Patrick McGee

And yes, it's cheap, but it's more that things will be built really quickly.

The local governments are working hand in hand with the entrepreneurs, right?

I compare government bureaucrats in China to like a venture capitalist who sits on your board and drives growth, but actually directs policy for you.

And then Western corporations like Apple are able to take advantage of that.

So this happens in March 2013, and it's within 36 hours of Xi Jinping fully taking the presidency in China.

Apple at that time had a business worth more than $20 billion of revenue a year, which is far bigger than anybody else.

And that was the least significant thing.

They're also the world's most sophisticated operator in China.

The iPhone is growing exponentially at that stage to something like 160 countries around the world.

So in a certain sense, they had cracked...

China in two ways, both as an operator and as a retail giant.

And you would assume, wrongly, but you would assume that Apple had really understood the local political scene and the cultural scene and knew what they were doing, et cetera.

And what this episode exposed is that they really didn't.

There had actually been a cover story at Time magazine around this time that basically said, you know, Apple had sort of accidentally become a giant in China.

In other words, the local population just loved the iPhone, but it wasn't that there were particular advertisements directed to them or something.

So, yeah, the assumption would be that Apple really knew what they were doing in China.

And in fact, they sort of didn't.

And one reason they didn't is that Foxconn, the Taiwanese company that they rely on for much of their assembly, they hadn't just outsourced the manufacturing to Foxconn.

They'd outsourced their like political relationship building to Foxconn.

One thing that Foxconn founder Terry Guo was just brilliant at was building these local connections and getting subsidized machinery into his factories and so forth.