
“Samsung Rising” goes deep on corruption, chaebols, and corporate chaos - Tomte
https://www.theverge.com/2020/4/10/21216092/samsung-rising-book-interview-geoffrey-cain
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eatonphil
I have a really hard time finding books on Korean companies, methods, or up-
to-date planning; particularly on Samsung, Hyundai, LG or new fields like
biotech/renewable; and preferably written by Korean journalists or academics.
On the other hand there's a lot you can find written about American or
Japanese companies like Taiichi Ohno on Toyota, John Bogle on Vanguard, MITI
and the Japanese Miracle, etc. I get that this is primarily a matter of 1)
impact and 2) population. But Hyundai, LG and Samsung are major international
companies now.

The few books on Korean companies I've read, written by Americans, have been
terribly pithy and missing a lot of actual history. I will still give Samsung
Rising a read though.

But if you have worked with Korean companies before and have any
recommendations for good histories of companies or methods, I'd love to get
them. Biographies are a little more common and a little less interesting to
me. Over biographies I'd prefer up to date recommendations on the Korean
economy and planning. Most of the books out there were written in the 90s/00s.

Edit: recommendations don't have to be in English, Korean is fine.

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lycidas
I recently read "Bad Samaritans" by Ha-Joon Chang and a lot of it giving an
overview of how the Korean economy developed in the 20th century.

~~~
eatonphil
Yeah! He's been on my list for a while. He's a prolific author.

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pcr910303
Okay, as a Korean, I would just like to chime in and say that Samsung is much
more than a smartphone/digital gadget company. It’s a very big company.

It not only produces displays and semiconductors, it also makes home
appliances, it builds apartments, it runs hotels, it runs hospitals, it issues
credit cards and runs insurance, etc... which means that the Galaxy Note 7
crisis is pretty much nothing to that gigantic company.

Also, keep in mind that a lot of Koreans (including myself) doesn’t think
Samsung positive — it’s hard to get unbiased opinions about Samsung (whether
it’s positive or not). So if you’re reading this, please take it with a grain
of salt.

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JohnJamesRambo
Can you go more into why you aren’t positive about Samsung?

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eatonphil
Not who you're responding to, but for just one possible reason look at Lee
Jae-Yong. He's the head of Samsung and was arrested in 2017 for bribery,
embezzlement, etc. Chaebols (name for families that run these mega-companies)
are both respected for success and disliked for corruption as I understand it.

While there are these mega-companies in RoK and Japan that have especially
"close" relationships with governments, I don't think it's that dissimilar
from the revolving door of lobbyists/board members/politicians in the US.
Citizens in the US are similarly critical of corruption at this level in
pharma, tobacco, military, etc.

At the same time, these companies are all responsible to varying degrees for
the success of the economy and first-world lifestyle in the US, Japan, RoK. So
you can't just want them not to exist either.

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Nokinside
Keiretsu-type groups that do everything in-house can prevent whole business
sectors from emerging.

In Japan the relative lack of independent software companies have been
attributed to Keiretsu structure. Software development was just in-house
activity to serve established product divisions. It was not seen as business
to be sold independently. For example, Toyota made whole integrated
CAD/CAM/CAE system called 'TOGO' in the late 90s.

As a result Japan has been mostly no-show in software business outside console
games. Software they develop is sold inside hardware.

~~~
eatonphil
Agreed, historically anyway. Older Koreans (judging by my in-laws) hear
"computer science" or "programming" and think of computer repairmen.

Oddly enough, Korea and Japan have even higher percentage of SMBs than in the
US (can't remember the link but the OECD published such stats). However
historically they served only as subcontractors to the chaebols and keiretsu
groups.

I think that's changing in Korea and Japan as of recently. In the last 20
years, there has been a rise in startups serving massive audiences in online
gaming, social media, and e-commerce. Think Nexon, Daum, Naver/LINE, Rakuten,
SoftBank, etc.

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bobthepanda
IIRC, one big type of sector that they received flak for when they moved into
it was bakeries. Food is one sector in Korea with a lot of SMBs, and at the
time it looked like they were trying to steal even more of the economy for
themselves.

[http://www.koreaherald.com/view.php?ud=20120126001019](http://www.koreaherald.com/view.php?ud=20120126001019)

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mncharity
> I’ve met hundreds and hundreds of very talented Samsung executives [...]
> people who are highly educated, highly competent. They know what they’re
> doing. They know both, say, the guts of a smartphone in addition to what
> business decisions need to be made to improve their company. And I’ve always
> gotten the impression that they can run the show themselves, that there’s
> really not much of a need this far into their corporate history for a
> founding family to oversee them.

This brought to mind the devastation of Boeing by MD corporate leadership. And
Jack Welch. I suggest the author is undervaluing the avoidance of high-
negative variance in top leadership.

The argument for _stationary_ bandit gangs is not that they're wonderful
executives, but that they have less toxic incentives than the roving bandit
gangs they displace. Asset stripping Samsung, and Korea, is not something Wall
Street, and some associated subcultures of corporate leadership, would be
unhappy to help with.

~~~
dba7dba
Having a family at the top of a corporation does usually lead to the firm
operating with long term vision more consistently.

Yes, if a Chaebol style leadership was in Boeing, MD corporate leadership
wouldn't have gotten the chance to ruin Boing. We all know that the take over
of Boing by MD leadership is why we have 737 Max.

I am sure there are many many hedge funds that would love to asset strip
Samsung or any other chaebol of S. Korea.

~~~
someguydave
This “family effect” is probably one reason for the success of German
“Mittelstand” export businesses.

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empath75
I will never buy a Samsung product again after the bait and switch they pulled
on their 4K TVs, advertising that they would be able to be used as smart home
hubs, continuously telling people it would be coming, and then quietly
cancelling it and making it an add on for the nvidia shield instead, without
so much as an apology or a press release.

Today I went to use their official iPhone tv remote app, and it said it’s
being discontinued and to use the SmartThings app, something that was broken 2
years ago in a firmware update to my tv, and has never been fixed. This tv
isn’t that old — 3 years old and it’s already on its way to slowly being
bricked with crappy updates and products being decommissioned.

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redis_mlc
Not all countries have the concept of a professional management class.

In Asia and India, the family owners/founders typically run the company, so
when you talk about corruption or nepotism, well, it's their family company.

You can even see that on a large scale, with Huawei's CFO being the niece of
the founder (who is PLA.)

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wenc
> with Huawei's CFO being the niece of the founder (who is PLA.)

I believe she's not the niece, but the daughter? I only know this because this
was big news in Canada.

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robomartin
I had the unfortunate experience of having a run-in with Samsung America over
a decade ago. They were a components supplier for a business I founded and ran
many years ago. They lobbied us to switch from LG to Samsung. They made
promises and helped us select sole-source components with, as they promised,
long EOL (end of life) timelines.

We devoted a multidisciplinary ten month engineering effort to design an
entire line of products around the components Samsung recommended. I won't
even talk about the money we spent. It wasn't trivial, particularly for a
small company. The way I can put it is, we bet the farm on Samsung.

I will never forget the day I emailed our distributor to plan orders for
production. I got a three sentence reply:

"These parts have been discontinued. There are no planned replacements. You
will have to redesign your products."

I have no idea why I didn't end up in the hospital with a massive heart
attack. I mean, this was a company-ending email. I must have stared at that
text for an hour before someone walked into my office and snapped me out of
the mental loop I was in.

What's worse is what they did after I raised hell. They lied and filed a TRO
(temporary restraining order) against us to prevent us from attending an
industry trade show where they, and, more importantly, their competitors, were
exhibiting. The TRO had a radius of a few hundred feet from the Samsung booth
at the show. We couldn't even park at the convention center.

Because of the TRO we couldn't go to the convention and talk to alternative
sources to try and find a solution. With sole-source components there are no
substitutes. Every company makes a unique version and you are absolutely
screwed if they EOL the part number you are buying. It's not like buying
resistors, where there are million alternatives. This is why a trade show was
almost the only way we could deal with this situation. It would take months
and much travelling, potentially outside the US, to be able to meet with other
manufacturers and evaluate options. The financial damage Samsung created with
their surprise EOL (after promising a seven year lifetime of the components
they selected for us) was such that we couldn't even buy a cheeseburger
without risking going out of business.

After the conference we could not attend I found myself in court in San Jose,
CA, for the TRO hearing. I didn't know anything about TRO's until then. If you
don't go to the hearing they can turn into a permanent restraining orders and
they go on your record. So, you have to take TRO's seriously or suffer
additional consequences. Once again, we couldn't hire an attorney due to the
financial damage Samsung caused...so I went on my own.

The judge was very surprised by two things. One, that I showed up on my own.
The CEO of a company doesn't normally go to court without counsel. Second, he
could not believe this TRO was issued. He understood why I was there on my own
and advised me to let him run this and say very little unless he asked
questions. Samsung's attorney was there with one of their Vice Presidents, the
guy who lied in the TRO declaration in order to secure it. The judge proceeded
to read these people the riot act. I wish I had it on video. He tore them a
new asshole, both of them. He told the attorney that if I had the money to
pursue it he could be disbarred but that they had caused so much damage that
the best outcome would be to cancel the TRO and advise me to lick my wounds
and move on.

He ripped them a new one more time and asked me how we were doing. I told him
"not well". He said, "I am sorry this fraudulent TRO was issues in the first
place. Clearly this caused much damage. I can't address it at this level. If
you recover financially you might consider consulting with an attorney for
further action".

That was the end of that story. It was like Samsung detonated a nuclear bomb
inside my company. We were in life support after that. We managed to stay
alive. We had designed a line of six new products that we could not
manufacture. We had no funds or financial path to redo them. Our competitors
were taking business away from us every day. Our entire product line
evaporated overnight.

We managed to redesign one of the products but it wasn't ideal or very
competitive. And then the 2008 economic downturn hit us. We somehow survived
until 2010, when I finally shut down the business. I ended-up in the hospital
twice in two years due to the inordinate amount of stress this caused.

I wrote a very dark email to one of my friends at the end of 2009. I told him
I now understood, in no uncertain terms, why people took their own lives
during financial catastrophes. He was at my office in the blink of an eye
concerned about what I might do. I realized reading it later that the email
sounded terrible. What I meant to say was that the pain and suffering all of
the above caused me led me to understand how someone --not me-- could make
that choice and see it as perfectly logical or necessary. That wasn't my case
at all. Well, I'll say that it was my kids and family who kept me together,
without them I could absolutely see someone with the right (or, more
appropriately, wrong) brain chemistry having a tragic ending under such
circumstances.

Entrepreneurship is hard, even without some of the tragic shit that can happen
for no reason at all. This is partly why I sometimes react very harshly to
people who, without any real experience building a non-trivial business, use
words like "greed" and beyond. Hence my favorite quote by Mark Twain: "A man
holding a cat by the tail learns something he can learn in no other way".

I am not going to extend my experience to the entire Samsung organization, yet
I am sure my words, over a decade after the incident, still communicate the
tension I feel every time I think about what they did to us, the jobs they
cost, the future they destroyed and the life-ending stress they were
responsible for. A shameful example of how financial asymmetry can stomp the
little guy. This also made me view the concept of Asian honor as a complete
fable. Maybe I was naive in believing such horseshit in the first place.

~~~
ypcx
Thanks for writing this.

Do you think they gave you the false EOL information knowingly, by mistake, or
was it a coincidence that all the parts got binned prematurely?

~~~
robomartin
No, I think the original EOL specification was truthful. What likely happened
is that a major customer canceled an order that was the basis for
extrapolating such a product lifetime. Unlike other companies, organizations
like Samsung and LG live for large contracts in order to be able to justify
spinning up assembly lines and build inventory. In other words, there are
organizations that exist to supply the industrial markets who will commit to
having a stable supply for years because that's the nature of the markets they
serve.

Once the key customer cancelled the order they had no way to manufacture these
products for the many small companies who were feeding off the edges. During
that time I met the CEO of another company who had a multi-million-dollar
government contract that was impacted by the same parts we were promised. He
was about to be sued by the US government for violating his contract due to
Samsung's premature EOL. It is likely that Samsung destroyed dozens of
companies when this happened.

BTW, I was dealing the Samsung America's Vice President at the time. In other
words, the top guy in the US. The promise came from him and various division
top management people. So, yea, it was one of those "you can take it to the
bank" promises.

In many ways this was a case of ethics and honor. Having made promises to
multiple small to medium companies they should have delivered product at a
loss and provided a reasonable runway for everyone to migrate designs.
Hardware isn't like software, you can't turn on a dime, even if you want to.
Realistically speaking, you need a two year run before new designs. Among
other things, your customers don't like it very much if they buy an expensive
product and you obsolete it six months later. And then there's the case of
having to provide a reasonable EOL for your own products as well as parts,
service and support. It can get complicated and messy very quickly.

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dba7dba
1\. Lobbying

Bribery (Korea) | Lobbyist (US)

S. Korea has no concept called lobbyist. Definitely no official lobbying firms
exist. So when a company or trade association wants something, it inevitably
turns into something like bribery.

2\. Dollar and oil

Won (Korea) | Dollar (US)

To be able to exist as a self determining nation in modern world, you need
oil. And you need a lot of oil if you want an industry and provide a decent
living standard. And oil is usually sold when buyer pays with with US Dollar.
US can just run printing presses harder if more $ is needed. And still keep
buying oil with no issue. S. Korea doesn't have such a luxury. And S. Korea
has to keep earning $ in order to be able to defend their nation (both
physically and to keep out undue influence) from
Russia/China/Japan/NorthKorea. And this is why those firms who can bring in
more dollars are valued in S. Korea. It's a matter of national survival.

The last time Korea wasn't able to defend itself, the royal family that had
been ruling the kingdom for 500+ years were literally tossed out to the
street. Empress Myeongseong was killed in court by Japanese backed thugs, and
her body was burned and buried unceremoniously.

And the Japanese occupation led to the nation being split in two. A kingdom
nation that had existed with same boundary for 500+ years. Much longer than
Germany.

And this led to the Korean war, war that brought a civil war to Korea that is
probably more devastating comparatively than the Civil War of US.

All because the nation couldn't pay for the things (people, material,
technology) needed to defend itself in 1910.

Even the much praised great preparedness against covid-19 in S. Korea was
possible because firms brought in $ which meant more tax revenue for the S.
Korean govt to use to pay for everything that is needed.

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anticsapp
This happens everywhere, the tech is in the mafia, the mafia is in the tech.

