Apple’s China Policy: Reckless Entanglement or Stratagem Unfolding?  

TLDR/Key points: 

Longterm (corporate) survival requires adaptability and the ability to seize opportunity
Change is constant in any system not at rest, and change creates opportunity
China is undergoing change
Adaptability is about survival and maintaining fitness; seizing opportunity is using fitness to change things to one’s favor
Consistent adherence to core values and policies are essential internal guidance through that change

Survival is complex. Were it not so, then extinction would be a rare event. Instead, more species have gone extinct than are alive today. The long-haulers, those that have survived across multiple mass extinctions, have possessed two traits: adaptability and the capacity to seize opportunity for competitive advantage. Human enterprises, whose progress we can measure at human time scale, live and die by the same principles. 
Recently, the New York Times featured a piece called Censorship, Surveillance and Profits: A Hard Bargain for Apple in China.
While critical of Apple’s policies in China, a state under one-party rule led by an authoritarian president who, by many accounts, has amassed more centralized authority and power than even Chairman Mao, the piece lacked essential context. 
Apple-critical pieces in the mainstream press often follow one of two patterns: they either negatively evaluate Apple’s policies or products, supplemented with commentary from Apple’s competitors or critics; or they are thinly veiled advocacy pieces designed to get Apple to take a specific action, focussed almost exclusively on Apple irrespective of other industry involvement. This NYT piece seems to fall into the latter category. Either way, like many of both types of criticisms, it was long on complaint and short on solutions. To be clear, big tech, Apple included, have much upon which they can improve; but critical analysis requires context, which in turn defines both expectations and performance indicators.  
Apple has made substantial concessions to the Chinese government, but so too have other companies, world councils and nation states, from low and middle income countries to the United States of America to the United Nations and the World Health Organization on just about everything. To this day, for example, neither the United Nations nor the United States have had any effect on China’s expansion of its territorial waters in the South Pacific. Indeed, not only have Chinese fighter jets consistently challenged both US military aircraft and naval vessels over nominally international waters, they have begun to encroach their military shadow towards Taiwan, and the forecast is stormy. Trade relations have been no less troubled. 
So, let us take a pause, and set our assessment of Apple’s China concessions into that geopolitical context. No nation, in isolation, can successfully compel China to do anything China does not wish to do, let alone anything that it views as contrary to its interests. That being the case, what recourse has any company, irrespective of market cap, in the absence of international geopolitical backing?
Then there is the current legislative and regulatory context, in which not only Apple but big tech in general are under active investigation for everything from unfair competition to where they make their products to cooperation with law enforcement – a toxic brew brimming with skepticism and hostility at home and abroad – which has positioned Apple awkwardly with the very governments that could provide Apple with the protections they require in conducting business in China. 
This is essential context in which to assess Apple’s decisions in China. In the world of global tech giants, Apple is akin to an apex predator atop the food chain. Think of Apple as a leopard, an apex predator in its own right, but occupying a defined niche, having to negotiate its survival on an open savannah amidst multiple prides of lion, who rule like nation-states. Now, a leopard is an awesome and beautiful beast, but it’s no match for even a single lion, let alone a pride and less still multiple prides all claiming their respective turf. The lions dictate the terms of engagement; don’t take our stuff, don’t come near our cubs, don’t hunt our game, and don’t whiz on our termite mounds, capiche?
Oh, and be prepared to hand over your kills, concede the hunting ground whenever we want it, accept that we can whiz wherever the hell we want, and if we see your cubs, we get to take them out because…lions rule. To any fair-minded human who believes in individual liberty and equality, this seems unfair and intolerable. Here’s the problem; lions and leopards are not people, and on the savannah (or jungle, take your pick) in the absence of active human husbandry, might makes right. Sovereign states and corporations, likewise, are not ‘people’, but entities that seek to survive and exert dominion; and in that arena, in the absence of enforceable regulation, might makes right. It’s just a different kind of savannah. And when corporations enter the territory of a sovereign power, they have to play by their rules, retreat or die. It’s not complicated. 
Whenever anyone opines that companies can simply opt not to compete in a market, specifically China’s, they assert that a global company can ignore the world’s largest market, whilst their competitors, many of them Chinese, engage. Chinese enterprises will not only compete in China, they will, to paraphrase Churchill, compete ‘on the beaches, on the landing grounds, in the fields and in the streets, in the hills and shall never surrender any market on the planet’. In short, they will out-compete and become fitter than their China-abstaining competition, and might ultimately drive them out of business or acquire (eat) them.
Does this obviate Apple from any responsibility as to how they negotiate that savannah? No, however for any company to maintain social credibility and market viability, it must balance two values, like opposite ends of a tightrope walker’s balancing pole; and these are the metrics by which it should be judged. The first are its core operating principles; the second, its stated practices and policies, in this case compliance with local law – typically the price of admission to a domestic market. Amongst Apple’s core principles are a commitment to civil liberties and privacy; the former subject to national law, and varying from nation to nation, the latter is the consensual sharing of personal information.
It is in this context that we can talk about adaptability and seizing opportunity; and as we will discuss in part 2, these serve different functions.In part 1, we discussed how consistently balancing core operating values and stated policies and practices maintains a company upright relative to social credibility and market viability. Now, let us examine how that serves two essential longterm survival traits, adaptability and the ability to seize opportunity. 
Regarding adaptability, the goal is survival. For a company in a market, this means compliance with the law of the land (the savannah), laws that are set by the sovereign power. This means that civil liberties are determined by that government, not by Apple. Whether a company agrees or disagrees with the law, compliance is compulsory at pain of penalty, meaning that Apple must tailor its products and services accordingly. Nor is this confined to Apple; all companies providing similar services must do the same – a point under-represented in the NYT article. 
However, until the community of nation states bring China around to global standards of practice, companies can choose a third path between entering or avoiding the Chinese market, namely provide a China-specific variant of their products and services. Regarding civil liberties, Apple argue that they have to comply with Chinese law. In their justification, as the NYT article states, 
“Apple added that it removed apps only to comply with Chinese laws. “These decisions are not always easy, and we may not agree with the laws that shape them,” the company said. “But our priority remains creating the best user experience without violating the rules we are obligated to follow.”” 
Ultimately, Apple’s policy here is consistent with its global standards and practices. We have seen Apple comply, where technically feasible, with demands from law enforcement and even demands from legislators, with actions that impinge upon consumer privacy, but were consistent with local law. Where Apple has disagreed, or where compliance would render an entire platform for users everywhere insecure, such as an encryption ‘backdoor’, they have resisted. In settings governed by the rule of law, Apple has appealed specific demands in court. Were Apple taking these privacy-impinging measures proactively, or applying them inconsistently from nation to nation, such as obeying the laws of some nations whilst flagrantly violating them in others, then Apple could and should be called to account. 
Regarding privacy in China, however, Apple has argued that, although they have moved the data on Chinese citizens to Chinese servers, as required by Chinese law, those servers are walled off from those controlled by Apple for non-Chinese users beyond China, and even in China, Apple retain the encryption keys. In short, not only have Apple shown consistency in obeying the law of the land, they have taken ‘a third way’, and provided a China-specific solution that does not affect the world outside of China. Adaptability. 
One can quibble with the policy of compliance with local law; one can quibble about its inconsistent application. One cannot quibble that the consistent application of a policy is a betrayal of public expectation. NB: The notion of whether or not a law is ethical is another matter and outside of the scope of our discussion, and is yet another reason why all corporations should have an independent ethical review board to advise on such matters. 
What of seizing opportunity? This involves a combination of having the insight to spot the opportunity, and the fitness to seize it. Ecological, geopolitical, industrial and market ecosystems share a common dynamic; equilibrium is inconstant. The drive for survival, competition, is a destabilizing force that pushes equilibrium to ever higher plateaus of achievement, but at its best, is momentary.
China is not at equilibrium. Despite generations under communist single party authoritarian rule, the communist economy of public ownership and communal control yielded, under former party-leader Deng, to a somewhat market economy, not because Deng wanted it, but China’s economy was failing and a market system was an escape valve; he had to do it. The ascent of the individual has not stopped there. An insurgency towards greater individual freedom is now playing out on social media, in universities, amongst China’s rising middle and upper classes, and even amongst a younger generation in the Communist Party itself. The outcry and open criticism of the government’s handling of COVID-19 in Wuhan on Chinese social media was unprecedented, and will likely not be a one-off. It is no longer a question of if, but when will Communist Party rule end, and what concessions it will continue to make in the interim in order to prolong its survival, and ultimately with what will it be replaced. No one knows, but one thing is certain. That change creates opportunity. And for corporations seeking an opportunity to enable greater civil liberties, ask yourself, which company is better poised to do so; a company with a modest portfolio and/or with no ties to the nation’s market, and only nominal if any demonstrated affiliation or solidarity with the people, or one of the most valuable global companies on the planet with deep ties not only to the national economy, but to the culture and people, who feel a sense of ownership in that company? In other words, which company would be the most fit to seize that opportunity? Answer: few international companies better than Apple, if any.  
A company can and should be held to account for its adherence to both stated policy and core values, and the consistency with which it applies both. Consistency is essential to maintain credibility, if not also market viability. In the end, it is not about the consistency of offerings and content across Apple’s ecosystem of products and services, but the consistency of the application of its stated policies across the board, irrespective of local adaptation, and the extent to which that application aligns with the true north of Apple’s core values. 
Survival is the long game, requiring both adaptability and seizing of opportunity when it presents itself. Adaptation necessitates sacrifice, not just of the non-essential, but often-times things that are valued. That sacrifice is the price of survival, not simply for survival’s sake, but to help create opportunity and then seize it to change the power dynamics in favor of one’s core values and the freest expression one’s policies across the board. 
By consistent adherence to those core values and policies, that has become Apple’s stratagem, and Apple’s gambit.
There is one more thing. 
Historical context. 
It is impossible to predict precisely where consistent adherence to one’s core values will position one in a shifting sociopolitical or economic landscape. However, organizations and people that center an expansion of civil liberties and human rights at the core of their values have seldom landed on the wrong side of history. Organizations and people that have sought to restrict those same rights to a limited few, or constrict those rights amongst the population in toto most often have found themselves on the wrong side of history. 
Apple, and others, would do well to ensconce those values as their perpetual True North; the opposition of governments, the policies and practices of industry, and the inconsistencies of public opinion of the day be damned. 
Tags: Apple, China