What Foxconn’s really doing in Wisconsin, with Reply All’s Sruthi Pinnamaneni

Nilay Patel interviews Sruthi Pinnamaneni on The Vergecast Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Nilay Patel?

  This episode of The Vergecast is brought to you by Glenfiddich. 'Tis the season to celebrate. Treat yourself and the ones you love to a whiskey that delivers the perfect union of smoky and sweet. Try Glenfiddich Fire and Cane. Whether served neat or on the rocks, Fire and Cane challenges convention, packing equal parts citrus and sizzle in every sip. Learn more about the newest experimental whiskey from the masters at Glenfiddich. Visit glenfiddich.com/us. That's glenfiddich.com/us. Drinking involves risk. Please drink responsibly. Hey, everybody. It's Neil from The Vergecast. On this week's interview episode of the show, I interviewed Shruti Pennimanani, who is an incredibly talented producer and reporter over at Reply All. Reply All's episode last week was called Negative Mount Pleasant. It's an episode about Foxconn in Wisconsin.

• 0:45Nilay Patel?

  Foxconn, of course, is the huge Taiwanese manufacturing company that makes iPhones and TVs and every other piece of consumer electronics that you can think of. They're building a gigantic factory in Wisconsin. And Mount Pleasant is where I am from. It is where I personally grew up. It's where my family's home still is. And so it is wild that this huge company is building one of the biggest factories in the world in my hometown. It is extremely controversial. We've published some stuff on it, but Shruti went, she dug deep into what's happening with Foxconn in Wisconsin. She talked to the village president, this guy named Dave DeGroot. Dave was just a guy who took some classes, basically a boot camp on how to be a politician from some right wing groups.

• 1:27Nilay Patel?

  He became the village president of Mount Pleasant, and in his first week in office, he got the Foxconn. So there's just characters galore in her story. We talked about all of them. We talked about my conspiracy theory that all of this is a plot to capture the United States ginseng production, which is maybe true, maybe not true. And we talked about toxic sludge, basically all the stuff that Shruti wasn't able to get to in her great episode of Reply All. So check this out. Shruti's an incredible reporter, and frankly, for me, it was super weird to be talking about my hometown on The Vergecast with somebody from Reply All. Here we go. Shruti, Pinnamaneni. I got it right.

• 2:09Speaker 01

  You did.

• 2:10Nilay Patel?

  I'm super excited. Shruti, you are a reporter at Reply All.

• 2:13Speaker 01

  Yes.

• 2:14Nilay Patel?

  And you did something that to me is amazing. You went to my hometown, Mount Pleasant, Wisconsin. And you just produced, and what I will tell you is an absolutely wild episode about the small town politics of Foxconn, just dropping in the middle of our scene in Mount Pleasant.

• 2:32Speaker 01

  Yeah.

• 2:32Nilay Patel?

  So I want to start with like the very, very basics, which when I talked to you before and when I was listening to this episode, and I really encourage everyone to go listen to this episode of Reply All. It's so, so good. You were already looking into Foxconn, and then they landed in Wisconsin. And you're like, I should look at that. And then you fell down a rabbit hole of village board meeting archive videos. And then somehow you pulled the story. Just walk me through that, because that is already crazy.

• 2:59Speaker 01

  Yeah. So, so much of the story, first off, is just purely an accident. So after Trump won the election, I was really, there were like specific things that I was really drawn to, which felt like issues where, from the Democrat's side, I mean, they believe things that I would expect them to believe, a different thing, and ditto for Republicans, right? And so manufacturing was one of those things for me, because traditionally, you would think Democrats would be the ones that are really gung ho about bringing jobs back and really focusing on that. And it was surprising to me so, how much of the news coverage was like, jobs that can't be brought back.

• 3:43Speaker 01

  I mean, this is sort of like foregone conclusion feeling to things, and I really wanted to question that. And so I was taking a bit of a contrarian approach and being like, okay, everybody says the iPhone can't be made in the US, right? They're saying it's going to be too expensive, or it's just like, there's no way to get all these components back into this country. And so I was looking for people who were trying to do crazy things like that, like sort of make a thing. Soup to nuts like in the US, a thing that people said couldn't be made here. And so somehow I wandered off from that path to Foxconn. Because I was looking at Foxconn's attempt to build this huge factory in Brazil. And then while I was doing that, just bam, in July of last year,

• 4:28Speaker 01

  there was this Trump announcement saying, hey, we're bringing this huge Foxconn factory to Wisconsin.

• 4:35Speaker 02

  This is a great day for American workers and manufacturing, and for everyone who believes in the concept and the label "Made in the USA."

• 4:47Speaker 01

  And so right away, I thought, okay, I should look into that. And I had a certain set of assumptions coming in, having already looked at Foxconn in Brazil and India. And that was, they're going to come in big, they're going to make a bunch of promises, and then the project is going to be stalled. And that is not what happened. What happened was, they moved incredibly quickly. The Trump announcement was in July, and within, I believe, eight months, they were already breaking ground.

• 5:16Nilay Patel?

  Yeah.

• 5:16Speaker 01

  Which I don't think anybody expected. And so I started to really look at the local level to see like, how are they pulling this off? How are they doing it this fast? And that's how I found the village board meeting today.

• 5:31Speaker 03

  I come before the board today to talk about the same subject everyone has been for the last three months: Foxconn. As you can tell by my address, I am one of those who are probably going to lose my house. But then again, no one knows where this is going, right?

• 5:47Speaker 01

  After having done a ton of reporting, it's hard to imagine that this project is going to play out in the way that the most optimistic people think that it will. And a lot of people that I spoke to who moved out of their homes and said to me, you know, I did it because this is important, we need this. I don't know if they're going to get what they want.

• 6:06Nilay Patel?

  Yeah. So let me just back up and just kind of levels it. So Foxconn is a huge manufacturing concern headquartered in Taiwan. They have facilities in China. They make the iPhone, they make the Xbox, they work for every big tech company. They decided to drop into Wisconsin. Scott Walker and President Trump said, we'll give you, depending on who you ask, somewhere between $3 and $5 billion worth of tax subsidies. And in exchange for promising $10 billion investment. They promised a bunch of $50,000 jobs, average $50,000. If you do the math, the state is going to pay Foxconn $200,000 per $50,000 job. That doesn't pay back for like 30 or 40 years, or never, depending on who you ask. And then the plant was designed to make, what, 75-inch TVs?

• 6:50Nilay Patel?

  That was what they promised. That's already been scaled back to making like Android tablets or something, and it could get further scaled back.

• 6:57Speaker 01

  Yeah.

• 6:57Nilay Patel?

  And so you're saying, this is Foxconn's history. They come in big, they ask for whatever they're gonna get, and then they scale it down and scale it down. And the people in Wisconsin, who are saying, we've gotta just try, you think they're gonna end up disappointed?

• 7:10Speaker 01

  I think so. And I think that sucks because, again, I'm not a manufacturing job skeptic. Like, I did speak to people who were like, you know, the thing that people want to do? Bring back tech jobs or manufacturing jobs. It can be done. You just have to be smart about it. But there was a feeling of, hey, it can be done, and so why are we doing this thing, which seems like the odds are really stacked against it?

• 7:34Nilay Patel?

  This is so weird for me. This is home. Like, I was just there for Thanksgiving, and to get to my parents' house, you have to drive down KR, that little local highway, which is a total mess, and that's where Foxconn is.

• 7:48Speaker 01

  Yeah.

• 7:49Nilay Patel?

  Like, I just drove by, I was like, well, there it is.

• 7:52Speaker 01

  It's a huge crater in the ground, and it's impossible to really imagine until you're there how large it is. The PR person told me, it's, he said it'll be one of the largest manufacturing campuses in the world.

• 8:06Nilay Patel?

  That's crazy.

• 8:07Speaker 01

  Yeah, it's crazy. So it's four and a half square miles, just the Foxconn project. There's all these side areas as well, so imagine like four and a half miles one way, four and a half miles another way. And yeah, it's, it's just, right now, obviously, just like, flat.

• 8:22Nilay Patel?

  You know how you spend, the longer you spend away from where you're from, the more you're from there? I'm very much in that mode now. I'm the most from Wisconsin now that I have not been there for over a decade. I caught this in your story too, when I was listening to it. Wisconsin's full of very optimistic, good-natured people. I like being from there. I like being from the Midwest in that way. And Foxconn is gonna take advantage of that better nature. I can, you can just feel it, that they're not being 100% honest. They weren't already not 100% honest with what they were promising, what they were saying they're gonna do. The kind of side deals they're making, The Verge has reported on. So they put $100 million in the University of Wisconsin.

• 9:00Speaker 01

  Yeah.

• 9:00Nilay Patel?

  In exchange for that, they have this extremely ambiguous, like, patent-sharing agreement.

• 9:06Speaker 01

  Yeah.

• 9:06Nilay Patel?

  That has all the grad students freaked out. That they're gonna do engineering research and it's gonna get turned over to Foxconn. And they're not gonna be really responsible or accountable for that.

• 9:14Speaker 01

  Yeah.

• 9:15Nilay Patel?

  You can already see that playing out, like.

• 9:16Speaker 01

  Yeah.

• 9:17Nilay Patel?

  And everyone is saying things to me, or things to our reporters at The Verge, like, "Well, it's not every day $100 million shows up, so we should try." Which is the same thing they're saying to you.

• 9:26Speaker 01

  Totally. And it's interesting, when you look at Foxconn specifically, it's either like a bogeyman or savior. It's like everybody's... It's such a vacuum of actual information about how, what the company wants.

• 9:38Nilay Patel?

  They wouldn't talk to you, right?

• 9:39Speaker 01

  No. And they sent me the best response I've ever gotten, where they... They said, "Listen, we can't talk to you because it's our policy not to talk about any ongoing projects or any clients." So it's really, it's like, "We just don't talk."

• 9:53Nilay Patel?

  Yeah, they haven't spoken to us either.

• 9:54Speaker 01

  Yeah. So don't take it personally. Don't talk to anyone. It's because there's a vacuum of information about Foxconn's motives. It's interesting how much the optimism has filled that. Like, of course they want to come here, because this is just, like, who wouldn't? But the issue is, like, Foxconn, weirdly, even more so than, like, the American businessmen, they're like, super smart and strategic. They're like, proper capitalists. You know what I mean? Like, they're coming in with a real plan for how can we do the thing that we actually want to do.

• 10:29Nilay Patel?

  But, by the way, just to be... Let me set this... There's Racine, Wisconsin. Over time, Racine has gotten bigger, and the little, like, suburb neighborhood that I grew up in, Mount Pleasant, became a village of like 20,000 people. So the first time I talked to you, I was like, "Mount Pleasant's not a place."

• 10:45Speaker 01

  Oh, so you're from Mount Pleasant proper?

• 10:46Nilay Patel?

  Yeah.

• 10:47Speaker 01

  Oh, damn, okay.

• 10:49Nilay Patel?

  Yeah, I'm out there. I'm in the sticks. So my parents' house is now technically in Mount Pleasant, Wisconsin. Which, when I was growing up in, like, the 80s and 90s, like, was just part of Racine.

• 10:57Speaker 01

  Yeah.

• 10:58Nilay Patel?

  So Wisconsin's getting bigger, so we keep talking about Mount Pleasant. It's just right next to Racine. They're just on top of each other.

• 11:04Speaker 01

  It's a suburb that doesn't even have the feeling of being an actual village. It's not like there's a center to it with a main street. It's just a sort of neighborhood sprinkled around between just big fields or sort of like...

• 11:19Speaker 01

  Strip malls.

• 11:21Nilay Patel?

  Anyhow, so the village president of Mount Pleasant, this guy Dave de Groot, tell me his story because I think it's kind of amazing.

• 11:28Speaker 01

  Okay, so Dave de Groot, who really did not appear in any of the reporting that I have seen about this Foxconn project, but once you start listening to these village hall recordings, and again, village hall is just the place where the residents of Mount Pleasant, they go to listen to their village government, which is the village president, Dave de Groot, and his six village trustees. It's almost like a business meeting where they're talking about whatever local important thing, from a softball game to sort of certain yards that are overgrown right now and need to be dealt with. So the residents go there to listen to the public meetings and also there's a chance for them to go up and just speak their mind about anything for three minutes. So that's village hall.

• 12:11Speaker 01

  And so as I was listening to these recordings, it quickly becomes clear that President Dave de Groot is really, one person said to me, he runs the place as if he were the mayor, right? And he, it is really, I think he has a set of priorities and it was clear that Foxconn was a thing that he personally was invested in. Before I met him, I knew that he was very much in the party of Scott Walker. His Facebook banner, it was a picture of him shaking hands with Scott Walker. And so the whole thing started when Foxconn put out this anonymous RFP to a number of places, Wisconsin, one of them. I'm assuming that, no, I'm not assuming, I know this.

• 12:52Speaker 01

  The state of Wisconsin immediately was interested and they had a team of people, negotiators, who were mostly, my understanding is Scott Walker, who is a politician with no business experience, a few banker types, like finance guys. And they immediately said, okay, we need to get this. And then when it trickled down to the local level, You have someone like Dave DeGroot, who is suddenly in touch with his hero, Scott Walker.

• 13:18Nilay Patel?

  Yeah.

• 13:18Speaker 01

  Like, he said that Scott Walker's office was calling his office almost every day, just to say, you know, constantly like, what do you need? How can we make this happen? Like, really giving, you know, in his eyes, support.

• 13:28Nilay Patel?

  Yeah.

• 13:29Speaker 01

  I think the other way to see that is maybe they really wanted it, you could say cynically, for political reasons, or generously, they wanted the political benefits, but also the jobs. But for him, you know, they were like on the same team, and also he's on the same team with President Trump. So I think for him, this is like a big moment for him.

• 13:47Nilay Patel?

  And this is like his first week in office.

• 13:49Speaker 01

  Exactly. And so that was the other very surprising thing to me. He had just won the village presidency, like the local village elections. So this was April of 2017. He said, within a week on the job, he first saw that letter. And so it's almost like he's catapulted, right, to the state slash White House level. And I think that was very intoxicating.

• 14:10Nilay Patel?

  How did you become a politician?

• 14:12Speaker 01

  It's a little shadowy. I really scraped the internet to find all the information I can on Dave DeGroot. When I did interview him, I tried as hard as I could, and I think I'm generally pretty good at getting people to open up about their background, but he was very, like, careful about what information he was gonna give. There was a PR person there who's very careful.

• 14:31Nilay Patel?

  Yeah.

• 14:32Speaker 01

  But here's what I know about Dave DeGroot. There's a group called American Majority that likes to take people who are of a Tea Party bent and really train them in politics, like, teach them about fundraising, teach them of what it takes to get into local politics, kind of refine their views and their, just their talking points. And so he was part of this, I'll call it a boot camp. I think they selected about eight people, and he was one of them.

• 14:57Nilay Patel?

  Wow.

• 14:57Speaker 01

  Yeah. And so he was a village trustee in another small town, Elmwood Park, I think.

• 15:02Nilay Patel?

  Elmwood Park is right next to, right next to Non-Plausible.

• 15:04Speaker 01

  So that was his first entry point into village politics, and then...

• 15:09Nilay Patel?

  I used to get my hair cut in Elmwood Park. That's like, that's where I'm at.

• 15:11Speaker 01

  So funny. And then in 2015, he became a trustee in Mount Pleasant. And then last year, he won the village presidency. And he did really well. I just want to be clear. And this was after his boot camp. And so the thinking is, he came out of that boot camp, like really having the backing of local tea party slash conservative folks. And so they really helped propel him into power.

• 15:35Nilay Patel?

  Wow.

• 15:35Speaker 01

  The thing I didn't know, but really blew my mind, is none of the people on the village board, this is not their job. They're elected, but they're all part time. So Dave DeGroot, it's a little unknown exactly what he does, but he seems to be loosely like a landlord with some apartments. And so, yeah, it's not as if he's coming into this with any real business or government experience.

• 15:59Nilay Patel?

  So here's this landlord from, from Racine or Mount Pleasant. He goes to boot camp to become a politician. He ends up as the village president of like a 20,000 person community that's next to a much larger community.

• 16:11Speaker 01

  It's about 26,000, yes.

• 16:12Nilay Patel?

  And then $10 billion of Foxconn, it's dropped on his lap. Is he in charge?

• 16:18Speaker 01

  In charge would be overstating it because I would say very much the people at the state level are in charge. But they found in Dave DeGroot, a person who was very, very receptive.

• 16:30Nilay Patel?

  Yeah.

• 16:31Speaker 01

  And I do believe that there were neighboring towns who were also part of this competition to bring Foxconn there. And they dropped out because, especially Kenosha, which I'm sure you know. Kenosha dropped out because they said, hey, this doesn't make any sense for us. This is just, Foxconn is asking for way too much. And so the mayor didn't think that it was good for his residents.

• 16:55Nilay Patel?

  Yeah.

• 16:56Speaker 01

  And so really, at the end, it was just Mount Pleasant. There was nobody else.

• 17:00Nilay Patel?

  So now he's got leverage, but he doesn't use it. He just gives everything away.

• 17:03Speaker 01

  Yeah. So, so my point is that I do think that Dave DeGroot had power in that if he was very much against the deal, I don't know if he would have been the ideal partner for Scott Walker's team.

• 17:15Nilay Patel?

  So you have all this tape from these board meetings. They're like fighting. There's like other people who are against it and he's kicking them out.

• 17:24Speaker 04

  This is enough. You're out of order. You're out of order. You're out of order once more and you're gone. These are residents of our community. If I hit this gavel one more time, you're gone for the rest of this meeting.

• 17:38Nilay Patel?

  How did the opposition to this in this community develop?

• 17:43Speaker 01

  It's so much more complex than that. And I find it so fascinating in that it's more complex than I expected. They're not even debating it with him, right? There's no moment where Dave DeGroot said to the residents, hey, you have all these questions about Foxconn, and I just want to say they might be coming. We don't know yet. Here's my opinion. He never said the word Foxconn until the deal was done and signed.

• 18:08Nilay Patel?

  Wow.

• 18:08Speaker 01

  Right? And so what was actually happening is residents heard rumors that there's first it was just something big is coming. They assumed it was a development. And I think a lot of people were excited because, like I say in the story, everybody I spoke to agrees that people want development there. It's not an anti-development community, or like an anti sort of corporate community. But they didn't know who was coming. And the other main character in the story, Kelly Gallagher, who's this local activist, she said she started to get worried because they were hearing so little information. And so she was trying to get her friends at local government to tell her what's going on. There were whispers, maybe it's Foxconn. And then there's the Trump announcement where he's

• 18:52Speaker 01

  saying Foxconn is coming to Wisconsin. People put two and two together and they say, oh, they're probably coming to Mount Pleasant. And so they start going to these village hall meetings and saying, tell us what's happening. Like, is this going to affect my home? Are my taxes going to go up? Who's going to get these jobs? Just really basic questions. But the village board, the president and his trustees would just sit there and watch. They never responded. And so the reason things started getting tense is because people were having real emotional reactions but getting nothing in return. And so, yeah, you can just hear nerves fray, you know?

• 19:30Speaker 04

  That's enough, sir.

• 19:30Speaker 05

  Can I respond to that?

• 19:31Speaker 04

  No, sir.

• 19:32Speaker 05

  You responded to me.

• 19:33Speaker 04

  No, sir.

• 19:33Speaker 05

  Let me respond back to you.

• 19:35Speaker 04

  Go sit down.

• 19:36Speaker 05

  What? Now, you're going to respond to your taxpaying citizens?

• 19:39Speaker 04

  Do you want to be called out of order?

• 19:41Speaker 05

  We can't respond back to you.

• 19:42Speaker 04

  No, sir.

• 19:44Speaker 05

  That is totally wrong, sir.

• 19:44Speaker 04

  Go sit down.

• 19:46Speaker 05

  Who are you talking to, man?

• 19:47Speaker 04

  You're out of order.

• 19:49Nilay Patel?

  And then he had to apologize to everybody.

• 19:50Speaker 01

  It's so, it's so raw, it's so hard to listen to every single time. I've heard it maybe 25 times at this point. And they're not even fighting about Foxconn. They're just fighting about whether or not a person can speak.

• 20:02Nilay Patel?

  Yeah.

• 20:02Speaker 01

  That's it. It's the most basic kind of fight about what it means to be in a place that has some kind of democratic process. And so I just, I felt like there were a lot of ideas and tensions and kind of weirdnesses in there.

• 20:17Nilay Patel?

  Yeah. The other one that got me, and then I want to actually talk about Foxconn.

• 20:20Speaker 01

  Yeah.

• 20:21Nilay Patel?

  Was that they're moving people out of their homes. And they're paying a lot of money. They're paying $30,000 an acre, like some 10x number.

• 20:28Speaker 01

  Yeah.

• 20:28Nilay Patel?

  What you would normally get for this land. But they're asking people to leave. They're paying the money. And then they're moving people into houses that maybe, there was one gentleman, I think he was in a wheelchair, and he needed to make his house accessible. They won't give him the extra money to make his new house accessible. And I thought that, just listening to that, I was like, heartbroken.

• 20:46Speaker 01

  Yeah. It's so hard to imagine why the village decided to do it this way. Because in the negotiations with Foxconn, the parcel of land that they needed to get ready for Foxconn right away, so they gave themselves a deadline of August 1st. And so by August 1st, they had to get about 60 homeowners off of this very large, we're talking like almost two square mile area of land. And the way they did it was, the village said, "Foxconn, you don't need to go individually and do the buyouts and buy the land. We will do it for you." In fact, the village is also paying for that land. Like, they took out, I believe it was over $100 million in loans, just to pay for the land. So the village,

• 21:31Speaker 01

  your village, now pleasant, is paying a mortgage on land that they collected from their own residence and gave, not sold, not rented, gave to Foxconn.

• 21:42Nilay Patel?

  That's insane.

• 21:42Speaker 01

  It is, it is odd. It's not what you expect a village to do. But, and just to get to Sean. They're not set up to do this kind of operation. Like, the Board of Trustees, they're not real estate brokers, right? And so, everybody I spoke to, even people who were for the deal, who lived on that land and had to move out, said, "The process was so chaotic. So many things fell through the cracks. There was all this confusion about what money, who was gonna get, how, like, just getting the relocation fees." And I think most of the people took the deal that the village was offering, because they know the village is doing this. And so, the threat of eminent domain was always hanging above the whole process, right? So, there wasn't room for negotiation. So, a lot of them took the deal.

• 22:27Speaker 01

  And then, the few people that didn't, yeah, that's really where it gets super contentious. But Sean is one of those people who took the deal, but still kind of fell through the cracks, because he ended up in this house with four children, and he's in a wheelchair. And the village argues that, like, they already gave his mother the money. His mother owned the house that he lived in. But at some level, I don't know, even standing there, I was like, "There is a lot of money in this project, and it's strange that this is the way they're cutting the corners." It's, it's hard to swallow.

• 22:59Nilay Patel?

  Yeah, and it just seems like what you want to do is make everybody excited, and $20,000 against $10 billion, or $4 billion of subsidy, should just probably get rounded away.

• 23:09Speaker 01

  Because they're spending so much money, I can't, like, if you look at the breakdown of the numbers, so, they've taken out all these loans, right? And so, you've got hundreds of thousands of dollars that they're paying, the village is paying right now, for all kinds of, they call it "other services." But just to give you an example, every time I interviewed Dave DeGroot, the village president, there was a fancy PR person from Milwaukee, who drove from Milwaukee to be there.

• 23:32Nilay Patel?

  Wow.

• 23:32Speaker 01

  You know, so, they're spending a lot more money than they're saving on a person in a wheelchair, living in a really shitty house with his four very young children.

• 23:41Nilay Patel?

  Yeah. Every time I, I mean, you know, we, we cover tech companies. We're very used to fancy PR people. And every time I reach out to these folks, I'm like, "Hey, I'm gonna be in town, I'd love to meet some of y'all." And I get these emails back, I'm like, "This is pro PR. Absolutely pro PR."

• 23:58Nilay Patel?

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• 25:34Nilay Patel?

  Thanks to our sponsor Dell. Learn more about Dell Cinema's amazing color and Intel Core i7 processor at dell.com/xps13. That's dell.com/xps13. So let's talk about Foxon, and I want to transition to it by just referencing this thing that Dave Groot told you.

• 25:51Speaker 09

  That's what drives the technology market is new whiz-bang stuff for kids as they're...

• 25:59Speaker 09

  As they're getting through school and getting into their income earning years.

• 26:03Nilay Patel?

  I listened to that and I was like, y'all got played. Like you straight up got played. This isn't how it works. What Foxconn makes here is not what the kids are gonna buy in Best Buy. The end, the local engineering talent, like there are engineering schools in Wisconsin. The University of Wisconsin has some good engineering schools. So Foxconn like doesn't make a ton of consumer products. They have three brands. They have Belkin, which makes like iPhone cases and cables. Apple loves them actually. They have WeMo, which is like the smart plugs home stuff. And they have Linksys, which is the router company. And they own like a majority share of Sharp, which is not the world's most popular TV company. If you're expecting Foxconn to show up and invent stuff, that is almost certainly not gonna happen in this area.

• 26:48Speaker 01

  What struck me right away when I was talking to Dave DeGroot and basically everybody else on the state side, the village side who were working on this deal, was this real disconnect between what I understood Foxconn to be and what they were saying it was. So in my mind, Foxconn is a very practical, smart company that manages to make money in a sector that's very difficult to make money. They operate on very skinny margins, right? And that's why they, they have these big operations, like a lot of people working on a thing that is expensive, but it works out. They can make it for less. And like you said, I always think of them as a company that puts together things, like they don't invent things.

• 27:32Speaker 01

  Did you know that they make like more than half of the world's gadgets? Like more than half of the world's electronic stuff is just put together by Foxconn. That blew my mind. But when you talk to somebody like Dave DeGroot and he's just spinning these ideas of like, it's not even Silicon Valley. It's like beyond Silicon Valley, right? Like this is the company that's gonna do sort of flying autonomous cars and healthcare.

• 27:56Nilay Patel?

  Did they say the phrase, my favorite phrase?

• 27:58Speaker 01

  Which one?

• 27:59Nilay Patel?

  AI 8K plus 5G.

• 28:01Speaker 01

  Oh, Foxconn did. I talked to this Foxconn analyst, his name is Alberto Muel, he's in the story, but he told me when he listened to the announcement, the Foxconn announcement, where you have the chairman standing next to President Trump and saying what they're going to make in Wisconsin, my first thought was vaporware. I mean, this is just nonsense. What are they talking about? But anybody you talked to in Wisconsin who was, you know, working on this deal, did not know that. And I just couldn't understand how, how? How do you not know that? I mean, just pick up the phone and call a tech consultant. It's not that hard.

• 28:33Nilay Patel?

  Yeah.

• 28:33Speaker 01

  I spoke to this investigative reporter Larry Tabak, who was in Madison, so he was really closely following the negotiation process. And he said, I called several flatscreen consultants. There's not that many. And he said, nobody had talked, nobody was on the negotiating team. They didn't have any Asia consultants either. And so it was really, you know, they're not going into this negotiating room prepared. Because on the other side, you have people, the Foxconn folks, who are extremely prepared.

• 29:02Nilay Patel?

  Yeah.

• 29:02Speaker 01

  Right? This is what they do. And so, yeah, I mean, the ideas of what Foxconn is going to make, and this WisCon Valley, and what it's going to be, it really is out of, I don't even know what kind of movie.

• 29:15Nilay Patel?

  I mean, it's funny that they think it's going to be beyond Silicon Valley. Silicon Valley doesn't even make-

• 29:19Speaker 01

  Make stuff. Yeah, I know.

• 29:20Nilay Patel?

  Right? They make software. There's a really popular TV show on HBO that you could watch, and be like, what actually happens here? And it's obviously a comedy, but it's closer to what happens in reality-

• 29:30Speaker 01

  Yeah.

• 29:31Nilay Patel?

  -than some dream of a huge manufacturing facility.

• 29:33Speaker 01

  I didn't understand what was propelling this thing forward. I really didn't. I didn't, when I started reporting the story, I didn't understand what Foxconn was getting out of it. I mean, obviously, there's a lot of subsidies, but I thought, but still, does the math really work out in their favor? And I didn't understand what Wisconsin thought they were getting out of it. And when I really started speaking to people like Dave DeGroot, it takes your breath away, really, because you're like, oh, wow, you really think of technology in a way that I do not. You see it. It's not just a thing of the future that is coming now. It is also a thing that lasts forever. You're shaking your head. I know that.

• 30:12Nilay Patel?

  It's just like, I'm having like a visceral, physical reaction to this. Cause it's hot, like they could have just asked.

• 30:18Speaker 01

  They could have just asked and, and it's, I know, because that's the part, it's like, I don't want to be the skeptical person who goes into a small town and says like, this is stupid. But it's just like, there are people who know these things and look at these things for a living. Just pick up the phone.

• 30:34Nilay Patel?

  Yeah. So the thing about that is even the history of the tech industry is we understand it is not very long. Even just now.

• 30:43Speaker 01

  Yeah.

• 30:44Nilay Patel?

  Intel, if Intel was coming to Wisconsin, and I bring up Intel for a very specific reason, I'll get to. If Intel was coming to Wisconsin, would people be excited? We're going to build all our chips in Wisconsin. Well, maybe, right? It's a big company, famous name. Intel is in a moment of complete disarray. They're looking for a CEO, they can't compete on chips. And this company is not that old. So if you're making some permanent bet that's going to pay off in 50 years.

• 31:09Speaker 01

  Yeah.

• 31:09Nilay Patel?

  The idea that any tech company, even one of the ones that we think are permanent.

• 31:14Speaker 01

  Yeah.

• 31:14Nilay Patel?

  It's just, it's kind of scary.

• 31:17Speaker 01

  It, it is extremely scary and a lot of the people who are making these bets don't know that. I mean, haven't, I can't blame them for not thinking through what's going to happen to this factory. Because I honestly didn't really grapple with it until I, I spoke to this historian of factories. That is a job.

• 31:36Nilay Patel?

  It's wild. You have a cool job.

• 31:39Speaker 01

  And he told me this thing at the end of the interview that I was like, I've never thought of that. He said, um, you know, when you look at the lifespan of a factory, it's coming down. Right? So a factory like the Ford factory, the T model factory in Detroit, that lasted about 60 years. And he said, that's a very old factory, but factories now don't last that long. Anecdotally, he was saying he thought it was about 10 years. Canada has some data that says that factories there last about nine years. That's nothing. And we're talking about building giant places. Like factories are not small, right? And so it's kind of like saying, let's build big stadiums for sports that won't exist in eight years.

• 32:19Nilay Patel?

  And also to make a thing. Like, display technologies come and go.

• 32:23Speaker 01

  Yeah.

• 32:24Nilay Patel?

  Right, so this is an LCD plant. My phone right now has an OLED screen in it. My TV is an OLED screen. I think LCDs are gonna be around for a long, long, long time.

• 32:32Speaker 01

  It's an old technology, yeah.

• 32:33Nilay Patel?

  But you can buy a 75-inch LCD TV for like 500 bucks. And so it's like, not even the most expensive or best thing. And the closest I can get to understanding AI 8K plus 5G. I can't even say it, it's so embarrassing. Is that we're all gonna roll around in self-driving cars powered by AI, watching 8K TVs that are delivered over 5G. And like, Foxconn makes one part of that value chain.

• 33:00Speaker 01

  Yeah.

• 33:01Nilay Patel?

  Right, they don't make the Waymo car. We just did a big report on Google's Waymo taxi service in Arizona. That's made by Chrysler and it's full of a bunch of Google stuff.

• 33:10Speaker 01

  Yeah, yeah.

• 33:11Nilay Patel?

  Right, and like, they don't make... Qualcomm has all the patents on 5G. That's why they're demoing it in Hawaii right now.

• 33:16Speaker 01

  Yeah.

• 33:16Nilay Patel?

  That's their stuff. So like, the part of it that is Foxconn, it's like, you didn't even like, look at... They gave you this alphabet soup of letters. You didn't even look at like, who owns the letters.

• 33:27Speaker 01

  They just have a different view of Foxconn. And I'm not sure what it's based on, honestly. It's like, this is a company that is... Makes so many different things and is a multi-billion dollar company, which is one of the biggest employers in the world. So I'm sure those things are what they chose to focus on. And even when Foxconn said that they wouldn't talk to me, they did send me their standard response to all questions related to Wisconsin. And it was, basically, we're committed to doing the thing that we said we were gonna do. It is gonna be $10 billion in investment. It is gonna be 13,000 jobs. And we really believe in Wisconsin. Like, they're going with the party line.

• 34:06Nilay Patel?

  Yeah. There is pressure that the governments at every level can put back on them. Right, like tariffs on iPhones are real, that will hurt their business. They don't keep these promises or stuff. There's penalties that they will face.

• 34:17Speaker 01

  Yeah.

• 34:17Nilay Patel?

  But that's over a very long timeline.

• 34:19Speaker 01

  Have you seen the actual, the fine print of the deal with Foxconn? Like, the actual financial agreement? It's really that moment that the whole thing crystallized for me, where I was like, oh. Foxconn's gonna be fine. Like, they're, this is, I'm sure they're doing it to hedge against tariffs, and I'm sure there was some political pressure, but when you look at what they're getting, there's just no reason they wouldn't have said no.

• 34:44Nilay Patel?

  Yeah.

• 34:44Speaker 01

  So, basically, once the factory is up and running, they've agreed to pay the village of Mount Pleasant $30 million in property taxes, which is nothing to sneeze at, but the village of Mount Pleasant is gonna spend $18 million of that just to pay off its loans, like, just to pay off the interest of its loans, and then they're gonna give $10 million back to Foxconn.

• 35:07Nilay Patel?

  That's amazing.

• 35:07Speaker 01

  And then the rest of it just goes into expenses. So, they actually don't make any money off the deal. When I talked to the consultant who worked on the finances of the deal, so he's actually, you could say, he's like, one of the architects of the incentive package, both at the state level and at the local level, he said, "The reason I think it's conservative is because we're just banking on the Foxconn factory, just this factory, but we imagine we're gonna get way more in property taxes, more than $30 million, because there's going to mushroom around this factory, all these other parts of the supply chain." Like, it's gonna be this booming manufacturing hub. But when I asked him, like, "But what is that Foxconn factory around which all these other things are gonna mushroom up? What is that factory gonna make?" He doesn't know.

• 35:51Nilay Patel?

  Yeah.

• 35:51Speaker 01

  Nobody knows.

• 35:52Nilay Patel?

  You just assume you're gonna bring in all these jobs, and then they're gonna need, I don't know, restaurants, right?

• 35:59Speaker 01

  I spoke to this, like, this person who studies economic development packages, and he said, he's in the story, actually, David Swenson, he's the sort of grumpy gnome of an economist you hear. He was like, you know, there's, um, the thing that they're trying to do in Wisconsin, it's never worked. It's never worked for a government to say, "We're gonna create this huge tech hub." And he said, "The few people who have tried that," he pointed me to a town called Normal, Illinois.

• 36:22Nilay Patel?

  Yeah.

• 36:23Speaker 01

  Do you know the story of the Mitsubishi plant? It's a little similar in that Mitsubishi said, "We're gonna put this factory in Normal, Illinois," even though nothing related to car manufacturing is close to there. We're just gonna assume that people will come, like, sort of come up organically, and it'll just flourish because, because. And it didn't.

• 36:44Nilay Patel?

  Yeah, that's basically the story of small-town America all over the place. So, one of the reasons we were told that Foxconn had to be where it is, is because LCD manufacturing takes a lot of water.

• 36:55Speaker 01

  Yes.

• 36:55Nilay Patel?

  And they need to just, like, siphon water from the Great Lakes. So when I was driving through this area in November, just at home, I'm like, "Wow, they're digging up everything, and there's just massive conduits everywhere." And that's because they need all this water.

• 37:09Speaker 01

  Yeah.

• 37:09Nilay Patel?

  Are they gonna get it? Because the new governor kind of doesn't want to give it to them, right?

• 37:13Speaker 01

  No, they were told they were gonna get it. There's a pipeline already that is being built from Racine to the factory site. But there's a lawsuit against it. So there's people who are saying that you cannot use the Great Lakes water for a private corporation that's sitting, like, not even fully within the basin.

• 37:30Nilay Patel?

  Yeah.

• 37:30Speaker 01

  So that's, I think they're arguing it in a couple of months.

• 37:33Nilay Patel?

  And they're gonna presumably create a bunch of, like, toxic sludge.

• 37:36Speaker 01

  So much toxic sludge. Like LCD plants create, like, several, several, several tons of sludge a day. And this Foxconn factory sits on wetlands. A lot of their environmental regulations were waived. They don't have to actually, like, be careful about what they do with the wetlands as they build the factory. And they haven't yet said what they're gonna do with the toxic sludge.

• 37:58Nilay Patel?

  That's an amazing thing to have not yet discussed.

• 38:01Speaker 01

  Yeah.

• 38:01Nilay Patel?

  And it seems like that's the new governor's primary point of leverage.

• 38:05Speaker 01

  It is, but let's see. I mean, yeah, he still has to contend with all the local politicians who are not so, who might have a different feeling about the environment than he does.

• 38:16Nilay Patel?

  When I spoke to someone in Racine, they said, "You know, where we're seen in there, I'm not pleasant." It was just like a very, like, "Okay."

• 38:22Speaker 01

  I heard that a lot.

• 38:23Nilay Patel?

  Understood.

• 38:24Speaker 01

  I did hear that a few times.

• 38:25Nilay Patel?

  Okay, so here's my conspiracy theory. And this has been reported out a little bit.

• 38:28Speaker 01

  Yeah.

• 38:29Nilay Patel?

  Foxconn is, they're in Wisconsin.

• 38:31Speaker 01

  Mm-hmm.

• 38:32Nilay Patel?

  They also own, like, a premium ginseng business in China. Which is amazing. It's an amazing sentence that I love. And they are buying and partnering and investing in ginseng farms all over Wisconsin.

• 38:46Nilay Patel?

  And so my theory is that this factory is like a ruse. And before you know it, the people of Wisconsin are gonna wake up and realize that they all work for ginseng farms.

• 38:54Speaker 01

  Wow.

• 38:54Nilay Patel?

  And it's all been terraformed into like ginseng central and it's been like a sneaky diversion.

• 39:00Speaker 01

  Totally. The thing that you should add, which I think gives some weight to your conspiracy theory, is that 95% of American ginseng is grown in Wisconsin. And do you know who loves American ginseng? Chairman Teri Gao.

• 39:14Nilay Patel?

  See, that's there. That's like the vergiest verd story I can come up with is Foxconn swooped in and bought up all the ginseng in America.

• 39:22Speaker 01

  There is one other conspiracy theory, which is sort of, I think, much more sinister.

• 39:27Nilay Patel?

  Yeah.

• 39:27Speaker 01

  Water. They're there for the water. The Great Lakes, last remaining, the largest source of fresh water remaining. And they're coming from a part of the world where water isn't easily accessible.

• 39:40Nilay Patel?

  Yeah.

• 39:40Speaker 01

  To me, having looked at the numbers, I think they're coming because they were given enough subsidies to come. But yeah, there are a lot of resources that are being spent from ginseng to water on a company where we're not sure exactly what their plan is.

• 39:55Nilay Patel?

  Yeah. I think that's the piece of it where it's, you've got the people in Wisconsin who run Wisconsin.

• 40:00Speaker 01

  Mm-hmm.

• 40:00Nilay Patel?

  And they're not talking to Teri Gao. Right, they're, they're talking to Foxconn functionaries. Who are just there to hit their numbers and move on. And I, that disconnect, I think no one is, no one's particularly happy about.

• 40:12Speaker 01

  Yeah.

• 40:13Nilay Patel?

  Whoever Dave DeGroot is talking to at Foxconn, they're gonna get promoted in a year and leave. And then there'll be some other executive in charge of just a factory. And I don't think anybody has given that disconnect enough credit. I don't think anybody has thought about, who am I gonna hold accountable?

• 40:26Speaker 01

  Mm-hmm.

• 40:27Nilay Patel?

  It's just this company and they're gonna pay the money and do whatever they wanna do. At the same time, I do share like that slight optimism. You know, the Verge published a big piece about Foxconn right before the elections.

• 40:38Speaker 01

  Uh-huh.

• 40:39Nilay Patel?

  And I sent it to my parents and like, my dad's a Republican, my mom's a Democrat. They had like wildly different responses to this.

• 40:45Speaker 01

  Yeah.

• 40:45Nilay Patel?

  But they're like, don't you hope it works out?

• 40:47Speaker 01

  Yeah.

• 40:48Nilay Patel?

  And that's, that to me is like, I'm still from the Midwest, right? Like, that, that feeling is still there. So what is the best case scenario?

• 40:55Speaker 01

  Gosh. Honestly, I think a best case scenario is Foxconn builds something and maybe it's close to what they say it's going to be. Just LCD screens, it's going to create a lot of jobs and they do actually pay people what they say they're going to pay. Right now, they promised to pay an average of 50 something thousand dollars, but if you look at the fine print, they can actually pay people far less. But if they actually turn out to be a good partner and they do create good jobs, like family supporting jobs, I don't know. It just seems like, even as I say it out loud, we just shouldn't be hoping for the best. I think, I think the way to do it, if you're in government, is go for

• 41:38Speaker 01

  the thing that you can get. You know, there are things in Wisconsin where you can make stuff, like robotics is a really, it's a flourishing sector in Wisconsin. Like, fund people who are doing good things and like, you know, build it from the ground up instead of trying to go after some mysterious sort of-

• 41:56Nilay Patel?

  Ginseng conglomerate.

• 41:58Speaker 01

  Yeah. Yeah. But yeah, the best case scenario is that they build a thing and they do make jobs and they are careful with the environment.

• 42:06Nilay Patel?

  Yeah. You know, it's interesting, is there's other huge tech companies in Wisconsin that nobody ever talks about. So like, Epic is like the world's largest healthcare software provider. It's privately owned. It's just like, they're up there in Monaca, they're like doing it. And like, why don't you give them 10 billion dollars and see what happens to them? Like-

• 42:22Speaker 01

  Yeah.

• 42:23Nilay Patel?

  That to me is like the hard part, but we'll see what happens. Shruti, thank you so much for joining. We were like, you gave us so much time and I'm so appreciative, but-

• 42:32Speaker 01

  Thank you for having me. Yeah. And it's a subject that I'm so deeply fascinated with, so I could talk about it forever.

• 42:39Nilay Patel?

  Well, look, I'm going home for Christmas. I'll let you know if there's any updates.

• 42:42Speaker 01

  Seriously.

• 42:42Nilay Patel?

  And we'll have you back soon. Thank you so much.

• 42:44Speaker 01

  Okay, good. Thank you.

• 42:46Nilay Patel?

  All right. So that was Shruti Pennimaneni from Reply All. Thank you so much, Shruti, for coming on the show. If you haven't yet listened to Negative Matt Pleasant, which was Shruti's episode about Foxconn in Wisconsin, go listen to that now. It is absolutely wonderful and I highly recommend it. We'll be back later this week with more of the Regular Verge Cast and every Tuesday with more interview episodes. I love hearing from you on how this is going. Please tweet at me, I'm at Reckless. I'd love to hear from you about who we should interview and what we should cover. It's tremendously valuable. We'll see you later this week. And now, another word from our sponsor, Dell.

• 43:17Speaker 10

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