Steve Jobs: The Unrelenting Ambition to Build Great Products

In 1968, a 13-year-old kid in Cupertino was building a frequency counter and needed parts. So he opened the phone book, found the home number of Bill Hewlett, the founder of Hewlett-Packard, and called him. Hewlett talked with him for 20 minutes, got him the parts, and gave him a summer job. More than 4 decades later, when HP abandoned its Cupertino campus, that same kid quietly bought the land— 150 acres. By then, his company had passed Microsoft to become the most valuable technology company in the world. But he admired the way Hewlett and Packard had built a company that lasted, and he prided himself on having done the same. In June 2011, he stood before the Cupertino City Council and unveiled the plans for what would become his company's new home on that ground. It was one of his last public appearances. 4 months later, he was gone. This is the story of Steve Jobs. Welcome to Ambition, a show about the most ambitious people in history and what we can learn from them. I'm your host, Justin Gordon, an entrepreneur based in Los Angeles. My main source for this episode is the phenomenal book Steve Jobs by Walter Isaacson, originally published in 2011. It is so good. Let's get right to it. Steve Jobs was born February 24th, 1955 to two 23-year-old graduate students. who put him up for adoption. The couple who took him in were not the college-educated parents his birth mother demanded. Paul Jobs was a high school dropout, a mechanic who could build anything, and it turned out that mattered more than any degree. Paul Jobs had been raised on a dairy farm in Germantown, Wisconsin. Funny enough, I'm from Brown Deer, Wisconsin, which is not quite far from there at all. And Steve Jobs would say, knowing I was adopted made me feel more independent. But I've never felt abandoned. I've always felt special. My parents made me feel special. That is an important point. Our parents, our environment, they shape us, as we talked about in the previous episodes. Steve's environment definitely shaped him as well. And Paul tried to pass along his love for mechanics and cars to Steve. Steve would say, I thought my dad's sense of design was pretty good because he knew how to build anything. If we needed a cabinet, he would build it. When he built our fence, he gave me a hammer so I could work with him. It was also important, his father said, to craft the backs of cabinets and fences properly. Even though they were hidden, he loved doing things right. Quote, he even cared about the look of the parts you couldn't see. Steve would say that he showed me the rudiments of electronics and I got very interested in that. And the house Steve Jobs grew up in, like others in the neighborhood, was modeled on ones built by the real estate developer Joseph Eichler. Jobs said his appreciation for Eichler Homes instilled in him a passion for making nicely designed products for the mass market. I love it when you can bring really great design and simple capability to something that doesn't cost much. As we see later in this story, that is what they do. And as we all know, and it shows the importance of exposing yourself to different environments, being in different environments, seeing different products, knowing that they will influence you. And he soaked up the history of the Valley and developed a yearning to play his own role. He'd say, the first computer terminal I ever saw was when my dad brought me to the Ames Center. I fell totally in love with it. And the environment that Steve Jobs grew up in, there was so much to it. In one part of the book, he says, you had all these military companies on the cutting edge. It was mysterious and high-tech and made living here very exciting. In a move that would help transform the area into the cradle of the tech revolution, Stanford University's Dean of Engineering Frederick Terman created a 700-acre industrial park on university land for private companies that could commercialize the ideas of the students. Terman came up with this great idea that did more than anything to cause the tech industry to grow up here, Jobs said. The most important technology for the region's growth, of course, was the semiconductor. William Shockley, who had been one of the inventors of the transistor at Bell Labs in New Jersey, moved out to Mountain View in 1956 and started a company to build transistors using silicon rather than more expensive germanium that was more commonly used. And Shockley had been increasingly erratic and abandoned his silicon transistor project, which led 8 of his engineers, most notably Robert Noyce and Gordon Moore, which I'm sure you've heard of, to break away to form Fairchild Semiconductor. And that company grew to 12,000 employees, but it fragmented in 1968 when Noyce lost the power struggle to become CEO He took Gordon Moore and founded a company that they called Integrated Electronics Corporation, which they soon smartly abbreviated to Intel. And as you're listening to this show, it showcases you understand the importance of history. Jobs understood the importance of history, and he studied history to understand the place that he grew up in and the place that he wanted to make his own mark. It also reminds me of, as we talked about in a different episode, Paul Graham has this great essay called Cities and Ambition. Part of it says, great cities send a message. Cambridge says you should be smarter. New York says you should be richer. Silicon Valley says you should be more powerful. Our environment affects us. It's important you find the right one. And Steve Jobs would say, growing up, I got inspired by the history of the place that made me want to be part of it. And this actually reminded me of all this, this environment. The idea of your environment affecting you. When people say this person was self-made, I always find that funny because no one's really self-made. There's so much else to it as far as other people supporting us and inspiring us and impacting us. It reminded me of this Arnold Schwarzenegger quote. I found the version from the 2017 commencement speech at Houston. He said, Arnold said, I always tell people that you can call me anything you want. You can call me Arnold, you can call me Schwarzenegger, you can call me the Austrian Oak, you can call me Schwarzy, you can call me Arnie, but don't ever, ever call me the self-made man. I didn't make it that far on my own. To accept that credit or that medal would discount every single person that has helped me get here today. The whole concept of the self-made man or woman is a myth. I love that quote, and that's definitely Steve Jobs, as we're gonna see in this story. And from a year— from an early age, Steve knew that he was special. He'd say at one point, it was a very big moment that's burned into my mind when I realized that I was smarter than my parents. I felt tremendous shame for having thought that. I will never forget that moment. And he'd say, both my parents got me. They felt a lot of responsibility once they sensed that I was special. They found ways to keep feeding me stuff and putting me in better schools. They were willing to defer to my needs. And in school, of course, as you can imagine, Steve was, uh, A problem child, a bit. He'd say, I was kind of bored for the first few years, so I occupied myself by getting into trouble. I encountered authority of a different kind that I'd never encountered before, and I did not like it. They really almost got me. They came close to really beating any curiosity out of me. And Steve would play tons of pranks on people. His parents would later say, if you can't keep him interested, it's your fault. They'd say that to his teachers, which I find hilarious. But Steve was also bullied, and in the middle of 7th grade, he gave his parents an ultimatum. I insisted they put me in a different school, he recalled. Financially, this was tough. His parents were barely making ends meet, but by this point, there was little doubt that they would eventually bend to his will. Which, of course, Steve, throughout his life, would showcase that. Steve would say, when they resisted, I told them I would just quit going to school if I had to go back. So they researched where the best schools were and scraped together every dime and bought a house for $21,000 in a nicer district. And early on, Steve starts to work on different projects. He'd say that it made you realize you could build and understand anything. Once you built a couple of radios, you'd see a TV in the catalog and say, I can build that as well. Even if you didn't. I was very lucky because when I was a kid, both my dad and the Heath kids made me believe I could build anything. Again, our environment affects us. He already has that self-belief. He already has this self-confidence from a very young age. It comes from doing. He already, already thought he was special, but then he starts to build things. He sees he can build other things. He sees other people and how they built things. He's in this environment where the history of the place itself is people who built things, and that affected him for the rest of his life. The point of being in the right environment is so critical. And one of those environments was the Hewlett-Packard Explorers Club. It was a group of about 15 or so students who met in a company cafeteria on Tuesday nights. They would get an engineer from one of the labs to come and talk about what he was working on. Steve's dad would drive him there. Steve would say, I was in heaven. I saw my first desktop computer there. It was called the 9100A. It was a glorified calculator, but also really the first desktop computer. It was huge, maybe 40 pounds, but it was a beautiful thing. I fell in love with it. And in a project he was working on, when he needed parts from HP, picked up the phone and called the CEO. Back then, people didn't have unlisted numbers, so I looked up Bill Hewlett in Palo Alto and called him at home. He answered and chatted with me for 20 minutes. He got me the parts, but he also gave me a job in the plant where they made frequency counters. And Jobs would work there the summer after his freshman year at Homestead High. And he liked to work. He had a newspaper route. His father would drive him when it was raining. And during his sophomore year, he spent weekends in the summer as a stock clerk at a cavernous electronics store. He would say the satisfaction of getting paid and saving up for something, that was very exciting. Steve would go on to buy his own car. And then during the summer between sophomore and junior year in high school, he began smoking marijuana and then began using pot regularly. By his senior year, he was also dabbling in LSD and hash, as well as exploring the mind-bending effects of sleep deprivation. So he very early on starts kind of exploring different drugs and testing his body, I would say. And then he ends up taking a course that was incredibly important, taught by John McCollum. And in this course, he also needed a part that was available. So he made a call to a manufacturer in Detroit and said he was designing a new product and wanted to test out the part. It arrived a few days later. McCollum was furious at him. Jobs said, I don't have the money for the phone call. It's a collect call. Basically, the other person had to pay for it, which is an insane concept. And Jobs made that call, obviously lying about it, which I just find hilarious. But it does show repeatedly, multiple times, how you can just kind of cold outreach or cold call people and great things can happen. I think that is incredibly underutilized, the cold outreach, incredibly underutilized. It's funny. I've Hosting a summit in a few months. And some people I got in contact with are just from cold email, like billionaires, which is pretty insane. You can just reach out to people. And also through this class, the reason why it's even more important is he meets Steve Wozniak, not in the class, but because of the class. And Steve Wozniak, whose younger brother had been on a swim team with Jobs, was almost 5 years older than Jobs and far more knowledgeable about electronics. But emotionally and socially, he was still a high school geek. Woz's father taught him something else that became ingrained in his childlike, socially awkward personality, and that was to never lie. Quote, my dad believed in honesty, extreme honesty. That's the biggest thing he taught me. In addition, he imbued his son with an aversion to extreme ambition, which set Woz apart from Jobs. And Woz spent a lot of time at home reading his father's electronics journals and He became enthralled by stories about new computers, such as the powerful ENIAC. He also prided himself on being a hardware engineer. One day, Bill Fernandez told Wozniak there was someone he should meet. His name is Steve. He likes to do pranks like you, and he's also into building electronics. Woz would say, typically it was really hard for me to explain to people what kind of design stuff I worked on, but Steve got it right away, and I liked him. He's kind of skinny and wiry and full of energy. Jobs was also impressed. Woz was the first person he'd met who knew more about electronics than he did. They also had this shared passion for music, which would come up much, much later with the iPod. And they would end up playing a bunch of pranks on people. More importantly though, when hackers found a way to make long-distance calls for free by replicating the tones that routed signals on the AT&T network, there's a whole story called The Secrets of the Little Blue Box. Wozniak had read the article. Halfway through it, he called Steve Jobs. He knew Steve was one of the few people who'd understand how exciting this was. And they basically would find a way to build these themselves. They went to the library to find the journal that had these frequencies. They would build their own blue box to be able to make these calls. The most daring calls they made was to the Vatican, trying to call the Pope. And Jobs came up with the idea that the blue box would be more than merely a hobby. They could build and sell them. The finished product was about the size of 2 decks of playing cards. The parts would cost about $40, and they could charge a markup on that to make some money. Jobs would say, I got together the rest of the components like the casing and the power supply and keypads and figured out how we could price it. They made 100 or so blue boxes and sold almost all of them. But the fun and profits came to an end at a Sunnyvale pizza parlor. Jobs needed money and was eager to sell, so he pitched the device to some guys at the next table. They were interested. So Jobs went to a phone booth and demonstrated with a call to Chicago. The prospect said that they had to go to the car for, for money. So we walked over to the car and I've got the blue box in my hand. The guy gets in, reaches under the seat, and he pulls out a gun. It was a weird robbery. The guy who took the blue box actually gave Jobs a phone number and said he would try to pay for it if it worked. They ended up deciding not to have another encounter with a gunman, even on the off chance they could get their $150 back. It is funny. This reminds me of back years ago, my best friend Zach and I, we were just getting into the idea of building something on the internet after seeing The Social Network in a friend's basement. And we wanted to get a copy of Dreamweaver, but Dreamweaver to make websites and stuff and like code, but Dreamweaver was expensive. And so we actually found some guy on Craigslist, met him at a gas station and bought a copy of Dreamweaver, which at the time was very sketch, I will say. But we got, we got what we needed and was able to make our first website, which is crazy thinking back on that. Luckily, luckily no gun was pulled on us for this one. And for Steve Jobs and Steve Wozniak, this experience was incredibly important. It paved the way for what would become a much bigger adventure. Jobs would later reflect, if it hadn't been for the blue boxes, there wouldn't have been an Apple. I'm 100% sure of that. Woz and I learned how to work together. We gained confidence. We gained the confidence that we could solve technical problems and actually put something into production. You cannot believe how much confidence that gave us. And that is incredibly important, that piece of it. Shipping things gives you confidence to ship other things. Like, you make something and it gives you more confidence to make another thing. That is just how it often works in business. It's also an important lesson in finding A great co-founder or partner, can you work on a small project together? Can you build something together? Can you ship something together and see how you work together and see if it might work between you two? That was— this was definitely the case between Steve Wozniak and Steve Jobs. Important note around this time, in spring of 1972, Jobs starts going out with a girl named Chrisann Brennan, who was about his age. And when it was time to choose a school, So going to college. Steve wanted something that was more artistic and interesting than Stanford. He insisted on applying only to Reed College, a private liberal arts school in Portland, Oregon, that was one of the most expensive in the nation. His father tried to talk him out of it. So did his mother. It was far more than they could afford, they said. But Steve responded with an ultimatum. If he couldn't go to Reed, he wouldn't go anywhere. They relented, as usual. This is just Steve early, early on, kind of inflicting his will on people, which he would do his entire life. He started school in the fall of 1972, and he found himself deeply influenced by a variety of books actually at the time on spirituality, enlightenment, most notably Be Here Now: A Guide to Meditation and The Wonders of Psychedelic Drugs. It was profound, Jobs said. It transformed me and many of my friends. Steve would later say, I began to realize that an intuitive understanding in consciousness was more significant than abstract thinking and intellectual logical analysis. However, Steve's intensity made it difficult for him to achieve inner peace like some of these books we're talking about. Another book that influenced him a lot was Diet for a Small Planet, which extolled the personal and planetary benefits of vegetarianism. And that was when Steve pretty much swore off of meat for good. Around this time, Steve needed some money. In order to raise cash, he decided to sell his IBM Selectype typewriter. The student who offered to buy it was Robert Friedland, who was one of the few people in Jobs's life who was able to mesmerize him. He adopted some of Friedland's charismatic traits and for a few years, and for a few years treated him almost like a guru until he began to see him as a charlatan. He was 4 years older than Jobs, but still an undergraduate. He was the son of an Auschwitz survivor who became a prosperous Chicago architect. As a sophomore, he was arrested for possession of 24,000 tablets of LSD worth $125,000. Friedland would say of Steve Jobs, the thing that struck me was his intensity. Whatever he was interested in, he would generally carry to an irrational extreme. And that word comes up— intensity comes up again and again with Steve Jobs. He was intense. Fiercely intense. And while in college, Jobs complained to Wozniak that they were making him take all these courses and refused to go to the classes he was assigned and instead went to the ones he wanted. He began to feel guilty though, because he was spending so much of his parents' money on an education that seemed worthless. He'd say, I had no idea what I wanted to do with my life and no idea how college was going to help me figure it out. Here I was spending all the money my parents had saved their entire lives, so I decided to drop out and trust that it would all work out okay. He'd go on to say that the minute I dropped out, I could stop taking the required classes that didn't interest me and began dropping in on the ones that looked interesting. Among them was a calligraphy class that appealed to him after he saw posters on campus that were beautifully drawn. And he'd say, if I had never dropped in on that single course in college, the Mac would never have had the multiple typefaces on proportionally spaced fonts. Since Windows just copied the Mac, it's likely that no personal computer would have them. And in the meantime, Jobs eked out a bohemian existence on the fringes of Reed. He returned soda bottles for spare change, continued his treks to the free Sunday dinners at the Hare Krishna temple, and wore a down jacket in the heatless garage apartment he rented for $20 a month. Just think about this time in his life. He's in college, drops out, not sure where life is going to take him, but he's obviously open to possibilities and ends up building one of the most valuable companies in the world, as we're going to see later on. But these all impact him. Every bit of his life impacts him and drives him. Same with us. Our influences across our entire life impact us in some way. We can use them in some way to do other things. And Jobs would say about this time, taking LSD was a profound experience, one of the most important things in my life. LSD shows you that there's another side to the coin, and you can't remember it when it wears off, but you know it. It reinforced my sense of what was important: creating great things instead of making money, putting things back into the stream of history and of human consciousness as much as I could. In February of 1974, after 18 months of hanging around Reed, Jobs decided to move back to his parents' home in Los Altos and look for a job. It was peak time during the 1970s. The classified section of the San Jose Mercury carried up to 60 pages of technology help wanted ads. One of those caught Jobs' attention. It said, quote, have fun, make money, which I think is a phenomenal job headline. That day, Jobs walked into the lobby of the video game manufacturer Atari and told the personnel director, who was startled by his unkempt hair and attire, That he wouldn't leave until they gave him a job. Atari's founder was a burly entrepreneur named Nolan Bushnell, who was a charismatic visionary with a nice touch of showmanship in him. In other words, another role model waiting to be emulated. Funny enough, I actually interviewed Nolan's son, who's the founder of PolyCade, on another podcast years ago. And I just find it hilarious, by the way, that Steve just decides that he wants to work at Atari. and won't leave until he's able to work at Atari. Just forcing his will on people again and again is insane, but it does work. And the chief engineer of Atari was Al Alcorn, which is important for this story. And Atari's big hit thus far was a video game called Pong. When Jobs arrived in the Atari lobby wearing sandals and demanding a job, Alcorn was the one who was summoned. He said, I was told, we've got a hippie kid in the lobby. He's not gonna leave until we hire him. Should we call the cops or let him in? I said, bring him on in! And thus Jobs became one of the first 50 employees at Atari. Alcorn assigned him to work— Alcorn assigned him to work with an engineer named Don Lang. He complained that this guy is a goddamn hippie with body odor. He said, why do you— why'd you do this to me? And he's impossible to deal with. Steve was prickly, but Bushnell kind of liked him, so he asked him to go on the night shift. It was a way to save him. Despite his arrogance, or perhaps because of it, he was able to charm Atari's bosses. Bushnell would say he was more philosophical than the other people he worked with, and Steve later applied the same simplicity and intuitiveness to his products at Apple. And at Atari, he also saw people who had started companies. He hadn't been around that before. Again, the importance of environment and the environments we put ourselves in. Steve repeatedly found environments that motivated him, inspired him, exposed him to different people that would impact his thinking for the rest of his life. And at Atari, Steve appreciated the simplicity of their games. They came with no manual and needed to be uncomplicated enough that a stoned freshman could figure them out. The only instructions for Atari's Star Trek game were: 1, insert quarter. 2, avoid Klingons. And then in early 1974, Robert Friedland was urging Steve Jobs to go to India because he had gone the summer before to take his own spiritual journey. While in India, Steve got dysentery pretty fast and dropped from 160 to 120 pounds. He spent 7 months in India. Once he got back, he continued trying to find himself. It was a pursuit with many paths toward enlightenment. In the mornings and evenings, he would meditate and study Zen, and in between, he would drop in to audit physics or engineering courses at Stanford. Later on, Jobs confided to close friends that he was driven by the pain he was feeling about being put up for adoption and not knowing about his birth parents. In early 1975, Steve is back working mostly night shifts at Atari. Late summer in 1975, Nolan Bushnell had now decided to develop a single-player version of Pong, and he asked Steve Jobs to design it. There would be a bonus, Bushnell told him, for every chip fewer than 50 that he used. Bushnell knew that Jobs was not a great engineer, but he assumed correctly that he would recruit— that he would recruit Wozniak, who was always hanging around. I looked at it as a 2-for-1 thing, Bushnell recalled. Woz was a better engineer. And Wozniak was sure that Jobs had asked him to help. What he hid from Wozniak was that the deadline was one that Jobs had imposed because he needed to get to the All-in-One farm to help prepare for the apple harvest. He didn't mention that there was a bonus tied to keeping down the number of chips. Which is just one of the many, many, many examples of Steve Jobs' complex personality. But the Atari experience helped shape his approach to business and design. He appreciated the user-friendliness of Atari's Insert quarter, avoid Klingons games. That simplicity rubbed off on him and made him a very focused product person. And also, Jobs absorbed some of Bushnell's take-no-prisoners attitude. Nolan Bushnell wouldn't take no for an answer. This was Steve's first impression of how to get things done. Nolan Bushnell was never abusive like Steve sometimes is, but he had that same driven attitude. Nolan would say, there's something indefinable in an entrepreneur. And I saw that in Steve. He was interested not just in engineering, but also the business aspects. I told him, pretend to be completely in control and people will assume that you are. I think this is a great line. I'm gonna say it one more time, actually. Pretend to be completely in control and people will assume that you are. I mean, how true is this? In our own lives. People just are going and doing something and they're so confident about it. You're like, oh yeah, they know what they're doing. Even if they don't, it's just, it is important. This is just like the whole fake it until you make it, which I have varying opinions on this, but I do think you being confident in one direction makes others around you confident in what you're doing, which later on, as we'll see, Steve does with many of the projects he works on. Of course, sometimes they aren't, they don't turn out how he wants, but. That attitude allows him to accomplish tremendous things. And Steve Jobs had many influences at this time. One was Stewart Brand, who created the Whole Earth Catalog. And on the back of the final issue was a photograph. Above it were the words, stay hungry, stay foolish. And that, that stuck with Steve Jobs as well. And another form of media, the January 1975 issue of Popular Electronics, had on its cover the first personal computer kit, the Altair. The Altair wasn't much, just a $495 piece of parts that had to be soldered to a board that would then do little. But for hobbyists and hackers, it heralded the dawn of a new era. Bill Gates and Paul Allen read the magazine and started working on a version of BASIC, an easy-to-use programming language for the Altair. It also caught the attention of Jobs and Wozniak. And this just makes me think, with all the books that Jobs read in the magazines and The whole Earth catalog, how media influences us today, and what media today is covering the frontier technology of the day. We see shows like TBN interviewing people daily that are building different things in tech. There's newsletters out there; they're doing the same thing. There's so much media to consume that is impacting impacting us. I think it's a phenomenal medium we have. There was way less of it back in 1975 when Jobs is. Being influenced as only a 20-year-old and building something himself. And then an important day, Sunday, June 29th, 1975, a milestone for the personal computer. For the first time in history, anyone had typed a character on a keyboard and seen it show up on their own computer screen right in front of them. Also, Jobs made a few calls and was able to score 6 of them for free from Intel. And Wozniak would say Steve was just that sort of person. I mean, He knew how to talk to the sales representative. I could never have done that. I'm too shy. But of course, Steve Jobs and Steve Wozniak end up being tremendous partners, but it did take some convincing. Jobs knew how to appeal to Wozniak though. He didn't argue that they were sure to make money with a new project. Instead, they would have a fun adventure. He would say, even if we lose money, we'll have a company. For once in our lives, Will have a company. And this was enticing to Wozniak even more than the prospect of getting rich. So to start their own company, they needed some money. So Wozniak sold his HP-65 calculator for $500, though the buyer actually ended up stiffing him for half of that. And then Jobs sold his Volkswagen bus for $1,500, even though he had to get less than that. But the person who bought it came to find them 2 weeks later and said the engine had broken down. Jobs agreed to pay for half of their repairs. Despite these little setbacks, they now had their own small savings thrown in, about $1,300 in working capital, the design for a product, and a plan. They would start their own computer company. Of course, they needed a name. Jobs proposed Apple Computer. He'd say, quote, I was on one of my fruitarian diets, which of course influenced the name, and A better name did not hit them by the next afternoon, so they stuck with it, which is insane. Again, like I mentioned, how your environment and things around you shape things. Jobs getting influenced to be a vegetarian leads to the name Apple Computer. It's just a crazy through line. You never know how these different things affect us. And they would stick with the name Apple. It was a smart choice, instantly signaling friendliness and simplicity. Mike Markkula would say that Apple and computers don't go together. So it helped them grow brand awareness. And Mike Markkula would end up being their first angel investor. But at this time, Wozniak was not yet ready to commit full-time. He was an HP company man at heart, and he wanted to keep his day job there. Ron Wayne was a person who ended up helping convince Wozniak to quit HP. Jobs was so impressed and grateful that he offered Wayne a 10% stake in the new partnership. Turning him into a tiebreaker if Jobs and Wozniak disagreed over an issue. And how Ron Wayne got Wozniak to quit HP is his argument was that a great engineer would only be remembered if he teamed up with a great marketer. And this required him to commit his designs to the partnership. So Wozniak had designs for a computer that he committed to the Apple partnership. Even though Wozniak actually first offered up his designs to HP. They thought it was a hobbyist product and didn't actually take him up on that, so he was good to go. In 1976, Jobs and Wozniak went to Ron Wayne's apartment in Mountain View to draw up the partnership agreement, but not long after, Wayne got cold feet as Jobs started planning to borrow and spend more money. Because Ron Wayne recalled the failure of his own company and he didn't want to go through that pain again. And because they had structured Apple as a simple partnership rather than a corporation, the partners would be personally liable for the debts. And Wayne was afraid potential creditors would go after him. So he returned just 11 days later with a statement of withdrawal and an amendment to the partnership agreement. In payment for his 10% of the company, he received $800 and shortly after, $1,500 more. Had he stayed on and kept his 10% stake, In the company, of course, that would be worth many billions of dollars. So when Wozniak and Jobs eventually create the Apple I, which had a cut-rate microprocessor, not the Intel 8080, the audience, audience was not very impressed. But one person stayed behind to hear more about it. His name was Paul Terrell, and in 1975, he opened a computer store, which he dubbed the Byte Shop on Camino Real in Menlo Park. Now, a year later, he had 3 stores and visions of building a national chain. Jobs was thrilled to give him a private demo. He said, take a look at this. You're going to like what you see. And Terrell was impressed enough to give Jobs his card. He said, keep in touch. And Jobs said, I'm keeping in touch, the next day when he walked in barefoot to the bike shop. Jobs made the sale. Terrell agreed to order 50 computers on one condition. He didn't want just $50 printed circuit boards, which customers would have to buy all the chips and do the necessary assembly. That would appeal to a few hardcore hobbyists, but not to some more customers. Most customers wanted the board fully assembled, and for that, he was willing to pay $500 apiece, cash on delivery. Jobs immediately called Wozniak at HP. Are you sitting down? he asked. Wozniak said he wasn't. Jobs nevertheless proceeded to give him the news. I was shocked, completely shocked, Wozniak recalled. I would never forget that moment. To fill the order, they needed about $15,000 worth of parts. Alan Baum, the 3rd prankster at home, agreed to loan $5,000 along with his father. Jobs tried to borrow more from a bank and got declined, of course, given his appearance, appearance at the time. But he was able to convince the manager of Kramer Electronics to call Paul Terrell to confirm that he had really committed to an order. After 30 days, Apple was on the verge of being profitable. Jobs recalled, we were able to build the boards more cheaply than we thought because I got a good deal on parts. The 50 we sold to the Byte Shop almost paid for all the material we needed to make 100 boards. Now they could make a real profit by selling the remaining 50 to their friends and Homebrew Computer Club compatriots. In order to make Apple seem like a real company, Jobs hired an answering service. Which would relay messages to his mother. Of course, Jobs is already thinking about the next Apple computer, and the next Apple computer, he decided, needed to have a great case and a built-in keyboard and be integrated end-to-end from the power supply to the software. Steve would say that for every one of them, the hobbyists, there were 1,000 people who would want the machine to be ready to run. But to produce the fully packaged Apple II, would require significant capital, so they considered selling the rights to a larger company. Jobs went to Al Alcorn and asked for the chance to pitch it to Atari's management. He set up a meeting with the company's president, Joe Keenan, who was a lot more conservative than Alcorn and Bushnell. Steve goes in to pitch him, but Joe couldn't stand him, Alcorn recalled. He didn't appreciate Steve's hygiene. Jobs was barefoot and at one point put his feet up on a desk. Not only are we not going to buy this thing! Keenan shouted, but get your feet off my desk! Alcorn recalled thinking, oh well, there goes that possibility. Then in September, Chuck Peddle of the Commodore Computer Company came by Jobs' house to get a demo. Jobs said, you might want to buy us for a few hundred thousand dollars. When they got there, Wozniak was stunned by this ridiculous suggestion, but Jobs persisted. The Commodore honchos called a few days later saying they decided it would be cheaper to build their own machine. I just think it's insane looking back on history how many different moments there are that could have gone differently. Like this moment, for instance. Imagine Commodore Computer buys the Apple computer. That's it. Like, that's the company. I'm sure Steve Jobs would've done something else differently, but there's only a few moments in any company that could have gone different ways. I just always find that fascinating. And even though Steve Jobs and Steve Wozniak worked well together, Wozniak's father Jerry thought most of the money should be going to his son. He confronted Jobs personally when he came by the Wozniak house. He said, you don't deserve shit. You haven't produced anything. Jobs began to cry, which was not unusual. He told Steve Wozniak that he was willing to call off the partnership. He'd say, if we're not 50/50, you can have the whole thing. Wozniak, however, understood better than his father the symbiosis they had. It was Jobs who had turned his ingenious designs into a budding business. He agreed they should remain partners. Jobs began asking Ron Wayne to design a case. His design called for a plexiglass cover attached by metal straps and a roll-top door that slid down over the keyboard. Jobs didn't like it. He wanted a simple and elegant design. Which he hoped would set Apple apart from other machines with their clunky gray metal cases. While haunting the appliance aisles at Macy's, Jobs was struck by the Cuisinart food processors and decided that he wanted a sleek case made of light molded plastic. At a Homebrew Computer Club meeting, he offered a local consultant, Jerry Manock, $1,500 to produce such a design. Again, I had to highlight this. How different things could have gone. Imagine Jerry Wozniak influences them to break up their partnership. There is no Apple then. It's crazy to me how many things have to go right for companies to survive is wild. And also a key piece here of differentiation. Jobs already knew intuitively that they had to build something different. They had to stand out in the market. They had to have something different. He knew this, and he also knew it had to be simple. And the last piece here is just that Jobs would do this for a long time, just looking at other products for inspiration, for examples around him of what could be done and how he could implement that into the own— his own products, the products he wanted to create. So many other entrepreneurs in history Did the same thing. I read a book on Sam Walton, the founder of Walmart, years and years ago, and he would fly to so many stores, always trying to get more ideas and better ideas for how to run Walmart. That is just what great entrepreneurs do again and again. We see this all the time. Same with what we mentioned in the first episode with Cy Newhouse, and he's looking at trade journals and articles and trying to get insights that he can apply to his business. And he does this again and again, and this helped him even decide he wanted to buy more newspapers, build a chain of newspapers, and he'd end up being a billionaire and building this massive empire. Studying history and people before you and getting ideas from the world around you is just so incredibly important. And just this last piece is the idea of being around people and being in an environment at a company That has a high caliber of talent. Ron Wayne, who Jobs asked to design the case, he met him at Atari. Atari was so critical to Steve. The network it gave him to people and access it gave him was so important, which is why I tell a lot of young people to work at companies where you'll have a world-class network through your coworkers. The next important piece of the Apple II was the power supply. Something that Wozniak and most people paid little attention to, but Jobs decided it was a key component. In particular, as he would his entire career, he wanted to provide power in a way that avoided the need for a fan. Fans inside computers were not zen-like; they distracted. He dropped by Atari to consult with Al Alcorn, who knew old-fashioned electrical engineering. Al turned him onto his. Brilliant guy named Rod Holt. Holt would say, I'm expensive, but Jobs sensed that he was worth it. And Holt would say that he conned me into working for him. He ended up joining Apple full-time. Instead of a conventional linear power supply, Holt built one like those in oscilloscopes. It switched the power on and off not 60 times per second, but thousands of times. This allowed it to store the power for far less time and thus throw off less heat. Jobs would later say that switching power supply was as revolutionary as the Apple II logic board was. Rod doesn't get a lot of credit for this in the history books, but he should. Every computer now uses switching power supplies, and they all rip off Rod's design. And just to highlight this point, so many innovations have gone into the products that Steve and Apple have been a part of over time. There's so many, and in aggregate, they're magical. There's many little ones and many key people that go into every single company. I think this is very important to understand. And reflecting back to an earlier time, Jobs's father had once taught him that a drive for perfection meant caring about the craftsmanship, even of the unseen parts. And Jobs applied that to the layout of the circuit board inside the Apple II. He rejected the initial design because the lines were not straight enough. And I'm sure this drove people crazy at his different companies, but it's this philosophy that carries on with him to everything he does. Important to note that Jobs is operating in the right environment, Silicon Valley. He worked for a company with high-quality people at Atari. And at Atari, he made an impression on the people around him. So then he could rely on that network directly through intros, which helped him again build this company. But of course, all these things about the product took money. The tooling of this plastic case was gonna cost like $100,000, Jobs said. Just to get this whole thing into production was going to be like $200,000. He went back to Nolan Bushnell this time to get him to put in some money and take a minority equity stake. Bushnell would say, he asked me if I would put $50,000 in. He would give me a third of the company. I was so smart, I said no. It's kind of fun to think about when I'm not crying. I just laugh out loud thinking about that. But Bushnell suggested that Jobs try Don Valentine. A straight shooter, former marketing manager at National Semiconductor, who had founded Sequoia Capital, a pioneering venture capital firm. If you want me to finance you, Valentine told him, you need to have one person as a partner who understands marketing and distribution and can write a business plan. Send me 3 suggestions, Steve Jobs replied. Valentine did. Jobs met them and he clicked with one of them, a man named Mike Markkula. Markkula, who would end up playing a critical role in Apple for the next 2 decades. An important note we're about to find out here is that you need to find people who have something to prove, who have a chip on their shoulder. So Mike Markkula was only 31, but he had already retired after working at Fairchild and then Intel, where he made millions on his stock options when the chipmaker went public. He excelled at figuring out pricing strategies, distribution networks, marketing, and finance. Jobs immediately lied to Markkula. Jobs would say of Markkula, he was short and he had been passed over for the top marketing job at Intel, which I suspect made him want to prove himself. Markkula proposed to Jobs that they write a business plan together. They made a lot of assumptions, such as how many houses would have a personal computer, and there were nights when they were up until 4 AM. Markkula actually ended up writing most of the business plan. And this plan envisioned ways of getting beyond the hobbyist market. Markkula also made a wild prediction at this time. He said, we're going to be a Fortune 500 company in 2 years. This is the start of an industry. It happens once in a decade. It would end up taking Apple 7 years to break into the Fortune 500, but the spirit of Markkula's prediction turned out to be true. Importantly, Markkula offered to guarantee a line of credit up to $250,000 in return for being made a 1/3 equity participant. Apple would incorporate, and he, along with Jobs and Wozniak, would each own 26% of the stock. Jobs would say, I thought it was unlikely that Mike would ever see that $250,000, and I was impressed that he was willing to risk it. And now it was necessary to convince Wozniak to come on board full-time. So this whole time for the Apple I, mind you, he's moonlighting from HP. But Wozniak announced that he wasn't going to leave HP, and Jobs got very upset. He cajoled Wozniak. He got friends to try to convince him. He cried and yelled and threw a couple of fits. He even went to Wozniak's parents' house, burst into tears, and asked Jerry for help. Alan Baum said, you really ought to go ahead and do it. He argued that if he joined Apple full-time, he would not have to go into management or give up being an engineer. That was exactly what I needed to hear, Wozniak later said. On January 3rd, 1977, the new corporation, the Apple Computer Company, was officially created. And remember, at this time, Steve Jobs is like 21 or 22 years old. And their computer wasn't exactly crushing it. So the old partnership that had been formed by Jobs and Wozniak 9 months earlier, few people noticed then. The Homebrew Computer Club surveyed its members and found that 6 of the 181 who owned personal computers had an Apple. But as they bring on Mike Markkula, he began to have a big impact on Steve, where he taught him about sales and marketing. Mike really took me under his wing, Jobs said. His values were much aligned with mine. He emphasized that you should never start a company with the goal of getting rich. Your goal should be making something you believe in and making a company that will last. And Markkula also wrote his principles in a one-page paper titled The Apple Marketing Philosophy. It stressed 3 points: empathy, so an intimate connection with the feelings of the customer, Number 2 is focus. In order to do a good job of those things that we decide to do, we must eliminate all the unimportant opportunities. Third one was impute. It emphasized that people form an opinion about a company or product based on the signals that it conveys. People do judge a book by its cover, he wrote. Just in case you missed these: empathy, focus, and impute. And just think today when you open the box of an iPhone or an iPad or anything Apple products, or going to the Apple stores, which we're going to talk about as well, that tactile experience you have and how it sets the tone for the product. That all goes back to 1977, early days of Apple, carries on to today. It's so interesting. So let's talk more about the Apple II. One of the first steps in the process was convincing Regis McKenna, one of the, the Valley's premier publicists, to take on Apple as a client. McKenna was a college dropout who had worked for Fairchild and National Semiconductor before starting his own PR and advertising firm. His 2 specialties were doling out exclusive interviews with his clients to journalists he had cultivated and coming up with memorable ad campaigns that created brand awareness for products such as the microchips. One of these was a series of colorful magazine ads for Intel that featured racing cars and poker chips rather than the usual dull performance charts. These caught Jobs' attention. He called Intel and asked who created them. Regis McKenna, he was told. I asked them what Regis McKenna was, Jobs recalled, and they told me he was a person. He couldn't get through to McKenna and was transferred to Frank Burge, an account executive. who tried to put him off. Jobs called back almost every day. Eventually, he breaks through. McKenna and his team got to work on brochures for the Apple II. The first thing they did was to replace Ron Wayne's ornate Victorian woodcut-style logo, which ran counter to McKenna's colorful and playful advertising style. Jobs ordered, don't make it cute. Rob Janoff came up with a simple apple shape in 2 versions. One hole and the other with a bite taken out of it. The first looked too much like a cherry, so Jobs chose one with the bite. Atop the brochure, McKenna put a maxim often attributed to Leonardo da Vinci that had become the defining precept of Jobs's design philosophy: simplicity is the ultimate sophistication. And that's something that they will carry on through obviously the entire time with Apple— simplicity Is the ultimate sophistication. And just take a step back here. Jobs sees this amazing ad campaign. It catches his eye. He immediately calls the company. He's like, who did that? And wants to hire that person. Ends up working with the Valley's top publicist. I think it's important that you go for great. Steve wanted the best for everything, and he just reaches out to the person. Just think about this. He's like, reaches out. He can't even get in contact with him. And he just keeps calling and calling and calling until he can. I mean, how many people just stop so early or they settle in life? And if there's anything to take away from this, like, he just goes for things that he wants repeatedly. He is relentless, he is intense, and I love it. So the introduction of the Apple II was scheduled to coincide with the first West Coast Computer Fair to be held April 1977 in San Francisco. Organized by the Homebrew Computer Club stalwart Jim Warren. The admonition of making a memorable impression was reflected in the care that Jobs took with Apple's display area. Other exhibitors had card tables and poster board signs. Apple had a counter draped in black velvet and a large pane of backlit plexiglass with Janoff's new logo. They put on display the only 3 Apple IIs that had been finished, but empty boxes were piled up to give the impression That there were many more on hand. And Jobs was furious when the computer cases had arrived with tiny blemishes on them. So he had his handful of employees sand and polish them. And Markkula had sent him to a San Francisco tailor for 3-piece suits, which looked very ridiculous on them, but it was worth the effort. Apple got 300 orders at the show. And Jobs met a Japanese textile maker who became Apple's first dealer in Japan. Apple was now a real company with a dozen employees, a line of credit, and the daily pressures that come from customers and suppliers. Jobs did not wear his growing responsibilities gracefully. He became increasingly tyrannical and sharp in his criticism, according to Markkula. He would tell people that their designs just look like shit, which obviously for the entire time he's building Apple, this is basically how he operates, which I don't love that part, and we know he's notorious for that, but he did get results. Steve was also convinced against all evidence that his vegan diets meant that he didn't need to use deodorant or take regular showers. Markkula was averse to confrontation, so he decided to bring in a president, Mike Scott, to keep a tighter rein on Jobs. Wozniak embraced the idea of hiring Scott. Jobs had more conflicting emotions. I was only 22. And I knew I wasn't ready to run a real company, he said, but Apple was my baby and I didn't want to give it up. For Steve Jobs, relinquishing control, any control at all, was agonizing to him. And because Steve Jobs was so particular about everything, obviously this annoyed people to no end. Like, a good example is the Pantone Company, which Apple used to specify colors for its plastic. had more than 2,000 shades of beige, and none of them were good enough for Steve. I rolled at this. Steve Jobs wanted to create a different shade of beige, and Scott had to stop him. And when the time came to tweak the design of the case, Jobs spent days agonizing over just how rounded the corners should be. This led to problems later on. Apple would be late and delayed on products, and there were times, of course, that Jobs made mistakes. But on the whole, like net-net, this led to insanely great products. Another way that Jobs was different though was insisting that Apple be different in how it treated its customers. He wanted a 1-year warranty to come with the Apple II. This flabbergasted Scott. The usual warranty was 90 days. And Arthur Rock, who had initially been unimpressed when Markkula sent Jobs to see him, after scoping out the Apple II, he made an investment and joined the board. The Apple II would be marked in various models for the next 16 years, with close to 6 million sold, more than any other machine. It launched the personal computer age. As Regis McKenna later said, Woz designed a great machine, but it would be sitting in a hobby shop today if it were not for Steve Jobs. Nevertheless, most people consider the Apple II to be Wozniak's creation. That would spur Jobs to pursue the next great advance, one that he could call his own. Right as Apple was starting to take off, his on-again, off-again girlfriend, Chrisann Brennan, got pregnant. Steve was 23, the same age his biological parents were when they had him. He denied paternity for years, and his daughter Lisa grew up on welfare while Steve became a millionaire. He was very, very ashamed of it later. It's just one piece of his very complex character. And also goes to remind me of just how much I love the character of the Wright brothers, which we talked about in episode 2. They were like the model of character. They were tremendous. And obviously both people, the Wright brothers and Steve Jobs, accomplished great things, but there are many ways to go about it. And the Wright brothers, as far as character, were my example that I love. On the business side, the Apple II sales rose dramatically. They took the company from Jobs's garage to the pinnacle of the new industry. 2,500 units sold in 1977 went to 210,000 in 1981. But Jobs was restless. He wanted a product that would, in his words, make a dent in the universe. He hoped the Apple III would play that role. It'd have more memory. The screen size would display 80 characters across rather than 40. It'd handle uppercase and lowercase letters. And Jobs decreed the size and shape of the external case and refused to let anyone alter it, even as committees of engineers added more components to its circuit boards. The result was piggybacked boards with poor connectors that frequently failed. When the Apple III began to ship in May of 1980, it was a flop. By that time, Jobs distanced himself from the Apple III and was thrashing about for ways to produce something more radically different. He hired 2 engineers from Hewlett-Packard to conceive a totally new computer. The name he chose for it was the Lisa. They had to make up an acronym actually so they could claim it wasn't named after Lisa, his child, his daughter. So they reverse engineered locally integrated systems architecture, which of course is meaningless. And Jobs would later say, obviously it was named for my daughter. He denied that though, of course, at the time. It was conceived as a $2,000 machine, the 16-bit processor rather than the 8-bit one, but eventually Jobs began to grow impatient with how boring it was turning out to be. One programmer was infusing life into the project, Bill Atkinson. When he was asked to come work for Apple, he declined, but then Apple sent him a non-refundable plane ticket and he decided to use it. Jobs tried to persuade him, We are inventing the future, Jobs told him at the end of a 3-hour pitch. Think about surfing on the front edge of a wave. It's really exhilarating. Now think about dog paddling at the tail end of that wave. It wouldn't be anywhere near as much fun. Come down here and make a dent in the universe. Atkinson did. I just love how he's able to convince people again and again to join him. Like sending him a what? Sending him a non-refundable plane ticket? Like, okay, sure, I'll come see what he has to say. Like, he just finds a way to get all the best people to work for him, which ends up being incredibly important to the story, of course. And it's a theme that comes up again and again. He doesn't take no for an answer, just like Nolan Bushnell taught him. And he also has this incredible way of getting to the essence of people and what inspires them or motivates them and offering it up so that they come work for him and build what he wants to build. It is just remarkable. So by the fall of 1979, at this time, Apple was breeding 3 ponies to be the potential successors to the Apple II workhorse. There's the Apple III, the Lisa project, and a small skunkworks project being developed by Jeff Raskin, a former professor who had taught Bill Atkinson. It's important to understand this skunkworks project. So Xerox PARC was established in 1970. It's officially called the Xerox Corporation's Palo Alto Research Center. It was built to create this spawning ground for digital ideas. It was safely located, for better or worse, 3,000 miles from the commercial pressures of Xerox corporate headquarters in Connecticut. Among its visionaries was a scientist, Alan Kay. who had 2 great maxims that Jobs embraced. One was that the best way to predict the future is to invent it. And 2, people who are serious about software should make their own hardware. And Xerox PARC pioneered a concept called bitmapping, which is what facilitated this new graphical user interface, or GUI, or GUI as they call it. Until then, most computers were character-based. We'd type a character on a keyboard and the computer would generate the character on the screen. In a bitmap system, on the other hand, each and every pixel on the screen is controlled by bits in the computer's memory. Jeff Raskin decided that these features were the future of computing, so he began urging Jobs and other Apple colleagues to go check out Xerox PARC. The only problem was Jobs regarded Raskin as an insufferable theorist, or as he called people he didn't like that were dumb, he called them a shithead. And Raskin enlisted his friend Atkinson instead, who fell on the other side of Jobs' shithead genius division, to convince Jobs to take an interest in what was happening at Xerox PARC. Raskin at the time didn't know that Jobs was working on a more complex deal. Xerox's venture capital division wanted to be part of the second round of Apple financing. During the summer of 1979, Jobs made an offer. I will let you invest $1 million in Apple if you will open the kimono on PARC. Xerox accepted. It agreed to show Apple its new technology, and in return, it got to buy 100,000 shares at about $10 each. By the time Apple went public a year later, Xerox's $1 million worth of shares were worth about $17.6 million. But Apple got the better end of the bargain. Jobs and his colleagues went to see Xerox PARC's technology in December 1979. And when Jobs realized that he hadn't been shown enough, he got an even fuller demonstration a few days later. Larry Tesler was one of the Xerox scientists called upon to do some briefings, and he was thrilled to show off the work that his bosses back east had never seemed to appreciate. The other briefer, Adele Goldberg, was appalled that her company seemed willing to give away its crown jewels. So after they show basically like a few applications, Jobs is pissed. And he gets invited back a few days later. He's impatient. He's like, let's stop this bullshit. They thought they could show him some stuff and dazzle him, and he'll never know, like, the confidential stuff. They were wrong. Atkinson and others had actually read some of the papers published by Xerox PARC, so they knew they were not getting the full description. Jobs phoned the head of Xerox venture capital division to complain, and a call immediately came back from corporate headquarters in Connecticut. Decreeing that Jobs and his group should be shown everything. Goldberg stormed out in a rage. When Tesler finally showed them what was truly under the hood, the Apple folks were astonished. You're sitting on a gold mine! he shouted. I can't believe Xerox is not taking advantage of this! is what Steve Jobs said. The small demonstration showed 3 amazing features. One, how computers could be networked. 2, how object-oriented programming worked, and 3, the graphical interface that was made possible by a bitmap screen. It was like a veil being lifted from my eyes, Jobs recalled. I could see what the future of computing was destined to be. Picasso had a saying, good artists copy, great artists steal, and we have always been shameless about stealing great ideas. This is what Steve Jobs said. Obviously, seeing everything at Xerox PARC was insane. And they basically saw the future, as he said. And also later Jobs would say of Xerox, they just grabbed defeat from the greatest victory in the computer industry. Xerox could have owned the entire computer industry. This again just brings to my mind how crazy every part of a company is. Imagine Xerox does use their technology and doesn't show us the Apple, like where does Apple become? All these different pieces of a business have to play out for you to get Apple to one day, one day to become the most valuable technology company in the world. So a few days after his second Xerox PARC visit, Jobs went to a local industrial design firm, IDEO, and told one of its founders, Dean Hovey, that he wanted a simple single-button model that cost $15. Like a mouse, a single-button mouse that's $15. He wanted it to be very easy to use and Hovey complied. And by the way, in 1981, well before the Apple Lisa or Macintosh. Xerox introduced the Xerox Star, a machine that featured their graphical user interface, mouse, bitmap display, windows, and desktop metaphor, but it was clunky. It could take minutes to save a large file, and it was very costly, $16,595 at retail stores. And it was aimed mainly at the networked office market. It flopped. Only 30,000 were ever sold. So they did try. To use their technology, but obviously they didn't put together in a way that Steve Jobs did, for example. Steve Jobs and his team went to the Xerox dealer actually to look at the Star as soon as it was released. They deemed it worthless. They were very relieved. Steve called Bob Belleville, one of the hardware designers on the Xerox Star team, and said, everything you've ever done in your life is shit, so why don't you come to work for me? And Belleville did, and so did Larry Tesler. And in his excitement, Jobs began to take over the daily management of the Lisa project, which at the time was being run by John Couch, the former HP engineer. And Steve wasn't much of an engineer himself, but he was very good at assessing people's answers. He could tell whether the engineers were defensive or unsure of themselves. One of Atkinson's amazing feats was to allow the windows on a screen to overlap. So that the top one clipped into the ones below it. Another example here of just the many innovations that go into creating a revolutionary product. And one of the things Atkinson said was, I got a feeling for the empowering aspect of naivete. Because I didn't know it couldn't be done, I was able to do it. And around this time, the tug of war between Jobs and people like Couch, both Mike Scott and Mike Markkula were intent on bringing some order to Apple. They became increasingly concerned about Jobs's disruptive behavior, so in September 1980, they secretly plotted a reorg. Couch was made the undisputed manager of the Lisa division. Jobs lost control of the computer he had named after his daughter. He was also stripped of his role as vice president for research and development. He was made non-executive chairman of the board. This position allowed him to remain Apple's public face, but it meant that he had no operating control. That hurt. He'd say that he was upset and felt abandoned by Markkula. Let's take a step back. In January 1977, the Apple Computer Company is valued at $5,309. Less than 4 years later, they decided it was time to take it public. It would become the most oversubscribed initial public offering since that of Ford Motors in 1956. By the end of December 1980, Apple will be valued at $1.79 billion, and in the process, it would make 300 people millionaires. At age 25, Steve Jobs was now worth $256 million. But Steve would say, I never worried about money. I grew up in a middle-class family, so I never thought I would starve. I learned at Atari that I could be an okay engineer, so I always knew I could get by. I was voluntarily poor when I was in college in India, and I lived a pretty simple life even when I was working. I went from fairly poor, which was wonderful because I didn't have to worry about money, to being incredibly rich when I also didn't have to worry about money. I watched some people at Apple who had made a lot of money and felt they had to live differently. Some of them bought a Rolls-Royce and various houses, each with a house manager and then someone to manage the house managers. Their wives got plastic surgery and turned into these bizarre people. This was not how I wanted to live. It's crazy. I made a promise to myself that I'm not going to let this money ruin my life. Inc. magazine was the first to put Steve Jobs on the COVID in October 1981. Time followed in February 1982 with a piece on young entrepreneurs. The accompanying profile written by Michael Moritz noted, quote, at 26, Jobs heads a company that 6 years ago was located in a bedroom in a garage of his parents' house, but this year is expected to have sales of $600 million. That's just so wild to me. Now we have to talk about the Macintosh. So one of Raskin's dreams was to build an inexpensive computer for the masses. And in 1979, he convinced Mike Markkula to put him in charge of a small development project codenamed Annie to do just that. Since Raskin thought it was sexist to name computers after women, he redubbed the project in honor of his favorite type of apple, the Macintosh. Throughout 1979 and early 1980, the Macintosh project led a tenuous existence. Every few months it would almost get killed off. But each time Raskin managed to control Markkula into granting clemency. It had a research team of only 4 engineers, a few blocks from the company's main building. The star on the team was an intense, self-taught young engineer named Burrell Smith. Jobs was enthralled by Raskin's vision, but not by his willingness to make compromises to keep the cost down. At one point in the fall of 1979, Jobs told him instead to focus on building what he repeatedly called an insanely great product. Don't worry about the price, Jobs told him. Raskin had little patience for Jobs's belief that you could distort reality if you had enough passion for your product. They were destined to clash. And we had to highlight that piece of it because that comes up so much in this story. Insanely great products. That is all you have to take away from this story. That's all Jobs focused on, insanely great products again and again and again. And Raskin was trying to keep the price of this under $1,000, so he was devoted to this like underpowered microprocessor. Because Jobs was determined to build an insanely great machine, he was pushing for the Mac to switch to the more powerful Motorola 68000. Bill Atkinson, Raskin's former student, Sided with Jobs. They both wanted the powerful processor that would support the wizier graphics and the use of a mouse. Steve had to take the project away from Jeff. Of course, some on the team found Jobs impossible to work with, but many others realized that despite his temperamental failings, Jobs had the charisma and corporate clout that would lead them to make a dent in the universe. Jobs told the staff that Raskin was just a dreamer. Whereas he was a doer and would get the Mac done in a year. It was clear he wanted vindication for having been ousted from the Lisa group, and he was energized by the competition. He publicly bet John Couch $5,000 that the Mac would ship before the Lisa. And with Jobs in charge of the project, he started recruiting people. Andy Hertzfeld, a young engineer on the Apple II team, was excited by him. Jobs asked him, are you any good? We only want really good people working on the Mac. And I'm not sure you're good enough. Hertzfeld knew how to answer. He told him, yes, I thought I was pretty good. Jobs later said, I've got news for you. You're working on the Mac team now. Come with me. And this is just an example of Jobs's speed and focus. So when Hertzfeld replied he needed a couple more days to finish the Apple II product he was in the middle of, Jobs demanded, what's more important than working on the Macintosh? He'd say that he's wasting his time with the Apple II. He said, who cares about the Apple II? The Apple II will be dead in a few years. The Macintosh is the future of Apple, and you're going to start on it now. And with that, Jobs yanked out the power cord to Hertzfeld's Apple II, causing the code he was working on to vanish. Come with me, he said. I'm going to take you to your new desk. And he drove Hertzfeld, computer and all, in his silver Mercedes. to the Macintosh offices. He said, here's your new team. Welcome to the Mac team. Bruce Horn was another one of the programmers at Xerox PARC. When some of his friends, such as Larry Tesler, decided to join the Macintosh group, Horn considered going there as well. Steve was so passionate about building this amazing device that could change the world, Horn recalled. By sheer force of his personality, he changed my mind. At this time, Steve Jobs even tried to re-engage Wozniak, But as soon as Jobs was starting to get him interested in the Mac, Wozniak crashed his new single-engine Beechcraft while attempting to take off near Santa Cruz. And by the way, it's important to know that even people as genius as Steve Jobs have terrible ideas, because when he overtook the Mac, he had been referring to computers as a bicycle for the mind, and he wanted to call the Macintosh the bicycle, which obviously people hated. And within a month they dropped the idea. So just remember, these people are not perfect. They are very flawed in different ways, and even people who have great ideas also have terrible ideas. By early 1981, the Mac team had grown to about 20 people, and they needed bigger quarters. So Jobs moved them to a second floor of a brown shingle, 2-story building about 3 blocks from Apple's main offices. It was next to a Texaco station and thus became Known as Texaco Towers. A few weeks after winning his triumph in his power struggle with Raskin, Steve Jobs helped push out Mike Scott as Apple's president. And one of the people working with Steve, Bud Tribble, a software engineer on the Mac team, said Steve had a reality distortion field. In his presence, reality is malleable. He can convince anyone of practically anything. It wears off when he's not around, but it makes it hard to have realistic schedules. And Herzfeld would say, amazingly, the reality distortion field seemed to be effective even if you were acutely aware of it. We would often discuss potential techniques for grounding it, but after a while, most of us gave up accepting it as a force of nature. And Debbie Coleman would say, it was a self-fulfilling distortion. You did the impossible because you didn't realize it was impossible. And at the root of the reality distortion was Jobs's belief that rules didn't apply to him. And Jobs pushed his team in every respect. So he went to the cubicle of Larry Kenyon complaining that the operating system was taking too long to boot up. Jobs asked, if you could save a person's life, would you find a way to shave 10 seconds off the boot time? Kenyon said he probably could. Jobs went to a whiteboard and showed that if there were 5 million people using the Mac, it takes 10 seconds extra time to turn on every day. That added up to 300 million or so hours per year that people would save. That was the equivalent of at least 100 lifetimes saved per year. Larry was suitably impressed, and a few weeks later he came back and booted up 28 seconds faster. Atkinson recalled, Steve had a way of motivating by looking at the bigger picture. That is an important piece, motivating your team by looking at the bigger picture of what you are doing. The result was that the Macintosh team came to share Jobs's passion for making a great product, not just a profitable one. Jobs thought of himself as an artist, and he encouraged the design team to think of themselves that way too. The goal was never to beat the competition or make a lot of money. It was to do the greatest thing possible, or even a little greater. And he once took them to see an exhibit of Tiffany glass in San Francisco because he believed they could learn from Louis Tiffany's example of creating great art that could be mass-produced. Recall Bud Tribble? We said to ourselves, hey, if we're going to make things in our lives, we might as well make them beautiful. I absolutely love that and agree completely. But of course, this all comes at a cost. So even though the Macintosh would turn out to be great, it was way behind schedule and way over budget because of Jobs' impetuous interventions. There was also a cost in brutalized human feelings, which caused much of the team to burn out. Steve Jobs would say, I've learned over the years that when you have really good people, You don't have to baby them. By expecting them to do great things, you can get them to do great things. The original Mac team taught me that A+ players like to work together, and they don't like if you tolerate B work. Ask any member of that Mac team, they will tell you it was worth the pain. And Steve Jobs liked the notion of simple and clean modernism produced for the masses. He also loved listening to his father describe the styling intricacies of various cars. From the beginning of Apple, he believed that great industrial design, a colorful simple logo, and a sleek case for the Apple II would set the company apart and make its products distinctive. The company's first office after it moved out of his first family garage was in a small building it shared with Sony's sales office. Sony was famous for its signature style and memorable product designs, so Jobs would drop by to study the marketing material. His fondness for the dark industrial look of Sony receded around June 1981 when he began attending the annual International Design Conference in Aspen. So important to note, you can get ideas from anywhere. Jobs is always seeking them, seeking new inspiration. And Jobs would say, I'd come to revere the Italian designers. In Aspen, he was exposed to the functional design philosophy, the Bauhaus movement, which was enshrined by Herbert Bayer in the building's Living Suites, Sans-serif font, typography, and furniture on the Aspen Institute campus. And he repeatedly emphasized that Apple's products would be clean and simple. We will make them bright and pure and honest about being high-tech rather than a heavy industrial look of black, black, black, black like Sony, he preached. That's our approach, very simple. And we're really shooting for Museum of Modern Art quality. Quality. The company, the product, the design, the advertising— it all comes down to this. Let's make it simple, really simple. Apple's design mantra would remain the one featured in its first brochure: simplicity is the ultimate sophistication. Also, in talking about the desktop metaphor, Steve would say people know how to deal with a desktop intuitively. If you walk into an office, there are papers on the desk. The one on the top is the most important. People know how to switch priority. Part of the reason we model our computers on metaphors like the desktop is that we can leverage this experience people already have. And Steve would use these great visuals for what was needed in his products. He plopped down at one point a phone book and declared to the horror of engineers that the computer shouldn't have a footprint larger than that. And this is how the Macintosh ends up coming to be. On one weekend, Jobs went to Macy's in Palo Alto and again spent time studying appliances, especially the Cuisinart. He came bounding into the Mac office that Monday, asked the design team to go buy one, and made a raft of new suggestions based on its lines, curves, and bevels. Jobs kept insisting that the machine look friendly. Jobs was obsessed with equal intensity about the look of what would appear on the screen. When he was shown circles and ovals, which he thought were good, he said, how about drawing rectangles with rounded corners? And he started pointing them out everywhere. And he also learned to love typefaces with all their serif and sans-serif variations, proportional spacing, and leading. He would say, when we were designing the first Macintosh computer, it all came back to me. And because the Mac was bitmapped, it was possible to devise an endless array of fonts ranging from the elegant to the wacky and render them pixel by pixel on the screen. In fact, the delightful assortment of Macintosh fonts, when combined with LaserWriter printing and great graphics and capabilities, would help launch the desktop publishing industry and be a boon for Apple's bottom line. And even when thinking about the PC board, Jobs reacted typically. I want it to be as beautiful as possible, even if it's inside the box. A great carpenter isn't going to use lousy wood for the back of a cabinet, even though nobody's going to see it. And then when IBM introduced its personal computer in August 1981, Jobs and his team bought one and dissected it. The consensus was that it sucked. Reflecting its cheeky confidence, Apple took out a full-page ad in the Wall Street Journal with the headline, Welcome IBM, seriously. And this was like super clever positioning in the upcoming battle. It made it seem like it's a 2-way contest between the spunky and rebellious Apple and the establishment Goliath that was IBM at this time. And of course his philosophy is that he wanted computers to be truly great. And of course his philosophy was that he believed That for a computer to be truly great, its hardware and its software had to be linked tightly. When the computer was open to running software that also worked on other computers, it would end up sacrificing some functionality. He was all about end-to-end design. And with this software combined with the hardware, in later years, Jobs' whole widget approach would distinguish the iPhone, iPod, and iPad from their competitors. It resulted in awesome products, but it was not always the best strategy for dominating a market. And remember that bet that Jobs had with Couch? Well, Apple launched Lisa in January 1983, and it was a full year before the Mac was ready. So of course Jobs had to pay his wager. But the Lisa did also die a slow death. Within 2 years, it'd be discontinued. And working on the Mac, every 6 months he would take most of his team on a 2-day retreat at a nearby resort. The first retreat in September 1982, his main thought: At the first retreat in September 1982, one of the main thoughts was, don't compromise. He would say this again and again. Most technology teams made trade-offs. The Mac, on the other hand, would end up being as insanely great as possible. But it would not ship for another 16 months, way behind schedule. After mentioning a scheduled completion date, he told them it would be better to miss than to turn out the wrong thing. And he displayed another maxim. It's not done until it ships. Another one of his favorite maxims around this time was, the journey is the reward. And at the end of the retreat, he would say, as every day passes, the work 50 people are doing here is going to send a giant ripple through the universe. I know I might be a little hard to get along with, but this is the most fun thing I've done in my life. At the next retreat in January 1983, there's a new maxim: Real artists ship. 4 months earlier, it was don't compromise. And another maxim he had was, it's better to be a pirate than join the Navy. He wanted to instill a rebel spirit in his team. And for his birthday, the team paid for a billboard on the road to Apple headquarters. It read, Happy 28th, Steve. The journey is the reward. The Pirates. I mean, how many people, how many teams would do that today for their, for their boss? How much you'd have to love someone like this to be able to do that. I just think it's very admirable. By the end of 1982, after almost 2 years, Mike Markkula, who had never actually wanted to be Apple's president, got an order from his wife, find a replacement right away. And so began the courting of John Sculley. The courting of John Sculley was a process that took months. Sculley was an executive at PepsiCo, had done some amazing work there, and Jobs wanted him to come to Apple. This whole courting process, by the way, reminds me a lot of later on Patrick Collison, the founder of Stripe. I wrote a deep dive on him a couple years back, and it took Stripe 6 months to hire their first couple of employees, even with a phenomenal network. And Patrick stressed the importance of being okay with waiting a very long time to hire. He said that he could think of 5 people off the top of his head who took 3+ years. And this was his filter: find the good ones first, then convert them to interest, not the other way around. So he would find people and just wait, and eventually they would join Stripe. Of course, for Steve Jobs, convincing John Sculley was a long process, as I mentioned, but he used the famous line that eventually got him, which was, do you want to spend the rest of your life Selling sugared water? Or do you want a chance to change the world? Sculley could not deny that. Sculley ended up arriving in California just in time for the May 1983 Apple management retreat. And around this time, Jobs confided in Sculley that he believed he would die young, and therefore he needed to accomplish things quickly so he would make his mark on Silicon Valley history. He told Sculley, We all have a short period of time on this earth. We probably only have the opportunity to do a few things really great and do them well. None of us has any idea how long we're going to be here, nor do I, but my feeling is I've got to accomplish a lot of these things while I'm young. This is just the— such an important point of sense of urgency. And, you know, our time on earth is, is short. We have to make the most of it. However you want to do that. For Steve, this was making insanely great products. Maybe it's something else for you. But you have to think about what that is and how you want to spend this short time we have on Earth. And I find Steve incredibly motivating and inspiring because of how he operated in his short time on this planet. And though there was this honeymoon phase with Sculley and Jobs, they, they quickly had disagreements. The first one was about the price of the Macintosh. Originally it was to be much cheaper than it ended up being. At one point, Sculley decided it needed to be $500 more to account for marketing. It was just a whole crazy situation. Jobs was basically furious. He'd say that it'll destroy everything we stand for. I wanna make this a revolution, not an effort to squeeze out profits. And at this time, there was this battle between IBM PCs and Apple. So the year before, 279,000 Apple IIs were sold compared to 240,000 IBM PCs and its clones. But the figures for 1983 were coming in starkly different. IBM Completely annihilated Apple as far as sales. And on the COVID of Businessweek, the title was Personal Computers and the Winner is IBM. It declared, in a stunning blitz, IBM has taken more than 26% of the market in 2 years and is expected to account for half the world market by 1985. But Jobs had always been able to draw energy by imagining himself as a rebel. Hated against the forces of darkness. And now he was able to energize his troops with the same vision. At one point in time, he'd say, you guys have been working on this stuff for months. Another couple weeks isn't going to make that much of a difference. You may as well get over it. I'm going to ship the code a week from Monday with your names on it. Well, we've got to finish it, Steve Kapp said. And so they did. And that was to get the Macintosh live. In spring of 1983, Jobs began to plan for that Macintosh launch. He wanted a commercial that was as revolutionary and as astonishing as the product they had created. And that task fell to Chiat/Day, the advertising agency led by Lee Clow, the creative director of the agency's office in Venice Beach. And they were toying with the idea of something that played off the George Orwell novel, Why 1984 Won't Be Like 1984. And Jobs loved it. And he wanted them to develop it for the Macintosh launch. He got Ridley Scott fresh off the success of Blade Runner as director and attaching himself to the cyberpunk ethos at the time. He was able to get a $750,000 budget just to film the ad, which they planned to premiere during the Super Bowl. Most of the board at the time thought it was the worst commercial they had ever seen. When Jobs said the board decided not to run it during the Super Bowl, Wozniak asked what the cost of the time slot was. Jobs told him $800,000. And with his impulsive goodness, Wozniak immediately offered, well, I'll pay half if you will. He ended up not needing to. Lee Clow said they told him that they couldn't sell the 60-second ad slot. They tried to basically sell both the ad slots. And he said they couldn't sell it. So they ended up running it. Partially because of Bill Campbell, the head of marketing, who said he thought they should go for it. And 96 million people watched an ad they thought was unlike anything they'd seen before. It was a sensation. That evening, all 3 networks and 50 local stations aired news stories about it, giving the ad viral life unprecedented in the pre-YouTube era. The launch event was January 24th, 1984. Jobs gave a presentation first, then the auditorium went black and the 1984 commercial appeared on the screen. And when it was over, the entire audience was on its feet cheering. And we had to mention Bill Gates and Microsoft and this relationship between Gates and Jobs. When the Macintosh was first being developed, Jobs went to visit Gates in his office near Seattle. Microsoft had written some applications for the Apple II, including a spreadsheet program. And Jobs wanted to get Gates and the company excited about what was happening with the Macintosh, At the time, Jobs was a king and Gates was still a courier. So it's 1982, Apple sales are $1 billion. Microsoft sales in that same year were $32 million. So huge disconnect here. Gates signed on to do graphical versions of the new spreadsheets called Excel and a word processing program called Word. And one of the many differences they have is in developing this, This interface, this graphics interface. Because Bill Gates also saw what was going on at Xerox PARC. So Jobs convinced Gates to agree that Microsoft would not create graphical software for anyone other than Apple until a year after the Macintosh shipped in 1983. Unfortunately for Apple, it did not provide for the possibility that the Macintosh launch would be delayed a year. So Gates was within his rights when in November 1983, he revealed that Microsoft planned to develop a new operating system for IBM PCs. Featuring a graphical interface with windows, icons, and a mouse for point-and-click navigation, it would be called Windows. And this part actually I like a lot. Jobs said Bill Gates was ripping him off. Said he trusted him and now he's stealing from them. But Bill Gates said, well, Steve, I think there's more than one way of looking at it. I think it's more like we both had this rich neighbor named Xerox, and I broke into his house to steal a TV set. And found out that you had already stolen it. I think that's an amazing, amazing line. And then Steve Jobs would go on to say about Microsoft, the only problem with Microsoft is they just have no taste. They have absolutely no taste. I don't mean that in a small way. I mean that in a big way, in a sense that they don't think of original ideas and they don't bring much culture into their product. The launch of the Macintosh in January 1984. Would propel Jobs into an even higher orbit of celebrity, but not long after would come the first downfall. So after the Mac, the Lisa and Macintosh divisions were folded together with Jobs in charge, and in May of 1984 was the first anniversary of Sculley's arrival. To just get an idea of how Steve Jobs operated and why He's also hard to work with. At one point, he's driving 100 miles an hour on the highway and a police officer stops him and begins writing a ticket. After a few minutes, as the officer scribbled away, Jobs honks his horn. Excuse me, the policeman said. Jobs replied, I'm in a hurry. Amazingly, the officer didn't get mad. He simply finished writing the ticket and warned that if Jobs was caught going over 55 again, He would be sent to jail. As soon as the policeman left, Jobs got back on the road and accelerated to 100 miles an hour. He absolutely believed the normal rules did not apply to him. As far as the Macintosh though, after the burst of excitement that accompanied the release, its sales began to taper, taper off in the second half of 1984. The problem was a fundamental one. It was a dazzling but woefully slow and underpowered computer. And no amount of hoopla could mask that. At the end of 1984, with Lisa sales virtually nonexistent and Macintosh sales falling below 10,000 a month, Jobs made a shoddy and atypical decision out of desperation. He decided to take the inventory of unsold Lisas, graft on a Macintosh emulation program, and sold them as a new product, the Macintosh XL. Since the Lisa had been discontinued and would not be restarted, It was an unusual instance of Jobs producing something that he did not believe in. You just have to remember that even the greats make mistakes. You're going to make mistakes as you're building great things, and sometimes you make trade-offs that aren't the right ones. Jobs would say around this time that it's rare you see an artist in his 30s or 40s really able to contribute something amazing. He'd go on to say, quote, Your thoughts construct patterns like scaffolding in your mind. You're really etching chemical patterns. In most cases, people get stuck in those patterns, just like grooves in a record, and they never get out of them. I'll always stay connected with Apple. I hope that throughout my life I'll have sort of the thread of my life and the thread of Apple weave in and out of each other like a tapestry. There may be a few years when I'm not there, but I always come back. If you want to live your life in a creative way as an artist, you have to not look back so much. You have to be willing to take whatever you've done and whoever you were and throw them away. The more the outside world tries to reinforce an image of you, the harder it is to continue to be an artist, which is why a lot of times artists have to say, bye, I have to go, I'm going crazy. I'm going and I'm getting out of here. They go and hibernate somewhere. Maybe later they reemerge a little differently. And after the Macintosh launch, his team was exhausted, so many of them actually end up leaving. And even as the Apple II remained the cash cow for Apple, accounting for 70% of its sales at Christmas in 1984, people are being treated as unimportant by Steve Jobs. And frustrated by this, Wozniak ends up leaving. And Jobs continues to have problems with John Sculley, saying he was never a product person and he didn't make the effort or show the capacity to understand the fine points of what they were making. Which obviously, in contrast, he found Jobs' passion for tiny technical tweaks and design details to be obsessive and counterproductive. And the problem was also that Jobs was frequently obnoxious, rude, selfish, and nasty to other people. And the Macintosh continued to disappoint. Sales in March 1985 were only 10% of the budget forecast. It's fair to say morale was low. And the culmination of all of this is that Steve gets kicked out of his own company. After this, Jobs decides that maybe going to Europe, getting away for a little bit would help. In Florence, he soaked in the architecture of the city. The texture of its building materials, particularly memorable were the paving stones, which actually end up making their presence as the floors of major Apple stores, which ends up being this full circle moment. In August of 1985, because Steve Jobs of course cannot stay still, he talks to his biochemist about the advances being made and begins talking to all these other academics to ask what their workstation needs were. And he had in his mind to start a new company. I mean, Steve Jobs was young, he's rich, he needed to find something to do with the rest of his life. He'd say, I've been thinking a lot and it's time for me to get on with my life. It's obvious that I've got to do something. I'm 30 years old. This is what Steve Jobs mentioned to the Apple board about starting a new company. And at first they were like, yeah, we're like on board and they're going to take a stake in this company and all of that. But quickly, because Steve Jobs is saying like, I'm going to take some low-level people with me to the next company. He does not. He takes important people with him and the board is pissed. They are very upset with him about this. So Steve goes on to start a company called NeXT, where he makes many mistakes over the course of a decade plus. He starts off with a very expensive $100,000 logo that he obsessed about. And lavish office spaces for a company that was going to target universities and colleges and make high-end workstations. And their first product, Jobs wanted a perfect cube, this 1-foot cube with exactly 90-degree angles, which would be hard to manufacture. And one of his first 10 employees at NeXT would actually be an interior designer. For that lavish headquarters I mentioned. So he just makes all these different mistakes. He's doing— it's just operating in a crazy way, focused on the wrong things at NeXT, trying to build up this image and maybe applying— and applying the wrong lessons from what he's learned earlier in his career to this new company. But he does get some others to write software for the company. The business itself is hemorrhaging cash. So Jobs had pledged $7 million of his own funds But at their current burn rate, he'd last maybe 18 months. He was careful to show— not show this need to investors. He had to play the game. In 1986, he sent a proposal to venture capital firms offering a 10% stake in the company for $3 million, but with no product to show, just a logo and snazzy offices with no revenue, nor none on the horizon. All the venture capitalists passed on the offer to invest. There was, however, one cowboy who was dazzled: Ross Perot, a Texan who had founded Electronic Data Systems and sold it to General Motors for $2.4 billion. Perot happened to watch the PBS documentary The Entrepreneurs, which had a segment on Jobs and NeXT in November 1986. Perot called Jobs the next day and offered, if you ever need an investor, call me. Jobs needed one badly. But he was careful not to show it. He waited a week before calling back. Perot sent some of his analysts to size up NeXT, but Jobs took care to deal directly with Perot. Jobs made an offer to Perot that was 3 times more expensive than it had been offered to VCs a few months earlier. For $20 million, Perot would get 16% of the equity in the company after Jobs put in another $5 million. That meant the company would be valued at $126 million. But at Next, Bill Gates decided not to create software that was tailored for the platform. He thought the Macintosh was truly unique, but he didn't understand what was so unique about Steve's new computer. And he would say that the machine is crap. Said it made no sense for Microsoft to divert resources from other projects to develop applications for Next. After announcing the world premiere of the Next computer, Quickly came out that it was going to be delayed. Of course, Jobs tries to spin it and he says, quote, it's not late, it's 5 years ahead of its time. I just think that's a phenomenal line, even though NeXT was delayed so much. And when the computer finally was on sale in mid-1989, the factory he had built for this was primed to turn out 10,000 units a month. As it turned out, Sales were about 400 a month, which just shows the disappointment of NeXT. All those beautiful robots, so nicely painted, remained mostly idle, and the company continued to hemorrhage cash. But this was not the only thing that Steve Jobs was working on. When Jobs was losing his footing at Apple in the summer of 1985, he went on a walk with Alan Kay, who had been at Xerox PARC And was then an Apple Fellow. Kate knew that Jobs was interested in the intersection of creativity and technology, so he suggested they go see a friend of his, Ed Catmull, who was running the computer division of George Lucas's film studio. The Lucasfilm computer division made hardware and software for rendering digital images and also had a group of computer animators making shorts, which was led by a talented cartoon-loving executive named John Lasseter. Lucas, who had completed his first Star Wars trilogy, was embroiled in a contentious divorce, and he needed to sell the division. He told Catmull to find a buyer as soon as possible. As Steve Jobs would say, I wanted to buy it because I was really into computer graphics. I realized they were way ahead of others in combining art and technology, which is what I've always been interested in. Jobs offered to pay Lucas $5 million plus invest another $5 million to capitalize the division as a standalone company. That was far less than Lucas had been asking, but the timing was right. They decided to negotiate a deal. The chief financial officer at Lucasfilm found Jobs arrogant and prickly. So when it came time to hold a meeting of all the players, he told Catmull, We had to establish the right pecking order. The plan was to gather everyone in a room with Jobs, and then the CFO would come in a few minutes late to establish that he was the person running the meeting. A funny thing happened. Catmull recalled, Steve started the meeting on time without the CFO, and by the time the CFO walked in, Steve was already in control of the meeting. I just think this is classic Steve Jobs. He is always in control of anything. They reached a final agreement in January of 1986. For his $10 million investment, Jobs would own 70% of the company. With the rest of the stock attributed to Ed Catmull, Alvy Ray Smith, and the 38 other founding employees, down to the receptionist. The division's most important piece of hardware was called the Pixar Image Computer, and from it the company took its name. Initially, the revenue was supposed to come from the hardware side. A Pixar Image Computer sold for $125,000. Jobs would say at the time, my view is that people are creative animals And will figure out clever new ways to use tools that the inventor never imagined. He later said, I thought that would happen with the Pixar computer, just as it did with the Mac. So Steve wanted to sell Pixar's computers to mass market. He was never content to aim only at the corporate or high-end specialized markets. One company that was eager to use these computers was Disney. And they bought dozens of the Pixar image computers. And Jobs was energized by this experience at Pixar. Artistic creativity energized him, especially when he was connected to technology. And Jobs committed to making new animated shorts each year, even when there wasn't much business rationale for it. Even as Pixar's hardware and software products floundered, Jobs kept Protecting the animation group. It became for him a little island of magical artistry that gave him deep emotional pleasure, and he was willing to nurture it and bet on it. In the spring of 1988, cash was running so short that he convened a meeting to decrease deep spending cuts across the board. When it was over, Lasseter and his animation group were almost too afraid to ask Jobs about authorizing some extra money for another short. Finally, they broached the topic and Jobs sat silent, looking skeptical. It would require close to $300,000 more out of pocket. After a few minutes, he asked if there were any storyboards. Catmull took him down to the animation offices, and once Lasseter started his show, displaying his boards, doing the voices, and showing his passion for the product, Jobs started to warm up. The story was about Lasseter's love, classic toys. It was told from the perspective of a toy named Tinny who meets a baby that charms and terrorizes him. Escaping under the couch, Tinny finds other frightened toys, but when the baby hits his head and cries, Tinny goes back out to cheer him up. Jobs provided the money. He would later say, I believed in what John was doing. It was art. He cared and I cared. I always said yes. His only comment was, all I ask of you, John, is to make it great. Tin Toy went on to win the 1988 Academy Award for Animated Short Films, the first computer-generated film to do so. The new team at Disney, Michael Eisner, the CEO, and Jeffrey Katzenberg in the film division, began a quest to get Lasseter to come back. They liked Tin Toy, and they thought something more could be done with the animated stories of toys that come alive. And have human emotions. By this point in time, Jobs said he poured close to $50 million of his own money into Pixar. Taking a step back here, if Jobs does not okay that $300,000 when Pixar's hardware and software products were floundering, Tin Toy does not get made. If Tin Toy does not get made, it does not catch the attention of Michael Eisner and Jeff Katzenberg, and then they don't have the idea to do more animated stories of toys. And if that doesn't happen, I bet that Toy Story doesn't happen. And if Toy Story doesn't happen, you know how much money is made from Toy Story? $16 billion it's made for Disney at least. And there's projections at like $50 billion in economic activity worldwide. My point here, the takeaway is that supporting creative projects, supporting people you believe in is important. Jobs believed in what John was doing. They both cared. And when you do this, when you invest in people who care about something deeply, greatness happens. Around this time, one of the most important things in Steve Jobs' life happens. He meets his wife, Laurene Powell. It happens when Jobs gives one of his lectures at Stanford. She was a new graduate student at the business school. A guy in her class convinces her to go. She ends up sitting right next to Steve Jobs. They talk for a while. They hit it off. Afterwards, he ends up asking her to dinner on a Saturday night. She agrees. He goes to his car to leave, but suddenly he stops and thinks that he'd rather have dinner with her than go to the next thing he had to go to. So he runs back to the car and says, how about dinner tonight? She says yes. They get married not long after. And coming back to Toy Story, There's a quote that Steve Jobs loved from Walt Disney, which said, it's kind of fun to do the impossible. That was the type of attitude that appealed to Jobs. He admired Disney's obsession with detail and design, and he felt that there was a natural fit between Pixar and the movie studio that Disney had founded. At the time, Pixar was on the verge of bankruptcy. They needed a deal with Disney far more than Disney needed a deal with Pixar. Plus, because Disney could afford to finance the whole thing and Pixar couldn't, they were basically at Disney's mercy. So they struck a deal in May of 1991 by which Disney would own the picture and its characters outright, have creative control, and pay Pixar 12.5% of the ticket revenues. They also had the option, but not the obligation, to do Pixar's next 2 films and the right to make, with or without Pixar, sequels including Sequels using the characters in the film. Disney could also kill the film at any time with only a small penalty. At one point in time, when Disney halts the production of Toy Story, Jobs keeps the project going with his own personal funding. Initially, the first half of Toy Story they show to Katzenberg and everyone, and then because of his notes and everything, it's terrible. It's not good. But the Pixar team comes back and creates a new script in 3 months. They change Woody from this tyrannical boss of Andy's other toys into being their wise leader. By February of 1994, the film is back in production. And along the way, as they're creating this, because Steve Jobs is good friends with Larry Ellison, founder of Oracle, there's a quote from Larry Ellison says, I can't tell you the number of versions of Toy Story I saw before it came out. It eventually became a form of torture. I'd go over there and see the latest 10% improvement. Steve is obsessed with getting it right, both the story and the technology, and isn't satisfied with anything less than perfection. I just think Larry Ellison's a funny dude. Toy Story ends up being a phenomenal success, of course. It recouped its cost in the first week with a domestic opening of $30 million, went on to be the top-grossing film of the year with $192 million in receipts domestically And a total of $362 million worldwide. And Jobs had planned before this for Pixar to go public coinciding with the release of Toy Story, which is a monumental bet that Toy Story would be a good film and would perform well. And just this incredible belief in what the team was making because the public offering occurs one week after Toy Story's opening. It was a risky bet that it obviously paid off big time, and it actually exceeded Netscape, which is the company Marc Andreessen co-founded, as the biggest IPO of the year. Earlier that year, Jobs had been hoping to find a buyer for Pixar that would let him recoup his $50 million that he had put in. By the end of the day, 80% of the shares he had recouped were worth more than 20 times that, an astonishing $1.2 billion. Jobs would say to the New York Times afterwards, there's no yacht in my future. I'd never done this for the money. The successful IPO meant that Pixar would no longer be dependent on Disney to finance its movies, which was just the leverage that Jobs wanted. He'd say that because we could now fund half the cost of our movies, I could demand half the profits. But more important, I wanted co-branding. These were to be Pixar as well as Disney movies. But let's remember, Steve Jobs is still running NeXT, his other company, and Jobs had to adjust the way he normally wanted to operate. He agreed in January 1992 to license the NeXTSTEP operating system to run on other computers, and a year later he gave up making the hardware altogether, which was an incredibly painful decision. But of course, he finds his way back to Apple. So in 1995, Windows 95 comes out and it becomes the most successful operating system ever. Around that time, Jobs and Ellison discuss a potential takeover bid for Apple to restore Jobs as its head. Ellison said he could line up $3 billion in financing. That was in 1995 during the Christmas vacation in Kona Village, Hawaii. By 1996, Apple's share of the market had fallen to 4% from a high of 16% in the late 1980s. Michael Spindler, who had replaced Sculley as CEO in 1993, tried to sell the company to Sun, IBM, and Hewlett-Packard. That failed. He was ousted in February 1996 and replaced by Gil Amelio, a research engineer who was the CEO of National Semiconductor. During his first year, the company lost $1 billion and the stock price, which had been $70 in 1991, fell to $14, even as the tech bubble was pushing other stocks into the stratosphere. So in the summer of 1996, Amelio realized they had a serious problem. Apple was pinning its hopes on creating a new operating system, but they didn't have one in the works that would be ready to ship in 1997. Emilio publicly promised that he would find an alternative, but his problem was he didn't have one. At first, they focused on another company to use their operating system. It falls through, and so they reach out to Steve Jobs. And on December 2nd, 1996, Jobs sets foot on Apple's Cupertino campus for the first time since his ouster 11 years earlier. Jobs suggested that Apple pay $12 a share for NeXT. That would amount to about $500 million. Amelio said that's too high. He counters with $10 a share, or just over $400 million. Jobs accepts immediately. On December 20th, 1996, the announcement is made in front of 250 cheering employees at Apple headquarters. And Amelio did as Jobs had requested, describing his new role as that of merely a part-time advisor. At the time, the Financial Times asked Jobs whether he was going to take over Apple or not. He said, oh no, there are a lot of other things going on in my life right now. I have a family, I'm involved at Pixar, and my time is limited, but I hope I can share some ideas. As we know, of course, Jobs cannot help himself. And at the time, Jobs is truly conflicted. He'd say that, I keep thinking about all the time away from my family this will cause. And the time away from the other family at Pixar. But the only reason I want to do it is that the world will be a better place with Apple in it. Jobs officially returned to Apple in January 1997 as a part-time advisor. First thing he does is install the best people. And Apple was still struggling with Gil Amelio as CEO. At one point in time, the board discusses getting rid of Gil in favor of Jobs, which they decide to do. At the time though, Jobs actually declines. Here's what he said: We just took Pixar public and I was happy being CEO there. I never knew of anyone who served as CEO of 2 public companies, even temporarily, and I wasn't even sure it was legal. I didn't know what I wanted to do. I was enjoying spending more time with family. I was torn. I knew Apple was a mess, so I wondered Do I want to give up the nice lifestyle that I have? What are all our shareholders going to think? I talked to people I respected. I finally called Andy Grove at about 8 AM one Saturday morning. Too early. In the middle, he stopped me and said, Steve, I don't give a shit about Apple. I was stunned. It was then I realized that I do give a shit about Apple. I started it, and it is a good thing to have in the world. That's when I decided to go back on a temporary basis to help Them hire a CEO. It just brings to mind, by the way, this whole thing of like, what do you care about? What gets you out of bed each day? Clearly Steve Jobs found it, and he was clear on that vision of what he wanted to do, where he wanted to work. Was that for you? We all have to think about that same thing for us as well. I think it's incredibly important. And when Jobs steps on stage 12 years after he lost his power struggle, For Apple, it was immediately clear that he was going to take control. He said, "Okay, tell me what's wrong with this place." He waited. It's the products," he answered. So what's wrong with the products? The products suck," he shouted. There's no sex in them anymore. And as we're going to see here, he understood the problems. He came back. He understood the problems. He knew how to act swiftly, align incentives. And get the top people to stay. And his speed of decisions, which we're going to hear about in a second here, he needed to make money at many of them. The speed at which he did it is what allowed them to come back as well. So Steve got involved in all aspects of the business: product design, where to make cuts, supplier negotiations, advertising agency review. He believed that he had to stop the hemorrhaging of top Apple employees. And to do so, he wanted to reprice their stock options. When Ed Woolard from the board, he was at DuPont before, said they never did such a thing, Jobs argued, you brought me here to fix this thing and people are the key. When the board proposed a study that could take 2 months, Jobs exploded. Are you nuts? He paused for a long moment of silence, then continued. Guys, if you don't wanna do this, I'm not coming back on Monday because I've got thousands of key decisions to make. That are far more difficult than this. If you can't throw your support behind this kind of decision, I will fail. If you can't do this, I'm out of here. And you can blame it on me. You can say Steve wasn't up for the job. It got approved. But instead of declaring victory and thanking the board, Jobs continued to see that he had to answer to the board that he didn't respect. Stop the train. This isn't going to work, he told Woolard. This company is in shambles, and I don't have time to wet nurse the board. So I need all of you to resign, or else I'm going to resign and not come back on Monday. The one person he said could stay was Woolard, and among those who were being asked to resign was Mike Markkula, who in 1976, as a young venture capitalist, had visited Jobs' garage, fallen in love. With a computer on the workbench, guaranteed a $250,000 line of credit, and become the third partner and one-third owner of the new company. Which is a personal note here. I just think it's kind of sad. But onward. So we know Jobs's ambition was to build a company that would endure. And Mike Markkula had that formula saying that lasting companies know how to reinvent themselves. This is exactly what Steve Jobs did. He brought in Larry Ellison on the board, Bill Campbell as well. And because of Jobs being deeply engaged at Apple, the stock ends up going from $13 to $20 in July 1997. And Jobs would say at this time, there are a lot of great people at Apple, but they're doing the wrong things because the plan has been wrong. I found people who can't wait to fall in line behind a good strategy, but there just hasn't been one. And that was after Apple had had their sales fall 30% over the previous 2 years. He would go on to say, Apple lives in an ecosystem. It needs help from other partners. Relationships that are destructive don't help anybody in this industry. I'd like to announce one of our first partnerships today, a very meaningful one, and that is one with Microsoft. And this deal was actually one of the first ones that Jobs made. One of his very first calls was to Bill Gates, and he told him that he was going to turn this thing around. He knew that Bill always had a soft spot for Apple. Jobs had gotten him into the application software business, and so Jobs said he needed help. But at the time, they had this patent dispute and lawyers were involved in all these different things. It was not great. Bill Gates had been with Gil Amelio for 6 months. Proposals were getting longer and more complicated. But Steve came in and says, "Hey, this deal's too complicated. What I want is a simple deal. I want the commitment of Microsoft to develop software for Apple, and I want an investment." So they put together in four weeks. And this just reminds me of the Dietrich Mateschitz episode we just had, the founder of Red Bull. And how his deals with athletes are just like a handshake deal to support them. We're going to support you, pay you, support you in your career, and all will be well. It's just like that. A simple deal had to be made quickly. Simplicity, simplicity, simplicity. And it just goes to show the benefit of being easy to work with in this regard. Obviously, Steve Jobs was hard to work with and work for. But in this particular deal, the value of being easy to work with for your partners. And also as part of this deal, Steve Jobs wanted incentives aligned. So Microsoft would've been investing $150 million in Apple and getting non-voting shares so that these incentives were actually aligned. And Jobs would say to the audience, if we want to move forward and see Apple healthy again, We have to let go of a few things here. We have to let go of this notion that for Apple to win, Microsoft has to lose. I think if we want Microsoft Office on the Mac, we better treat the company that puts it out with a little bit of gratitude. And this announcement of the Microsoft partnership jumped the stock 33% at the end of the day. It was at twice the price of when Gil Amelio resigned, and the one-day jump added $830 million to Apple's market cap. And it brings to mind a question of what do you need to let go of to move forward with your business? Steve Jobs knew he had to let go of this notion that for Apple to win, Microsoft had to lose. He knew this. He had showed some maturity in his second round of Apple. He had grown. And another move in coming back to Apple is working with Lee Clow again, the creative director at Chiat/Day who had done the great 1984 ad for the launch of the Macintosh. And Lee Clow did not pitch for business, but he was willing to do so for Jobs. And Jobs would say, this chokes me up. This really chokes me up. It was so clear that Lee loved Apple so much. He was the best guy in advertising, and he hadn't pitched in 10 years, yet here he was. He was pitching his heart out because he loved Apple as much as we did. He and his team had come up with this brilliant idea. Think different, and it was 10 times better than anything the other agencies showed. It choked me up, and it still makes me cry to think about both the fact that Lee cared so much and also how brilliant his Think Different idea was. And this campaign was a brand image campaign, not a set of advertisements featuring products. It was designed to celebrate not what the computers could do, but what creative people could do with the computers. Jobs would say, we at Apple had forgotten who we were. One way to remember who you are is to remember who your heroes are. That was the genesis of this campaign. I love this so, so much. And in this campaign, it would say, of course, here's to the crazy ones, the misfits, the rebels, the troublemakers. The round pegs in the square holes. The ones who see things differently. They're not fond of rules and have no respect for the status quo. You can quote them, disagree with them, glorify or vilify them, but the only thing you can't do is ignore them because they change things. They push the human race forward. And while some may see them as the crazy ones, we see genius because the people who are crazy enough to think they can change the world Are the ones who do. Oof, I actually still have chills reading that line. It is very good. That's the power of a great campaign. It's so impressive. And in addition to television commercials, they created one of the most memorable print campaigns in history. It's amazing. Just look at the entire thing. Google search the Think Different campaign. It's phenomenal. All featuring different personal heroes of Steve Jobs. And then on September 16th, 1997, Jobs announced that he would take over the title of interim CEO, which he called ICO. And he would say, what we're trying to do is not highfalutin. We're trying to get back to the basics of great products, great marketing, and great distribution. Apple has drifted away from doing the basics really well. And of course, the board, they tried to find another CEO, but Steve Jobs was the guy that was clear. And so we have the key moves by Jobs in round 2, incentivizing leadership team, this Microsoft partnership, getting a new board. Also, Apple at the time was doing some like licensing of their operating system, canceled that. No more, no more licensing of the operating system. One of the next moves was to simplify the product mix. At the time, it was terrible. It revealed how unfocused Apple had become. They had dozens of versions of the Macintosh, each with confusing numbers. I had people explaining this to me for 3 weeks, Jobs said. I couldn't figure it out. He began asking simple questions like, which one do I tell my friends to buy? When he couldn't get simple answers, he began slashing away at models and products. Soon he cut 70% of them. He said at one staff meeting in September 1997, I came out of the meeting with people who had just gotten their products canceled, and they were 3 feet off the ground with excitement because they finally understood where in the heck we were going. That piece is so important. People need to know that you have a vision for where this company is heading. After a few weeks, Jobs had finally had enough. He shouted at one big product strategy session, this is crazy. He grabbed a magic marker, padded to a whiteboard, and drew a horizontal and vertical line to make a four-square chart. Here's what we needed to do, he continued. Atop the two columns, he wrote consumer and pro. He labeled the two rows desktop and portable. Their job, he said, was to make four great products—one for each quadrant. And this sharp focus is important to underline because what it does is it frees up. Great people to work on better things. Instead of spreading your best people out among 30 products, he gets them to focus on a few products and frees up those resources, which ends up saving Apple. In his first year back, Jobs laid off more than 3,000 people, which salvaged the company's balance sheet. At the January 1998 San Francisco Macworld, Jobs took the stage where Emilio had bombed a year earlier. He ended the presentation with a phrase that would become his signature: Oh, and one more thing. This time, the one more thing was think profit. After 2 years of staggering losses, Apple had enjoyed a profitable quarter making $45 million. For the full fiscal year of 1998, it would turn in a $309 million profit. Jobs was back and so was Apple. And a big piece of Apple being back in the future with Jobs in his second state of Apple is Jony Ive, who, who started Apple in 1992 and became head of the design department in 1996. Here's a little on Jony Ive's philosophy. Why do we assume that simple is good? Because with physical products, we have to feel we can dominate them. As you bring order to complexity, you find a way to make the product refer to you. You find a way to make the product defer to you. Simplicity isn't just a visual style. It's not just minimalism or the absence of clutter. It involves digging through the depth of the complexity. To be truly simple, you have to go really deep. Design was not just about what a product looked like on the surface. It had to reflect the product's And his process of working with Jobs was much different than other companies. There were no formal design reviews, so there were no, no huge decision points. Instead, they make decisions fluid since they iterate every day and never have presentations, and they don't run into major disagreements because of that. And that signature packaging of Apple you, I'm sure, know of now. Steve and Jony spent a lot of time on packaging. Jony Ive would say, I love the process of unpacking something. You design a ritual of unpacking to make the product feel special. Packaging can be theater. It can create a story. One of the products they create is the iMac. It went on sale in August 1998. It sold 278,000 units in the first 6 weeks, 800,000 by the end of the year. Making it the fastest selling computer in Apple history. They ended up doing all sorts of colors as well, and it was an incredible product. Another important person in this rebuild is Tim Cook. In 1998, Steve Jobs met Tim Cook because Jobs wanted someone who could do just-in-time factories and supply chains as Michael Dell had done. And Tim Cook had been a procurement supply chain manager at Compaq Computers. He had joined Apple as a once-in-a-lifetime opportunity to work for a creative genius. He ended up being a perfect counterbalance to Steve Jobs. He would help cut their inventory from a month to 2 days. Jobs reflected on hiring at this time. Say, for most things in life, the range between best and average is 30% or so. The best airplane flight, the best meal, they may be 30% better than your average one. What I saw was someone who was 50 times better than the average engineer. He could have meetings in his head. The Mac team was an attempt to build a whole team like that. A-players, people said. A-players. People said they couldn't get along. They'd hate working with each other. But I realized that A-players like to work with A-players, and they just don't like working with C-players. At Pixar, it was a whole company of A-players. When I got back to Apple, that's what I decided to try to do. You need to have a collaborative hiring process. When we hire someone, even if they're going to be in marketing, I will have them talk to the design folks and engineers. My role model was J. Robert Oppenheimer. I read about the type of people he sought for the atom bomb project. I wasn't nearly as good as he was. That's what I aspired to do. And this is just another example of people, the great people like Steve Jobs, looking back at history for examples and inspiration, which is a great thing that you're listening to this show because that's what we're doing. We're looking back at some of the most ambitious people in history. And one of the next things that Jobs builds is the— and one of the next things that Jobs builds is the Apple Stores, which end up being tremendously successful. Originally, people were hesitant because Gateway stores from Gateway Computers, they were averaging like 250 visitors a week and they were not doing well. But by 2004, the Apple stores were averaging 5,400 per week. And that year, the stores did $1.2 billion in revenue. They were tremendously successful. Like Manhattan's Fifth Avenue store, which was opened in 2006. It would have 50,000 visitors per week during its first year. Remember, Gateway only had 250. This Apple Store is having 50,000, and it vindicated the strategy of finding signature high-traffic locations. One of the other things in this period is that Steve Jobs would take his most valuable employees on a retreat he called the Top 100, and at the end of each retreat, Jobs would stand in front of the whiteboard and ask, what are the 10 things we should be doing next year? People would all fight to get his suggestions in and Steve Jobs would write them down and then cross out the ones he thought were stupid. And then he would slash the bottom 7 and say, we can only do 3. Well, one of the most important things they do is create the iPod. And one of Jobs's talents was spotting markets that were filled with second-rate products. When they found a 1.8-inch drive from Toshiba that they didn't really know what to do with, They thought that was the perfect thing to create the iPod. And this is where Tony Fadell also comes into the story. He was thrilled to work on a music player. He had tried to do an MP3 player at Palm, but they didn't do it. And because of the integrated system of computer software and the hardware they had, it meant that when they had the iPod, this would also drive sales of the iMac. Jobs would say, I had this crazy idea that we could sell just as many Macs by advertising the iPod. In addition, the iPod would position Apple as evoking innovation and youth. I moved $75 million of advertising money to the iPod even though the category didn't justify 1/100th of that. That meant that we could completely dominate the market for music players. We outspent everybody by a factor of about 100. And of course, this just brings to mind the last episode we did on Red Bull and how they spent so much money on marketing their energy drink. It was like a third of their revenue spent on marketing, and they outspent everybody in the drink category by a lot. And the ads they end up creating for the iPod, they end up being legendary, iconic. And so much so that bands want to actually be in them. Normally you'd have to pay a band to want to be in your ads, and they had it flipped completely where artists wanted to be in their ads because they were so iconic and they meant that they'd be successful. And the whole 1,000 songs in your pocket tagline of the iPod was perfect. But they needed an iTunes Store to make this all work, which would require persuading top record companies to allow digital versions of their songs to be sold there. Jobs would say, I've never spent so much of my time trying to convince people to do the right thing for themselves. But he was able to use the Mac's small market size at the time, a mere 5%, to his advantage. He'd say, we use our small market share to our advantage by arguing that if the store had turned out to be destructive, it wouldn't destroy the entire universe. Jobs proposed selling digital songs for $0.99. A simple impulsive purchase. The record companies would get to keep 70 cents of that. He believed that people had an emotional connection to the songs they loved, so they wanted to own them. This was counter-positioning to other companies that were trying to run subscription services, and it ended up being the right move. Of course, Jobs played up his charm and all his tactics to be able to convince these different companies To put their music on the iTunes Store. But he did it. The iTunes Store was unveiled on April 28th, 2003. It would have 200,000 tracks. Even though there is this whole world of piracy of music at the time, it was worth it to buy the songs because the right song from Kaza, for instance, could take 15 minutes to find rather than 1 minute. In the iTunes Store. By spending an hour of your time to save about $4, he calculated you're working for under minimum wage. Eddy Cue, who was in charge of the store, predicted that Apple would sell a million songs in 6 months. Instead, the iTunes Store sold a million songs in 6 days. It would go down in history as a turning point for the music industry. And a hilarious quote from Steve Jobs at the time. Is that iTunes for Windows is probably the best Windows app ever written. This was, I find, just so funny. And Microsoft comes out with its own version of the iPod as well in November 2006. It was called the Zune. It looked like an iPod but clunkier. 2 years later, it had achieved a market share of less than 5%. Jobs would say, the older I get, the more I see how much motivations matter. The Zune was crappy because the people at Microsoft don't really love music or art the way we do. We won because we personally love music. We made the iPod for ourselves, and when you're doing something for yourself or your best friend or family, you're not going to cheese out. If you don't love something, you're not going to go the extra mile, work the extra weekend, challenge the status quo as much. I think this is a very, very important piece of this. You have to ask yourself, what do you personally love? Build that for yourself. It doesn't always mean you're going to make the most money, but it gives you a better chance of making something great. And by January 2007, iPods were half of Apple's revenue. But let's remember, Jobs is still running Pixar. They keep producing movies, and it becomes clear at some point that Disney needs to buy them. And so they do. In 2006, Disney buys Pixar for $7.4 billion, making Jobs its largest shareholder. And with the hits they had at Pixar and why Disney needed to buy them is Showcasing the value of IP. Because when you have good IP, like Toy Story for instance, Toy Story led to a movie sequel, a Disney on Ice show, a Toy Story musical performed on Disney cruise ships, a direct-to-video film featuring Buzz Lightyear, a computer storybook, 2 video games, a dozen action toys that sold 25 million units, A clothing line, and 9 different attractions at Disney theme parks. I had to include that part because I just think the value of IP witnessed through this story is absolutely absurd when you have the full engine that Disney has, which is why they pretty much had to buy Pixar that was coming up with all these incredible movies and characters, and it made so much sense. And I will definitely cover Disney in an episode for sure at some point. But a few years before this, and what would plague Jobs through the last 8 years or so of his life, is cancer. October 2003, diagnosed with cancer. He'd say that I really didn't want them to open up my body, so I tried to see if a few other things could work. That lasted for 9 months, which was a big mistake and one of the bad parts of Steve Jobs's personality, trying to distort reality, which does not work with cancer. And a couple of years later, at his very famous Stanford commencement address, he would say, remembering that I'll be dead soon is the most important tool I've encountered to help me make the big choices in life. Because almost everything, all external expectations, all pride, all fear of embarrassment or failure, these things just fall away in the face of death, leaving only what is truly important. Remembering that you're going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There's no reason not to follow your heart. Around the same time as that commencement address, To Stanford, the iPod was crushing it. Sales were skyrocketing. Twenty million were sold that year in 2005, quadruple the number of the year before. But Jobs, of course, had to worry about what could kill the company. Board member Art Levinson recalled that he was always obsessing about what could mess us up. The conclusion he came to. Was that the device that could eat their lunch was a cell phone. At the time, Tony Fadell was trying to make the track wheel, which they made famous in the iPod, work for the phone, but wasn't really working out that well. But Apple in 2005 quietly acquired a company called FingerWorks that was making a line of multi-touch trackpads and had developed some tablets with multi-touch sensing patents on ways to translate various finger gestures such as pinches and swipes into useful functions. Jobs also had a friend on the board of Corning Glass, and they had this product called Gorilla Glass, which Apple ends up using. And they focus intently on making sure every part of the device deferred to the screen. At one point, they made a big change. Basically had to reset, and Fidel would say other companies may have shipped, but we pressed the reset button and started over. And they did this because they cared; they cared intently. They cared so much about making a great product. It was unveiled in January 2007, and it went on sale five months later at the end of June in 2007. Competitors thought it cost too much at $500. Competitors like Microsoft's Steve Ballmer said it doesn't appeal to business customers because it doesn't have a keyboard. But once again, Microsoft had underestimated Jobs's product. By the end of 2010, 2 and a half years after it launched, Apple had sold 90 million iPhones and it reaped more than half the total profits generated in the global cell phone market. And by that time in 2010, the iPad had come out. January 2010, it sold 1 million units in under a month. But round 2 for cancer had come back to Steve in 2008. He had ended up taking a leave around that time and came back. But when Jobs was back at Apple, you know, he had learned so much from his younger days. He was actually able to take Criticism and insights people had and apply them. So when people said the iPad at first was a lovely device for consuming content, but it didn't facilitate much for the creation of content, Jobs took it to heart. He ended up making adjustments because of that. And by the way, by March 2011, 9 months after the iPad's release, 15 million have been sold. This is just crazy numbers. They end up creating the App Store and iCloud, and the App Store ends up getting a billion downloads in 9 months. And less than 5 months after the iPad launched, developers had created 25,000 new apps for the iPad, and there were 185,000 apps available for the iPhone. The App Store created a new industry overnight, and John Doerr's venture capital firm created an iFund of $200 million to offer equity financing for the best ideas. Jobs would work to continually get more content to make these devices more valuable. At one point in time, at one point in time courting Rupert Murdoch from News Corp, who owned the Wall Street Journal, New York Post, among other things. There's a great quote as well from Murdoch when he went to eat at Steve Jobs'. He said, eating dinner at Steve's is a great experience as long as you get out before the local restaurants close. Because of course Jobs was vegetarian, at times vegan. And at dinner, they talked about the importance of infusing an entrepreneurial and nimble culture into a company. Jobs would say, I used to believe that a really big company couldn't have a clear corporate culture. But I now believe it can be done. Murdoch's done it. I think I've done it at Apple. And one thing I have to mention as well, the iPhone 4 was released in June 2010, and there's a whole issue, it's called Antennagate, about dropped calls and all this thing. It's like a PR masterclass for how Jobs handles it. So he first calls Regis McKenna, the PR guru, and Jobs decides to take his son Reed with him to all these meetings because they were in Hawaii at the time. He'd say, I'm going to be in meetings 24/7 for probably 2 days, and I want you to be in every single one because you'll learn more in those 2 days than you would in 2 years at business school. You're going to be in the room with the best people in the world making really tough decisions and get to see how the sausage is made. Jobs got a little misty-eyed when he recalled the experience. He said, I would go through all that again just for the opportunity to have him see me at work. At the press event that Friday in Apple's auditorium, Jobs followed McKenna's advice. He did not grovel or apologize. He was able to defuse the problem by showing that Apple understood it and would try to make it right. Then he changed the framework of the discussion, saying that all cell phones had some problems. Later, he told me that he had sounded a bit too annoyed at the event, but in fact he was able to strike a tone that was unemotional and straightforward. He captured it in four short declarative sentences. We're not perfect. Phones are not perfect. We all know that, but we want to make our users happy. If anyone wasn't happy, he said they can return the phone or get a free bumper case from Apple. The return rate ended up being about 1.7 percent less than a third of the return rate of the iPhone 3GS or most other phones. Michael Wolf of News.com wrote. This is a level of modern marketing, corporate spin, and crisis management about which you can only ask with stupefied incredulity and awe, how does he get away with it? And a couple years earlier, by 2008, Jobs had a vision for the digital era. Call it the digital hub, and he knew that the hub would move to the cloud. They had launched a product called MobileMe, but it was expensive, and in Jobs' terminology, It sucked. Jobs was furious and got rid of the leader of MobileMe and replaced him with Eddie Cue. As Fortune's Adam Lashinsky reported in a dissection of the Apple corporate culture, accountability is strictly enforced, and that is an important piece of it. Jobs definitely enforces accountability for anybody who is putting out subpar work, which obviously is not, not accepted at Apple. They change the new service, it becomes iCloud. Jobs was still on medical leave at the time they announced it in June 2011, but the prospect of ushering in another tectonic shift in the digital age seemed to re-energize him. And I mean, my own note on this is just, what is life for besides doing things that give us energy? That we're excited about. It's the same thing with spending time with people we hang out with who give us energy or that we're excited to be around. That's what life is about. And this is near the end of Jobs's life, and he's still doing things that give him energy. But, but to be clear, by this time Jobs was very sick. Tim Cook took over day-to-day operations. And when Jobs, still furious at Google for Android, he got a visitor, Larry Page, co-founder of Google. And when he called, it's funny, like Jobs did not want to talk to him at first, but then he thought about all the people that had helped him when he was young. So he called back Larry Page and said, sure. And Page came over, sat in Jobs' living room, and listened to his ideas on building great products and durable companies. Jobs recalled, we talked a lot about focus and choosing people, how to know who to trust and how to build a team of lieutenants he can count on. I described the blocking and tackling he would have to do to keep the company from getting flabby or being larded with B players. The main thing I stressed was focus, figuring out what Google wants to be when it grows up. It's now all over the map. What are the 5 products you want to focus on? Get rid of the rest because they're dragging you down. They're turning you into Microsoft. They're causing you to turn out products that are adequate but not great. I tried to be as helpful as I could. I will continue to do that with people like Mark Zuckerberg too. That's how I'm going to spend part of the time I have left. I can help the next generation remember the lineage of great companies here and how to continue that tradition. The Valley has been very supportive of me. I should do my best to repay. I love that entire exchange. You have to give back, especially once you've made it, once you've made some progress, like giving back to people is the best thing you can do because all of us get help along the way. Every single one of us has gotten help from others along the way, even people who are quote unquote self-made. Everyone gets help. By July of 2011, his cancer had spread to his bones and other parts of his body. His doctors were having trouble finding targeted drugs that could beat it back. Talking to Walter Isaacson about the book, Jobs said, "I had a lot of trepidation about this project. I was really worried." Why'd you do it? Isaacson asked. I wanted my kids to know me, Jobs said. I wasn't always there for them, and I wanted them to know why and to understand what I did. Also, when I got sick, I realized other people would write about me if I died, and they wouldn't know anything. They'd get it all wrong. So I wanted to make sure someone heard what I had to say. Steve Jobs died Wednesday, October 5th. 2011, with members of his family around him. It honestly made me teary-eyed at the time reading this, thinking of my own dad passing away a year and a half ago. And near the end of his life, Walter Isaacson asked Steve Jobs about his legacy. There were a few quotes he had. I have some favorites, but one I want to close with is, You build a company that will stand for something a generation or two from now. That's what Walt Disney did, and Hewlett and Packard, and the people who built Intel. They created a company to last, not just to make money. And Hewlett and Packard, the same Bill Hewlett who picked up the phone for a 13-year-old kid 40 years earlier and gave him parts and a summer job. Steve Jobs built his company on their land. He measured his life against their standard. Steve Jobs is gone, but his company is still there. And if you're listening to this show now, you still have time. What do you want to do with it? Thank you so much for listening. I loved reading this book about Steve Jobs. I hope you enjoyed the episode. Talk to you in the next one. I hope this inspires you to make something great.