TIM COOK'S $2.3 TRILLION FORTRESS
Bloomberg Businessweek|February 15 - 22, 2021
Trade war? Pfft. Trump? Please. Antitrust? Zuck’s problem. (Ditto privacy.) Revenue? Endless
Austin Carr and Mark Gurman

JOE BIDEN HAD A QUESTION FOR TIM COOK: WHY, THE then-vice president wanted to know, couldn’t Apple make the iPhone in the U.S.? It was January 2012, during President Barack Obama’s reelection campaign and three months after the death of Cook’s predecessor, Steve Jobs. Biden was in Palo Alto for a dinner meeting with Cook and a group of tech leaders that included Netflix Chief Executive Officer Reed Hastings, Google Executive Chairman Eric Schmidt, and Facebook Chief Operating Officer Sheryl Sandberg.

As everyone at the dinner well knew, the idea of mass-producing an iPhone, or any advanced consumer electronics, in a domestic factory was an exceptionally tall order. The big Asian contract manufacturers, especially Apple Inc.’s main partner, Foxconn, had built city-size factories in China with armies of hundreds of thousands of skilled laborers. None of that scale existed in the U.S. Chinese factory employees generally worked much longer hours, for a fraction of what even the lowest-paid American workers make. “I’m not sure, short of dictatorial practices, that you could ever make that work,” says John Riccitiello, another Silicon Valley executive who witnessed the exchange between Cook and Biden.

Biden’s question put Cook, who’d become Apple’s CEO the previous August, in an awkward position. He was the architect of the strategy to outsource Apple’s production to China, a trend of increasing concern for the Obama administration. But Cook was also, as it turned out, extremely effective at deflecting political pressure. He was certainly more diplomatic than his old boss. Obama once asked Jobs the same question, and Jobs’s characteristically blunt reply landed on the front page of the New York Times: “Those jobs aren’t coming back.” Cook, though, was smooth and noncombative— so much so, in fact, that Riccitiello can’t recall exactly what he said to Biden. By the end of that year, Cook announced a small yet politically significant shift. Apple, he said, would start making some Macs in the U.S.

And then, Apple’s reliance on China only grew. You might think its ever-tighter embrace with the country would have put Cook in a worse political position after Donald Trump was elected president in 2016 based on a campaign marked by anti-China rhetoric, threats of a trade war, and promises to bring jobs lost to Shenzhen back to American shores—not to mention the challenges of the coronavirus pandemic and rising antitrust fervor during his term in office. Strangely, though, Apple thrived under Trump. In August 2018, the company’s market value reached $1 trillion; 24 months later, even as Trump bellowed on the campaign trail that “these stupid supply chains” in China should move home, it surpassed $2 trillion.

Current and former employees, executives at rival companies, and Washington insiders credit this to Cook’s shrewd management, equally shrewd politicking, and zero reluctance to wield Apple’s market power. “Tim Apple,” as Trump once called him, charmed and cajoled his way into the former president’s good graces, while keeping Beijing happy and finding ways to squeeze more revenue from the iPhone.

Cook’s handling of Trump suggests how Apple, which declined to comment for this story, might approach now president Biden. Over the next four years his White House will continue pushing to increase U.S. manufacturing and may support congressional scrutiny of potentially anti-competitive practices, egged on by Facebook Inc. and other companies that say Apple exercises too much power. But Cook has been counterpunching, broadening his influence over the mobile phone industry while marketing Apple’s commitment to privacy as the antidote to the practices of social media companies. Moreover, Cook’s unflappable temperament makes him well suited to the polarized political climate. Allies praise his operational skills and diplomatic instincts. “Tim may not be able to design a product like Steve,” says Warren Buffett, who knows Cook well and whose Berkshire Hathaway Inc. has a stake in Apple worth $111 billion, as of a September filing. “But Tim understands the world to a degree that very, very few CEOs I’ve met over the past 60 years could match.”

COOK CAME TO APPLE IN 1998 AFTER A DOZEN YEARS at IBM Corp. and a six-month stint at Compaq and seemed, at least to old Apple hands, devoid of any obvious personality. He’d work 18-hour days and send emails all through the night. When he wasn’t at the office he seemed to live at the gym. Unlike Jobs, he had no pretensions to being an artist. “Tim was always pure work: grind, grind, grind, grind,” says one former Apple executive who worked with Cook in his early years at the company and who, as with other sources in this story, spoke on the condition of anonymity because of nondisclosure agreements and fear of corporate reprisals. “I always found him exceptionally boring.”

Apple’s turnaround in the ensuing years has generally been attributed to Jobs’s product genius, beginning with the candy-colored iMacs that turned once-beige appliances into objets d’office. But equally important in Apple’s transformation into the economic and cultural force it is today was Cook’s ability to manufacture those computers, and the iPods, iPhones, and iPads that followed, in massive quantities. For that he adopted strategies similar to those used by HP, Compaq, and Dell, companies that were derided by Jobs but had helped usher in an era of outsourced manufacturing and made-to-order products.

Back when Cook was managing Compaq’s hardware inventory, he became friendly with Foxconn founder Terry Gou, according to two people who’ve worked closely with Cook. The Taiwanese company had started as a lower-end manufacturer: Early products included the plastic channel- changing knobs for televisions and connectors for Atari joysticks. But by the late 1990s, Foxconn had graduated to more complex manufacturing, such as making computer chassis for Compaq. Foxconn eventually moved on to other PC parts, which it produced in sprawling factories around Shenzhen, near component suppliers. By the time Cook joined Apple, these centralized factory hubs were far more efficient than anything in the U.S. Apple sold offa huge Colorado plant in 1996, and after Cook arrived, he temporarily cut its Ireland-based manufacturing workforce, closed what was then its only remaining American production line, in Elk Grove, Calif., and outsourced more and more production to China, starting with laptops and webcams. (The Elk Grove facility is now used for refurbishing and repairs.)

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