Episode 1447 Scott Adams: Is it Safe to do Business in China?
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Content:
Is it safe to do business in China?
Uighur concentration camps
Forced, living organ donors
China has a reputation on par with Nazi Germany
Spyware, IP Theft, Unfair Trade Deals, Stability Risk
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Hello, everybody. Today's topic is, is it safe to do business in China?
If you're an American company, let's say, for example.
Now, I would say that in the past, if you looked at the risk and reward of doing business in China, you had a certain amount of risks, but the reward was so high because the cost advantage would be great, you could get things done quickly, perhaps.
And so in the past...
It was safe enough to do business in China that massive amounts of business went there.
But what's changed?
A lot. First of all, reputationally.
If you do business in China, now you're doing business with an entity that literally is running, I guess you'd call them, imprisonment slave labor camps for the Uyghurs.
I'm not sure what the right word is, but you don't want your company associated with that.
Imagine if you'd been doing business with Nazi Germany.
And then suddenly the world decides that that's a bad idea.
You don't want to be caught in that situation.
Likewise, we have the allegations that China is using political prisoners, the Falun Gong group, for example, as the sources of forced organ transplants.
So they're donors.
Do you want to be associated with that reputationally?
It's kind of risky.
It's a big risk, I would say.
What about China's fentanyl trade?
They're sending fentanyl to the cartels in Mexico, and then the cartels are putting it into pills, sending it to the United States, and tens of thousands of Americans are dying every year.
Do you want your company associated with prison camps, forced organ donations, and drug overdose deaths?
Because that's China's brand at this point.
And if you do business with them, you're taking on a little bit of that reputational risk.
What about the ransomware attacks?
What about the IP theft?
What about a number of things that they've been doing?
There are reports of bogus arrests.
If you went to do business in China, could you guarantee that you wouldn't be arrested on trumped-up charges?
Take me, for example.
Do you think I could go to China and they wouldn't be watching me and looking for a reason to maybe pick me up?
China's a pretty dangerous place at the moment because they're not answerable to anybody and they're looking out for their own best interests.
One of the big risks of doing business in China is that your cost advantage might be an illusion.
Because a robot, let's say a robot is designed in America to manufacture something, that robot's going to cost China the same thing as it costs an American company, because they're buying the same robot from the same place.
But if the robot makes something in America, you don't have these shipping fees for American customers.
If the same robot works in China, well, then they've got a shipping fee on top of the robot expense.
So in theory...
Robotics should make their business go away and the entire stability of China is going to be at risk if robots start taking those kinds of jobs.
So that could happen and it could happen fairly quickly.
So you don't want to be embedded in a country where the entire country has some instability.
You want to make sure that you're in a country that has fair trade deals and they're not going to change them after the fact.
I don't know if you could trust China there.
I don't know that you could trust China's courts if you get into any kind of a legal battle in China.
How's that going to go? Well, I think that they're going to prefer Chinese companies.
And so I would say that that's a pretty big risk.
There's also a big demographic issue.
I don't know if karma is real.
I'm not a new age kind of person.
But China is involved in some really, really bad stuff.
And if that doesn't come around and bite them in the ass...
I'd be surprised. Because it looks like everything is sort of going in that direction right now.
And then also there's the problem that China is banning the internet, or at least free use of the internet to its own population.
What happens to the Chinese government and its stability if people can't breathe and it's flooded and they can't get jobs and...
And there's a demographic time bomb, and all of it gets blamed on leadership.
In my opinion, the leadership of China is more vulnerable than maybe we realize.
I think that they could be a lot closer to having to make a big change, because their reputation could not be worse.
I mean, they have a reputation that's on par with Nazi Germany.
And that's real.
That's actually the way people are starting to see them.
So, if you're an American company and you've not made the decision to do business with China, consider that it's no longer just the cost and benefit of how much it costs to do business here versus somewhere else.
It's now you taking on a reputational risk.
And probably somewhere in the neighborhood of 30% to 50% of Americans would definitely make the decision to buy American, even if it costs a little bit more, if they have the option.
So imagine American companies simply targeting the Chinese manufacturing companies that are the most vulnerable, reproducing them in America.
Americans say, hey, thank you very much.
I like your robotic-made stuff, and I like your 3D printers, and we can do that here.
So, bottom line...
Nobody ever got fired for buying IBM equipment.
It used to be an old saying back when IBM was so dominant that if you bought their hardware and it didn't work, well, they'd fix it, and it wouldn't be your problem.
So they would make it work every time.
So you never got fired for buying IBM for your company because IBM made it work.
But could you get fired for making a decision to bring some part of your manufacturing or doing business with China...
When all of these risks are known, these are known reputational risks and financial risks and legal risks and everything else.
And if you know that there are risks, and you do it anyway, you're putting your own job in jeopardy.
So I think things might start changing pretty quickly, because in the United States, both the Democrats and the Republicans seem to be quite united that we should be making and buying things from America.
So, yeah, and I'm seeing in the comments somebody says, I actually get angry when I see China on a product.
Yeah, we're no longer talking about dollars and cents.
You know, one entity can produce things much cheaper than another.
Now you have to worry about the emotional part, the anger, the direction of things, the amount of animosity that Americans are starting to get against the Chinese government.
Not the people. We like the people.
And that was all I wanted to say today.
I just want to put that out there, that if you're a business leader and you're looking at China, you're putting yourself at great risk, reputationally and career-wise, and I can predict that things will probably get much worse for China before they get better.
