Bak USA’s road to defeat was paved with good intentions.
J.P. and Ulla Bak called their company, which opened in 2015, a social enterprise. They employed workers from disadvantaged backgrounds to make affordable electronic devices.
Gov. Andrew M. Cuomo in 2014 announced Bak USA was one of eight companies accepted into the state’s Start-Up NY tax-free zone program. B. Thomas Golisano, a former owner of the Buffalo Sabres, signed on as a partner, investing $30 million in the company.
The Trump administration this year imposed a series of tariffs on goods imported from China in an effort to promote American goods and protect U.S. jobs. But for Bak USA, the tariffs were a drag on business, rather than a boost. The company was already struggling, but the tariffs – really a tax on consumers – sealed its fate.
Now the company’s last 77 employees are out of work. We’ll leave it to students at the nation’s business schools to write papers about what Bak USA might have done differently. But the takeaway should not be that companies can’t become profitable while doing good in the world. Many tech startups walk a razor’s edge between success and failure, and Bak USA fell victim to some poor timing.
When the Baks, Danish-born attorneys, started the company on Michigan Avenue in Buffalo, they originally planned to manufacture Android tablets. They later pivoted to making laptops and tablets on the Windows platform, and signed a deal with Microsoft.
Things were looking up.
“I actually think, if you’re not greedy, that good stuff will come back to you,” Ulla Bak told The News in 2017.
Eventually the company ran into trouble with some of its suppliers. In June of this year, Bak laid off 15 workers, then was a week late on meeting payroll for its salaried employees.
Then came the tariffs ordered by President Trump. A story in The News said about 84 percent of the components that Bak USA used in its computers were subject to tariffs, adding 10 percent to the cost of the parts. The rate is scheduled to increase to 25 percent at the beginning of 2019.
The duties added about $62 in costs to the price of the Atlas laptops, which retailed for approximately $500.
Most of Bak USA’s competitors, from Apple Inc. to Lenovo, are not subject to the tariffs because they manufacture their tablets overseas and import finished products into the United States. But its “made in America” policy subjected Bak USA to the tariffs on the components it imported.
The president in March tweeted, “trade wars are good and they’re easy to win.”
In this case, Bak USA suffered collateral damage, an unfortunate result for a company that was manufacturing in this country and giving refugees, immigrants and other people from disadvantaged backgrounds valuable job training and experience.
We hope the Baks will stay in our community and get back in business soon. Perhaps they can draw inspiration from the Samuel Beckett quote that’s become a favorite meme in Silicon Valley: “Ever tried. Ever failed. No matter. Try again. Fail again. Fail better.”