“Apple’s poisonous business practices,” The Colorado Springs Business Journal, March 18-24, 2016, p. 27.

Beware of the Apple, It’s Poisonous

As the latest debate over Apple’s stance on privacy and its refusal to help federal investigators access the iPhone of the San Bernardino attackers, we should recall an earlier stance that seemed principled at the time, but was not.

For those who may have forgotten, Apple appealed a 2014 settlement that found it guilty of antitrust violation in relation to e-books. The settlement amount was $450 million. Its appeal to the Supreme Court was just denied, so the original settlement is binding.

In that case, Apple’s CEO, Tim Cook, made a passionate argument on behalf of “free enterprise” and the right of Apple to conspire with publishers to artificially inflate the price of e-books. At the time, Amazon.com, which had its own disputes with publishers, was setting the benchmark price for e-books.

Apple may argue about its monopoly-like right to set prices in the marketplace as much as it wants; it even can try to present itself as a martyr for free enterprise; but the truth is that it was hurting consumers to enrich itself, called profiteering.

One wonders if today’s debate about privacy isn’t a similar case where the veneer of an ideal ends up being just that, a veneer. The real point is a marketing ploy to convince present and future customers of its protective corporate culture. Fighting “the government,” as many presidential candidates are finding out, is quite popular!

Apple’s hypocrisy need not be measured exclusively by the yardstick of its entanglements with the government, as these two cases illustrate. Instead, it seems that Apple is unabashedly pursuing maximal profits, pure and simple.

To begin with, let’s examine what has set Apple on its path to American iconography. It is outrageously successful, valued at more than $750 billion (biggest in the world), profits of over $53 billion (October 2015), and over $180 billion in cash. Its legendary leader, Steve Jobs, has been lionized as a design guru and creative genius (despite some less than flattering books and documentaries).

Apple came out of IBM’s and Microsoft’s shadows to capture our imagination and pocketbooks; we are so enamored by its products that we stand in line for hours to pay premium prices for the latest revision of its latest gadgets. But there is something dark about Apple, so dark that good publicity, as the one now enjoyed by Apple, is needed to distract our attention from its fundamentals.

First, Apple produces its gadgets overseas, primarily by Foxconn in China. This outsourcing has become ubiquitous, but it sheds light on the awful working conditions of Apple’s sub-contractors’ employees (nets have been set in workers’ dorms so they won’t jump to their death). As president Obama beseeched Steve Jobs to bring jobs back to America during the Great Recession, Jobs scoffed at him and said it’ll never happen.

Second, as Mariana Mazzucato argues in her The Entrepreneurial State (2011), Apple has licensed most if not all of its patents and intellectual property from government sources. Apple doesn’t “invent” as many new technologies or processes as one might believe, but uses others’ inventions for its own designs. It’s R&D budget in 2015 came close to $8 billion, pittance as percentage of its sales of $234 billion (just over 3%). By comparison, Microsoft spent over $12 billion on R&D out of $93 billion in sales (close to 13%).

Third, there are some who are wondering about Apple’s legal behavior both domestically and globally, as it continues to be embroiled in patent disputes with its rivals (Samsung), overseas antitrust allegations, and class-action suits at home. Some have speculated that Apple spends more money on legal fees and fines annually than on R&D. If true, how “entrepreneurial” is it?

Fourth, if you have missed it, Apple has been under scrutiny for its tax-evasion tactics, most of which are perfectly legal, yet fly in the face of it being a good corporate citizen. It’s not that Apple doesn’t pay taxes at all, as it does ($8 billion as Cook told Charlie Rose on “60 Minutes”). Yet, between channeling some sales through offshore distribution networks and keeping over $180 billion in offshore accounts it avoids paying much more. Shouldn’t it contribute to the infrastructure that guarantees its sales?

As we piece the narrative about Apple’s corporate behavior, what may seem a principled stand against government intrusion into citizens’ privacy turns out to be a smokescreen. Is there really no technological way to accommodate federal investigators? We see instead a legal machine with exuberant profits enjoying the American framework of markets without contributing its fare share to ensure its operation. Just like those who came for dinner and never quite contributed their fair share. Perhaps legal, but is it right?

Raphael Sassower is professor and chair of philosophy at UCCS. He can be reached at rsassower@gmail.com See previous articles at sassower.blogspot.com

“Whose great ideas are those, after all?,” The Colorado Springs Business Journal, July 4-10, 2014, 23.

WHOSE IDEAS ARE THEY, AFTERALL?

The Constitution guarantees some protection for inventions as a way to provide incentives for geniuses of all stripes. By now the protection of patents and copyrights has become a legal industry under the catchall phrase Intellectual Property.

The question remains, should one’s ideas be legally protected against infringement by others? Is it fair, in other words, for me to use someone else’s ideas without paying any licensing fees? Regardless of how the law answers these questions, a generational divide spins its answers in different ways.

Young consumers, called by some millennials, deeply believe that they have an inalienable right to download whatever they find, no matter the source, for free. The very idea of paying for music or television shows seems absurd to them. They are also comfortable with “remixing” (Lessig 2008) based on the Supreme Court decision that allows “fair use” of materials—as long as enough of the original has been changed.

Older consumers have some respect for the sweat and toil that went into an invention of a song or an engine valve; they were socialized to pay for enjoying others’ inventions and products. In fact, they feel as if they are stealing from someone—individuals and corporations alike—when appropriating for profit that which isn’t theirs.

Of course, we can find among both groups thieves and saints whose age doesn’t express or betray their moral compass.

So, what should we make of the opposing strategies undertaken by Apple and Tesla, the former lionized as an American miracle with its late leader Jobs as its resident genius and the latter led by an iconoclastic billionaire named Musk?

The irony, if not outright hypocrisy, associated with Apple’s success should be laid bare before we switch to Tesla’s radical announcement.

According to pain-staking research by Marianna Mazzucato (2014), Apple’s entire collection of inventions has been graciously paid for by American citizens like you and I. The “entrepreneurial state,” as she calls it, researched and developed every facet of the iconic iPhone which enriched Apple. Government subsidies, loans, and outright underwriting of these technologies allowed Apple to scoop them all for the low price of some licensing fees. So, whose intellectual property was bought? Who owns it now?

We, taxpayers, already paid for the technologies and yet Apple makes us pay again when we buy the well-designed gadgets it sells to us. Not only are these gadgets made by Foxconn in China (outsourcing jobs), the profits made on them when sold in US are actually shifted to Ireland and other offshore places so that Apple can cut its taxes by an average of 25% and keep some 88% of its cash oversees (Financial Times).

Apple, the archetypal American corporate giant, has been enjoying the largess of government-generated, financed, and protected patents; it has also enjoyed access to the largest global market for its products. But when it comes to paying back anything to its benefactors—fairness—it shields itself from the IRS. Heads I win, tails you lose.

By contrast, Tesla’s CEO, Elon Musk, announced on 6/13/14 that all the patents his electric car company has developed and patented over the years will be open to its rivals. Has he lost his mind? What about the Constitution and Capitalism doesn’t he understand?

Quoted in the Financial Times, Musk said that “we believe that Tesla, other companies making electric cars and the world would all benefit from a common, rapidly evolving technology platform.” Is he all alone in this quixotic quest for an ecologically responsible future? Apparently not.

For those following the fashion industry, the practice of “knockoff” is as old as the trade itself. Instead of protecting one’s design, designers borrow from each other liberally and thereby increase competitiveness and the quest for new ideas. This is true for chefs and their recipes, standup-comedians and their routines, and football coaches and their tactics. (The Knockoff Economy 2012) Have these practices dulled our palates, closed restaurants, or stopped us from watching the Super Bowl? Imitation leads to innovation!

Likewise, Open-Source (Copyleft) isn’t news among code writers and users. In defiance of the restrictions posed by corporate lawyers and captains of industry, there has been an ongoing strong movement to keep codes as open sources for anyone to use freely. Your contribution is free of charge; so is your use. Sounds crazy? Only nerdy types will be so communal, ha?

Well, it’s been impossible to estimate how many millions of people around the world contributed millions of hours to write and edit Wikipedia. Not only aren’t they paid, they don’t even get credit for their work. Why do they do it? Do they believe in the greater good, like Musk? What a bizarre, anti-capitalist way of thinking? Have we lost our way?

No, we haven’t. Perhaps the good intentions of protecting one’s labor had the unintended consequences of allowing Big Pharma to patent our genes and DNA (Supreme Court decisions keep changing). At some point enough is enough, and our good sense overcomes the narrow interests of corporate America.

Will better automobile technologies necessarily evolve with open-sourced cooperation? Check your Apple iPhone to see if a new app can give you the answer. Then ask Apple to send $1 to the US government to ensure the future of American R&D!

Raphael Sassower is professor of philosophy at UCCS. He can be reached at rsassower@gmail.com See previous articles at sassower.blogspot.com