Tariffs and The End Of Affordable Computing w/ Steve Burke

0:00This is an iHeart Podcast.

0:30Thomson Reuters and specialized bikes have since they upgraded to the next generation of the cloud. Oracle Cloud Infrastructure. OCI is the blazing fast platform for your infrastructure, database, application development, and AI needs, where you can run any workload in a high availability, consistently high performance environment, and spend less than you would with other clouds. How is it faster? OCI's block storage gives you more operations per second. Cheaper? OCI costs up to 50 % less for computing, 70 % less for storage, and 80 % less for networking. Better? In test after test, OCI customers report lower latency and higher bandwidth versus other clouds.

1:12This is the cloud built for AI and all your biggest workloads. Right now, with zero commitment, try OCI for free. Head to oracle.com slash strategic. That's oracle.com slash strategic. Wells Fargo has awarded$138 million in grants to nonprofits, supporting military and veterans with housing, small business, career transition, and more over the last 10 years. It's one of the many ways Wells Fargo seeks broad impact in communities. Wells Fargo, the bank of doing. Learn more at wellsfargo.com slash say do. Support includes contributions from Wells Fargo and Company and the Wells Fargo Foundation.

1:52This week on a very special episode of Health Discovered, we're taking a closer look at a condition that affects hundreds of thousands of men each year, prostate cancer. I first found out about my cancer at the age of 45. Anything with cancer, you just think death sentence. In this episode, we'll explore the science behind detection along with the practical steps men can take to protect their health. Listen to Health Discovered on America's number one podcast network, iHeart. Open your free iHeart app, search Health Discovered, and start listening.

2:34Coming up, will Steve Burke of Gamers Nexus be able to help Ed Zitron understand tariffs? Should we treat Sam Altman's new startup like a venereal disease? And who is the mysterious, identical man living in Kevin Roos' mirror? All this and more on this week's Better Offline.

3:00Good grief.

3:10Better Offline. That's right, you're listening to Better Offline. I'm your host, Ed Zitron. As a reminder, you're now able to buy better offline merch. Check the episode notes for a link, of course. More importantly, today I'm joined by Steve Burke, the host of The Incredible Gamers Nexus, someone I've wanted on the show since I started it. Steve recently put out a three-hour-long video called The Death of Affordable Computing, and it's the single best way I've seen anybody explain the current tariff situation. Steve, thank you for joining me. Oh, thanks for having me. Yeah, I'm excited to talk more about it.

3:40so is there any way you can break down in simple language how these tariffs actually work uh i mean effectively the the tariffs are they're effectively a tax right that's paid on import so the goods come in from any any other country that's potentially tariffed and the company bringing those goods in has to pay some amount uh in order to complete bringing them in and so So that then gets passed on to somebody. Maybe they absorb some of the cost. Maybe they increase the price of the product. But tariffs in general, of course, not a new concept. And it's just this particular round of them has affected the computer hardware industry in a larger way.

4:23So they're paid by the people receiving the goods. So like Haight or CyberPower or whomever receiving a case, for example, would pay the tariff before they even shipped it to someone. Correct. Yeah. I mean, it's the same all the way down to the smallest companies. We spoke to Louis Rossman as part of that piece. He's known best for probably right to repair. And he's a good example where as a small repair shop in Austin, Texas, he's got maybe six or so employees. He personally doesn't, as he said in the video, bring in the goods, but he buys them from someone who does. So, you know, then that person would be the one importing them and paying the tariff.

5:02So what made you want to make this video? because you've done a good amount of pc industry stuff but tariff feels like a jump from you not an illogical one though yeah tariff was it's a big topic and it was very challenging uh to try and approach because for us the the number one reason to get into it was just we're starting to see the impact on computer hardware and a lot of companies had things to say about it so that was the obvious reason to maybe look into it the hesitations from us initially were this is a topic that is very difficult to completely isolate from politics which we try to stay away from but it's also important and it does affect what we talk about every day which is value and pricing but the other challenge is that this is not something where i can claim to be an expert like global trade you might imagine yeah it's a big yeah it's a very large topic but that made it interesting to us because it was one of those like okay so we're we're closer to where you might expect most viewers to be in terms of knowledge where you're just getting the information daily with the one exception that we might have better access to companies that do have a lot of experience with this stuff and maybe no one person can break down global trade for us uh and we've all seen economists on tv and whatever uh but what we could get is people talking about just how does it affect them and their company and then hopefully with that put together a fuller picture that's you know a little more maybe like a pragmatic approach to it so that that was uh yeah that was the way to break it down for us so for the listeners who haven't watched the video and i say this as someone who can barely make it through a half an hour video watch the whole bloody thing what is how what are the current effects what are the the things happening today to say pc manufacturers that people might not know about it's interesting so might not know about makes that interesting um the ones that people do know about i'll keep brief here but just days ago microsoft moved to increase pricing of its xboxes uh logitech has increased prices of its peripheral components, keyboards and mice, and so forth.

7:22And this is something we're going to see. At Corsair, I was just speaking to them. They're about to increase the price of some of their computer cases that we're in the process of reviewing. And that's kind of the obvious one. That's the one people expect. There's also, and having listened to some of your previous episodes, I think this might be a topic you'd want to get into, but there's also some room for greed, corporate greed, where this is a great cover story for them to change some prices. But then as far as answering the question, like what effects might people not know about, I think there's some really interesting ones sort of down chain in the supply chain where things like logistics and freight and shipping companies are starting to have to deal with potentially reduced hours.

8:17And so you think about the supply chain, like to get a product from a country to another country, just to make it in, say, China, a motherboard might require something like 100 factories if you tally all of them, including the metals factories. And so you've got all those impacts. And then you have the freight and the couriers, the port the dock workers the couriers on the other side the warehouse workers right it's just a huge chain and it's really it can't be elastic it's got to be pretty rigid uh one of the interesting ones we're seeing though is some of the factories um from some of the companies i was just speaking with are beginning to adjust their terms so factories will allow terms of payment to be potentially partially up front and partially on completion of order some of them are starting to adjust to front load more of the upfront cost or all of it and that's because they have kind of gotten scared of potential order abandonment when companies can't afford the tariff they abandon the container and stiff the factory yeah and so so that'll have this unseen impact later where it's going to affect the cost of money companies have to borrow money a lot of times to bring this stuff in they have to pay more up front oh so they'll be borrowing more money up front because otherwise they won't be able to afford the orders that are now more expensive on the front end.

9:43Yeah, and then they pay interest for a longer period of time. That gets factored in. So it's just really like, the more you talk to people, the more there's all these hidden consequences that pop up. And the one thing everyone kind of drove home was, it's not to them the tariffs themselves that are necessarily the problem. It's sort of the way they were being rolled out where it was, at least for a couple weeks, they're nearly daily changes and unpredictable. I did like during the video watching as you went from person to person saying, okay, right now, this tariff is this. By the end of this conversation, it may not be.

10:22Yeah. Insane way to run global trade. You had a few examples as well where it kind of looked like certain things would just double in cost for the company, that they would just be paying effectively nearly double or like if it's 120 bucks to buy something they're paying 100 bucks on top how is any of this sustainable i think i mean yeah for the computer industry i'm not sure that it is sustainable there's already there's already been price creep that is not anything to do with tariffs i it just over the last several years the companies yeah i mean they've they have big markets to sell into and so if you're a small-time consumer or gamer you use adobe premiere with the cuda gpu you're just not at the top of the priorities and the only way to get closer to the top is to pay a whole hell of a lot more for the components so like there's already been price creep when you say pay a lot more for the components who is paying more there it's it's the consumer i mean right yeah so it's really the high-end stuff is the best it you have why do you have to buy the more expensive stuff is it just that it will be the cheap ones are having to use lower quality components or is it something else well it's it's interesting because it's almost like the this question i think is it the real answer is that cheap stuff doesn't exist anymore huh like the the cheap products are gone and this is pre-tariffs this is like it's only getting worse but you look at gpus and nvidia with its dominance has has managed to slowly shift the low end into the mid-range in terms of pricing and the mid-range into the high end in terms of pricing but not in terms of necessarily performance scaling and so you're already paying disproportionately more for what you're getting versus several years ago and this is beyond inflation this is beyond tariffs you stack something like massive tariffs on top of it and people who are already kind of struggling to justify a purchase of an expensive gpu i was looking at rtx 5090s which are supposed to be about a two thousand dollar video card uh about a week or two ago i haven't checked today but and the cards were typically in the$2 ,900 to$3 ,000 range.

12:51Jesus. Yeah, and that includes on shelves at micro centers and some of that's going to be tariff impact and some of it is just kind of price creep.

13:10Parking shouldn't slow you down. ParkWiz gives every driver a shortcut. Book ahead. Save up to 50 % and skip the hassle of circling the block. Park smarter. Park faster. ParkWiz. Download the ParkWiz app today and save every time you park. This week on a very special episode of Health Discovered, we're taking a closer look at a condition that affects hundreds of thousands of men each year, prostate cancer. I first found out about my cancer at the age of 45. Anything with cancer, you just think death sentence. In this episode, we'll explore the science behind detection along with the practical steps men can take to protect their health.

13:52Listen to Health Discovered on America's number one podcast network, iHeart. Open your free iHeart app, search Health Discovered and start listening. Mint is still$15 a month for premium wireless. And if you haven't made the switch yet, here are 15 reasons why you should. One, it's$15 a month. Two, seriously, it's$15 a month. Three, no big contracts. Four, I use it. Five, my mom uses it. Are you playing me off? That's what's happening, right? Okay. Give it a try at mintmobile.com slash switch. Upfront payment of$45 for three-month plan,$15 per month equivalent required. New customer offer first three months only.

14:28Then full price plan options available. Taxes and fees extra. See mintmobile.com. This is LeVar Arrington from Two Pros and a Cup of Joe. Toyota is moving forward a more sustainable future by giving you the freedom to choose from an incredible lineup of trucks. Now available in both gas and hybrid models, including the legendary Tacoma and powerful Tundra. Both available with the iForce Max Hybrid powertrain and backed by Toyota's legendary reputation for reliability. More choices, less compromise. Visit BuyAToyota.com for a great deal on an efficient Toyota today. Toyota, let's go places.

15:14it does kind of feel like well to the title of the to the title of the video it's like the end of affordable computing has already kind of happened because it doesn't seem for and for our less technical listeners when we say 50 70 50 80 50 90 referring to uh nvidia graphics cards on the consumer side so the things you put a computer so you can see what's on your monitor and also play games steve i'm sure you'll love that technical explanation yeah it's great but it's i nearly said uh 3dfx there for a second aging myself uh but it feels like those lower end ones aren't even anywhere near as good as you did a video on this as well that the 5070 5080 the lower end or mid-range ones just are nowhere near as good as mid-range and lower end used to be yeah it's the i think the the most understandable version of this in terms of when we were trying to figure out how do we communicate what's happening to people was we came to the word shrinkflation which people are familiar with except instead of a bag of chips where you get well maybe you should explain what it means just sure yeah yeah so the concept being that and again to preface this you know we're experts on hardware not economy but like this this is stuff that it all kind of bleeds together in a way we get familiar with it but shrinkflation being the concept of you go to a store to buy your bag of chips or your bundle of toilet paper or whatever and you get fewer items for minimally the same cost as it used to be so it sort of disguises the change in value, the cost per unit or whatever that you're getting then you apply this to electronics and the version of it is you buy the video card or the CPU and maybe you have fewer, lower performance, relatively speaking, than you would have had in previous generations while still spending at least the same but likely more.

17:13And one of the things that, you know, this kind of deviates from the tariffs discussion, but one of the things I'm concerned about is as cost for consumer electronics goes up, especially things like computers uh and especially it's caused by things like the current tariffs there's an opening for companies like nvidia to push for more of a lack of ownership model so like they have services where you can play games over the internet streaming kind of like netflix was it geforce now that's right yeah and and this creates a great opening for these companies to step in and say, you know, we're so sorry, you can't afford our cheapest model$550 video card to play games or to render videos, you know, or do 3d modeling.

18:06But good news, we have something for you. And it's$50 a month. And you can use it for, you know, this many hours. And in between, maybe we'll do ads, or maybe we turn on and off the different services you have access to. And so that's one of my concerns is it's another step in furthering the you-own-nothing-ness of the current consumer economy. It kind of feels as well, and you hinted at it earlier as well, where it's like, these companies are, Microsoft's raising the price of the Xbox. I don't imagine that's coming down. I don't get the sense that Microsoft is going to say, don't worry everyone.

18:46that everyone on wall street by the way they the markets love it when we charge less so we're going to bring this down as an ethical company it just feels like a that there are the immediate near term effects where its prices are going to increase but just no one is going to like no no one's going to bring these prices back down at the end of the tariffs no one really understands what's going on so they it almost feels like they'll be able to kind of push it under the rug and obfuscate what they've actually done as well. Yeah, I think there's a couple of things going on where there's, it's interesting.

19:25Normally we, as in GN, we're in a very cynical mindset for a lot of our coverage and that's just the nature of it. It's not necessarily adversarial, but it's untrusting, I would say, of what companies are saying. And so part of that in this situation is, okay, there are avenues here for companies to get the price increases they've wanted, but they've needed an opportunity to do it. But at the same time, unlike most of the other stories we cover, this one is so wide-reaching and industry-impacting with the sporadic nature of the tariffs application and also the high percentage of them that there are real consequences and it is hurting companies.

20:14So you've got this mix, right? Where it's like, we can't be too cynical this time because there are real world impacts, like with height, where they were just going to lose money for computer cases that they sell if they continued to sell them into the US market. And so they've abandoned it. They decided we don't need to sell to the US. We'll send them somewhere else, which is crazy. That's a large part of their business. Yeah, it was, I want to say the number, the product director rob teller shared during the interview i think he said 65 revenue it was from the us yeah and um but at the same time you know so that's a real that's where it's it's not helpful to be cynical because this is a real impact to this company we've seen their numbers uh but then on the flip side of that back to the cynicism you look at a company like microsoft where they've increase not only the cost of their physical hardware which is impacted by tariffs because a lot of it does come from china but also they've increased the price of their digital downloads like video games where they're saying they're going to start moving towards an 80 per game model from typically 60 and digital video game downloads are not currently as far as i understand it are not tariffed no in fact that's the whole point of digital downloads that why are they 80 dollars you're saving money selling this right and and i think what's happening here is they have one real reason to increase the price which is their cost has gone up on the hardware and that is giving them sort of cover fire to also increase the price of things that haven't gone up maybe you can make an argument for inflation affecting development cost or something like this but packaging it all together and doing it at the same time i i think it's also it sort of exhausts the consumer's attention where it eases the acceptance of this higher price because at some point you get hit with this news so frequently you're like i i just i don't care anymore i get it it's all expensive and you lose the capacity to be mad at a specific company but it's just i truly i'm learning about this in real time so microsoft is raising the price of first party games to 79.99 that's completely insane and i think the there is a delineation of cynicism here where you can be cynical about a company but all of the companies you talked to in this video were very much i mean you had competitors hanging out with each other to tell you stuff it feels like there is a market difference between a company saying, yeah, every two minutes a wheel spins and we pay more on stuff and having a real reason to do that and a company just saying, yeah, games are 80 bucks now.

23:07I don't know what to tell you, mate. Yeah, and I think the companies we spoke to, I mean, they range, like you said, from someone with six employees who's a sort of true small business owner. You think of an American small business owner and that's exactly the representation you think of. all the way up to multi-billion dollar publicly traded Corsair components, which makes memory, keyboards, computers. They even have some assembly in the U.S. And all of them feel the impact in comparable ways, but where they differ is their ability to cope with it. And so I think it's these smaller companies that are going to get hit particularly hard.

23:52And this actually came up a couple of times in the interviews as well. One of them that we didn't include was a comment that someone from Corsair made. I think we weren't filming yet, but we were talking about GN. And my goal with this wasn't to insert ourselves into this story. So we kind of kept anything about Gamers Nexus out of it. But the tariffs impact us too. And one of the comments he made, I asked him, who do you think this affects the most? and he said well it's guys like you right like it's small businesses and medium-sized businesses because the big ones are large enough to have levers to pull right and i guess i'm going to ask you one of the most annoying questions that i possibly could which is and you do cover this in the video why can't they just make in america and i know that the answer is it's going to be very obvious but still people are going to want to hear sure yeah it's really it is actually a great question it's obviously very common um it's complicated so the easiest answer to that i think if you try to boil it down into kind of like two components there's cost which everyone's familiar with and we can kind of get into that so there's uh things like labor cost real estate cost all this And there's maybe some greater social discussions to have there with regard to labor cost.

25:23But then there's also supply chain. And so if we ignore the cost component for a moment and just assume it costs exactly the same amount of money to make it in China or Vietnam or Thailand as it does in the US. Which it doesn't. Which it doesn't. The global manufacturing average cost in terms of wage per hour is, according to Corsair's CEO in our interview, is$2 to$4 per hour. It's obviously not even close. Yeah. and so if we just assume it's equal though for sake of conversation the new challenge is in China in particular but just that part of Asia in general there's already a huge factory presence they have the tooling they have the people they have supply chain and so what that really means is you can go to Huaqiangbei in Shenzhen right now and you can go talk to someone to tell them you have this brilliant idea for a new electronic device.

26:25You can have someone design the PCB. You can have someone print the PCB. The printing can be delivered same day for a prototype. And you can also start sourcing factories for the capacitors, the inductors, the semiconductors, the MOSFETs, the shell or case, if there's going to be one. All of that can happen in the same spot, And it can all be sourced from sort of the same, say, 50-mile radius for the most part. And that doesn't exist in the U.S. And if you want to make a motherboard, as an example that came up in the video, in the U.S., we didn't get too deep into it in the video, but there's probably 10 to 30 major component, complete component suppliers for that board.

27:10So if you want to make that motherboard in the U.S., which your CPU and your GPU go into, it's sort of the brainstem of the computer. you bring that over here and what you might have first is the assembly line it's an automated line it's it's primarily done by machine these days so you bring over the smt line the surface mount technology line that line has machines that first of all are made all over the world right uh yeah so that's already a different thing but and then those machines have reels of components like capacitors the capacitors come from a factory in china so you'd have to bring that factory over that factory to make the capacitors has factories so it uses factories for maybe ceramics or for aluminum or steel or copper whatever they may use copper coil for inductors you have someone doing the winding for the coil for things like going power supplies and all of that is downchain factories so this one motherboard quote-unquote factory what they're doing is effectively equivalent to someone assembling a pre-built computer in a pre-built computer assembly plant in the U.S.

28:15like Lenovo. They're doing the same thing. They're putting all the parts together, but they're buying them from elsewhere, and that's fine. That's how it works. But to just bring that over, it's not something you can flip a switch on.

28:36Parking shouldn't slow you down. ParkWiz gives every driver a shortcut. Book ahead, save up to 50%, and skip the hassle of circling the block. Park smarter, park faster. ParkWiz. Download the ParkWiz app today and save every time you park. This week on a very special episode of Health Discovered, we're taking a closer look at a condition that affects hundreds of thousands of men each year, prostate cancer. I first found out about my cancer on my birthday at the age of 45. Found out my cancer has spread to my pelvic bone. And from there, life just changed. About one in eight men will be diagnosed with prostate cancer during their lifetime, and the risk increases with age.

29:23Anything with cancer, you just think death sentence. And the only thing I could think about was, who's going to take care of my family? You have to go out there and build your support system. You got to build your team. In this episode, we'll explore the science behind detection, along with the practical steps men can take to protect their health. Listen to Health Discovered on America's number one podcast network, iHeart. Open your free iHeart app, search Health Discovered and start listening.

29:56Hey, this is LaVar Arrington from Two Pros and a Cup of Joe. Toyota is moving toward a more sustainable future by giving you the freedom to choose from an incredible lineup of trucks now available in both gas and hybrid models, including the legendary Tacoma and the powerful Tundra, both available with the i-Force Max hybrid powertrain and backed by Toyota's legendary reputation for reliability and value. In fact, for 2025, Toyota is the best resale value brand for the fifth year in a row. According to the Kelly Blue Book, KBB.com with Tacoma ranked number one, holding the highest projected retained value of any vehicle.

30:42Choosing Toyota means having more options and less compromise. So visit buyatoyota.com for a great deal on an efficient Toyota today. Hey, vehicle's projected resale value is specific to the 2025 model year. For more information, visit Kelly Blue Books, KBB.com. Toyota, let's go places. So I've shopped with Quince before they were an advertiser and after they became one. And then again, before I had to record this ad, I really like them. My green over shirt in particular looks great. I use it like a jacket. It's breathable and comfortable and hangs in my body nicely. I get a lot of compliments.

31:17I liked it so much. I got it in all the different colors, along with one of their corduroy ones, which I think I pull off, and really that's the only person that matters. I also really love their linen shirts too. They're comfortable, they're breathable, and they look nice. Get a lot of compliments there too. I have a few of them. Love their rust-colored ones as well. And in general, I really like quints. The shirts fit nicely and the rest of their clothes do too. They ship quickly, they look good, they're high quality, and they partner directly with ethical factories and skip the middlemen. So you get top-tier fabrics and craftsmanship at half the price of similar brands.

31:47And I'm probably going to buy more from them very, very soon. Keep it classic and cool this fall with long-lasting staples from Quince. Go to quince.com slash better for free shipping on your order and 365-day returns. That's q-u-i-n-c-e dot com slash better. Free shipping and 365-day returns. Quince.com slash better.

32:13And it seems like a big part of it as well is that China already has this infrastructure to manufacture these things, to your point, that they have someone who can do the prototype, that they have someone. I don't know, like, I assume there are, like, screw factories and things that don't exist in America, or if they do, they are geographically inefficient in comparison. Yeah, I think that's a big part of it is there are factories in the U.S. that can do various things. I mean, certainly you get down to physical hardware like screws. I'm absolutely certain there's factories that make screws in the U.S.

32:44There's factories that make cardboard boxes in the U.S. But like you said, these things are not on the same block. And while that can be reconciled, making a company eat an extra cost is basically impossible. And so if the approach is to do some form of taxes, it would have to be so extreme that there really is no other choice but to start building factories in the U.S. But the problem then is that this takes years. And it just isn't here yet. Right. Yeah. It just takes forever to start building. I mean, then it's also just an enormous amount of money. You can't just have it. You need to plan for it.

33:30So that's a big challenge. It kind of feels like, on the cynical side, I mean, it kind of feels like it is the case where it's so much of our economy is based on just cheap labor. that we've outsourced our entire manufacturing to other countries, and it all relies upon a certain kind of discount labor that just doesn't exist and probably can't exist in America. I think it not only can't exist in America, but the amount of available people is probably not high enough to create that many manufacturing jobs, especially instantaneously. Um, one thing that's interesting though, I don't think I've really spoken in, um, anywhere about this side, but something that's interesting with, uh, contract manufacturing, especially in China is at least for the factories we've toured and visited over the years, a lot of the contract factories, you know, they, they shut down for Chinese new year for a while.

34:34It's, it's their biggest holiday. So similar to Christmas in the U S you have several weeks off for a lot of people and And they're at last pretty long. So the one factory we work with and we've toured, they shut down for nearly a month for Chinese New Year. And when I once asked them, when it was my first time over there, I asked the factory owner, it was basically, hey, no, absolutely no disrespect. Don't take this the wrong way. I'm just curious, why such a long time? As an American, you come from a work culture in terms of just you're always at work. Four weeks is a big stretch of time. doesn't that affect your production?