Apple as the direct-sales model
In the March 30, 2014 episode on the worst economic mistakes of the twentieth century, Bob Zadek raised Apple while explaining how automobiles are sold in the United States. He described a franchise system dating to the 1920s or 1930s in which manufacturers granted local business owners the right to sell cars within a geographic area, and he argued that over time franchisees accumulated political power — as collectors of sales tax, sponsors of Little League and other civic activities, and large local employers — and used it to obtain state laws protecting them from manufacturers. Under those laws, Zadek said, a manufacturer cannot terminate a franchise because it makes no economic sense, cannot terminate for a geographic area that has become less economically important, and cannot terminate even when the contract expires, so that a franchise can be passed to an owner’s children as part of an estate Worst Ten Economic Mistakes of the 20th Century (2014).
Zadek used Apple to contrast this arrangement with direct selling. A buyer who wants a computer can go to Best Buy and choose among ten or fifteen models from ten or fifteen manufacturers, he said, but a buyer who wants an Apple product has to go to an Apple Store, because Apple has chosen to sell direct. Ford, by contrast, is not allowed to sell direct, because state laws protective of franchisees forbid a car manufacturer from doing so; there can be no automobile-manufacturer equivalent of Apple, no Ford store owned by Ford, only a middleman. Zadek put the cost of that middleman at about $1,800 added to the price of a car, or roughly $25 billion a year, which he characterized as a subsidy and a wealth transfer to car dealers Worst Ten Economic Mistakes of the 20th Century (2014).
Tesla Motors, in Zadek’s account, wanted to follow the Apple model: to set up Tesla stores staffed by Tesla employees who would deal directly with buyers, would not be paid on commission, and would not be under pressure to sell but would explain how a technologically different car works. He read the Apple Store’s staff into the comparison directly, telling listeners to think of the techies they interact with at the Apple Store — high energy, smart, helpful, and in his experience never trying to sell anything. A soundbite from Elon Musk, identified by Zadek as the founder and CEO of Tesla Motors, described taking a page from the Apple playbook: selling directly to consumers, with no hard sell, no commission for employees, and uniform prices at every store, and training people to educate rather than to sell Worst Ten Economic Mistakes of the 20th Century (2014).
Zadek also described how Tesla worked around state prohibitions in states where it could not sell directly. Because the company would not have franchisees, it opened stores in malls rather than on auto rows; an employee would explain the car and arrange a test drive, but could not take an order, instead leading the customer to a computer terminal where the car was bought online, as one would from home. He framed the resulting fights as crony capitalism, said he was unsympathetic to the franchisees and invoked creative destruction, and described a New Jersey episode in which Tesla’s temporary permission to sell at a mall came up for renewal and the state’s Motor Vehicle Department shut the store down after dealers pressured Governor Christie Worst Ten Economic Mistakes of the 20th Century (2014).
Apple in the antitrust argument
Apple reappears in the November 4, 2020 episode on trustbusting Big Tech, in the context of the Department of Justice case against Google. Ryan Young described one part of the case as the allegation that Google pays large sums to Apple and to smartphone companies to make its browser the default, so that people will never use anything else. He said it is believed — the exact amount is not known — that Google pays Apple $8 to $12 billion every year just to make its search engine the default in iPhones, and that this payment is part of the complaint because it gives Google power that, according to the complaint, it should not have and should not be allowed to obtain Why Trustbusting Big Tech is a Bad Idea (2020).
Young’s argument against the case rested on the claim that Google has very little power, and he drew his example from the earlier Microsoft antitrust case over Internet Explorer. Microsoft tied its browser into Windows, made it the default, and made it so that people could not get rid of it or uninstall it if they preferred something else; yet within a couple of years of a lawsuit that ended essentially in a draw with very few actions taken, Mozilla Firefox, Google Chrome and Apple Safari had taken over. Microsoft Internet Explorer and its successor Microsoft Edge remained the default option for Windows computers, he said, but had a combined market share of maybe 15%, with the rest split mostly among Apple, Google, Firefox and other third-party browsers. From this Young concluded that consumers, not Microsoft, held the power, and that the same dozen keystrokes — typing bing.com into a browser, even Google’s Chrome — show that consumers hold the power rather than Google Why Trustbusting Big Tech is a Bad Idea (2020).
In that episode Apple figures only as a party to the alleged default-payment arrangement and as one of the browsers that displaced Internet Explorer. Bob Zadek’s own framing in the exchange concerned power as such: he asked where in any founding document the mission is for government to attack power simply because it exists, said that wealthy people have more power than less wealthy people and that NFL team owners have power he will never have, and argued that power per se is benign unless misused Why Trustbusting Big Tech is a Bad Idea (2020).
Across episodes
The excerpts show no development in the treatment of Apple. The 2014 episode uses Apple as a model of direct selling against state auto-franchise laws; the 2020 episode mentions Apple as a recipient of alleged Google default payments and as a browser competitor. The two treatments are advanced by different speakers — Bob Zadek in the earlier episode, Ryan Young in the later one — and address unrelated questions, so the excerpts do not show the same question argued twice.
What the sources do not cover
The excerpts do not describe Apple’s founding, its products beyond computers, phones and a browser, its executives, its finances, or any antitrust action brought against Apple itself. Nothing in the sources states where Apple is headquartered, when it was founded, or what its market share is in any market. The 2021 episode on debt and taxes mentions apples only as a metaphor for a taxed tree and does not discuss the company Debt & Taxes (2021).