careful and finally devastating detail, “False Dawn” shows that, with a few exceptions, FDR’s experiments did not work. And he did not acknowledge it.
Based simply on raw numbers, the case for the New Deal is not strong. Although the economy did recover from its nadir when FDR took office in 1933, by 1939 the unemployment rate was still 17%. After six years of supposed recovery, the economy was in worse shape than in any other recession of that century or the following one.
Some might suppose that FDR used deficits rather than the Fed to juice the economy. But deficits as a percent of the economy were hardly different during Roosevelt’s time in office than they had been at the end of Herbert Hoover’s. While the New Deal spent more, it also imposed new taxes on food and payrolls. The result was a bigger federal government, but not one that relied on deficits as stimulus.
If not by increasing the amount of money or deficit spending, how did Roosevelt and his advisors hope to create recovery? The earliest solution they hit on—odd considering the rampant shortages—was to restrict production and thus raise prices. The National Industrial Recovery Act that passed in mid-1933 turned much of the American economy over to giant cartels. Industries colluded to raise prices and unions colluded to raise wages. The result was fewer goods on the market and an immediate economic collapse that would still be remembered today if it hadn’t been surrounded by so many others.
This could be an interesting update to The Forgotten Man, by Amity Shlaes, a Wall Street Journal reporter. I wrote a lot about that book shortly after its 2007 publication (what awesome timing by Schlaes and her publisher, given that the U.S. economy collapsed just a year later):
U.S. economy may not be tough enough to survive incompetent government (July 2008; given how rich the receptionists at NVIDIA have become, it seems as though either our economy was very tough indeed or our government has been competent, but Gemini says “When adjusted for inflation, using a constant dollar base (e.g., 1982-84 dollars), the median wage shows a much smaller increase. The real median weekly earnings were about $368 in Q4 2007 and grew to only $376 by Q3 2025. This highlights that much of the nominal wage growth has been offset by inflation.” (i.e., the economy is much bigger, but inflation and the larger population are responsible for most of the growth))
A related book for American minorities, i.e., the minority of Americans who pay federal income tax… Fat Leonard: How One Man Bribed, Bilked, and Seduced the U.S. Navy (Craig Whitlock 2024). The book is a great argument for replacing the entire U.S. Navy with sea drones, which won’t be vulnerable to attack (nobody will cry if a drone is lost), bribery, etc. The case of Fat Leonard, and the book, expose a fundamental incompatibility between modern Americans and life aboard ships. Prior to no-fault no-shame divorce, the man on the ship and the woman back home were both coerced to be at least reasonably faithful to each other. Even in the rare cases where he didn’t fear God, the man would be shamed if he had too many girlfriends and prostitutes in foreign ports. The woman wouldn’t harvest substantial alimony and child support if she had sex with 10 different boyfriends while the husband was at sea defending our nation. The book describes what happens when all of this social infrastructure is torn down, but ship schedules that keep spouses separated for months at a time are preserved. The females left at home eventually realize that the local family court will give them whatever they want. The males at sea are thus reduced to poverty and can’t afford girlfriends, prostitutes, or new wives on whatever is left to them after paying alimony and child support. Far Leonard figured out that a man who has lost his kids, home, and wife back in the U.S. and who now has only one third of his paycheck to spend is a man who is easy to bribe.
Who was this pioneer of social psychology? Leonard Glenn Francis ran a “husbanding” business to supply ships, ideally expensive U.S. Navy warships whose officers weren’t likely to quibble about prices, with whatever they needed when in various Asian port. Much of his financial success was attributable to jihad:
The USS Cole arrived mid-morning on October 12 in Aden, an ancient Arabian port, and anchored at the mouth of the harbor. The guided-missile destroyer had transited the Suez Canal and the Red Sea and needed to stop for several hours so it could take on 220,000 gallons of fuel before continuing north into the Persian Gulf. As the crew started to eat lunch, a small red-and-white motorboat approached. The two men aboard smiled and waved as they drew close to the hulking warship. Unsuspecting sailors on the Cole waved back, thinking the skiff had come to collect trash. In fact, the two men were suicide bombers recruited by al-Qaeda and the motorboat was packed with explosives. The terrorists detonated their cargo and blew a gaping hole in the side of the Cole that almost sank the $1 billion vessel. Seventeen U.S. sailors were killed and forty-two were wounded, making it the deadliest assault on a U.S. Navy vessel in thirteen years. The attack presaged the far bigger one that al-Qaeda would inflict eleven months later with hijacked airliners. Just as the United States was unprepared for 9/11, the Navy had not foreseen that a common motorboat could torpedo one of its powerful warships. The Cole disaster instantly upended the Navy’s risk calculations for foreign port calls. Unsure of the extent of the maritime threat posed by al-Qaeda, the Navy curtailed ship visits to Yemen and other Muslim countries and upgraded force protection requirements elsewhere.
Francis devised a solution: a floating barrier that encircled a ship to prevent waterborne intruders from getting too close. The primitive contraption was merely a makeshift fence of heavy barges and pontoons linked by steel cables. But in a deft stroke of marketing, he branded it as the “Ring of Steel.” The Ring of Steel sounded impregnable and looked plausible when he showed it to Navy force protection officers. “It was impressive,” said Jim Maus, the supply officer from the USS Independence. “No little boat is going through that. Bounce off it, maybe.” The Ring of Steel was also portable. Glenn Marine could move the components from harbor to harbor and customize the perimeter to suit any ship. Shaken by the Cole bombing, the Navy grabbed the Ring of Steel as a lifeline. It didn’t have better ideas to protect its ships in Southeast Asia. Nor did it trust commercial ports or revenue-starved foreign navies to provide adequate security. The only other option was to park ships at well-guarded U.S. bases in Japan and Hawaii. With the Ring of Steel, Francis not only saved his company, but found a way to expand it. After the Cole attack, Glenn Marine became one of a handful of contractors that could meet the Navy’s enhanced force protection requirements. Most competitors in the husbanding industry were mom-and-pop operators who couldn’t or wouldn’t invest in their own floating barriers. That meant more business for Francis. “The Navy went crazy and paranoid over the Cole,” recalled Commander David Kapaun, an operations officer based in Singapore at the time. “Leonard jumped on that like you wouldn’t believe.”
There was also a virtuous interaction between Navy tradition and jihad:
He knew if he wined and dined the Americans, they were unlikely to question his exorbitant fees, including for the Ring of Steel, which cost between $50,000 to $100,000 per day. “Everybody had to use the Ring of Steel,” he recalled. “So literally, the military’s force protection became the golden goose for me.” For ship captains, no price was too high to protect their crews, not to mention their careers. The Navy held them accountable for everything that happened on their watch, regardless of whether they were personally responsible. If a low-ranking seaman screwed up a task that led to a serious accident, the Navy disciplined the commanding officer on the grounds that he or she had failed to ensure the sailor was properly trained and supervised. The Navy upheld that unforgiving standard after the attack on the Cole. A high-level investigation concluded the Cole was “a well-trained, well-led and highly capable ship” and that the skipper, Commander Kirk Lippold, was not at fault. Intelligence reporting had also failed to detect any threats in advance of the visit to Aden. But the Navy nonetheless blocked Lippold from promotion and forced him to retire—Pentagon officials and members of Congress decided someone needed to be held accountable for the disaster. Many commanding officers thought the Navy and Congress treated Lippold unfairly, but the message resonated: Take every precaution. As a result, few ship captains were willing to risk a port visit without the Ring of Steel, no matter the expense—particularly after 9/11 demonstrated that al-Qaeda’s attack on the Cole was not an isolated event. Terrorist threats spread to Southeast Asia. In October 2002, an al-Qaeda affiliate bombed Bali’s tourist districts, killing 202 people. Seven Americans died and the U.S. consulate was damaged. The Navy reduced its visits to Indonesia, but demand for the Ring of Steel soared in other ports. Glenn Defense’s bottom line soared with it.
An officer would be demoted or fired if something bad happened to the ship, but there were no consequences for wasting taxpayer funds.
The book has some inspiration for upgrading your next party:
With his shirt untucked and his stomach hanging out, an inebriated Leonard Francis lay atop a banquet table at one of the most exclusive restaurants in Singapore. A prostitute hand-fed him leftover morsels from the $30,000 feast he was hosting. Around the table, his American guests—about two dozen U.S. Navy and Marine Corps personnel—puffed Cohiba cigars from Cuba and swilled Dom Pérignon while a gaggle of young women massaged their necks. One Navy officer present said the scene resembled a “Roman orgy.” For the five-hour party with his American customers, Francis had rented Jaan, a Michelin-starred restaurant on the seventieth floor of a luxury hotel. Through plate-glass windows, the private dining room boasted spectacular views of the Singapore skyline and, in the distance, the twinkling lights of ships on the South China Sea. But the sights inside the restaurant that evening made an even more indelible impression. One prostitute flashed her breasts at Rear Admiral Robert Conway Jr., the commanding officer of the USS Peleliu expeditionary strike group. Colonel Michael Regner, the normally rigid commander of the strike group’s 2,200 Marines, mouthed the words to “Y.M.C.A” while a band played the disco hit. One Navy captain was spotted French-kissing a prostitute. As the spectacle unfolded, a few officers watched slack-jawed, unsure how to respond to their superiors’ conduct. The rest had the time of their lives.
U.S. Navy officers weren’t supposed to accept bribes, whether cash or fancy dinners/fancy women, but the service came up with a workaround whereby captains and admirals would pay $50 to Fat Leonard’s company as their share of a meal that cost far more (remember that all of the numbers in the book are in pre-Biden dollars):
The “Valentine’s Cheer” celebration unfolded the next night in a balloon-decorated banquet room at Petrus, the Michelin-starred restaurant on the top floor of the Shangri-La Hotel. About twenty people attended, including a half-dozen Navy spouses who received floral bouquets and fancy chocolates from Glenn Defense. The avant-garde menu showcased elements of molecular gastronomy, including champagne espuma and coral powder made from dehydrated lobster roe. The Americans and their genial host also ate Oscietra caviar, gobbled slices of bread topped with foie gras and Wagyu beef, and savored Périgord black truffle, a rare French fungus that is to be served within three days of harvesting. A different wine accompanied each of the eight courses. “It was one of the most extravagant things I’ve ever seen,” recalled Lieutenant Commander Edmond Aruffo, an officer on the Blue Ridge. “I didn’t know people lived like that.”
Some officers and civilian Navy employees took cash instead of or in addition to fine living:
The senior civilian supervisor at the Naval Regional Contracting Center in Singapore was Paul Simpkins, a fifty-one-year-old South Carolinian who had specialized in the fine print of defense contracts since he was a teenager. He served more than two decades as a uniformed contracting officer in the Air Force and attained the rank of master sergeant before retiring from active duty in 1994. He then filled a variety of civilian contracting jobs for the Marines and Navy before arriving in Singapore in 2005 for a two-year assignment. In his new job, he held the power to award millions of dollars in federal contracts. The child of a single mother, Simpkins grew up poor in the South. The military provided him with a steady career, if not riches, and opportunities to live all over the world. A slim, fastidious man, he was an introvert who rarely socialized with coworkers or discussed his personal life. Few knew that he had been married five times or that his current wife had cancer and was living in Japan. Even fewer knew he was cheating on her with a Chinese girlfriend who would eventually become spouse number six.
After several conversations, Simpkins cut to the chase: What was in it for him? Francis was pleased. This was a man he could do business with. Ordinarily, he devoted months or years to grooming Navy contacts, but occasionally he got lucky and found someone who was unabashedly greedy. During a subsequent visit to the hotel bar, Francis said he handed over an envelope containing a stack of $100 bills—$50,000 worth. Simpkins smiled, allegedly taking the bribe and sliding it into his jacket pocket.
… Reagan—he bribed Simpkins with an additional $350,000 by wiring the money to a Japanese bank account in the name of his cancer-stricken wife. As an added sweetener, he said, he provided Simpkins with prostitutes on more than ten occasions.
Here’s the government worker and Fat Leonard:
The money paid to Simpkins and others was a great investment:
David Schaus, the lieutenant in the Ship Support Office who had feuded with Francis over the Reagan’s wastewater bill, devised a
Donna Strickland: I think the biggest mistake we make in teaching, all the way up through undergrad, is teaching what science we already know. Science is not about knowing; it’s about figuring out how to ask the question why. It’s not about learning how everything else has already been done. That’s not to say we don’t need that, but we should instruct them to ask the right questions as opposed to knowing the answers. … As students, you’re always taught that you’re not going to succeed unless you know all the answers. The higher you go in science, the fewer answers there are. The goal is not to have the answers but, first, to be able to ask the right questions.
Especially now that Grok and ChatGPT know all of the answers, why not reengineer education around trying to answer new questions? Young people would still have to do the drudgery of learning the answers to old questions, of course, but they’d be doing that in the context of trying to make some progress on an unanswered question. The same thinking would enliven our nation’s science museums, most of which explicitly say “the Science is settled”.
I’m not sure that the book lives up to the “ignite your career” promise from the title, unless the strategy to “ignite your career in Science” is to quit and do medicine instead. Donna Strickland echoes what I wrote in “Women in Science” (2006; “This article explores this fourth possible explanation for the dearth of women in science: They found better jobs.”):
Keating: What are your feelings on how the status of women has changed over your career, and where do you see it going?
Strickland: Well, it’s changed, but I don’t think that’s the point. The point is that physics itself is not appreciated highly by society. All these other issues, why they say women don’t want to do physics, would have been true in medicine as well—and yet now more women go into medicine than men. Parents still tell children that are good in science to become doctors. If you get paid well, society says, “We value this.” Physics is not one of those valued things; it doesn’t matter if you’re a man or a woman…
Many of the interviewees point out that there is a huge overproduction of PhDs relative to the number of sought-after academic jobs and that the chance of career success is low. A book like this, in which Nobel laureates are interviewed, is almost the definition of sample bias. Undergrads at a Queers for Palestine League university fall prey to this as well. The freshman at MIT or Yale subconsciously absorbs that being a tenured biology professor at MIT or Yale is a typical outcome for someone with a biology PhD because tenured biology professors are the only PhD biologists that the freshman has encountered.
The book contains some information that is misleading, e.g.,
For example, even with a doubling of salary, you’re not likely to register a doubling in well-being. In fact, the effect of wealth has been shown to be nonlinear. Beyond a certain income threshold, happiness saturates, leading to a diminishment in returns beyond, according to Nobel Prize–winner Daniel Kahneman.
A 10% raise delivers a similar boost in satisfaction across income levels, research finds
A big raise provides significant boosts in happiness even at household incomes of $500,000, according to a new research report.
A wealth of research has long shown that more money makes a big difference to people with low pay, moving them from insecurity to stability. Above that level, the effect is often assumed to be much smaller.
But according to a paper by Matt Killingsworth, a senior fellow at the University of Pennsylvania’s Wharton School, the bonuses and leaps in income high earners reap are so large that they keep adding to well-being in the same way that smaller pay bumps do at lower tiers of earnings.
So it’s true that a $1 raise doesn’t make a Wall Street hero significantly happier, but there isn’t a diminishing return to a 10 percent raise.
The book reminds us that academics all around the world love to see elites locking down the peasants. Tim Palmer, a senior citizen physicist in the UK, celebrates the fact that eventually the rulers of the UK locked down their young healthy subjects in an attempt to slow the spread of a disease that kills 80-year-olds:
Palmer: It’s a tough problem. As a scientist, we can’t make decisions. All I can do is lay out the signs as clearly as possible and hope the politicians get it. At least in the UK, politicians did get it eventually with COVID. They were slow on the uptake—and the science, of course, was pretty uncertain in the initial phase, largely because a lot of people were asymptomatic—but they did get it eventually.
Of course, the UK had a higher COVID-tagged death rate than do-almost-nothing Sweden and a higher rate of excess deaths compared to do-almost-nothing Sweden. The lockdowns in the UK were spectacular failures, in other words, by the advertised standards of the Covidcrats (minimize Covid-tagged deaths even if it drives up long-term deaths from other causes, such as unemployment, sedentary lockdown lifestyle, alcohol consumption, deferred health care, and lack of education) and yet the Nobel-winning genius considers the muscular Science-informed public policy to have been a success.
Let’s circle back to the issue of victimization by gender ID. Donna Strickland again:
The problem in the seventies, in my time, is that women were told we could do anything, but the men weren’t told you also have to do your share. When Maria Goeppert Mayer won her Nobel Prize [in 1963], the newspaper wrote, “San Diego housewife wins Nobel Prize.” Everybody said it’s OK that she’s doing science because she’s also doing all her women’s jobs too. Well, this is not possible. It’s not possible for us to be twice as much. We will have around-the-world gender equity when we also let men look after children and the elderly. It bothered me during COVID-19 that it was like, “Well, all the women have to lose their jobs because they’re the ones who look after kids and the elderly.” I don’t think women are more caring than men. That’s just as offensive as saying women aren’t as smart as men. If everybody did their share, then everybody could have an equal shot at it.
She doesn’t want “everybody to do their share” on construction sites, on Florida roofs in July, or on oil rigs, but rather wants men to relieve women of some onerous household chores, such as putting shirts into electric washing machines and dishes into automatic dishwashers. She is echoing Bill Burr on the subject of a job that can be done in one’s pajamas being the hardest job in the world:
Let’s close with a Nobel nerd’s prediction of where we end up relative to our AI overlords:
Geradus ’t Hooft: I expect there will be an intelligence so smart that Einstein, Feynman, and ’t Hooft would all look like primitive gorillas. The point is that all abilities of biological life forms can be copied by human engineers: we make houses taller than trees, dig holes deeper than moles can, we can fly faster and higher than birds, with much heavier machines, and so on. So why can we not produce brains that work better than the human brain? Well, biology took millions of years to create us; our machines are only a few centuries old, and we’ll get there and beyond. I do not quite follow the ideas AI engineers are using. I think it could be done better, but comparing the previously mentioned examples, people will make many different AI machines, each for their own particular purposes.
The book’s big theme is that Apple taught the Chinese everything that they now know about making high-end electronics. The author says that Tesla did something similar:
As The Economist later put it: “For all its manufacturing might, China never mastered internal-combustion engines, which have hundreds of moving parts and are tricky to assemble.” Electric vehicles changed the game. But more specifically, Tesla did. China’s ambition in electric vehicles goes back to around 2001, and with hefty government incentives, EVs became embedded in the public transportation system about a decade later. The sector had been so awash in incentives and subsidies that Shenzhen alone had 17,000 electric buses at a time when all of Europe and North America had practically none. Consumers who purchased EVs were often able to get a free license plate, which are otherwise tightly controlled and sold at auction. Despite all this support, EVs and plug-in hybrids together accounted for just 4.8 percent of the new car market in 2019. Tesla broke ground on the Shanghai Gigafactory in December 2018; by late 2019 China-made Model 3 vehicles were coming off the production line. Immediately they were a massive hit, and the Tesla Model 3 was China’s bestselling EV in 2020. Chinese consumers “didn’t want to buy anything being manufactured by Chinese brands; they all wanted Tesla,” says Parikh. “As soon as Tesla came, there was a paradigm shift from consumers, and that’s something the Chinese government saw. This was an opportunity to have the entire EV industry in China compete with, and learn from, Tesla.”
Tesla’s investment in China has worked out brilliantly for China’s EV sector, with quality improving across the board. The share of EVs and plug-ins soared from under 5 percent in 2019 to 38 percent in 2023. And the investment has certainly worked out well for Tesla: Shanghai now accounts for half of the company’s global production. But there are longer-term uncertainties and unanswered questions. “In this game, one American company—Tesla in cars and Apple in phones—gets to win,” says another former Tesla executive. “They don’t care if all their US competitors lose. It’s actually better for them. But on the other side, all the Chinese companies win. They all get to step up and create a massive market where none previously existed.”
What’s the potential downside?
Over the coming year, the onslaught from Huawei would be intense. China’s national champion increased its share of the local market from 20 percent in the first half of 2019 to 27 percent in the second half, and then to 29 percent in early 2020. It began outselling the iPhone three to one in China, particularly threatening because it was taking a bite out of Apple’s luxury dominance. In China’s “premium market”—phones priced between $600 and $800—Huawei share soared from 10 percent in early 2018 to 48 percent a year later, causing Apple’s share to fall from 82 percent to 37 percent. Apple’s hold in the “super premium” market—phones priced above $800—was still impressive, at 74 percent, but it had fallen from 90 percent a year earlier. If Huawei’s success had been confined to China, the damage would’ve been limited. But in 2019 the Chinese brand overtook Apple sales globally. It shipped 238.5 million phones—more phones than Apple had shipped even in its peak year of 2015. The student, as they say, had become the master.
Chinese brands had accounted for just 23 percent of global smartphone shipments in 2013, the year of Apple’s political awakening. But their share surpassed 50 percent in 2020. Brands led by Huawei, Xiaomi, and Vivo gave Chinese companies, in 2022, a cumulative market share in both China and Russia of 79 percent; in Indonesia, 73 percent; in India, 66 percent, per Counterpoint Research. In fact, Samsung and Apple were the only two sizable non-Chinese companies still making smartphones. Taiwan’s HTC, Korea’s LG, Canada’s BlackBerry, and Finland’s Nokia were all basically gone; Motorola was now owned by China’s Lenovo; and global sales of Google Pixel were so low as to be subsumed into the “other” category.
Who saved Apple and its 2SLGBTQQIA+ CEO? A purported threat to the 2SLGBTQQIA+ community:
How Apple got out of this mess was a surprising twist, the stuff of novels. Donald Trump had ascended to the US presidency threatening Apple; instead, he saved it. In May 2019 the Trump administration alleged Huawei was a security threat, citing alleged ties with the Chinese government and the potential for its communications equipment to be used for espionage or cyberattacks. It soon imposed unprecedented sanctions, depriving Huawei of Google services, including the Play Store, Gmail, YouTube, and other Android tools—a crippling blow for Huawei phones distributed outside of China. Washington also disallowed American companies from shipping fifth-generation cellular chips to the group.
Apple was suddenly the only game in town for premium 5G phones. Huawei’s share of the Chinese market plummeted from a peak of 29 percent to just 7 percent; Apple filled the void, its China share near doubling from 9 percent to 17 percent.
Tim Cook’s mind in early December 2022 when he was confronted by a reporter on Capitol Hill, en route to meeting privately with senior lawmakers. “Do you support the Chinese people’s right to protest? Do you have any reaction to the factory workers that were beaten and detained for protesting COVID lockdowns?” asked Hillary Vaughn of Fox News as Cook walked through the building. “Do you think it’s problematic to do business with the Communist Chinese Party when they suppress human rights?” Cook ignored Vaughn, eyes cast downward as he changed direction to avoid her. One supply chain executive characterized the confrontation as “the worst forty-five seconds of Cook’s career.” But his biggest, most astute critic might have been… himself. In 2017, explaining why corporate executives should be more up-front about their values and “lead accordingly,” Cook had told journalist Megan Murphy that “silence is the ultimate consent.” He went on: “If you see something going on that’s not right, the most powerful form of consent is to say nothing. And I think that’s not acceptable to your company, to the team that works so hard for your company, for your customers, or for your country. Or for each country that you happen to be operating in.” The forty-five-second clip of Cook ignoring questions about China played repeatedly on US cable news. Cook’s silence—his ultimate consent—was highly indicative of just how beholden America’s most valuable company had become to an authoritarian state.
When in 2019 the company rolled out Apple TV+, its Netflix-style streaming service, software and services head Eddy Cue issued just two directives to Apple’s content partners: no hard-core nudity and “avoid portraying China in a poor light.” … Apple TV+ isn’t even available in China, but Cupertino understands the country well enough to know when and how to self-censor.
With Tim Cook and Apple doing whatever China wants, what risks remain for the company? According to the author, Huawei’s innovations in hardware and in building its own operating system (HarmonyOS) may enable Huawei to wipe out Apple in what is currently a huge and lucrative Chinese market.
This will be my last post about Apple in China: The Capture of the World’s Greatest Company. I’ve left out a huge section regarding the rise of Apple’s business in China, e.g., the Apple Stores that it opened. It’s worth reading, but China is so different from the rest of the world that I can’t think of any practical value for knowing this history.
… just a month after the launch of iTunes [January 2001], hardware chief Jon Rubinstein—aka Ruby—and procurement head Jeff Williams were in Japan and stopped by Toshiba. The Japanese supplier showed them a new hard drive, just 1.8 inches in diameter, with a massive 5 gigabytes of capacity. Toshiba didn’t really know what to do with it, but to Ruby, the implications were “obvious” immediately: this thing could hold a thousand MP3s! It was the enabling technology they needed. “Jeff,” Ruby quietly said, “we need to get all of these.” Williams negotiated an exclusive supply agreement as Ruby made sure the $10 million check they drew up wouldn’t bounce.
Rubinstein and Fadell would later dispute who the key figure was behind the hit MP3 player, but the truth is that its brilliance had multiple authors, reflecting how each domain in the pyramid structure (ID, PD, MD, and Ops) worked on their specialty simultaneously. Ruby had found Toshiba’s disk drive and realized its potential. Phil Schiller, of marketing, introduced the idea of the scroll wheel—probably the feature most loved by consumers, as it reacted to the velocity of each turn and enabled them to race through hundreds of songs in a matter of seconds. Fadell was the overall architect. He presented to Jobs a prototype made from foam core and stuffed with old fishing weights to give it some heft. Jony Ive’s team made it unapologetically white, with a polished, chrome-like stainless steel back, a remarkably sharp turn from the childlike colors of the iMac. It was an unusually high-end material for a mass-market product, giving it a feel unlike any other handheld device. It was also durable and could dissipate heat more effectively than plastic.
The MP3 player would remain nameless for months, until four people in branding tossed ideas back and forth with Jobs. Vinnie Chieco, a creative director, recalls how the team would write down every permutation and then sort them into three piles: the worst, the ones that suck, and the not horrible. He’d come up with one: Troubadour, named after French poets who went from town to town playing music. This thing, too, was mobile, could travel and play music. The metaphor worked. The name didn’t. Jobs had his own preferred moniker, which Chieco remembers but won’t share. Like MacMan—what Steve wanted to call the iMac—his idea wasn’t very good, and Chieco is hesitant to share something now that Jobs can’t defend. The other three people in the room told Jobs they loved his name for the device, perhaps trying to avoid his infamous wrath. But when Jobs asked Chieco for his opinion, the creative director said, “Well, I understand your name is novel, but…” Feeling as if he were putting his head in a guillotine, Chieco told Jobs the reasons he didn’t like it. Meanwhile, he kept thinking in metaphors. He was struck by the all-white design, which looked space-like. Riffing on Jobs’s idea that a Mac computer was the “hub for your digital life,” he considered how in the future, the ultimate hub would be the mother ship. The only way to escape would be in a pod that flies away for temporary adventures, returning to replenish and recharge. He got the idea from 2001: A Space Odyssey, and hey—now it was 2001! It felt serendipitous, like when the Macintosh emerged in the Orwellian year, 1984. He proposed Pod. Jobs didn’t hate it, and over a few meetings it grew on him until it became the obvious name. It just needed one tweak, one letter, and then it was perfect: iPod.
Why did Apple make a phone? It was obvious to everyone that consumers wouldn’t want an iPod once reasonably capable smartphones were ubiquitous. Profits from Apple computers were insignificant compared to profits from the mass market iPod.
Around mid-2005, another project began to gain traction internally. The interfaces team had been toying with multi-touch technology for roughly two years, aided by a start-up Apple had purchased called FingerWorks. Senior engineers from Project Purple knew about it, but the original concept was about rethinking the Mac’s interface. When Steve Jobs first showed Fadell the technology, asking if it might work for a phone, it was far from obvious that the enormous contraption Jobs pointed to was the future of something that would sit on your desk, let alone be shoved in your pocket. “It filled the room,” Fadell recalled. “There was a projector mounted on the ceiling, and it would project the Mac screen onto this surface that was maybe three or four feet square. Then you could touch the Mac screen and move things around and draw on it.”
Meanwhile, the fear that the iPod business would be cannibalized by the phone giants continued to fuel anxiety and innovation. “It was an existential crisis,” a senior engineer says. “[We were saying], ‘You realize what’s gonna happen here is this business we built on iPods is going to go away. We need to build a phone.’ ” Jobs eventually canceled the other phone ideas and declared multi-touch the future. He was adamant there’d be no keyboard, so the phone would be as full screen as possible. Apple’s engineers suddenly had to find suppliers that could build multi-touch displays at scale—something that didn’t exist at the time. There was no way Apple could send the specs to some factory and wait for the parts to be built; instead, it sent teams of engineers to Japan, Korea, Taiwan, and China to find hungry vendors it could work with to co-create the processes. “There were a few truly groundbreaking mass production processes we were involved with, where we really had to go around to find the best people in the entire world—the peak of what humans have developed for some of these technologies,” says a product manager. By early 2006, they had a full-screen prototype enclosed in brushed aluminum. Jobs and Ive “were exceedingly proud of it,” journalist Fred Vogelstein would later recount. “But because neither of them was an expert in the physics of radio waves, they didn’t realize they’d created a beautiful brick. Radio waves don’t travel through metal well.”
(I don’t understand how “cannibalized by the phone giants” made it through the purported editing process of this book. In business, cannibalized refers to a reduction of sales of Product A after the company that makes Product A introduces Product B. In the context of Apple, the iPhone might cannibalize sales from the iPod or a notebook-format Macintosh might cut into sales of desktop Macs rather than take sales away from IBM PCs.)
The iPhone required a lot of new manufacturing techniques, mostly developed by vendors in China and Taiwan, often with significant help from Apple engineers who’d fly over from California.
Another important supplier was TPK, which placed a special coating on the Corning glass, enabling the user’s fingers to transmit electrical signals. The Taiwanese start-up had been founded just a few years earlier by Michael Chiang, an entrepreneur who in the PC era had reportedly made $30 million sourcing monitors and then lost it all on one strategic mistake. In 1997 he began working with resistive touch panels used by point-of-sale registers. When Palm was shipping PDAs that worked with a stylus, Chiang worked on improving the technology to enable finger-based touchscreens, even showing the technology to Nokia. But nobody was interested until 2004, when a glass supplier introduced TPK to Apple. An iPhone engineer calls Chiang “a classic Taiwanese cowboy [who] committed to moving heaven and earth” by turning fields into factories that could build touchscreens. The factory was in Xiamen, a coastal city directly across from Taiwan. “The first iPhones 100 percent would not have shipped without that vendor,” this person says. He recalls Chiang responding to Apple by saying, “ ‘We can totally do that!’—even though [what we were asking was something] nobody in the world had ever done before.” Among the techniques Apple codeveloped with suppliers was a way to pattern, or etch, two sides of a piece of glass to do the touch sensor, at a time when film lithography processes were being done on only one side. Another pioneering technique is called rigid-to-rigid lamination, a process for bonding two materials using heat and pressure, which Apple applied to tape a stack of LCD displays to touch sensors and cover elements to create one material. The process was performed in a clean-room environment with custom robotics.
Instead of selecting components off the shelf, Apple was designing custom parts, crafting the manufacturing behind them, and orchestrating their assembly into enormously complex systems at such scale and flexibility that it could respond to fluctuating customer demand with precision. Just half a decade earlier, these sorts of feats were not possible in China. The main thing that had changed, remarkably, was Apple’s presence itself. So many of its engineers were going into the factories to train workers that the suppliers were developing new forms of practical know-how. “All the tech competence China has now is not the product of Chinese tech leadership drawing in Apple,” O’Marah says. “It’s the product of Apple going in there and building the tech competence.”
We might owe most of our current toys to Apple’s 2010 agreement with TSMC, motivated by a desire to reduce its dependence on Samsung:
In 2010, Apple operations chief Jeff Williams reached out to Morris Chang through his wife, Sophie Chang, a relative of Terry Gou. Dinner between them launched months of “intense” negotiations, according to Chang, as Williams pressed TSMC on prices and convinced the Taiwanese group to make a major investment. “The risk was very substantial,” Williams recalled at a gathering for TSMC’s thirtieth anniversary in 2017. “If we were to bet heavily on TSMC, there would be no backup plan. You cannot double-plan the kind of volumes that we do. We want leading-edge technology, but we want it at established technology… volumes.” Williams’s narrative leaves out some of the most interesting facts about the early partnership. One is that Chang wouldn’t commit to Apple’s demands. In a 2025 interview with the podcast Acquired, Chang said that TSMC would’ve had to raise substantial amounts of money, either by selling bonds or issuing more stock. Williams had another idea: “You can eliminate your dividend.” Morris balked at the aggressive suggestion. “If we do what Jeff Williams says, our stock to going to drop like hell,” he recounted. Chang agreed to take only half of Apple’s order. Even this partial commitment forced TSMC to borrow $7 billion, so it could invest $9 billion and devote 6,000 full-time employees working round the clock to bring up a new chips fab in eleven months, according to Williams. “In the end, the execution was flawless,” he said. The partial commitment forced Apple to toggle between Samsung and TSMC, which some in Cupertino saw as a plus—it meant that Apple wasn’t beholden to just one supplier for what serves as the brain within the iPhone. But Srouji’s team found it nightmarish to manage both suppliers. So Apple turned to TSMC on an exclusive basis, establishing over-the-top contract terms to protect itself. A person familiar with the contract characterized it as saying: “We need to make sure that you’re gonna go out of business—if you’re gonna put us at risk of going out of business.” It was a “mutually assured destruction” type of situation, this person says, because if TSMC didn’t perform in any given year, there’d be no iPhone. So the Apple decision was made: “We are going to put all of our eggs in one basket, and then we’re gonna guard the basket.” TSMC’s bet would prove critical for making it the world leader in semiconductor fabrication, with Apple as its
The CHIPS and Science Act, which is designed to stimulate computer chip fabrication in America, will cost the US government $52 billion over four years—$3 billion shy of what Apple invested annually in China nearly a decade earlier. Let me underscore this point: Apple’s investments in China, every year for the past decade, are at least quadruple the amount the US commerce secretary considered a once-in-a-generation investment.
What’s the scale of Apple?
The number of Apple devices in active use surpassed 2.35 billion in 2025, led by 1.4 billion iPhone users who spend more than four hours a day immersed in their glowing screens. These users represent the richest quintile of people in the world, and Apple can advertise or promote features to them—wireless payment, television shows, music streaming, fitness offerings—for free. In fact, Google pays Apple close to $20 billion a year just to be the default search engine on the iPhone. The control Apple has over its ecosystem is extraordinary: When in 2021 Apple changed how third parties like Instagram and Facebook could “track users”—ostensibly a move to protect the privacy of iPhone owners—Meta estimated the new policy diminished its annual earnings by $10 billion. Meanwhile, revenue from Apple’s own privacy-first ad business was on a path to grow from $1 billion in 2020 to $30 billion by 2026. One advertising executive characterized the change as going “from playing in the minor leagues to winning the World Series in the span of half a year.” On average, Apple’s Services business earns margins north of 70 percent, double that of its hardware, and the business has been growing at nearly 20 percent a year for six years—all before potentially being supercharged by new artificial intelligence features. In short, the notion that Apple is at its peak is patent nonsense. But there is one Achilles’ heel: The fate of all the company’s hardware production relies on the good graces of America’s largest rival.
Don’t take the tech reporting here as gospel. The author has fallen in love with his subject:
The second force was the advanced nature of the Macintosh operating system (OS). It really was a decade ahead of its time when, in 1984, a boyish and handsome Steve Jobs, then just twenty-eight, unveiled the Mac with dramatic flair to a packed auditorium. When Jobs clicked the mouse—itself a novelty at the time—the computer took the air out of the room by speaking.
(The mouse, of course, was 16 years old in 1984. The graphical user interface, as embodied in the Xerox Alto, was 11 years old.)
The seeds of the App Store, in which Apple would take a cut of all sales, were sown circa 1980:
By the end of 1983, the Apple II “had the largest library of programs of any microcomputer on the market—just over two thousand—meaning that its users could interact with the fullest range of possibilities in the microcomputing world.” But Jobs resented third-party developers as freeloaders. In early 1980, he had a conversation with Mike Markkula, Apple’s chairman, where the two expressed their frustration at the rise of hardware and software groups building businesses around the Apple II. They asked each other: “Why should we allow people to make money off of us? Off of our innovations?” An attendee of the meeting would recount, years later, that Apple began to “fight” all third-party development.
The book is strong on recounting the rise of contract manufacturing in the 1980s and 1990s and on the history of Foxconn:
Foxconn had the humblest of origins. In 1974, two years before Apple was started out of a garage, twenty-three-year-old Terry Gou founded Hon Hai Plastics out of a shed. Gou, who’d just completed his duty in the Taiwanese army, founded the company with $7,500.
As the PC revolution took off in the early 1980s, Gou got in on the ground floor and created a name for himself making reliable sockets and connectors—small components that facilitate communication between different parts of a computer. The conn in Foxconn—Hon Hai’s international name—refers to connectors. “Fox” is just an animal he likes.
Employees were given a Little Red Book featuring the sayings of Terry Gou, some of which were also plastered on the otherwise bare walls. The aphorisms ranged from inspirational to threatening. “Work hard on the job today or work hard to find a job tomorrow,” said one.
In 1999, it was a company with $1.8 billion of revenue, far smaller than Solectron, SCI, or Flextronics, its US rivals. By 2010, Foxconn revenues were $98 billion, more than those of its five biggest competitors combined. And Foxconn’s extraordinary growth in those eleven years is the consequence of one client more than any other: Apple.
How much did China grow along with Foxconn?
By the time Mao died in 1976, China was poorer than sub-Saharan Africa. … In just twenty-five years, Shenzhen’s population grew a hundredfold.
Europe is poor compared to the U.S. Why not assemble stuff in Europe?
Once the Shenzhen line for iMacs was up and running, Foxconn established sites on two other continents. In Europe, Foxconn executive Jim Chang found a Soviet-era electronics site in Pardubice, a city of 100,000 people sixty miles east of Prague. The site had previously been run by a state-owned company called Tesla, whose specialty was radar systems and whose biggest client had been the government of Iran. The site had an eerie feel to it, like it had been hit by a neutron bomb. Forklifts stood motionless on the floor and cups of tea, their contents long gone cold, had been left on the tables. In May 2000, Foxconn was able to buy the plant for just 102 million CSK (2.9 million), a fire-sale price because it was bringing in jobs. Foxconn also won from the government a ten-year tax holiday.
The experience in the Czech Republic was an important proving ground for Foxconn and its hub model, but what it really demonstrated was that producing hardware in China was cheaper, more efficient, and less subject to media scrutiny. In China, assembly got done at incredible speed and with few complaints. Workers did twelve-hour shifts and lived nearby in dorms. At the Czech site, workers put in fewer hours and were represented by a trade union; they protested conditions and spoke to the press. Plans to build dormitories met local criticism and were abandoned. Over the course of a decade, Foxconn expanded its work in the Czech Republic, continuing to build for Apple, adding another location, and taking on production for Hewlett-Packard, Sony, and Cisco.
At one point, according to an ex-worker named Andrea, workers making Apple products didn’t receive an annual bonus as they were promised, so they threatened a “strike emergency” just before the ramp-up ahead of Christmas. “Afraid,” the Foxconn managers deposited the bonuses within a week. The incident triggered an audit by Apple, which interviewed workers about their experience. Apple, Andrea said, advocated for better conditions, but “instead Foxconn closed the division within half a year and 330 people were dismissed.” Around the same time, in August 2009, Foxconn shut its Fullerton site, too. How Foxconn laid the Czech workers off is worth highlighting. Mass dismissals—defined as laying off more than thirty people—need to be reported to the Labor Office, but it was important for Foxconn to avoid scrutiny. “What Foxconn did is they dismissed twenty-nine workers every month,” Andrea said. “Each month, regularly, they fired twenty-nine people.” The threat of a single strike ended all large-scale Apple assembly in Europe.
China ended up being the only answer for Apple and pretty much everyone else in the electronics world.
… by 2005, Jobs grasped that there was no going back. That year, a subordinate suggested that a certain project be done in the United States, and Jobs responded curtly. “I tried it. It didn’t work.” The results—in volume, efficiency, and price—were unmatched.
I’m been reading The Battle of Manila: Poisoned Victory in the Pacific War (Nicholas Evan Sarantakes, a professor at the U.S. Naval War College; published 2025 by Oxford University Press (i.e., a military work from a publisher in a country that can’t defend its own border)).
The loss of the Philippines in the first place was due to incompetence, similar to how Japanese success at Pearl Harbor was due to incompetence (failure to heed a radar warning of planes inbound from the NW). Having squeezed and provoked Japan, the U.S. expected attacks in Asia and yet the Japanese caught the Americans by surprise:
Recalled to active duty as the United States was on the verge of war, MacArthur wanted to defend the entire archipelago. “We are going to make it so very expensive for any nation to attack these islands that no one will try it,” he explained. On the first day of the war, the Japanese caught the air forces under his command on the ground and destroyed them. MacArthur then attempted to defend the entire island of Luzon. While his men did well tactically—fighting the Japanese to a standstill—their supplies were in the wrong positions, which sealed their fate as they retreated into the cul-de-sac that was the Bataan Peninsula.
The decision to fight in 1945 to take back the Philippines might also be said to have been an example of American military incompetence. Most of the senior officers wanted to ignore the Philippines and capture Formosa (present-day Taiwan) instead as a more useful base for bombing and invading Japan (USNI article). The Philippines would have been freed from Japanese rule in August 1945 when Japan unconditionally surrendered, though of course it was tough to know that in late 1944.
The book is about the fight for one city, Manila, and as such there are some parallels to the present-day fighting in Gaza. What the two battles have in common:
a mostly urban environment
the majority of people in the environment were/are not soldiers
the army trying to take the city (US in 1945; IDF today) was trying to minimize the number of non-soldiers killed
the army defending the city was indifferent to the number of non-soldiers killed and/or actually trying to increase the number of non-soldiers killed
The differences:
the non-soldiers of Manila were hostile to the defending army (Japan) and, in fact, was an organized guerilla force against the army whereas the non-soldiers of Gaza are fervent supporters of the defending army
the army attacking Manila (US) was trying to minimize damage to buildings and other infrastructure
the army attacking Manila (US) wasn’t trying to feed the army defending Manila (Japan) and, in many cases, defenders had to surrender or commit suicide because they’d run out of food and/or water
The book reminds us that war is most glorious when seen in the rearview mirror:
One of the great myths of World War II is that the American public immediately rallied to the cause after Pearl Harbor. The truth is that men had to be drafted, and they did not want to be in either the Army or the Philippines. Willard Higdon was honest about his motivations: “I was 27 yrs old, with a wife and a 5 yr. old dtr. I did not want to go.”
The Japanese actually weren’t that excited about owning the Philippines:
The main reason for their invasion in 1941 and 1942 was geopolitical. The Philippines had few natural resources that the Japanese economy required. What they wanted was to drive the Americans out of the western Pacific and, once that was done, they wanted to liquidate their commitment to the Philippines quickly. The Japanese had little interest in turning the archipelago into a Japanese colony.
The enemy doesn’t always cooperate with one’s plans…
Even as late as February 5 [the battle was February 3-March 3], MacArthur had no plan for an urban battle. “I do not believe anybody expected the Japs to make a house-to-house defense of Manila,” Eichelberger told his wife. The general belief—at MacArthur’s headquarters, at Krueger’s headquarters, and with the press—was that the Japanese would evacuate without a fight. Thirty years later, when he sat down to write his memoirs, Chase could not understand why anyone had made this assumption. “It was counter to everything the Nips had done in previous campaigns.”
The U.S. had almost no experience with the kind of fighting that was to ensue:
Other than some short operations in World War I and a few in the European theater, the last time Americans had fought in cities had been in 1864 and 1865 with the battles of Atlanta and Richmond. There are seven major characteristics of urban warfare. The first is that artificial terrain features constrain and channel movement. Buildings become significant geographical objectives. Roads direct advances in certain directions. Both can be barriers. Depending on the material used in their construction, they might be quite vulnerable to military action or quite impervious. Some weapons have better utility than others in the city, and these issues often influence tactics. Another feature is that ground operations are compressed and decentralized. Engagements are between small, tactical units—squads, platoons, companies—for small, geographic objects—a room, a building, or a city block. A third factor is that combat usually becomes three-dimensional. Soldiers fight ground operations as in any other form of ground combat, but they also advance and fight in sewers and blast holes through basement walls. They also have to fight an opponent that might control the floor of a building immediately above or below them, and they might move from rooftop to rooftop. City combat always consumes more time than other forms of fighting. This factor is relative, though. How slow is slow? The month-long fight for Manila was significant compared to other ground operations fought in the Pacific, but nothing compared to the eight-month-long struggle for Stalingrad or the twenty-eight-month-long siege of Leningrad. A fifth factor in urban warfare is the presence of civilians. There are always non-combatant deaths in urban operations and their presence requires some effort at stability operations afterward, but sometimes also during the period of active combat. Civilians can be assets or liabilities when it comes to intelligence gathering, as both the Americans and Japanese would learn. The ready influence of the media is another factor. Cities by their very nature are media centers and always have resident journalists. Since urban areas are also important population, political, economic, financial, cultural, religious, trade, and transportation centers, their fate attracts the interest of reporters. A final dynamic of urban warfare is the outsized ramification of its outcomes. Location matters, and cities are always more important than undeveloped countryside, and engagements for their control have more influence than engagements in isolated areas. Each of these would be in play in Manila.
As in the Gaza fighting, the army trying to take the city owns the airspace:
The US forces also had total air superiority, and piper cub observation planes loitered over the city looking for targets.
(Note failure to capitalize Piper Cub!)
A civilian population that does not support the defending army makes a city tough to defend:
The Japanese were well aware that the Filipinos on Luzon were welcoming the Americans enthusiastically. They resented this and they had orders—which they implemented willingly—to make the Manileños pay. The Battle of Manila was defined by the methodical targeting of the civilian population. The Japanese historian Hayashi Hirofumi has argued, given where most of the incidents took place, that the majority of these killings were done by the Imperial Japanese Army.1 Their orders, though, came from Rear Admiral Iwabuchi Sanji. He made the determination that there was no difference between Filipino guerrillas and civilians. “When the enemy invaded Manila, the citizens were welcoming the enemy well and disrupted all of our fighting action,” he reported. “The number of citizens is estimated to be about seven hundred thousand, but on the front line north of the Pasig River between 3 and 5 February, the general public carried out the following guerrilla activities: communicate with U.S. troops before our attacks, shoot our soldiers, and report our locations to U.S. troops. As a result, our surprise attack was infeasible, and many of our troops were unable to achieve their objectives.”2 The attitude that all Filipinos were the enemy was widespread among the Japanese defenders. Taguchi Hiroshi, a Navy aviation mechanic who became a prisoner of war, explained to U.S. Army investigators in late March: “The enlisted men in the lower ranks, believed that, since the Filipinos indicated that they were cooperative toward Americans in their attitude and had ill feeling toward the Japanese, because prices of food and other articles during the period when we occupied the Philippines went very high . . . , higher officials ordered the destruction of Manila and the Filipinos.”
Some locals were more creative than others…
“The real heroines at San Agustin were the prostitutes, they were the ones that helped,” Gisbert declared. The Japanese had concentrated them in the Intramuros. Gisbert guessed that their numbers were in the hundreds. They were willing to serve as nurses. They were also quite good at scrounging. They could acquire clean linen, or whisky, which Gisbert used as anesthesia. All of which suggests that they had a way of influencing Japanese supply officers.
Even as American soldiers were getting killed, MacArthur refused to let them fight effectively (i.e., by using artillery) because he doesn’t want his former home trashed:
The general was genuinely horrified by what was unfolding in Manila, and seemingly unable to process it. “MacArthur was shattered by the holocaust,” Lieutenant Paul P. Rogers, the headquarters typist, observed. Everything he had done to spare Manila in 1941 was being undone by his own troops, and the major coup of taking the city intact with its port facilities undamaged was falling apart in front of him. Admitting to that kind of setback was not in him. Suddenly the general and his command had a vested interest in making sure there was as little coverage of Manila—positive or negative—as possible. A press report that declared, “Manila is dying” set him off. MacArthur ordered Diller to block any usage of that phrase. He also ordered the units under his command to refrain from using artillery in the city. “That was most unlike the General, who prided himself on winning victories with minimum loss of life,” Diller recalled.
Eventually the subordinate officers wear MacArthur down:
He appointed a three-man committee to talk with MacArthur about the artillery restrictions. After listening to the three, MacArthur, despite his vehement and emotional initial response changed course completely. His subordinates were making it clear that they were not only taking heavy losses, but at rates they could not sustain. With reporters now in the mix, he could ignore that consideration only so long. He removed all the limits on both the artillery and on the media. His public relations man was happy: “They did start using artillery, and it all worked out just exactly the way I wanted it to.” The removal of restrictions on artillery was the third major event that shaped the battle for Manila. Despite their reputation as being a bunch of “yes men,” the staff had pushed back against the general and gotten him to reverse himself. Robert S. Beightler was happy with this decision: “From this point on, we really went to town.” Beightler was advocating any means which he believed would speed up the tempo of combat and save both American and Filipino lives. After the battle ended, he reported to Krueger: “the fantastic defenses of small pockets of resistance which had been isolated required the employment of all available weapons.” Some of this argument is rather weak. The infantry used indirect fire as a crutch to avoid close combat. The problem: it resulted in the deaths of thousands of civilians. Figuring the exact numbers killed in Manila is a tricky business. It seems
