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When the MBA guys and Wall Street starts drinking their own cool-aid and believes that finance is what creates money - you have a problem.

Lee Hutchinson of Ars Technica once wrote that a junior engineer now at Boeing has no viable path for promotion towards the C-suite. The middle rank engineering teams have all been divested and the only way to rise up the ranks is to actually leave Boeing, work at a different company, rise up the ranks there and come back a decade later.

As I've said a thousand times: the sorts of MBA types you are describing here are the US equivalent to Soviet "apparatchiks."

This is the best kept secret in corporate America. The McKinsey and private equity crowds like to think of themselves as these innovative and wild capitalist cowboys, when really they're just a bunch of Soviet rent-seekers with better haircuts.

To add to the metaphor - for many behind the curtain - the soviet aparatchiks came imposed from a foreign country - Russia.

The only difference is that you're less likely to be sent to Gulag, or worse.

US apparatchiks come from a foreign country of sorts too: coastal elite cities and coastal top-ten universities. That world is as far from most of America as Moscow was from Ukraine.

Just because you're a good engineer doesn't immediately make you a good executive.

Of course not, but if none of your execs have any engineering chops then you're setting up for a world of pain.

When C-level people in an aircraft company start to lack engineering background en masse, we see what happens :( Boeing was once great.

Steve Jobs had a great explanation for this phenomena. Companies with monopoly power do not require or benefit from product development in any form on most reasonable investment horizons. In practice they can only benefit from increasing their market via marketing, or increasing profits by financial engineering. Eventually the promotion process of the company will leave you with Sales, Marketing, and Finance folks running the show.

Do you have a source for this? I’d love to read more about it.

This is the clip, but the whole interview is worth watching: https://www.youtube.com/watch?v=P4VBqTViEx4

AMD is what happens when you have someone who is both.

No, but in an industry as technical as semiconductors, I'd like to see the evidence that default-hire-MBA is ever better than default-hire-PhD.

AMD and TSMC both have always had technical leaders. Intel had a series of legendary technical CEOs during their most formidable years.

The first non-technical-PhD CEO they had was Otellini, but he had been there for 30 years before becoming CEO.

There will only be a discussion if you define what "good" means first.

I grew up in Wichita and knew a few aerospace engineers as friends when I was still a teenager. The revolving door between the big companies is well known and has been going since the 90s at least. They told me pretty clearly that you wanted to be jumping companies every couple of years because the poaching offers were always way better for advancement than demonstrating loyalty.

They don't get lazy.

Think of it like a career change at age 42.

Imagine being married with a couple of children and at 42 you tell your wife that you are going to spend all of your free time, and a lot of your money working on becoming a lawyer. You want to do this because you think your current career is topped out and you want to be prepared for the future. In 6-8 years you'll be ready for the career change, but you'll need to start at the bottom of the laywer pool and work your way back up, your expenses won't change, nor will your obligations, just your income, and it will go down substantially.

I worked in a startup and we had a product that cost $1k per seat and it was full featured and slick as hell, but we started getting competition from a company that was selling a bare bones product for $99 a seat. Our customers really liked their price, but they wanted our features, in the end price won and we started losing business to the competitor.

Because of my company we actually legitimatized a market for an certain type of after market computer cards, we spent a ton of time and money helping to build the surrounding ecosystem so that our product could have a market. Once we invested all the money, the competitor came along and could ride the ecosystem we built, but we still needed to cover all of our costs, hence our high price.

I spent a ton of time arguing with the BOD about pricing and volumes, but they had financial models they had to meet and an $89 product had no place, luckily for us we got acquired because of our expertise and the work that we did to create the market. If we hadn't been acquired we would have been overrun by our competitor, and it had noting to do with lazy.

The fault lies entirely on your previous company's management.

As Buffett says, "price is what you pay, value is what you get." Your ex-co failed to provide reasons why customers should pay for the value it offers.

Apple excels at this, despite naysayers saying that a premium consumer electronics is a "bad business".

They excel at it from the point of view of Tier 1 countries.

They want to stay the Ferrari, Bang & Olufsen of mobile phones and laptops.

>What we have seen with China is that if manufacturing leaves eventually R&D and design will start to leave too.

Yep, Apple et al. are reaping what they sow here. All their employees go find suppliers in Asia for their hardware. The travel schedules are so grueling that you basically have to be from the country/province where the supplier is located for it to be a tolerable job (free trips home!). So basically, we have Asian engineers seeking out Asian suppliers on behalf of an American company where only the top few levels are American. The chance those Asian engineers are going to cut out the American company in 10 years is high.

Just realized that while the ARM transition makes technical sense it probably increases the odds of Apple being commodified. Using X64 makes it at least somewhat harder for a competitor to do this by offering competitors fewer choices and higher component costs.

By pushing the PC, the nucleus of all development, to ARM they are helping push the whole software industry onto a heavily globalized platform with many vendor choices and generally available IP.

What wasn’t commodified to begin with about the PC industry? Or later, with the smartphone industry? There’s Apple and then there’s the commodity alternative with more market share globally etc.

To me this is Apple trying to stay ahead of ARM Chromebooks and the desktop-ification of Android/Chrome. If left alone another half decade, it’s possible that Chromium via either Google or Microsoft could have made more of a dent in the wider market than just education uses. Adobe is already facilitating creatives to cheaper Windows workstations.

Frankly, Apple investing in unique silicon for their software simply means it will be more unique, just as the iPad has defended its place through an unbeatable software ecosystem and “cheap enough” hardware. If the Mac can go “cheap enough” to iPad pricing, this is Apple carving out its niche and market for the decade to come...

To me this is Apple trying to stay ahead of ARM Chromebooks and the desktop-ification of Android/Chrome.

Right. ChromeOS is getting interesting. At first glance it seems to be even more limited and appliance-like than iOS, but now you can run both Android and Linux software in containers, which opens up many more potential uses.

I assume it’s the double justification for Apple’s marketing to have chosen the phrase “Apple silicon”. One of course is to steer the discussion away from the ARM architecture itself and any sense of commoditization. This was a problem with the intel transition, though they were in a tighter situation so simply didn’t message around it ... and that was fine.

The second justification though is that the CPU architecture is less significant on the system scale. The SOC really is a ”system” (we used to predict this in the 1990s but couldn’t get there then) with a lot of other some what specialized functional units designed to work together.

In that the A series are more reminiscent of the mainframes of old, where the CPU really was merely the central processing unit and a tremendous amount of processing went on in other processing units.

I know plenty of western-born people making regular trips to China and in charge of sourcing. Not sure where this claim is coming from but it doesn’t feel grounded on the reality I observed first hand. You realize Apple has something like 50k employees in the Bay Area. There’s very large teams responsible for hammering out the deals and engineering teams responsible for finding suppliers.

Apple has (well, had) many seats booked on Bay Area-China flights every day for people traveling between the two.

I think this statement is, in general, completely true. But it doesn't actually seem to apply to Apple, which continues to design many aspects of the iPhone. In part this is because Apple essentially funds and builds many of the factories it "outsources" to, which very few companies can afford to do.

This is an important point. When hon hai builds the plant they have to capitalize it over 40 years or so (per whatever the local equivalent of GAAP is). For Apple it’s a current expense. Now most companies would prefer the longer capitalization period (it will increase earnings) but but with apple’s huge cash reserves and almost by definition nothing better to invest them in than Apple growth, this lets them take advantage of the investment right away, then move elsewhere if the numbers look better.

What does capitalization over 40 years mean? They amortize plant costs over 4 decades? That sounds crazy because in this industry I would assume a plant would need to be completely retooled every 2-3 years.

Sorry, that was poorly written out. Under GAAP the building itself would typically have to be amortized for decades. A lot of the physical plant would need a lot of explanation to justify a short amortization period too (although not 40 years!) given that plenty of decades old plants still churn out chips at large node size. And There is, as I mentioned, an asymmetry in accelerating vs deferring the expense in terms of sector-specific stock market perception.

But I was lazy in conflating the two cases so thanks for pointing that out.

Before Boeing bought McDonnal-Douglas, Boeing had a lot of executives with engineering experience. After the merger, the MD executives took over, move the HQ to Chicago and started running it like MBAs.

> We still have a ton of great semiconductor design. AMD, NVidia, and Apple's semiconductor division are here. They just don't fab here.

I advise you to see how huge are the overseas captive outsourcing centres of all of said companies are.