Saturday, January 14, 2012

The Apple didn't fall far from the tree

I read an interesting claim in today's paper by columnist Larry Cornies. Cornies was praising Mayor Joe Fontana's state-of-the-city address. With an attendance of about 1200, it is said to be the largest address of its kind by any mayor in any city in Canada.

Cornies reports Fontana said, "London's greatest assets . . . remain its people." No argument there. The LFP columnist expands on this thought, pointing out:

"Apple didn't locate in Cupertino, Calif., nor Research in Motion in Waterloo because of geographic location or persuasive politicians. They located there because that's where the ideas and human capacity were."

Whoa! I thought Apple is where it is because it founders had roots in the town. If you think about it, it only makes sense. You found a company where you are, not where you aren't.

Check out the map of Cupertino. Note where Steve Jobs grew up. Now, check the location of the Apple complex. You could walk from one to the other; The distance is less than 3 miles. One can drive from one to the other in seven minutes. If you don't want to take the freeway, it's about a ten minutes.

One can walk from Steve Job's boyhood home to the Apple Inc. complex.

According to an article in Time magazine, "Jobs led the world into the computing era, but physically, he rarely left a 20-mile radius that centered around his boyhood home."

RIM is a different story. Jim Balsillie comes from Seaforth, Ontario, while Mike Lazaridis was born in Turkey. Lazaridis's family moved to Canada when he was five, settling in Windsor, Ontario.

Before writing more on RIM, let's look at another famous company: the Ford Motor Company.

The Ford Motor Company was founded by Henry Ford, born on a farm near Dearborn, Michigan nine miles west of Detroit. He died 83 years later at his Fairlane estate not far from his place of birth. To this day, the FoMoCo head office is located in Dearborn.

I was going to play this listing game for awhile but a pattern quickly appeared. In the past, businesses were founded where their founders lived, often where they founders were born.

With the death of the the entrepreneurial owner, businesses are often cut loose, purchased by money from outside the community they shrink, or even close. They move away. They cease to play a major role in the city of their birth.

Think: McClary Appliances, London Life, The London Free Press, McCormicks bakery, etc.

If you'd like a smaller, less famous name for the list, try Vytec. It was founded in 1962 by London businessperson Andy Spriet but was owned by the French manufacturing giant Saint Gobain when it was closed. The production moved to the U.S.

My Medtronic ICD heart monitor is made in China.
Skilled workers be damned. In truth, skilled workers are a dime-a-dozen (almost), if you are willing to relocate offshore.

I've written a couple of posts on this: Not made in London, Ontario and The Forest City: A rich past of fading memories.

Now, back to RIM. As I said, neither Balsillie nor Lazaridis was born, or even raised, in Waterloo. There are a number of reasons why Waterloo, Ontario was a good place for RIM to locate and the availability of folk with the prerequisite skills was certainly one of them.

That said, there is an interesting post by Ben Spigel: The future of RIM and the future of Waterloo. Spigel tells us that his PhD dissertation focused on the local social and cultural factors underpinning high-tech entrepreneurship in Canada. Spigel interviewed dozens of entrepreneurs in Waterloo, with a specific focus on their relationship to RIM.

The quality of the workforce played a big role in attracting RIM to Waterloo, but what will happen if RIM continues its decline. According to Spigel, if RIM has large layoffs of highly skilled developers and engineers, the majority will find other jobs in the Waterloo region. Google, Microsoft and the rest would love to scoop up RIM talent for their mobile divisions. Of course, some of the younger and unattached individuals will leave for greener pastures: Toronto, Vancouver, Montreal, San Francisco, Boston . . . . This will be a big loss for the community.

Spigel argues that today it is RIM and not the University of Waterloo that is the main reason for Waterloo being synonymous with high-tech. Spigel tells us:

"If RIM continues its decline and becomes a mere Nokia or Motorola, Waterloo’s image will be tarnished. If RIM can no longer take on the cream of UW’s co-op crop, Waterloo’s imagine will decline and fewer of the world’s best computer scientists will come to the city."

Skilled workers capable of performing many jobs are available all over the planet. Let's take another look at Cornies' Apple example. According to a story carried by PR Newswire:

"Apple sold 4.86 million Apple II computers from 1977 to 1984, all made in the United States.  Then Apple introduced the MacIntosh, still one of the top-selling computers in the world.  Apple sold 13.7 million Macs in 2010.

According to the New York Times, Apple's plant in Fremont, Calif., was producing 1,500 MacIntosh computers a day in 1984. Apple made about 1 million Macs in 1985 at its Fremont plant.  According to the Los Angeles Times, Apple closed its Fremont plant in 1992 and shifted production to Sacramento, Colorado, Singapore and Ireland.  The Fremont plant had a remarkable eight-year run.

Apple increased its outsourcing overseas when Jobs returned to the company as CEO in 1998.  In 2004 Apple closed its manufacturing plant in Elk Grove, California.  Now no Apple computers, iPhones, iPods or iPads are made in the United States.

Forbes reports that Apple has one of the highest profit margins of any corporation, 41.4%.  The primary reason for this is outsourcing to China where workers are paid 15 or 20 cents per hour. Apple amassed a cash hoard of $76 billion, more than the U.S. Treasury had on hand in July of this year, according to Fortune magazine."

So, what is the biggest draw for a company today? Profit margins.

Don't believe me? Just ask the locked out workers at the Electro-Motive Canada plant in London. Oddly enough, the workers at the EMD plant in Muncie, where it is feared the London locomotive work may be transferred, might also agree. When they head home from work, it is reported that they head straight home. They are unable to afford to stop at the local bar for a draft with their co-workers.

There's a lot of stuff that drops by the wayside when you make only $12.50 an hour — like one's self esteem.


  1. Hi Ken,

    Thanks for your thoughts. My only real point in that one little paragraph was that Steve Jobs, who happened to grow up not far from Silicon Valley, was partly a product of it. It's no accident that he and others kept Apple where the 1980s computing talent was — in Silicon Valley. RIM was a direct outgrowth of the innovation that had been spurred at the University of Waterloo. Spigel is right: the reputations have now flipped. UW is overshadowed by its giant neighbour, RIM. Who knows, however, how long that will last.


  2. I used to work with, and in a sense for, Larry Cornies. He ordered pictures that I occasionally ended up taking when we both worked at The London Free Press. I like hearing from Larry. Knowing he may read my post, makes me a better writer and encourages me to try and put down a better argument. I have to confess, I don't think I have ever swayed him to my point of view.

    Ken Wightman (Rockinon)

  3. But your posts and stories are always thoughtful and thought-provoking, Ken. I especially like the stuff you've been writing on the Electro-Motive situation. Keep up the good work.


  4. Almost a year after writing this post, I came upon an interesting essay that argued Silicon Vally happened where it happened because William Shockley, the co-inventor of the transistor, wanted to go home, to go back to where he grew up. As in so many things in life, luck played a crucial role. What if Shockley had grown up in Tennessee instead of Palo Alto? The valley might well have had no Fairchild, no Intel . . .

    There are lots of theories. I'll leave you with this quote from A History of Silicon Valley [http://www.scaruffi.com/politics/sil18.html]: "There's another element to the success of Silicon Valley that is hard to quantify: the role of chance in creativity."