"Capitalism made your iPhone"

[Zelig]

Apple faces a few challenges with their piles of money, in no particular order:

* The sheer scale of the money pile. You can't effectively fund a low-risk $100B project. They're still expanding about as fast as is logistically reasonable while keeping talent top-tier.
* The scale of Apple production. This one is pretty limiting - a lot of cutting edge technology simply can't be produced at the scale that Apple products sell at. They typically don't fund projects that they won't be able to launch at full scale. There's some speculation that they'll start to pull away from this by doubling high-end iPhone price to depress demand for it, allowing them to sell higher-end, lower-yield technologies.
* Their history with near-bankruptcy. They'll likely never have another product as successful as the iPhone. Cash hedges against business downturns.

 

[Traitorfish]

I've designed a smartphone. I know what you need.

It couldn't be done without the incredible access to parts I have with capitalism. I get to choose among hundreds of backlight controllers to find the one that works for my needs. Communism would not have supplied the incredible breadth and quality of parts for me to pick from.

That still doesn't amount to capitalism making the iPhone. What it tells us that capital has succeeded in organising labour in such a way as to make it possible for labour to make iPhones. The question is the necessity of capital in this whole process, and not so much whether capital has been historically necessary, that's more or less a given, but whether capital continues to be necessary. Simply observing that a Belarussian tractor factory built in 1964 is not capable of producing an iPhone isn't an answer to that question.

 

[Aleksey_aka_al]

No, a highly coordinated and international manufacturing chain made your iPhone, with varying degrees of robotisation.

A nice euphemism for exploiting citizens of a communist-led country: mainland China.

 

[luiz]

A nice euphemism for exploiting citizens of a communist-led country: mainland China.

Only a fraction of the total value-added of an iPhone comes from China (which of course is communist in name only). You folks are stuck in the 19th century, too concerned about nuts and bolts. A thing or two has changed since then, and the iPhone is a shining example of that.

Anyway, those exploited citizens of China are now richer than the average human being, while just a few decades ago (when China was really communist), they were immensely poorer. Capitalism has literally saved hundreds of millions of Chinese. China will be a rich country in our lifetime, thanks to capitalism. While Venezuela has no food or toilet paper, thanks to socialism.

 

[Zelig]

That still doesn't amount to capitalism making the iPhone. What it tells us that capital has succeeded in organising labour in such a way as to make it possible for labour to make iPhones. The question is the necessity of capital in this whole process, and not so much whether capital has been historically necessary, that's more or less a given, but whether capital continues to be necessary. Simply observing that a Belarussian tractor factory built in 1964 is not capable of producing an iPhone isn't an answer to that question.

Have they figured out how to make good Ladas yet?

 

[Perfection]

That still doesn't amount to capitalism making the iPhone. What it tells us that capital has succeeded in organising labour in such a way as to make it possible for labour to make iPhones. The question is the necessity of capital in this whole process, and not so much whether capital has been historically necessary, that's more or less a given, but whether capital continues to be necessary. Simply observing that a Belarussian tractor factory built in 1964 is not capable of producing an iPhone isn't an answer to that question.

Let me give you a bit of background so you know where I am coming from.

I am electrical engineer who mostly specializes in PCB and unit level hardware design. (That is I design circuit boards and higher level assemblies - I don't design chips). When I go about designing these things, a whole bunch of my time is spent shopping for parts. That is I spend a lot of time evaluating which of thousands of different parts I would like to use. It is the fact that there are thousands of manufacturers offering up millions of different parts in marketplaces that allows me to do my job (here is an example of a distributor website I use - try clicking some links to see the parametric search options if you want to see a lot of what design engineers care about).

And it's not merely what parts are available that matters, it's the fact that all these parts have prices associated with them that matter. If I didn't have prices (prices decided by market forces I might add) I would not be able to rapidly make the sort of fine-grained decisions needed for the final product. I would not be able to dial in cost/performance properly to create the best solution. And note that by shopping it also allows me to discover what is really possible, if I need a 100uF capacitor that can be charged to 25V, I don't know off hand how big that will be, and if I did it'd change in a couple years. By shopping I can very rapidly come to know that.

My critique of anticapitalists is that I don't see how an anticapitalist system would provide me the sort of total shopping experience I need to come up with innovative solutions. It's not merely about technology or factories, but about my ability to choose among thousands of competing solutions. Without it would be like painting with less colors.

 

[El_Machinae]

Only a fraction of the total value-added of an iPhone comes from China (which of course is communist in name only). You folks are stuck in the 19th century, too concerned about nuts and bolts. A thing or two has changed since then, and the iPhone is a shining example of that.

I know that only a fraction of the value-adding comes from China. But given that supply and demand are on a curve, using a simple pie chart might not be the best way to quantify those differences.

The iPhone is able to get a much higher market penetration with a 20% lower cost (we use for example's sake). As well, iPhones benefit from network effects, where additional ones make each other more valuable, since they offer network benefits. So, even those the price only comes down a 'little' by using substandard labour and environmental standards, that 'little' means that many more people are buying it than you'd see from the pie chart looking at value-adding.

Anyway, those exploited citizens of China are now richer than the average human being, while just a few decades ago (when China was really communist), they were immensely poorer. Capitalism has literally saved hundreds of millions of Chinese. China will be a rich country in our lifetime, thanks to capitalism. While Venezuela has no food or toilet paper, thanks to socialism.

So, I'll agree with all of the above. By shuttling in jobs, we've been able to ratchet up a society using market forces because capital followed those jobs. Feedback mechanisms occur, and et viola quality of life improves. The only disagreement I'll have is that it's necessarily the best way. In the race to the bottom, governments will sell their people for too short-term of benefits. So, while the capital inflow then creates growth, we have slower growth than could have occurred if there was concomitant destruction. It's very possible for a desperate family to sell off its future, and it's very possible for rapacious capitalists to benefit from this unduly. For example, any toxins that manifest in longterm degradation (say, mercury poisoning, or whatever) could have been prevented for pennies what ended up costing dollars. While the cheap labour conditions certainly lead to compounding growth, nipping some costs earlier might just have been more efficient.

In broad sweeps, the capitalism certainly helps. But there are also going to be oodles of places where a minor intervention would have been much better.

 

[Perfection]

I also want to point out that Apple emblemifies our current social concern: that the rich are getting richer faster than economic growth.

As well, the price that Apple pays for the iPhone is unfairly subsidized, since the people and communities hosting their manufacturing facilities don't have proper levels of negotiating power. There's a debate to be had about whether the race to the bottom is a good thing, in many ways it is. But there also has to be a floor. People working long, brutal hours for low wages is one thing. But toxins being released into their lungs (unknowingly) or into the local ecosystems is entirely another.

There's no doubt that Apple generates mad profits. Everyone who buys an iPhone perceives higher value for the purchase than what they paid - this the win/win good thing.

Couple things to note:
1. Apple doesn't make its money on the iPhone, it makes its money at the App store. Every company that I've worked with to develop mobile computing hardware platforms was a company that wanted to sell services not hardware.
2. There's a lot of competition among Chinese manufacturers, most companies aren't getting a raw deal on making stuff in China.

 

[Zelig]

1. Apple doesn't make its money on the iPhone, it makes its money at the App store. Every company that I've worked with to develop mobile computing hardware platforms was a company that wanted to sell services not hardware.

Well, indirectly, they're able to sell hardware because of the software ecosystem, but directly, iPhone is >60% of their revenue and combined app store/itunes/icloud/etc. revenue is <15%.

Samsung also makes money on hardware, nobody else makes anything but peanuts or a loss.

 

[innonimatu]

And it's not merely what parts are available that matters, it's the fact that all these parts have prices associated with them that matter. If I didn't have prices (prices decided by market forces I might add) I would not be able to rapidly make the sort of fine-grained decisions needed for the final product. I would not be able to dial in cost/performance properly to create the best solution. And note that by shopping it also allows me to discover what is really possible, if I need a 100uF capacitor that can be charged to 25V, I don't know off hand how big that will be, and if I did it'd change in a couple years. By shopping I can very rapidly come to know that.

My critique of anticapitalists is that I don't see how an anticapitalist system would provide me the sort of total shopping experience I need to come up with innovative solutions. It's not merely about technology or factories, but about my ability to choose among thousands of competing solutions. Without it would be like painting with less colors.

You are not talking about capitalism here, you are talking about a market economy. And market economies are as old as history. Back in the ancient world you had market economies, and we don't agree on a name have a name for the economic systems they used. In the middle ages you had market economies and we called it feudalism. In the modern age you had market economies before people even used the term capitalism.

Truth is, capitalism is an older beast than most people believe. In that I agree with Fernand Braudel's opinion (Capitalism and Material Life, 1400-1800), capitalism has always been an "upper layer" engaged in the big business and monopolies, with little interest to spare for the lower margin level (what we'd call retail now). They will invest in an Amazon, or Alibaba, or some other big business. Even where venture capitalists invest in "start-ups", the goal is growing to grab monopoly power in some market. IF you're not playing in that league, you're not a capitalist... Smaller fish can handle niche production, and be appropriately squeezed by those who control the market platforms, the big consumers/distributors or their production. If any one of those particular businesses looks good enough, the capitalists will jump in, of ten the distributor with market power will copy the product and push the original producer out of the market before it gets big enough. That is capitalism at work.

Communism was not at all incompatible with a market economy, it was the political choices of the governents of communist countries that associated it with widespread state monopolies. Some of those communist countries even made very shy experiments with market-oriented organization, but political blocks prevented further experimentation. Arguably the chinese picket it up and then ran overboard with the idea... but if you think that they are capitalists like the [US, EU. whatever], you'll be in for quite a shock in the future. They are still keeping private capitalist (as in big and state-protected) business under state control to a degree that the "capitalist countries" do not.

 

[El_Machinae]

Couple things to note:
1. Apple doesn't make its money on the iPhone, it makes its money at the App store. Every company that I've worked with to develop mobile computing hardware platforms was a company that wanted to sell services not hardware.
2. There's a lot of competition among Chinese manufacturers, most companies aren't getting a raw deal on making stuff in China.

I don't begrudge Apple's money, don't get me wrong. They used the available infrastructure, and then developed something that people want. I think it's a really win/win arrangement, outside of a few caveats regarding labour and ecological concerns.

My broader point is that 'letting the uber-rich have more money' doesn't lead to trickle-down growth like people who believe in either Trickle-Down economics or even the money version of supply side. Apple will use that money to trickle wealth upwards, since it's a vastly easier choice than actually creating wealth.

 

[Kozmos]

Gee, I never though it would be so easy. Where are all the garage-assembled smartphones? Are there contests where people who recreationally build smartphones show them and compare them, perhaps?

http://www.instructables.com/id/Build-Your-Own-Smartphone/

If you know what you are doing technically you can stroll down Shenzhen and get yourself enough parts on the cheap to have a lifetime supply of smartphones. Hell you can buy Iphone parts and build one yourself, the locals have their own equipment for assembly. Million dollar machines housed in shacks.

 

[Perfection]

Well, indirectly, they're able to sell hardware because of the software ecosystem, but directly, iPhone is >60% of their revenue and combined app store/itunes/icloud/etc. revenue is <15%.

Samsung also makes money on hardware, nobody else makes anything but peanuts or a loss.

I was likely mistaken on iPhone stats, can't recall where I heard that from.

 

[innonimatu]

Well, we cross-posted, but one of the big differences I don't own an iPhone is because I prefer Firefox with uBlock to avoid scripts on the web. There are plenty of reasons to prefer performant devices though. There are various js-based web frameworks like Ember.js to create rich web-based applications. Not to mention algorithms for better photography: How the Pixel's software helped make Google's best camera yet

But in any case, Apple is way ahead of any other phone manufacturer in avoiding script-infested ads. Most recently:
Intelligent Tracking Prevention
Apple adds auto-play video blocking to desktop Safari

ok, I'll give you that, apple does seem to care a little more with such things.

http://www.instructables.com/id/Build-Your-Own-Smartphone/

If you know what you are doing technically you can stroll down Shenzhen and get yourself enough parts on the cheap to have a lifetime supply of smartphones. Hell you can buy Iphone parts and build one yourself, the locals have their own equipment for assembly. Million dollar machines housed in shacks.

Getting into the plane and flying across half the world is kind of impractical when I want a new phone. It might get rather expensive.

The example you gave is a nice diy project! But with a higher bom than those phones you can buy premade. Good for engineer types who like to tinker with technology, but let's be real, that's a fraction of a fraction of 1% of the population... hell even the commercial linux-based (non-android kernel) phones failed so far. I may put one together if ever Stallman comes around again though, just for the show... only instance I can think of where it would make sense.

Well, indirectly, they're able to sell hardware because of the software ecosystem, but directly, iPhone is >60% of their revenue and combined app store/itunes/icloud/etc. revenue is <15%.

Samsung also makes money on hardware, nobody else makes anything but peanuts or a loss.

Economies of scale. These are the two big producers of smartphones, all the other brands sell fewer and/r much cheaper models. Samsung and Apple have the market power to squeeze suppliers, and the capital to invest in big-scale industrial production. I don't think all the other brands are losing money though, initial capital only lasts so long... despite the ubers of this world.

 

[Birdjaguar]

Apple's profit margin on services is over 70%.
Its profit margin on phones is 35% and is over 60% of their revenue.

 

[Perfection]

Apple's profit margin on services is over 70%.
Its profit margin on phones is 35% and is over 60% of their revenue.

Yeah I was thinking something like that. I could also be recalling the iPod which I think had a higher service to hardware ratio or it could just be fuzz in my mind.

 

[Kozmos]

Getting into the plane and flying across half the world is kind of impractical when I want a new phone. It might get rather expensive.

The example you gave is a nice diy project! But with a higher bom than those phones you can buy premade. Good for engineer types who like to tinker with technology, but let's be real, that's a fraction of a fraction of 1% of the population... hell even the commercial linux-based (non-android kernel) phones failed so far. I may put one together if ever Stallman comes around again though, just for the show... only instance I can think of where it would make sense.

We'll see if the fabled metal 3D printer that launches next year works out as advertised. Production hubs might start popping up everywhere not long after that.

 

[Perfection]

http://www.instructables.com/id/Build-Your-Own-Smartphone/

Pi based smartphones are fun to play around with, but aren't nearly as nice as an entry cost smartphone.

If you know what you are doing technically you can stroll down Shenzhen and get yourself enough parts on the cheap to have a lifetime supply of smartphones. Hell you can buy Iphone parts and build one yourself, the locals have their own equipment for assembly. Million dollar machines housed in shacks.

This is quite an exaggeration. If you had technical expertise you certainly could make a product line of smartphones on the cheap. You could also could a quite cheap finished smartphone. You could also get parts for some workable but not very good homebrew stuff. But no, you're not going to be able to make an iPhone. (you might be able get a contract manufacturer to run a ghost shift on some smart phone lines but not for a heavy hitter like apple or samsung)

 

[Zelig]

Economies of scale. These are the two big producers of smartphones, all the other brands sell fewer and/r much cheaper models. Samsung and Apple have the market power to squeeze suppliers, and the capital to invest in big-scale industrial production. I don't think all the other brands are losing money though, initial capital only lasts so long... despite the ubers of this world.

They're not all losing money, but of the several thousand manufacturers none of them are above 1% of handset profits, and they combine for <0%.

We'll see if the fabled metal 3D printer that launches next year works out as advertised. Production hubs might start popping up everywhere not long after that.

It's not really an iPhone if you're not running an Apple SOC and iOS. Being able to stamp out a shell doesn't really help with sourcing top-end NAND chips that run on Apple's in-house SSD controller, OLED screens, etc.

 

[Birdjaguar]

We'll see if the fabled metal 3D printer that launches next year works out as advertised. Production hubs might start popping up everywhere not long after that.

3D printing with carbon fiber is here now!

http://www.mantiscomposites.com