Does having my very first guest blogger make me a "real blogger"? Whatever. Here is a post from my very good friend and writing partner, with a little editorial help from me.
Three Wishes by Bryan Neva
Let's pretend for a moment you're
the guy in the three wishes joke stranded on a deserted island and you find an
old bottle washed up on the beach; you pop the cork and out comes a genie who
grants you three wishes. What would you
wish for?
Well, you reply, the most logical
choice is to be rescued from this deserted island. Good one; it’s our basic human need to
survive.
Now what’s your second wish?
A good wife or husband, you
answer. Another good one; it’s our basic
human need to love and to leave a legacy (children).
You’ve made two good wishes. Now for your third and final wish?
You think for a moment, well a
million dollars would be good, a billion dollars would be better, but having all
the money in the world would be the best!
BLEEEEP! Bad choice! It’s our basic human vice of greed.
If you had all the money in the
world then no one else would have any and it would be worthless. By itself, money has no intrinsic value; it's
only a medium of exchange for goods and services, a way to store and exchange
your work for someone else’s without direct barter.
Corporate America is not much different
than the foolish guy in the three wishes joke.
We all have a basic need to live, to love, and to leave a legacy. Unfortunately, we’re all cursed with vices
like greed (like wishing for all the money in the world).
How is Corporate America doing
this? Generally speaking, they pay their
employees as little as possible, charge their customers as much as possible, hoard
most of their cash, and avoid paying taxes. Before they know it, they too will have all
the money in the world but it will be worthless because no one else will have
any to buy their products.
Apple is the epitome of what’s
wrong with Corporate America today. They
pay their Chinese factory workers as little as possible (about $1.11 an hour),
make them work as much as possible (twelve hours a day, six days a week), and
treat them as poorly as possible. Apple
then charges their customers as much as possible for their products. After this, they hoard their cash and do
their level best to legally avoid paying taxes (mainly using overseas tax
havens). And before they know it, they
too will have all the money in the world but it’ll be worthless because no one
else will have any to buy their products.
Now if Apple were to manufacture the iPad2 in the U.S. it would
cost them about $292.77 to assemble (at a labor/benefit rate $32.53/hour); the material
costs would be about the same $325 for a total of $617.77 per unit for labor
and material. Apple’s gross margin would
then shrink to 15.25%.
Sure,
manufacturing in the U.S. would shrink Apple’s gross margins. It’s not a question of making a profit, but
how BIG of a profit Apple would make.
They choose to manufacture in China because they can earn 54% gross
margins instead of a measly 15% in the U.S.
The only problem is that consumers will no longer be able to afford
Apple’s products because they’re earning much lower wages.
While
Apple and the rest of Corporate America have not achieved their wish for all
the money in the world they have purpose designed their business models to lock
up as much cash as they can and sequester it at the corporate level as cash on
hand or as bonuses to a few corporate mangers; in doing so their money is becoming
worthless because no one else has any.
Much of today’s unemployment is
caused by slow demand. People aren’t spending as much of their income for those
products because they just don’t have the cash! Flat salaries coupled with
inflation have eroded the bulk of the buying public’s disposable income
resulting in the slow recovery from the 2008 recession.
We will be stuck in this quagmire
unless and until the corporate mangers learn that their shortsighted wish for
“all the money in the world” is the root cause of their financial woes.