Outsourcing and My New iPad 3

UPS delivered my new, state-of-the-art iPad 3 last Friday, but before they did, I checked the UPS website for the shipping progress of my precious cargo--making sure the package hadn't been signed for by an unscrupulous neighbor who had no intention of giving it to me. My iPad had been quite the little traveler, starting its three-day journey in China, moving to Chek Lap Kok, Hong Kong the next day, then on to Anchorage, Alaska. A quick pit stop in Louisville, Kentucky followed. Then finally to New York City, where I was finally able to claim possession of it.

Seeing China as the starting point of my iPad's sojourn made me think of Foxconn and the workers from China who had helped put my latest electronics purchase together. Apple's share price stands at $601.10, up 15.53 for the day. (The preceding information is courtesy of the stock app that came with my iPhone 4s, another guilty pleasure I'm still indulging in.) Foxconn's workers have been notoriously underpaid and overworked for as long as anyone can remember, but recently Apple has exerted its influence to make the working conditions for Foxconn's workers a little more bearable: higher wages and less overtime are two of the changes that are being made. This is not to say that the workers are being paid well; only that they are being paid better.

As Eduardo Porter wrote in the 3/7/12 edition of the New York Times, "worker suicides at Apple's main Chinese supplier, Foxconn, in 2010, followed by reports of forced overtime, child labor, minimum wage violations and unsafe working conditions at its suppliers, have contrasted with Apple's status as creator of hallowed devices and its spectacular $13 billion in profit--30 percent of sales--in the first quarter." So what's the solution? Stop outsourcing? This would make the plight of the Chinese workers even worse. But how much worse can you get than suicide?

I find it ironic that in this new global economy that we live in, an economy in which information and communication are more accessible than ever, that the means of that communication--computers, smart phones, and tablets, not to mention cable television--has provided the solution. The hard work of the underpaid employees of Foxconn has led to the technology that has led to the plight and the suffering of these very workers becoming more known. How ironic is that?

This situation with Apple is the offspring of the outrage people directed at Nike and Reebok for the way the workers in Indonesia were treated way back when. Way back when? Kate Hodal wrote in the Guardian on 1/12/12 that "a Nike factory has agreed to pay $1m in unpaid overtime to Indonesian workers in a move that could force other suppliers of multinational companies to follow suit." This means more progress, but it also means that conditions were not so good three months ago, before this agreement was made.

These uncomfortable thoughts should not only influence the decisions that consumers make; investment decisions should be affected as well. The mean-variance approach to investing should never be enough.

Comments, anyone?