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Apple’s Economic Lesson To America

If America wants a good guideline on how we should be developing our economic base we need look no further than the example set by Apple Computer. In this otherwise dismal economy the company is enjoying record growth, and the stock topped $200 per share today. While we often worry about the Chinese takeover of the American economy, Apple goes to China to sell their hit iPhone. Apple’s success is not only the story of a great company developing innovative products that people really want, but also an indicator of how the American economy should develop.

While it is certainly legitimate to worry about “shipping jobs overseas” and staying competitive in the new world economy, we also need to think about the kind of jobs we want to maintain in our own country. The profit generated from an iPhone is a good example of what we should strive for. The primary profits when an iPhone is sold are divided between three countries; Korea, China, and The United States. At the low end of the totem pole is China. Chinese workers assemble the product, and their low-paid laborers receive a few dollars per phone. Samsung in Korea manufacturers the screen, and they receive approximately $15 per phone for this crucial piece of the device. And the rest of the profits all come back to the United States, where the product was conceived, designed, and marketed.

In these times of high unemployment we certainly need and want jobs, but I want the jobs Apple generates in the United States to expand, as opposed to the ones they generate in China or Korea. Intellectual capital and marketing expertise are much more valuable than a huge cheap workforce, and unfortunately there will always be an emerging economy ready and willing to work cheaper. China and Korea are primarily building their economy on their ability to act as a cost-effective factory to manufacture what we create and market. We are the best in the world at innovating, and our goal should be to continue to conceive, design, and market the world’s most innovative and needed products. It’s OK if the rest of the world builds the alternative energy devices designed in the US that help solve global warming. Our economy can still be robust if the world’s best autos and fashions and appliances are all developed here but manufactured abroad. The demand for innovation is so great that we should be able to support our entire population with a core group of “big brains” and “savvy marketers”.

But this vision requires a commitment to a few core beliefs that for some reason America is now hesitant to commit to. If we are going to be the smartest, most creative and innovative people in the world, we need to be the best educated. We need to embrace intellectual curiousity and foster creativity. But right now we are going in the opposite direction. As covered in this blog earlier, we are now turning out the first generation of Americans less educated than the last. As a result of our economic crisis, teachers are being fired, schools are lowering their standards, and fewer students can afford college. It is a recipe for disaster and a road to becoming a second-tier nation. Instead of regarding our educational system as sacred and protecting it at any cost, we quickly discard it as something we just can’t afford anymore.

We are in a bizarre period when intelligence is often ridiculed by a very vocal crowd that believes science is a theory, and would prefer to focus the national discourse on conservative religious issues, the antics of ratings-hungry talk show hosts, and the latest reality television stars.

We need visionary politicians that understand the absolute necessity of building a population that grows continually more enlightened and intelligent, instead of leaders that pander to any group that will donate to their campaign funds.

The Obama administration is currently backing a bill to give $250 to every Social Security recipient, since this is the first year retirees won’t get a cost of living increase. Two hundred and fifty bucks is not going to change anyone’s life – but in total it represents $13 billion dollars. $13 billion dollars pumped into our education system could change a lot of young lives and would represent a big investment in the country’s future.

Imagine if instead of invading Iraq we had pumped up our national education system and funded innovation. Why do we have people marching on Washington and into town halls complaining about healthcare, but there is little public outrage over our crumbling education standards and a population growing increasingly stupid?

Instead of putting governmental support behind failing companies with outdated products and/or Weasel management, lets pour some cash into our education system and new technology start-ups that will continue to keep us on the cutting edge.

It is certainly no accident that The Silicon Valley – the heartland of America’s technological and economic dominance over the last two decades – is just around the corner from Stanford University. Stanford graduates started Google, H-P, Cisco, Yahoo, and Sun Microsystems, just to name a few. The correlation between a smart population and economic prosperity and security in undeniable, and much easier to justify then pumping cash into dodgy financial institutions.

America needs more Apple Computers, Hewlett-Packards, and Googles, and the only way to keep building companies like this is if we have a culture that values education, intelligence, and innovation.

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