Real Coffee with Scott Adams - July 24, 2021


Episode 1447 Scott Adams： Is it Safe to do Business in China？


Episode Stats

Length

8 minutes

Words per Minute

150.58191

Word Count

1,268

Sentence Count

76

Hate Speech Sentences

10


Summary


Transcript

00:00:00.620 Hello, everybody. Today's topic is, is it safe to do business in China, if you're an
00:00:07.140 American company, let's say, for example. Now, I would say that in the past, if you
00:00:12.840 looked at the risk and reward of doing business in China, you had a certain amount of risks,
00:00:17.220 but the reward was so high because the cost advantage would be great, you could get things
00:00:22.620 done quickly, perhaps. And so in the past, it was safe enough to do business in China
00:00:29.380 that massive amounts of business went there. But what's changed? A lot. First of all,
00:00:35.440 reputationally. If you do business in China, now you're doing business with an entity that
00:00:40.660 literally is running, I guess you'd call them, imprisonment slave labor camps for the Uyghurs.
00:00:49.400 I'm not sure what the right word is, but you don't want your company associated with that.
00:00:54.240 Imagine if you'd been doing business with Nazi Germany, and then suddenly the world decides
00:01:02.980 that that's a bad idea. You don't want to be caught in that situation. Likewise, we have
00:01:08.220 the allegations that China is using political prisoners, the Falun Gong group, for example,
00:01:15.240 as the sources of forced organ transplants. So they're donors. Do you want to be associated
00:01:25.000 with that reputationally? It's kind of risky. It's a big risk, I would say. What about China's
00:01:32.560 fentanyl trade? They're sending fentanyl to the cartels in Mexico, and then the cartels are
00:01:38.860 putting it into pills, sending it to the United States, and tens of thousands of Americans are
00:01:43.720 dying every year. Do you want your company associated with prison camps, forced organ donations,
00:01:51.660 and drug overdose deaths? Because that's China's brand at this point. And if you do business with
00:01:58.260 them, you're taking on a little bit of that reputational risk. What about the ransomware
00:02:04.160 attacks? What about the IP theft? What about a number of things that they've been doing? There are
00:02:10.800 reports of bogus arrests. If you went to do business in China, could you guarantee that you wouldn't be
00:02:17.520 arrested on trumped-up charges? Take me, for example. Do you think I could go to China, and they
00:02:24.800 wouldn't be watching me and looking for a reason to maybe pick me up? China is a pretty dangerous place
00:02:31.340 at the moment, because they're not answerable to anybody, and they're looking out for their own
00:02:36.060 best interests. One of the big risks of doing business in China is that your cost advantage
00:02:42.860 might be an illusion. Because a robot, let's say a robot is designed in America to manufacture
00:02:50.060 something, that robot's going to cost China the same thing as it costs an American company,
00:02:55.860 because they're buying the same robot from the same place. But if the robot makes something in
00:03:01.900 America, you don't have these shipping fees for American customers. If the same robot works in
00:03:07.620 China, well, then they've got a shipping fee on top of the robot expense. So in theory,
00:03:15.940 robotics should make their business go away, and the entire stability of China is going to be at risk
00:03:23.760 if robots start taking those kinds of jobs. So that could happen, and it could happen fairly
00:03:29.620 quickly. So you don't want to be embedded in a country where the entire country has some instability.
00:03:36.560 You want to make sure that you're in a country that has fair trade deals, and they're not going
00:03:42.480 to change them after the fact. I don't know if you could trust China there. I don't know that you
00:03:47.800 could trust China's courts if you get into any kind of a legal battle in China. How's that going to go?
00:03:53.820 Well, I think that they're going to prefer Chinese companies. And so I would say that that's a pretty
00:03:59.840 big risk. There's also a big demographic risk in China. There's a climate change problem. There's
00:04:06.960 a pollution problem. There's some military provocation going on. And let's not leave out karma.
00:04:16.860 I don't know if karma is real. I'm not a new age kind of person. But China is involved in some really,
00:04:25.920 really bad stuff. And if that doesn't come around and bite them in the ass, I'd be surprised. Because
00:04:32.800 it looks like everything is sort of going in that direction right now. And then also there's a problem
00:04:39.240 that China is banning the internet, or at least free use of the internet to its own population.
00:04:45.560 What happens to the Chinese government and its stability if people can't breathe and it's
00:04:53.980 flooded and they can't get jobs and there's a demographic time bomb and all of it gets blamed
00:05:01.000 on leadership? In my opinion, the leadership of China is more vulnerable than maybe we realize.
00:05:09.500 I think that they could be a lot closer to having to make a big change because their reputation
00:05:14.440 could not be worse. I mean, they have a reputation that's on par with Nazi Germany. And that's real.
00:05:21.900 That's actually the way people are starting to see them. So if you're an American company and you've
00:05:26.980 not made the decision to do business with China, consider that it's no longer just the cost and
00:05:33.660 benefit of how much it costs to do business here versus somewhere else. It's now you taking on a
00:05:39.620 reputational risk. And probably somewhere in the neighborhood of 30 to 50% of Americans would
00:05:46.840 definitely make the decision to buy American, even if it costs a little bit more if they have the
00:05:52.580 option. So imagine American companies simply targeting the Chinese manufacturing companies that
00:06:00.820 are the most vulnerable, reproducing them in America. Americans say, hey, thank you very much.
00:06:06.060 I like your robotic made stuff. And I like your 3D printers. And we can do that here.
00:06:13.780 So bottom line, nobody ever got fired for buying IBM equipment used to be an old saying back when IBM
00:06:22.060 was so dominant that if you bought their hardware and it didn't work, well, they'd fix it and it
00:06:27.580 wouldn't be your problem. So they would make it work every time. So you never got fired for buying
00:06:32.320 IBM for your company because IBM made it work. But could you get fired for making a decision to bring
00:06:41.260 some part of your manufacturing or doing business with China when all of these risks are known? These are
00:06:47.880 known reputational risks and financial risks and legal risks and everything else. And if you know that there
00:06:54.800 risks and you do it anyway, you're putting your own job in jeopardy. So I think things might start
00:07:02.500 changing pretty quickly because in the United States, both the Democrats and the Republicans
00:07:07.540 seem to be quite united that we should be making and buying things from America. So yeah, and I'm seeing
00:07:17.780 in the comments, somebody says, I actually get angry when I see China on a product. Yeah, we're no longer
00:07:23.460 talking about dollars and cents. One entity can produce things much cheaper than another. Now
00:07:29.820 you have to worry about the emotional part, the anger, the direction of things, the amount of
00:07:38.020 animosity that Americans are starting to get against the Chinese government. Not the people. We like the
00:07:43.780 people. And that was all I wanted to say today. I just want to put that out there that if you're a
00:07:48.840 business leader and you're looking at China, you're putting yourself at great risk reputationally and
00:07:54.760 career-wise. And I can predict that things will probably get much worse for China before they get
00:08:00.920 better. That's all I wanted to say today. One topic. And thanks for listening.
00:08:05.380 All right.
00:08:09.300 All right.