The baddest Apple in a rotten bunch

August 17, 2010

Jason Farbman looks behind the hype about the world's most valuable tech company.

"This don't-be-evil mantra. It's bullshit."
-- Steve Jobs, on Google's informal slogan

"WALL STREET has called the end of an era and the beginning of the next one," proclaimed the New York Times in late May. Apple Computer, widely perceived to be on its financial deathbed as recently as the late 1990s, had become the most valuable tech company in the world, with total outstanding stock worth $222.12 billon.

It was a stunning turnaround for Apple, especially considering that it came during a decade when the U.S. economy wasn't expanding as quickly as in other periods.

So how was this possible?

It was easy to predict how the Times would explain Apple's success. Its permanent entry for Apple on the Times Web site praises "the oracular Silicon Valley company...With its coveted gadgets, Apple has cast something of a spell on both consumers and investors." And indeed, the May article on Apple surging to the top of the high-tech industry heap quoted a number of executives and CEOs who were in unanimous agreement that Apple's rise to the top was due to nonstop innovation and hard work.

Apple CEO Steve Jobs
Apple CEO Steve Jobs

As one executive put it, summarizing the attitude of the rest: "Microsoft depends more on maintaining the status quo, while Apple is in a constant battle to one-up itself and create something new."

The narrative was simple, and as old as the free market itself: Apple, down to its last dime, lived up to its slogan to "think different," worked hard and pulled itself up by the bootstraps.

But did Apple really manage to leapfrog the mighty--and ruthless--Microsoft, becoming second only to Exxon-Mobil among all U.S. corporations on the strength of good ideas and work ethic alone?

To get an idea of the real reason why Apple has succeeded, it was only necessary to look below the May article hailing the company's success on the front page of the Times business section. A second article reported on a spate of suicides in some Chinese sweatshops that was drawing attention to working conditions there. The Taiwanese owner of the sweatshops, Foxconn, was a contractor for numerous tech companies: Sony, Nokia, Dell, Hewlett Packard... and Apple.

The Times didn't make the connection between these stories. Between three credited authors and any number of editors, no one at the "newspaper of record" thought to point out that as Apple was taking the Dow by storm, at least 12 workers who make its products have committed suicide this year.

Most of the workers had thrown themselves from the top of the tall dormitories they are forced to live in during their few hours off. As of the end of May, Foxconn had begun to deal with the issue in two cynical ways. It installed nets around the buildings. And it began refusing to pay compensation to families of those who took their own lives--on the grounds, the company said, that this might be encouraging suicides.

All of the workers who committed suicide were between 18 and 24 years old. As Labor Notes reported, the deaths were "the result of 12-hour shifts, alienation from not being allowed to speak to co-workers, and a rapid just-in-time production model that has workers putting in a phone motherboard every seven seconds to meet the global demand for high-priced gadgets."

The first suicide of this year was in January--19-year-old Ma Xiangqian, who had been working seven nights a week for 11 hours at a time "forging plastic and metal into electronic parts amid fumes and dust," the Times reported.

But there was still room for life to get worse. After a run-in with a supervisor, Ma was demoted to cleaning toilets. In the last month of his life, Ma worked 286 hours "including 112 hours of overtime, about three times the legal limit. For all of that, even with extra pay for overtime, he earned the equivalent of $1 an hour."

There are 400,000 other workers on two Foxconn campuses where Ma Xiangqian was driven to kill himself. They are unionized, but as Labor Notes reported, this is essentially meaningless. The head of the union is secretary to the Foxconn CEO.

International outrage since the news broke forced Foxconn to provide several raises, but it's difficult to imagine working conditions at the sweatshops seeing the sort of turnaround that Apple Computer's bottom line has.

Apple's skyrocketing fortunes seem to have carried CEO Steve Jobs further away from reality, too. Incredibly, he has defended conditions at the Foxconn plant. "You go in this place, and it's a factory but, my gosh, they've got restaurants and movie theatres and hospitals and swimming pools," Jobs said. "For a factory, it's pretty nice."

WHILE THESE desperate conditions of near-slavery are the most damning indictment of the company, that certainly isn't the extent of the story. Microsoft may continue to be perceived as nasty, monopolistic and determined to "preserve the status quo," but Apple's reputation for being the opposite is increasingly undeserved.

This isn't to say Apple doesn't make exciting products. I became a convert several years ago after receiving a hand-me-down MacBook from my sister. Today, there might as well be a glowing apple on my back--one of Apple's products is rarely out of reach, whether it is the laptop I throw in my bag before my daily commute, or the iPhone that lives in my pocket.

But it's become hard to tell why anyone should consider Apple's business strategies any differently from those of Microsoft in the 1990s, when the software giant was investigated and penalized for its monopolistic practices by the U.S. and European Union.

In fact, Apple is a prime candidate for the same kind of investigation. The Justice Department is investigating threats by Apple against two major record companies--according to reports, Apple was trying to keep the record labels from participating in a promotion for, whose music sales are a rival to Apple's iTunes.

Considering the state of the corporate music industry today, it's pretty astounding to think that anyone could intimidate a major label. But with iTunes currently sitting on 70 percent of all digital song sales, Apple is able to do pretty much whatever it wants.

For example: Have you ever tried to use a non-Apple mp3 player with iTunes? Actually, before you answer that, can you even name the top two or three mp3 players not produced by Apple?

This was, in fact, the driving idea behind the iTunes Music Store: to dominate digital music at 99 cents a pop in order to sell millions of music players at up to $499 a pop.

On the off chance that you do have an mp3 player not made by Apple, you're probably painfully aware that you simply can't sync to your Mac's music collection. Jason Calacanis, writing in The Case Against Apple, invites readers to imagine the outrage if Microsoft had made its Zune the only player compatible with Windows.

Then there's Apple's exclusive contract with AT&T for cellular service for the iPhone. As Calacanis says:

Apple's iPhone is a revolutionary product that has devolved almost all of the progress made in cracking--wait for it--AT&T's monopoly in the '70s and '80s. We broke up the Bell Phone only to have it put back together by the iPhone. Telecommunications choice is gone for Apple users.

The ridiculous Apple approval process for iPhone applications is the very definition of a monopoly. In the company's own words, applications aren't allowed on its mobile operating system that "duplicate the functionality" of software that Apple also makes. So if you compete with Apple, you won't have access to one of the biggest mobile platforms around today.

All this has led to a phenomenon appropriately known as "jail-breaking"--or altering the iPhone to run unauthorized apps. There are countless things that a device with the power of an iPhone should be able to do if the creative power of developers were allowed to run free. Instead of encouraging that creativity, Apple has done everything it can to make each software update render a jail-broken phone inoperable.

At the same time, many of the best innovations of independently developed iPhone apps have been co-opted, diluted and incorporated into later versions of Apple's own software.

In July, during its review of the Digital Millennium Copyright Act, the Library of Congress exempted jail-breaking from the laws restrictions, making it officially legal. It remains to be seen how nicely Apple will play in the wake of this ruling.

OF COURSE, little of this was mentioned in the mainstream analysis of Apple's rise to the top.

Instead, there has been nonstop gushing about Steve Jobs, who co-founded Apple, and then returned to run it in the 1990s, when it reached the brink of collapse. By all accounts, Jobs has reinvented not just a corporation but whole industries: animated film (Pixar), music sales (iTunes), audio equipment (iPod) and mobile telephones (iPhone).

On April 3, the home pages of major media outlets took a break from their coverage of Tiger Woods' return to golf to giddily report from sidewalks of Apple Stores nationwide as they began to admit throngs of people lined up to purchase an iPad.

The latest device from Apple was widely predicted to revolutionize newspapers, and perhaps the entire publishing industry. I was confused as to why I should shell out for a big iPhone that can't make phone calls.

That skepticism was reflected to a fair degree in online discussions, where years-long debates continue about just how much value Apple will add with the iPad--or has ever added in any of the fields it has come to dominate. For example, audiophiles have long decried the iPod, now the de-facto standard in portable music players, for its role in promoting the mp3 file format, with its low audio quality, and its refusal to play higher-quality formats.

But you won't hear any of these debates in the mainstream coverage of Apple. A few months ago, when I found myself in front of a television watching CNN at the airport for two hours, I didn't hear a single mention of BP, Arizona's anti-immigrant laws or the economy. But twice, the network showed video of what the as-yet-unreleased next iPhone model would likely look like--as the ticker flashed, "iPhone 4.0 Release to be Announced--Thinner, More Features."

"More features?" How many times can Jobs convince people to wildly overpay for a phone that will be obsolete in a year when Apple adds "more features" that should have been included when the original device was released.

The most screamingly obvious example of this: In a recent sales speech, Jobs announced that multitasking--the ability to run multiple applications simultaneously--would be included with the release of the iPhone 4.0.

Wild applause greeted the announcement. But if one manages to evade the tornado of hype associated with all things Apple, its kind of a head-scratcher that the company could have sold over 34 million iPhones, 20 million iPod Touches and 2 million iPads before adding multitasking.

That means Apple has sold more than 56 million of these devices worldwide, and they can't--except in limited conditions--do more than one thing at a time.

Of course, any conversation about the superiority of Apple products lasting beyond a few minutes eventually gets to security--Apple computers and other products are less prone to being infected by the viruses and other digital vandalism that has proliferated in the era of the Internet. But recent reports indicate that this is likely due to Apple's smaller market share than to the company's concern about customers' security.

In a interview, famed hacker-turned-digital-security-consultant Marc Maiffret was clear:

Anytime there's been a hacking contest, within a few hours, someone's found a new Apple vulnerability. If they were taking it seriously, they wouldn't claim to be more secure than Microsoft because they are very much not...The reason we don't see more attacks out there compared to Microsoft is because their market share isn't near what Microsoft's is.

In other words, while Apple has been driving home how safe it is in order to steal business from Microsoft, that remains true only insofar as virus writers remain disinterested. It's difficult to say when that might change, but the two factors in the targeting of Microsoft products were: One, they were the biggest player in town; and two, they were widely perceived to be monopolistic jerks whose drive for profit was far greater than their desire to encourage exciting software development.

On both counts, Apple should watch out.

WHILE THE mainstream media breathlessly chronicle Steve Jobs' magical ability to anticipate what consumers want, they have ignored their own contribution to Apple's rise--free public relations that pushes aside hard news on the cable "news" networks every time a new Apple product appears.

As a result, Apple will for some time be perceived as a computer industry pioneer, even as their quest to pull every last dime from our pockets slows its rate of progress to a crawl. Unlike the mantra we're fed every day--that competition increases innovation--Apple's cutthroat strategy relies on slowing innovation, stifling it or stamping it out altogether.

Humanity didn't enter a new epoch simply because, as the New York Times put it, the "most important technology product no longer sits on your desk but rather fits in your hand."

There is nothing revolutionary about an overpriced computer crippled by an uncooperative, deliberately closed design, and manufactured under conditions so unbearable they drive people to suicide, just because people can carry it in their pockets.

A genuine revolution would make virtual slavery something associated with an old, out-of-date version of humanity.

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