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It’s been 10 years since the Macintosh was introduced. When you look around at the technological landscape today, what’s most surprising to you? | People say sometimes, “You work in the fastest-moving industry in the world.” I don’t feel that way. I think I work in one of the slowest. It seems to take forever to get anything done. All of the graphical-user interface stuff that we did with the Macintosh was pioneered at Xerox PARC [the company’s legendary Palo Alto Research Center] and with Doug Engelbart at SRI [a future-oriented think tank at Stanford] in the mid-’70s. And here we are, just about the mid-’90s, and it’s kind of commonplace now. But it’s about a 10-to-20-year lag. That’s a long time.The reason for that is, it seems to take a very unique combination of technology, talent, business and marketing and luck to make significant change in our industry. It hasn’t happened that often.The other interesting thing is that, in general, business tends to be the fueling agent for these changes. It’s simply because they have a lot of money. They’re willing to pay money for things that will save them money or give them new capabilities. And that’s a hard one sometimes, because a lot of the people who are the most creative in this business aren’t doing it because they want to help corporate America.A perfect example is the PDA [Personal Digital Assistant] stuff, like Apple’s Newton. I’m not real optimistic about it, and I’ll tell you why. Most of the people who developed these PDAs developed them because they thought individuals were going to buy them and give them to their families. My friends started General Magic [a new company that hopes to challenge the Newton]. They think your kids are going to have these, your grandmother’s going to have one, and you’re going to all send messages. Well, at $1,500 a pop with a cellular modem in them, I don’t think too many people are going to buy three or four for their family. The people who are going to buy them in the first five years are mobile professionals.And the problem is, the psychology of the people who develop these things is just not going to enable them to put on suits and hop on planes and go to Federal Express and pitch their product.To make step-function changes, revolutionary changes, it takes that combination of technical acumen and business and marketing — and a culture that can somehow match up the reason you developed your product and the reason people will want to buy it. I have a great respect for incremental improvement, and I’ve done that sort of thing in my life, but I’ve always been attracted to the more revolutionary changes. I don’t know why. Because they’re harder. They’re much more stressful emotionally. And you usually go through a period where everybody tells you that you’ve completely failed. |
Is that the period you’re emerging from now? | I hope so. I’ve been there before, and I’ve recently been there again.
As you know, most of what I’ve done in my career has been software. The Apple II wasn’t much software, but the Mac was just software in a cool box. We had to build the box because the software wouldn’t run on any other box, but nonetheless, it was mainly software. I was involved in PostScript and the formation of Adobe, and that was all software. And what we’ve done with NEXTSTEP is really all software. We tried to sell it in a really cool box, but we learned a very important lesson. When you ask people to go outside of the mainstream, they take a risk. So there has to be some important reward for taking that risk or else they won’t take it
What we learned was that the reward can’t be one and a half times better or twice as good. That’s not enough. The reward has to be like three or four or five times better to take the risk to jump out of the mainstream.
The problem is, in hardware you can’t build a computer that’s twice as good as anyone else’s anymore. Too many people know how to do it. You’re lucky if you can do one that’s one and a third times better or one and a half times better. And then it’s only six months before everybody else catches up. But you can do it in software. As a matter of fact, I think that the leap that we’ve made is at least five years ahead of anybody. |
Let’s talk about the evolution of the PC. About 30 percent of American homes have computers. Businesses are wired. Video-game machines are rapidly becoming as powerful as PCs and in the near future will be able to do everything that traditional desktop computers can do. Is the PC revolution over? | No. Well, I don’t know exactly what you mean by your question, but I think that the PC revolution is far from over. What happened with the Mac was — well, first I should tell you my theory about Microsoft. Microsoft has had two goals in the last 10 years. One was to copy the Mac, and the other was to copy Lotus’ success in the spreadsheet — basically, the applications business. And over the course of the last 10 years, Microsoft accomplished both of those goals. And now they are completely lost.
They were able to copy the Mac because the Mac was frozen in time. The Mac didn’t change much for the last 10 years. It changed maybe 10 percent. It was a sitting duck. It’s amazing that it took Microsoft 10 years to copy something that was a sitting duck. Apple, unfortunately, doesn’t deserve too much sympathy. They invested hundreds and hundreds of millions of dollars into R&D, but very little came out They produced almost no new innovation since the original Mac itself.
So now, the original genes of the Macintosh have populated the earth. Ninety percent in the form of Windows, but nevertheless, there are tens of millions of computers that work like that. And that’s great. The question is, what’s next? And what’s going to keep driving this PC revolution?
If you look at the goal of the ’80s, it was really individual productivity. And that could be answered with shrink-wrapped applications [off-the-shelf software]. If you look at the goal of the ’90s — well, if you look at the personal computer, it’s going from being a tool of computation to a tool of communication. It’s going from individual productivity to organizational productivity and also operational productivity. What I mean by that is, the market for mainframe and minicomputers is still as large as the PC market And people don’t buy those things to run shrink-wrapped spreadsheets and word processors on. They buy them to run applications that automate the heart of their company. And they don’t buy these applications shrink-wrapped. You can’t go buy an application to run your hospital, to do derivatives commodities trading or to run your phone network. They don’t exist. Or if they do, you have to customize them so much that they’re really custom apps by the time you get through with them.
These custom applications really used to just be in the back office — in accounting, manufacturing. But as business is getting much more sophisticated and consumers are expecting more and more, these custom apps have invaded the front office. Now, when a company has a new product, it consists of only three things: an idea, a sales channel and a custom app to implement the product. The company doesn’t implement the product by hand anymore or service it by hand. Without the custom app, it doesn’t have the new product or service. I’ll give you an example. MCI’s Friends and Family is the most successful business promotion done in the last decade — measured in dollars and cents. AT&T did not respond to that for 18 months. It cost them billions of dollars. Why didn’t they? They’re obviously smart guys. They didn’t because they couldn’t create a custom app to run a new billing system. |
So how does this connect with the next generation of the PC? | I believe the next generation of the PC is going to be driven by much more advanced software, and it’s going to be driven by custom software for business. Business has focused on shrink-wrapped software on the PCs, and that’s why PCs haven’t really touched the heart of the business. And now they want to bring them into the heart of the business, and everyone is going to have to run custom apps alongside their shrink-wrapped apps because that’s how the enterprise is going to get their competitive advantage in things.
For example, McCaw Cellular, the largest cellular provider in the world, runs the whole front end of their business on NEXTSTEP now. They’re giving PCs with custom apps to the phone dealers so that when you buy a cellular phone, it used to take you a day and a half to get you up on the network. Now it takes five minutes. The phone dealer just runs these custom apps, they’re networked back to a server in Seattle, and in a minute and a half, with no human intervention, your phone works on the entire McCaw network.
In addition to that, the applications business right now — if you look at even the shrink-wrap business — is contracting dramatically. It now takes 100 to 200 people one to two years just to do a major revision to a word processor or spreadsheet. And so, all the really creative people who like to work in small teams of three, four, five people, they’ve all been squeezed out of that business. As you may know, Windows is the worst development environment ever made. And Microsoft doesn’t have any interest in making it better, because the fact that its really hard to develop apps in Windows plays to Microsoft’s advantage. You can’t have small teams of programmers writing word processors and spreadsheets — it might upset their competitive advantage. And they can afford to have 200 people working on a project, no problem.
With our technology, with objects, literally three people in a garage can blow away what 200 people at Microsoft can do. Literally can blow it away. Corporate America has a need that is so huge and can save them so much money, or make them so much money, or cost them so much money if they miss it, that they are going to fuel the object revolution. |
That may be so. But when people think of Steve Jobs, they think of the man whose mission was to bring technology to the masses — not to corporate America. | Well, life is always a little more complicated than it appears to be.
What drove the success of the Apple II for many years and let consumers have the benefit of that product was Visi-Calc selling into corporate America. Corporate America was buying Apple IIs and running Visi-Calc on them like crazy so that we could get our volumes up and our prices down and sell that as a consumer product on Mondays and Wednesdays and Fridays while selling it to business on Tuesdays and Thursdays. We were giving away Macintoshes to higher ed while we were selling them for a nice profit to corporate America. So it takes both.
What’s going to fuel the object revolution is not the consumer. The consumer is not going to see the benefits until after business sees them and we begin to get this stuff into volume. Because unfortunately, people are not rebelling against Microsoft. They don’t know any better. They’re not sitting around thinking that they have a giant problem that needs to be solved — whereas corporations are. The PC market has done less and less to serve their growing needs. They have a giant need, and they know it. We don’t have to spend money educating them about the problem — they know they have a problem. There’s a giant vacuum sucking us in there, and there’s a lot of money in there to fuel the development of this object industry. And everyone will benefit from that
I visited Xerox PARC in 1979, when I was at Apple. That visit’s been written about — it was a very important visit. I remember being shown their rudimentary graphical-user interface. It was incomplete, some of it wasn’t even right, but the germ of the idea was there. And within 10 minutes, it was so obvious that every computer would work this way someday. You knew it with every bone in your body. Now, you could argue about the number of years it would take, you could argue about who the winners and losers in terms of companies in the industry might be, but I don’t think rational people could argue that every computer would work this way someday.
I feel the same way about objects, with every bone in my body. All software will be written using this object technology someday. No question about it. You can argue about how many years it’s going to take, you can argue who the winners and losers are going to be in terms of the companies in this industry, but I don’t think a rational person can argue that all software will not be built this way. |
Would you explain, in simple terms, exactly what object-oriented software is? | Objects are like people. They’re living, breathing things that have knowledge inside them about how to do things and have memory inside them so they can remember things. And rather than interacting with them at a very low level, you interact with them at a very high level of abstraction, like we’re doing right here.
Here’s an example: If I’m your laundry object, you can give me your dirty clothes and send me a message that says, “Can you get my clothes laundered, please.” I happen to know where the best laundry place in San Francisco is. And I speak English, and I have dollars in my pockets. So I go out and hail a taxicab and tell the driver to take me to this place in San Francisco. I go get your clothes laundered, I jump back in the cab, I get back here. I give you your clean clothes and say, “Here are your clean clothes.”
You have no idea how I did that. You have no knowledge of the laundry place. Maybe you speak French, and you can’t even hail a taxi. You can’t pay for one, you don’t have dollars in your pocket. Yet I knew how to do all of that. And you didn’t have to know any of it. All that complexity was hidden inside of me, and we were able to interact at a very high level of abstraction. That’s what objects are. They encapsulate complexity, and the interfaces to that complexity are high level. |
You brought up Microsoft earlier. How do you feel about the fact that Bill Gates has essentially achieved dominance in the software industry with what amounts to your vision of how personal computers should work? | I don’t really know what that all means. If you say, well, how do you feel about Bill Gates getting rich off some of the ideas that we had … well, you know, the goal is not to be the richest man in the cemetery. It’s not my goal anyway.
The thing I don’t think is good is that I don’t believe Microsoft has transformed itself into an agent for improving things, an agent for coming up with the next revolution. The Japanese, for example, used to be accused of just copying — and indeed, in the beginning, that’s just what they did. But they got quite a bit more sophisticated and started to innovate — look at automobiles, they certainly innovated quite a bit there. I can’t say the same thing about Microsoft.
And I become very concerned, because I see Microsoft competing very fiercely and putting a lot of companies out of business — some deservedly so and others not deservedly so. And I see a lot of innovation leaving this industry. What I believe very strongly is that the industry absolutely needs an alternative to Microsoft. And it needs an alternative to Microsoft in the applications area — which I hope will be Lotus. And we also need an alternative to Microsoft in the systems-software area. And the only hope we have for that, in my opinion, is NeXT. |
You’ve called Microsoft the IBM of the ’90s. What exactly do you mean by that? | They’re the mainstream. And a lot of people who don’t want to think about it too much are just going to buy their product. They have a market dominance now that is so great that it’s actually hurting the industry. I don’t like to get into discussions about whether they accomplished that fairly or not That’s for others to decide. I just observe it and say it’s not healthy for the country. |
What do you think of the federal antitrust investigation? | I don’t have enough data to know. And again, the issue is not whether they accomplished what they did within the rule book or by breaking some of the rules. I’m not qualified to say. But I don’t think it matters. I don’t think that’s the real issue. The real issue is, America is leading the world in software technology right now, and that is such a valuable asset for this country that anything that potentially threatens that leadership needs to be examined. I think the Microsoft monopoly of both sectors of the software industry — both the system and the applications software and the potential third sector that they want to monopolize, which is the consumer set-top-box sector — is going to pose the greatest threat to Americas dominance in the software industry of anything I have ever seen and could ever think of. I personally believe that it would be in the best interest of the country to break Microsoft up into three companies — a systems-software company, an applications-software company and a consumer-software company. |
Hearing you talk like this makes me flash back to the old Apple days, when Apple cast itself in the role of the rebel against the establishment. Except now, instead of IBM, the great evil is Microsoft. And instead of Apple that will save us, it’s NeXT. Do you see parallels here, too? | Yeah, I do. Forget about me. That’s not important. What’s important is, I see tremendous parallels between the solidity and dominance that IBM had and the shackles that that was imposing on our industry and what Microsoft is doing today…. I think we came closer than we think to losing some of our computer industry in the late ’70s and early ’80s, and I think the gradual dissolution of IBM has been the healthiest thing that’s happened in this industry in the last 10 years. |
What’s your personal relationship with Bill Gates like? | What’s your personal relationship with Bill Gates like? |
A lot of people believe that given the stranglehold Microsoft has on the software business, in the long run, the best NeXT can hope for is that it will be a niche product. | Apple’s a niche product, the Mac was a niche product And yet look at what it did. Apple’s, what, a $9 billion company. It was $2 billion when I left They’re doing OK. Would I be happy if we had a 10 percent market share of the system-software business? I’d be happy now. I’d be very happy. Then I’d go work like crazy to get 20. |
You mentioned the Apple earlier. When you look at the company you founded now, what do you think? | I don’t want to talk about Apple. |
What about the PowerPC? | It works fine. It’s a Pentium. The PowerPC and the Pentium are equivalent, plus or minus 10 or 20 percent, depending on which day you measure them. They’re the same thing. So Apple has a Pentium. That’s good. Is it three or four or five times better? No. Will it ever be? No. But it beats being behind. Which was where the Motorola 68000 architecture was unfortunately being relegated. It keeps them at least equal, but it’s not a compelling advantage. |
You can’t open the paper these days without reading about the Internet and the information superhighway. Where is this all going? | The Internet is nothing new. It has been happening for 10 years. Finally, now, the wave is cresting on the general computer user. And I love it. I think the den is far more interesting than the living room. Putting the Internet into people’s houses is going to be really what the information superhighway is all about, not digital convergence in the set-top box. All that’s going to do is put the video rental stores out of business and save me a trip to rent my movie. I’m not very excited about that. I’m not excited about home shopping. I’m very excited about having the Internet in my den. |
Phone companies, cable companies and Hollywood are jumping all over each other trying to get a piece of the action. Who do you think will be the winners and losers, say, five years down the road? | I’ve talked to some of these guys in the phone and cable business, and believe me, they have no idea what they’re doing here. And the people who are talking the loudest know the least |
Who are you referring to –John Malone? | I don’t want to name names. Let me just say that, in general, they have no idea how difficult this is going to be and how long it is going to take. None of these guys understands computer science. They don’t understand that that’s a little computer that they’re going to have in the set-top box, and in order to run that computer, they’re going to have to come up with some very sophisticated software. |
Let’s talk more about the Internet. Every month, it’s growing by leaps and bounds. How is this new communications web going to affect the way we live in the future? | I don’t think it’s too good to talk about these kinds of things. You can open up any book and hear all about this kind of garbage. |
I’m interested in bearing your ideas. | I don’t think of the world that way. I’m a tool builder. That’s how I think of myself. I want to build really good tools that I know in my gut and my heart will be valuable. And then whatever happens is… you can’t really predict exactly what will happen, but you can feel the direction that we’re going. And that’s about as close as you can get. Then you just stand back and get out of the way, and these things take on a life of their own. |
Nevertheless, you’ve often talked about how technology can empower people, how it can change their lives. Do you still have as much faith in technology today as you did when you started out 20 years ago? | Oh, sure. It’s not a faith in technology. It’s faith in people. |
Explain that. | Technology is nothing. What’s important is that you have a faith in people, that they’re basically good and smart, and if you give them tools, they’ll do wonderful things with them. It’s not the tools that you have faith in — tools are just tools. They work, or they don’t work. It’s people you have faith in or not. Yeah, sure, I’m still optimistic I mean, I get pessimistic sometimes but not for long. |
It’s been 10 years since the PC revolution started. Rational people can debate about whether technology has made the world a better place – | The world’s clearly a better place. Individuals can now do things that only large groups of people with lots of money could do before. What that means is, we have much more opportunity for people to get to the marketplace — not just the marketplace of commerce but the marketplace of ideas. The marketplace of publications, the marketplace of public policy. You name it. We’ve given individuals and small groups equally powerful tools to what the largest, most heavily funded organizations in the world have. And that trend is going to continue. You can buy for under $10,000 today a computer that is just as powerful, basically, as one anyone in the world can get their hands on.
The second thing that we’ve done is the communications side of it. By creating this electronic web, we have flattened out again the difference between the lone voice and the very large organized voice. We have allowed people who are not part of an organization to communicate and pool their interests and thoughts and energies together and start to act as if they were a virtual organization.
So I think this technology has been extremely rewarding. And I don’t think it’s anywhere near over. |
When you were talking about Bill Gates, you said that the goal is not to be the richest guy in the cemetery. What is the goal? | I don’t know how to answer you. In the broadest context, the goal is to seek enlightenment — however you define it. But these are private things. I don’t want to talk about this kind of stuff. |
Why? | I think, especially when one is somewhat in the public eye, it’s very important to keep a private life. |
Are you uncomfortable with your status as a celebrity in Silicon Valley? | I think of it as my well-known twin brother. It’s not me. Because otherwise, you go crazy. You read some negative article some idiot writes about you — you just can’t take it too personally. But then that teaches you not to take the really great ones too personally either. People like symbols, and they write about symbols. |
I talked to some of the original Mac designers the other day, and they mentioned the 10-year-annniversary celebration of the Mac a few months ago. You didn’t want to participate in that. Has it been a burden, the pressure to repeat the phenomenal success of the Mac? Some people have compared you to Orson Welles, who at 25 did his best work, and it’s all downhill from there. | I’m very flattered by that, actually. I wonder what game show I’m going to be on. Guess I’m going to have to start eating a lot of pie. [Laughs.] I don’t know. The Macintosh was sort of like this wonderful romance in your life that you once had — and that produced about 10 million children. In a way it will never be over in your life. You’ll still smell that romance every morning when you get up. And when you open the window, the cool air will hit your face, and you’ll smell that romance in the air. And you’ll see your children around, and you feel good about it. And nothing will ever make you feel bad about it.
But now, your life has moved on. You get up every morning, and you might remember that romance, but then the whole day is in front of you to do something wonderful with.
But I also think that what we’re now may turn out in the end to be more profound. Because the Macintosh was the agent of change to bring computers to the rest of us with its graphical-user interface. That was very important. But now the industry is up against a really big closed door. Objects are going to unlock that door. On the other side is a world so rich from this well of software that will spring up that the true promise of many of the things we started, even with the Apple II, will finally start to be realized.
After that … who knows? Maybe there’s another locked door behind this door, too; I don’t know. But someone else is going to have to figure out how to unlock that one. |
Do you see any parallel between the music revolution today and the PC revolution in 1984? | Obviously, the biggest difference is that this time we’re on Windows. Other than that, I’m not so sure. It’s still very early in the music revolution. Remember, there are 10 billion songs that are distributed in the U.S. every year – legally – on CDs. So far on iTunes, we’ve distributed about 16 million [as of October]. So we’re at the very beginning of this. |
Bringing iTunes to Windows was obviously a bold move. Did you do much hand-wringing over it? | I don’t know what hand-wringing is. We did a lot of thinking about it. The biggest risk was that we saw people buying Macs just to get their hands on iPods. Taking iPods to Windows – that was the big decision. We knew once we did that that we were going to go all the way. I’m sure we’re losing some Mac sales, but half our sales of iPods are to the Windows world already. |
How did the record companies react when you approached them about getting onboard with Apple? | There are a lot of smart people at the music companies. The problem is they’re not technology people. The good music companies do an amazing thing. They have people who can pick the person who’s gonna be successful out of 5,000 candidates. It’s an intuitive process. And the best music companies know how to do that with a reasonably high success rate.
I think that’s a good thing. The world needs more smart editorial these days. The problem is that that has nothing to do with technology. When the Internet came along and Napster came along, people in the music business didn’t know what to make of the changes. A lot of these folks didn’t use computers, weren’t on e-mail – didn’t really know what Napster was for a few years. They were pretty doggone slow to react. Matter of fact, they still haven’t really reacted. So they’re vulnerable to people telling them technical solutions will work – when they won’t. |
Because of their technological ignorance. | Because of their technological innocence, I would say. When we first went to talk to these record companies – about eighteen months ago – we said, “None of this technology that you’re talking about’s gonna work. We have Ph.D.s here who know the stuff cold, and we don’t believe it’s possible to protect digital content.” |
Of course, music theft is nothing new. There have been bootlegs for years. | Of course. What’s new is this amazingly efficient distribution system for stolen property, called the Internet – and no one’s gonna shut down the Internet.
And it only takes one stolen copy to be on the Internet. The way we expressed it to them was: You only have to pick one lock to open every door.
At first, they kicked us out. But we kept going back again and again. The first record company to really understand this stuff was Warner. Next was Universal. Then we started making headway. And the reason we did, I think, is because we made predictions. And we were right. We told them the music subscription services they were pushing were going to fail. MusicNet was gonna fail. Pressplay was gonna fail. Here’s why: People don’t want to buy their music as a subscription. They bought 45s, then they bought LPs, they bought cassettes, they bought 8-tracks, then they bought CDs. They’re going to want to buy downloads.
They didn’t see it that way. There were people running around – business-development people – who kept pointing to AOL as the great model for this and saying, “No, we want that – we want a subscription business.”
Slowly but surely, as these things didn’t pan out, we started to gain some credibility with these folks. |
Despite the success of iTunes, it seems that it’s a little early to call all of your competitors failures. RealNetworks’ Rhapsody, for example, has won over some critics. | One question to ask these subscription services is how many subscribers they have. Altogether, it’s around 50,000. And that’s not just for Rhapsody, it’s for the old Pressplay and the old Musicmatch. The subscription model of buying music is bankrupt. I think you could make available the Second Coming in a subscription model, and it might not be successful. |
When you went to see music executives, was there much comment about Apple’s “Rip. Mix. Burn.” campaign? A lot of them regarded it as an invitation to steal music. | The person who assailed us over it was Michael Eisner. But he didn’t have any teenage kids living at home, and he didn’t have any teenage kids working at Disney whom he talked to, so he thought “rip” meant “rip off.” And when somebody actually clued him in to what it meant, he did apologize. |
Lately, the recording industry has been threatening to throw anyone caught illegally downloading music in jail. Is that a smart approach? | Well, I empathize with them. I mean, Apple has a lot of intellectual property, and we really get upset when people steal our software, too. So I think that they’re within their rights to try to keep people from stealing their product.
Our position from the beginning has been that eighty percent of the people stealing music online don’t really want to be thieves. But that is such a compelling way to get music. It’s instant gratification. You don’t have to go to the record store; the music’s already digitized, so you don’t have to rip the CD. It’s so compelling that people are willing to become thieves to do it. But to tell them that they should stop being thieves – without a legal alternative that offers those same benefits – rings hollow. We said, “We don’t see how you convince people to stop being thieves unless you can offer them a carrot – not just a stick.” And the carrot is: We’re gonna offer you a better experience… and it’s only gonna cost you a dollar a song.
The other thing we told the record companies was that if you go to Kazaa to download a song, the experience is not very good. You type in a song name, you don’t get back a song – you get a hundred, on a hundred different computers. You try to download one, and, you know, the person has a slow connection, and it craps out. And after two or three have crapped out, you finally download a song, and four seconds are cut off, because it was encoded by a ten-year-old. By the time you get your song, it’s taken fifteen minutes. So that means you can download four an hour. Now some people are willing to do that. But a lot of people aren’t. |
You’ve sold about 20 million songs on iTunes so far – it sounds like a big number, until you realize that billions of music files are swapped every year. | We’re never going to top the illegal downloading services, but our message is: Let’s compete and win. |
David Bowie predicted that, because of the Internet and piracy, copyright is going to be dead in ten years. Do you agree? | No. If copyright dies, if patents die, if the protection of intellectual property is eroded, then people will stop investing. That hurts everyone. People need to have the incentive so that if they invest and succeed, they can make a fair profit. But on another level entirely, it’s just wrong to steal. Or let’s put it this way: It is corrosive to one’s character to steal. We want to provide a legal alternative. |
Of course, a lot of college students who are grabbing music off Kazaa today don’t see themselves as doing anything any different from what you did when you were a teenager, copying bootleg Bob Dylan tapes. | The truth is, it’s really hard to talk to people about not stealing music when there’s no legal alternative. The advent of a legal alternative is only six months old. Maybe there’s been a generation of kids lost – and maybe not, who knows? Maybe they think stealing music is like driving seventy mph on the freeway – it’s over the speed limit, but what’s the big deal? But I don’t think that’s the way it’s going to stay, not with future generations, at least. But who knows? This is all new territory. |
Apple has had a head start in the digital-music business, but obviously lots of other companies are getting into it now, too. Last week, for example, Dell came out with its rival to the iPod, the Dell DJ. | We will ship way more digital-music players than Dell this quarter. Way more. In the long run, we’re going to be very competitive. Our online store is better than Dell’s. And we have retail channels. Most people don’t want to buy one of these things through the mail. Dell’s distribution model works against them when they get into consumer electronics. Like, they’re going to be selling plasma TVs online. Would you ever buy a plasma TV without seeing it? No way. |
And then there’s Microsoft. What happens to Apple when Bill Gates starts building an iTunes clone into the Windows desktop? | I’d answer that by saying I think Amazon does pretty well against Microsoft. So does eBay. So does Google. And AOL has actually done pretty well, too – contrary to a lot of the things people say. There are a lot of examples of companies offering services, Internet-based services, that have done quite well.
And Apple is in a pretty interesting position. Because, as you may know, almost every song and CD is made on a Mac – it’s recorded on a Mac, it’s mixed on a Mac, the artwork’s done on a Mac. Almost every artist I’ve met has an iPod, and most of the music execs now have iPods. And one of the reasons Apple was able to do what we have done was because we are perceived by the music industry as the most creative technology company. And now we’ve created this music store, which I think is non-trivial to copy. I mean, to say that Microsoft can just decide to copy it, and copy it in six months – that’s a big statement. It may not be so easy. |
How about movies? Do you see an iTunes movie store? | We don’t think that’s what people want. A movie takes forever to download – there’s no instant gratification. |
Has it been difficult wooing artists to the iTunes store? | Most successful artists control the online distribution of their music. So even though they could do a deal with, say, Universal Music, the largest in the business, these companies weren’t able to offer us their top twenty artists. So we had to go to each artist, one by one, and convince them, too. A few said, “We don’t want to do that.” Others said, “We’ll let you distribute whole albums but not individual tracks.” And we declined. The store is about giving the users choice. |
Do you expect that one day Apple will start signing musicians – and, in effect, become a record label? | Well, it would be very easy for us to sign up a musician. It would be very hard for us to sign up a young musician who was successful. Because that’s what the record companies do.
We think there are a lot of structural changes that are probably gonna happen in the record industry, though. We’ve talked to a large number of artists who don’t like their record company, and I was curious about that. The general reason they don’t like the record company is because they think they’ve been really successful, but they’ve only earned a little bit of money. |
They feel they’ve been ripped off. | They feel that. But then again, the music companies aren’t making a lot of money right now… so where’s the money going? Is it inefficiency? Is somebody going to Argentina with suitcases full of hundred-dollar bills? What’s going on?
After talking to a lot of people, this is my conclusion: A young artist gets signed, and he or she gets a big advance – a million dollars, or more. And the theory is that the record company will earn back that advance when the artist is successful.
Except that even though they’re really good at picking, only one or two out of the ten that they pick is successful. And so most of the artists never earn back that advance – so the record companies are out that money. Well, who pays for the ones that are the losers?
The winners pay. The winners pay for the losers, and the winners are not seeing rewards commensurate with their success. And they get upset. So what’s the remedy? The remedy is to stop paying advances. The remedy is to go to a gross-revenues deal and tell an artist, “We’ll give you twenty cents on every dollar we get, but we’re not gonna give you an advance. The accounting will be simple: We’re gonna pay you not on profits – we’re gonna pay you off revenues. It’s very simple: The more successful you are, the more you’ll earn. But if you’re not successful, you will not earn a dime. We’ll go ahead and risk some marketing money on you. But if you’re not successful, you’ll make no money. If you are, you’ll make a lot more money.” That’s the way out. That’s the way the rest of the world works. |
So you see the recording industry moving in that direction? | No. I said I think that’s the remedy. Whether the patient will swallow the medicine is another question. |
So how did you get involved with personal computers? | Hmm. Well, um…I ran into my first computer when I was about 10 or 11. And it’s hard to remember back then. But I’m an old fossil now. I’m an old fossil. So when I was 10 or 11 was about 30 years ago. And no one had ever seen a computer. To the extent that they’d seen them in movies, and they were these big boxes with whirring…For some reason, they fixated on the tape drives as being the icon of what the computer was, or flashing lights somehow. And so nobody had ever seen one. They were very mysterious, very powerful things, that did something in the background. And so, to see one and actually get to use one was a real privilege back then. And I got into NASA, the Ames Research Center down here. I got to use a time-sharing terminal. So I didn’t actually see the computer, but I saw a time-sharing terminal. And in those days… Again, it’s hard to remember how primitive it was. There was no such thing as a computer with a graphics video display. It was literally a printer. It was a teletype printer with a keyboard on it. And so you would keyboard these commands in, and then you would wait for a while, and the thing would go… And it would tell you something out. But even with that, it was still remarkable, especially for a 10-year-old, that you could write a program in BASIC, let’s say, or FORTRAN. And actually, this machine would take your idea, and it would execute your idea and give you back some results. And if they were the results that you predicted, your program really worked. It was an incredibly thrilling experience. So, I became very captivated by a computer. And a computer, to me, was still a little mysterious,’cause it was at the other end of this wire, and I’d never really seen the actual computer itself. And then I got tours of computers after that, and saw the insides. And then I was part of this group at Hewlett-Packard. When I was 12, I called up Bill Hewlett, who lived in Hewlett-Packard at the time. And again, this dates me, but there was no such thing as an unlisted telephone number then. So I could just look in the book, and looked his name up. And he answered the phone, and I said, “Hi. My name’s Steve Jobs. You don’t know me, but I’m 12 years old, and I’m building a frequency counter, and I’d like some spare parts.” And so, he talked to me for about 20 minutes. I’ll never forget it as long as I live. And he gave me the parts, but he also gave me a job working at Hewlett-Packard that summer. And I was 12 years old then. And that really made a remarkable influence on me. Hewlett-Packard was really the only company I’d ever seen in my life at that age, and it formed my view of what a company was, and how well they treated their employees. They didn’t know about cholesterol back then. But at that time, they used to bring a big cartful of donuts and coffee out at 10 every morning. Everybody would take a coffee and donut break. And just little things like that, it was clear that the company recognized that its true value was its employees. So anyway, things led to things with Hewlett-Packard, and I started going up to their Palo Alto research labs every Tuesday night with a small group of people to meet some of their researchers and stuff, and I saw the first desktop computer ever made, which was the Hewlett-Packard 9100. It was about as big as a suitcase, but it actually had a small cathode-ray tube display in it, and it was completely self-contained. There was no wire going off behind the curtain somewhere. And I fell in love with it. And you could program it in BASIC and APL. And I would just, for hours, get a ride up to Hewlett-Packard and just hang around that machine and write programs for it. And so that was the early days. And I met Steve Wozniak around that time, too. Well, maybe a little earlier when I was about 14, 15 years old. And we immediately hit it off. He was the first person I’d met that knew more about electronics than I did, and so I was…I liked him a lot, and he was maybe five years older than I. He’d gone off to college and gotten kicked out for pulling pranks, and was living with his parents, and going to De Anza, the local junior college. So we became fast friends, and started doing projects together. We read about…We read about the story in Esquire magazine about this guy named Captain Crunch who could supposedly make free telephone calls. You’ve heard about this, I’m sure. And again, we were captivated. How could anybody do this? And we thought it must be a hoax. And we started looking through the libraries, looking for the secret tones that would allow you to do this. And it turned out, we were at Stanford Linear Accelerator Center one night, and way in the bowels of their technical library, way down at the last bookshelf, in the corner bottom rack, we found an AT&T technical journal that laid out the whole thing. And that’s another moment I’ll never forget. When we saw this journal, we thought, “My God! It’s all real.” And so, we set out to build a device to make these tones. And the way it worked was, you know when you make a long-distance call, you used to hear…(mimicking dial tones) Right? In the background? They were tones that sounded like the touch tone you could make on your phone, but they were a different frequency, so you couldn’t make them. It turned out that, that was the signal from one telephone computer to another controlling the computers in the network. And AT&T made a fatal flaw when they designed the original telephone network, digital telephone network, was they put the signaling from computer to computer in the same band as your voice, which meant that if you could make those same signals, you could put it right in through the handset. And literally, the entire AT&T international phone network would think you were an AT&T computer. So after three weeks we finally built a box like this that worked. And I remember, the first call we made was down to LA, one of Woz’s relatives down in Pasadena. We dialed the wrong number, but we woke some guy up in the middle of the night, and we were yelling at him like, “Don’t you understand we made this call for free?” And this person didn’t appreciate that. But it was miraculous, and we built these little boxes to do blue boxing, as it was called, and we put a little note in the bottom of them. Our logo was, “He’s got the whole world in his hands.” And they worked. We built the best blue box in the world. It was all digital. No adjustments. And so you could go up to a pay phone and you could take a trunk over to White Plains, and then take a satellite over to Europe, and then go to Turkey, take a cable back to Atlanta. And you could go around the world. You could go around the world five or six times ‘cause we learned all the codes for how to get on the satellites and stuff. And then, you could call the pay phone next door, and so you could shout in the phone, and after about a minute, it would come out the other phone. It was… It was miraculous. And you might ask, “Well, what’s so interesting about that?” What’s so interesting is that we were young. And what we learned was that we could build something ourselves that could control billions of dollars’ worth of infrastructure in the world. That was what we learned, We didn’t know much. We could build a little thing that could control a giant thing. And that was an incredible lesson. I don’t think there would have ever been an Apple computer had there not been blue boxing. |
Woz said you called the Pope? | Yeah, we did call the Pope. He pretended to be Henry Kissinger. And we got the number of the Vatican, and we called the Pope. And they started waking people up in the hierarchy. I don’t know, cardinals and this and that. And they actually sent someone to wake up the Pope when, finally, we just burst out laughing, and they realized that we weren’t Henry Kissinger. Yeah, and so, we never got to talk to the Pope, but it was very funny. |
So…So the jump from blue boxes to personal computers, what sparked that? | Well…Necessity, in the sense that there was time-sharing computers available, and there was a time-sharing company in Mountain View that we could get free time on. So, uh… But we needed a terminal, and we couldn’t afford one, so we designed and built one. And that was the first thing we ever did. We built this terminal. And so, what an Apple I was, was really an extension of this terminal putting a microprocessor on the back end. That’s what it was. So first we built the terminal, and then we built the Apple I. And we really built it for ourselves because we couldn’t afford to buy anything. And we’d scavenge parts here and there and stuff, and we’d build these all by hand. They’d take 40 to 80 hours to build one, and then they’d always be breaking cause there’s all these tiny little wires. And so, it turned out, a lot of our friends wanted to build them, too. And although they could scavenge most of the parts as well, they didn’t have the skills to build them that we had acquired by training ourselves through building them. And so, we ended up helping them build most of their computers, and it was really taking up all of our time. And we thought if we could make what’s called a printed circuit board, which is a piece of fiberglass with copper on both sides that’s etched to form the wires so that you could build a computer…You could build an Apple I in a few hours instead of 40 hours. If we only had one of those, we could sell them to all our friends for as much as it cost us to make them, and make our money back. And everybody would be happy, and we’d get a life again. So we did that. I sold my Volkswagen Bus, and Steve sold his calculator, and we got enough money to pay a friend of oursto make the artwork to make a printed circuit board. And we made some printed circuit boards, and we sold some to our friends. And I was trying to sell the rest of them, so that we could get our Microbus and calculator back. And I walked into the first computer store in the world which was the Byte Shop of Mountain View, I think, on El Camino. It metamorphosized into an adult bookstore a few years later. But at this point, it was the Byte Shop. And the person that ran it, I think his name was Paul Terrell, he said, “I’ll take 50 of those.” I said, “This is great.” He said, “But I want them fully assembled.” We’d never thought of this before. So we then kicked this around, we thought, “Why not? Why not try this?” And so, I spent the next several days on the phone talking with electronics parts distributors. We didn’t know what we were doing. And we said, “Look, here’s the parts we need. “We figured we’d buy 100 sets of parts, build 50, sell them to the Byte Shop for twice what it cost us to build them, therefore paying for the whole 100, and then we’d have 50 left, and we could make our profits by selling those. So we convinced these distributors to give us the parts on net 30 days credit. We had no idea what that meant. “Net 30? Sure.” “Sign here.” And then, so we had 30 days to pay them. And so we bought the parts, we built the products, and we sold 50 of them to the Byte Shop in Palo Alto, and got paid in 29 days. And then went and paid off the parts people in 30 days, and so we were in business. But we had the classic Marxian profit realization crisis, in that our profit wasn’t in a liquid currency, our profit was in 50 computers sitting in the corner. So then, all of a sudden, we had to think,”Wow! How are we going to realize our profit?” And so we started thinking about distribution, “Are there any other computer stores?” And we started calling the other computer storesthat we’d heard of across the country, and we just eased into business that way. |
The third key figure in the creation of Apple was former Intel executive Mike Markkula. I asked Steve how he came aboard. | We were designing the Apple II, and we really had much higher ambitions for the Apple II. Woz’s ambitions were, he wanted to add color graphics. My ambition was that…It was very clear to me that while there were a bunch of hardware hobbyists that could assemble their own computers or at least take our board and add the transformers for the power supply, and the case and the keyboard, et cetera, and go get the rest of the stuff. For every one of those, there were a thousand people that couldn’t do that, but wanted to mess around with programing. Software hobbyists. Just like I had been when I was 10, discovering that computer. And so my dream for the Apple II was to sell the first real packaged computer. Packaged personal computer where you didn’t have to be a hardware hobbyist at all. And so, combining both of those dreams, we actually designed the product. And I found a designer, and we designed the packaging and everything, and we wanted to make it out of plastic, and we had the whole thing ready to go. But we needed some money for tooling the case and things like that. We needed a few hundred thousand dollars. And this was way beyond our means, so I went looking for some venture capital. And I ran across one venture capitalist named Don Valentine who came over to the garage. And he later said I looked like a renegade from the human race. That was his famous quote. And he said he wasn’t willing to invest in us, but he recommended a few people that might, and one of them was Mike Markkula. So I called Mike on the phone, and Mike came over, and Mike had retired at about 30 or 31 from Intel. He was a product manager there and had gotten a little bit of stock, and made, like, a million bucks on stock options, which at that time, was quite a lot of money. And he’d been investing in oil and gas deals, and staying home and doing that sort of thing. And he, I think, was kind of antsy to get back into something, and Mike and I hit it off very well. And so Mike said, “Okay, I’ll invest after a few weeks.” And I said, “No. No. We don’t want your money. We want you.” So we convinced Mike to actually throw in with us as an equal partner. And so Mike put in some money, and Mike put in himself, and we took this design that was virtually done with the Apple II, and tooled it up and announced it a few months later at the West Coast Computer Faire. |
What was that like? | It was great. We got the best. The West Coast Computer Faire was small at that time, but to us, it was very large. And so, we had this fantastic booth there. We had a projection television showing the Apple II, and showing its graphics, which today, look very crude, but at that time, were, by far, the most advanced graphics on a personal computer. And I think…My recollection is, we stole the show. And a lot of dealers and distributors started lining up, and we were off and running. |
You’re 21, you’re a big success. You’ve just done it by the seat of your pants. You don’t have any particular training in this. How do you learn to run a company? | Throughout the years in business, I found something, which was, I’d always ask why you do things. And the answers you invariably get are,”Oh, that’s just the way it’s done.” Nobody knows why they do what they do. Nobody thinks about things very deeply in business. That’s what I found. I’ll give you an example. When we were building our Apple Is’ in the garage, we knew exactly what they cost. When we got into a factory in the Apple II days, the accounting had this notion of a standard cost, where you’d set a standard cost, and at the end of a quarter, you’d adjust it with a variance. And I kept asking, “Well, why do we do this?”And the answer was, “Well, that’s just the way it’s done.”And after about six months of digging into this, what I realized was, the reason you do it is because you don’t really have good enough controls to know how much it costs, so you guess, and then you fix your guess at the end of the quarter, and the reason you don’t know how much it costs is because your information systems aren’t good enough. But nobody said it that way. And so, later on, when we designed this automated factory for Macintosh, we were able to get rid of a lot of these antiquated concepts and know exactly what something cost to the second. So in business, a lot of things are… I call it folklore. They’re done because they were done yesterday and the day before. And so what that means is, if you’re willing to ask a lot of questions and think about things and work really hard, you can learn business pretty fast. It’s not the hardest thing in the world. It’s not rocket science. |
Now, when you were first coming in contact with these computers and inventing them, and before that, working on the HP 9100, you talked about writing programs. What sort of programs? What did people actually do with these things? | Hmm…See, what we did with them…Well, I’ll give you a simple example. When we were designing our blue box, we wrote a lot of custom programs to help us design it, and to do a lot of the dog work for using terms of calculating master frequencies with sub divisors to get other frequencies and things like that. We used the computer quite a bit. And to calculate how much error we would get in the frequencies, and how much could be tolerated. So, we used them in our work. But much more importantly, it had nothing to do with using them for anything practical. It had to do with using them to be a mirror of your thought process, to actually learn how to think. It was, I think, the greatest value of learning how to…I think everybody in this country should learn how to program a computer, should learn a computer language, because it teaches you how to think. It’s like going to law school. I don’t think anybody should be a lawyer, but I think going to law school would actually be useful ‘cause it teaches you how to think in a certain way. In the same way that computer programing teaches you, in a slightly different way, how to think. And so, I view computer science as a liberal art. It should be something that everybody learns. Takes a year in their life, one of the courses they take is learning how to program. |
Yeah, but I learned APL, which, obviously, is part of the reason why I’m going through life sideways. | You look back and consider itan enriching experience that taught you to think in a different way, or not? |
So, obviously, the Apple II was a terrific success. Just incredibly so. And the company grew like Topsy, and eventually went public, and you guys got really rich. What’s it like to get rich? | It’s very interesting. I was worthabout over $1 million when I was 23, and over $10 million when I was 24, and over $100 million when I was 25. And it wasn’t that important because I never did it for the money. I think money is a wonderful thing because it enables you to do things. It enables you to invest in ideasthat don’t have a short-term payback and things like that. But especially at that point in my life, it was not the most important thing. The most important thing was the company, the people, the products we were making, what we were gonna enable people to do with these products, so I didn’t think about it a great deal. I never sold any stock. Just really believed that the company would do very well over the long term. |
Central to the development of the personal computer was the pioneering work being done at Xerox’s Palo Alto Research Center which Steve first visited in 1979. | I had 3-4 people who kept bugging me that I ought to get my rear over to Xerox PARC and see what they were doing, and so I finally did. I went over there. And they were very kind, and they showed me what they were working on, and they showed me, But I was so blinded by the first one that One of the things they showed me was object-oriented programing. They showed me that, but I didn’t even see that. The other one they showed me was, really, a network computer system. They had over 100 Alto computers, all networked, using email, et cetera, et cetera. I didn’t even see that. I was so blinded by the first thing they showed me, which was the graphical user interface. I thought it was the best thing I’d ever seen in my life. Now, remember, it was very flawed. What we saw was incomplete. They’d done a bunch of things wrong, but we didn’t know that at the time. But still, though, they had…The germ of the idea was there and they’d done it very well. And within 10 minutes, it was obvious to me that all computers would work like this someday. It was obvious. You could argue about how many years it would take, you could argue about who the winners and losers might be, but you couldn’t argue about the inevitability. It was so obvious. You would have felt the same way had you been there. |
Those are the exact words that Paul Allen used. It’s really interesting. You saw it, then you brought some people back with you? And what happened the next time? They made you cool your heels for a while? | No. |
No? Well, Adele Goldberg says otherwise. And she said that she argued against doing it for 3 hours and they took you other places and showed you other things while she was arguing. | Oh! Oh! You mean they were reluctant to show us the demo? |
She was. | Oh, okay. Well, I have no idea. But they did show us. So…And it’s good that they showed us, because the technology crashed and burned at Xerox. |
Sure. You mentioned IBM. When IBM entered the market, was that a daunting thing for you at Apple? | Oh, sure. Here was Apple, a one-billion-dollar company. And here was IBM, at that time, probably about 30-some-odd-billion-dollar company entering the market. Sure, it was. It was very scary. We made a very big mistake, though. IBM’s first product was terrible. It was really bad. And we made a mistake of not realizing that a lot of other people had a very strong vested interest in helping IBM make it better. So if it had just been up to IBM, they would have crashed and burned. But IBM did have, I think, a genius in their approach, which was to have a lot of other people have a vested interest in their success. And that’s what saved them in the end. |
So you came back from visiting Xerox PARC with a vision. And how did you implement the vision? | Well, I got our best people together and started to get them working on this. The problem was that we’d hired a bunch of people from Hewlett-Packard. And they didn’t get this idea. They didn’t get it. I remember having dramatic arguments with some of these people who thought the coolest thing in user interface was soft keys at the bottom of a screen. They had no concept of proportionally-spaced fonts, no concept of a mouse. As a matter of fact, I remember arguing with these folks, people screaming at me that it would take us five years to engineer a mouse and it would cost $300 to build. And I finally got fed up. I just went outside and found David Kelley Design, and asked him to design me a mouse. And in 90 days, we had a mouse we could build for 15 bucks that was phenomenally reliable. So I found that, in a way, Apple did not have the caliber of people that was necessary to seize this idea in many ways. And there was a core team that did, but there was a larger team that mostly had come from Hewlett-Packard that didn’t have a clue. |
Well, there comes this issue of professionalism. There is a dark side and a light side to it, isn’t there? | Well, no. You know what it is? No, it’s not dark and light. It’s that people get confused. Companies get confused. When they start getting bigger, they want to replicate their initial success. And a lot of them think, “Well, somehow there is some magic in the process of how that success was created.” So they start to try to institutionalize process across the company. And before very long, people get very confused that the process is the content. And that’s, ultimately, the downfall of IBM. IBM has the best process people in the world. They just forgot about the content. And that’s what happened a little bit at Apple, too. We had a lot of people who were great at management process. They just didn’t have a clue as to the content. And in my career, I found that the best people are the ones that really understand the content, and they’re a pain in the butt to manage. But you put up with it because they’re so great at the content. And that’s what makes great products. It’s not process. It’s content. So we had a little bit of that problem at Apple. And that problem eventually resulted in the Lisa, which had its moments of brilliance. In a way, it was very far ahead of its time, but there wasn’t enough fundamental content understanding. Apple drifted too far away from its roots. To these Hewlett-Packard guys, $10,000 was cheap. To our market, to our distribution channels, $10,000 was impossible. So we produced a product that was a complete mismatch for the culture of our company, for the image of our company, for the distribution channels of our company, for our current customers. None of them could afford a product like that. And it failed. |
Now you and John Couch fought for leadership of the Lisa. How did that come about? | Absolutely, and I lost. Well, I thought Lisa was in serious trouble. I thought Lisa was going off in this very bad direction as I’ve just described. And I could not convince enough people in the senior management of Apple that that was the case and we ran the place as a team for the most part. So I lost. And at that point in time… I brooded for a few months. But it was not very long after that that it really occurred to me that if we didn’t do something here…The Apple II was running out of gas, and we needed to do something with this technology fastor else Apple might cease to exist as the company that it was. And so I formed a small team to do the Macintosh, and we were on a mission from God to save Apple. No one else thought so, but it turned out we were right. And as we evolved the Mac, it became very clear that this was also a way of reinventing Apple. We reinvented everything. We reinvented manufacturing. I visited probably 80 automated factories in Japan, and we built the world’s first automated computer factory in the world in California here. So we adopted the 68,000 microprocessor that Lisa had. We negotiated a price that was a fifth of what Lisa was going to pay for it because we were going to use it in much higher volume. And we really started to design this product that could be sold for $1,000 called the Macintosh. And we didn’t make it. We could have sold it at $2,000. Although, we came out at $2,500. And we spent four years of our life doing that. We built the product. We built the automated factory, the machine to build the machine. We built a completely new distribution system. We built a completely different marketing approach. And I think it worked pretty well. |
Now, you motivated this team. You had to guide them. Build the team, motivate it, guide them, deal with them. We’ve interviewed just lots and lots of people from your Macintosh team. And what it keeps coming down to is your passion, your vision, and…How do you order your priorities in there? What’s important to you in the development of a product? | You know…One of the things that really hurt Apple was after I left, John Sculley got a very serious disease, and that disease… I’ve seen other people get it, too. It’s the disease of thinking that a really great idea is 90% of the work, and that if you just tell all these other people, “Here is this great idea,” then, of course, they can go off and make it happen. And the problem with that is that there is just a tremendous amount of craftsmanship in between a great idea and a great product. And as you evolve that great idea, it changes and grows. It never comes out like it starts because you learn a lot more as you get into the subtleties of it, and you also find there is tremendous tradeoffs that you have to make. There are just certain things you can’t make electrons do. There are certain things you can’t make plastic do or glass do or factories do or robots do. And as you get into all these things, designing a product is keeping 5,000 things in your brain, these concepts, and fitting them all together and continuing to push to fit them together in new and different ways to get what you want. And every day you discover something new, that is a new problem or a new opportunity to fit these things together a little differently. And it’s that process that is the magic. And so we had a lot of great ideas when we started. But what I’ve always felt, that a team of people doing something they really believe in is like…When I was a young kid, there was a widowed man that lived up the street. And he was in his 80s. He was a little scary-looking. And I got to know him a little bit. I think he might have paid me to mow his lawn or something. And one day, he said, “Come on into my garage. I want to show you something.” And he pulled out this dusty, old rock tumbler. It was a motor and a coffee can and a little band between them. And he said, “Come on with me.” We went out to the back and we got just some rocks. Some regular, old, ugly rocks. And we put them in the can with a little bit of liquid and a little bit of grit powder. And we closed the can up, and he turned this motor on, and he said, “Come back tomorrow.” And this can was making a racket as the stones went around. And I came back the next day, and we opened the can, and we took out these amazingly beautiful polished rocks. The same common stones that had gone in, through rubbing against each other like this, creating a little bit of friction, creating a little bit of noise, had come out these beautiful polished rocks. And that’s always been, in my mind, my metaphor for a team working really hard on something they’re passionate about is that it’s through the team, through that group of incredibly talented people, bumping up against each other, having arguments, having fights sometimes, making some noise, and working together, they polish each other and they polish the ideas, and what comes out are these really beautiful stones. So it’s hard to explain, and it’s certainly not the result of one person. People like symbols, so I’m the symbol of certain things. But it really was a team effort on the Mac. Now, in my life, I observed something fairly early on at Apple, which…I didn’t know how to explain it then, but I’ve thought a lot about it since. Most things in life, the dynamic range between average and best is at most 2-1. If you go to New York City, and you get an average taxicab driver versus the best taxicab driver, you’re probably going to get to your destination with the best taxicab maybe 30% faster. In an automobile, what’s the difference between average and the best? Maybe 20%. The best CD player and an average CD player? I don’t know. 20%. 2-1 is a big dynamic range in most of life. In software, and it used to be the case in hardware, too, the difference between average and the best is 50-to-1, maybe 100-to-1. Very few things in life are like this. But what I was lucky enough to spend my life in, is like this. And so I’ve built a lot of my success off finding these truly gifted people, and not settling for B and C players but really going for the A players, and I found something. I found that when you get enough A players together, when you go through the incredible work to find five of these A players, they really like working with each other because they’ve never had a chance to do that before. And they don’t want to work with B and C players. And so it becomes self-policing, and they only want to hire more A players, and so you build up these pockets of A players, and it propagates. And that’s what the Mac team was like. They were all A players. And these were extraordinarily talented people. |
But they’re also people who now say that they don’t have the energy anymore to work for you. | Sure. Oh, I think if you talk to a lot of people on the Mac team, they will tell you it was the hardest they’ve ever worked in their life. Some of them will tell you that it was the happiest they’ve ever been in their life. But I think all of them will tell you that is certainly one of the most intense and cherished experiencesthey will ever have in their life. You know, it’s…Some of those things are not sustainable for some people. |
What does it mean when you tell someone their work is shit? | It usually means their work is shit. Sometimes, it means, “I think your work is shit, and I’m wrong.” But usually, it means their work is not anywhere near good enough. |
I had this great quote from Bill Atkinson who says, when you say someone’s work is shit, you really mean, “I don’t quite understand it. Would you please explain it to me?” | No, that’s not usually what I meant. When you get really good people, they know they’re really good, and you don’t have to baby people’s egos so much, and what really matters is the work. And everybody knows that. That’s all that matters is the work. People are being counted on to do specific pieces of the puzzle. And the most important thing, I think, you can do for somebody who is really good and who’s really being counted on is to point out to them when their work isn’t good enough. And to do it very clearly and to articulate why, and to get them back on track. And you need to do that in a way that does not call into question your confidence in their abilities, but leaves not too much room for interpretation that the work that they have done for this particular thing is not good enough to support the goal of the team. And that’s a hard thing to do. And I’ve always taken a very direct approach. And I think if you talk to people that have worked with me, the really good people have found it beneficial. Some people have hated it. And I’m also one of these people that I don’t really care about being right. I just care about success. So, you’ll find a lot of people that will tell you that I had a very strong opinion and they presented evidence to the contrary, and five minutes later, I completely changed my mind. Because I’m like that. I don’t mind being wrong. I’ll admit that I’m wrong a lot. It doesn’t really matter to me too much. What matters to me is that we do the right thing. |
So how and why did Apple get into desktop publishing which would become the Mac’s killer app? | I don’t know if you know this, but we got the first Canon laser printer engine shipped in the United States at Apple, and we had it hooked up to a Lisa, actually imaging pages before anybody. Before HP. Long before HP, long before Adobe. But I heard a few times, people would tell me, “Hey, there are these guys over in this garage that left Xerox PARC. You ought to go see them.” And I finally went and saw them, and I saw what they were doing, and it was better than what we were doing. And they were gonna be a hardware company. They wanted to make printers and the whole thing. And so I talked them into being a software company. And we had canceled our internal project. And a bunch of people wanted to kill me over this, but we did it. And I had cut a deal with Adobe to use their software, and we bought 19.9% of Adobe at Apple. They needed some financing. We wanted a little bit of control. And we were off to the races, and so we got the engines from Canon. We designed the first laser printer controller at Apple. And we got the software from Adobe, and we introduced the LaserWriter. And no one at the company wanted to do it but a few of us in the Mac group. Everybody thought a $7,000 printer was crazy. What they didn’t understand was you could share it with AppleTalk. They understood it intellectually, but they didn’t understand it viscerally because the last really expensive thing we tried to sell was Lisa. So we pushed this thing through. And I had to basically do it over a few dead bodies, but we pushed this thing through, and it was the first laser printer on the market, as you know, and the rest is history. When I left Apple, Apple was the largest printer company measured by revenue in the world. It lost that distinction to Hewlett-Packard after I left, unfortunately. But when I left, it was the largest printer company in the world. |
Did you envision desktop publishing? Was that a no-brainer? | You know…Yes. But… We also envisioned really a networked office. And so, in January of 1985, when we had our annual meeting and introduced our new products, I made probably the largest marketing blunder of my career by announcing the Macintosh Office instead of just desktop publishing. And we had desktop publishing as a major component of that, but we announced a bunch of other stuff as well, and I think we should have just focused on desktop publishing at that time. |
After serious disagreements with Apple CEO John Sculley, Steve left the company in 1985. Tell us about your departure from Apple. | Oh, it was very painful. I’m not even sure I want to talk about it. What can I say? I hired the wrong guy (Sculley). And he destroyed everything I’d spent 10 years working for. Starting with me, but that wasn’t the saddest part. I would have gladly left Apple if Apple would have turned out like I’d wanted it to. He basically got on a rocket ship that was about to leave the pad. And the rocket ship left the pad. And it kind of went to his head. He got confused, and thought that he built the rocket ship. And then he changed the trajectory so that it was inevitably going to crash into the ground. |
But it was always the…In the pre-Macintosh days, and the early Macintosh days, it was always the Steve and John show. the hip for a while there. And then something happened to split you. What was that catalyst? | Well, what happened was that the industry went into a recession in late 1984. Sales started seriously contracting. And John didn’t know what to do. He had not a clue. And there was a leadership vacuum at the top of Apple. There were fairly strong general managers running the divisions. I was running the Macintosh division, somebody else was running the Apple II division, et cetera. There were some problems with some of the divisions. There was a person running the storage division that was completely out to lunch. And a bunch of things that needed to be changed. But all those problems got put in a pressure cooker because of this contraction in the market place. And there was no leadership. John was in a situation where the board was not happy and where he was probably not long for the company. And one thing I did not ever see about John until that time was he had an incredible survival instinct. Somebody once told me, “This guy didn’t get to be the president of PepsiCo without these kinds of instincts.” And it was true. And John decided that a really good person to be the root of all these problems would be me. And so, we came to loggerheads. And John had cultivated a very close relationship with the board. And they believed him. So, that’s what happened. |
So there were competing visions for the company? | Oh, clearly. Well, not so much competing visions for the company, ‘cause I don’t think John had a vision for the company. |
Well, I guess I’m asking, what was your vision that lost out in this instance? | It wasn’t an issue of vision. It was an issue of execution. In the sense that my belief was that Apple needed much stronger leadership, to unite these various factions that we had created with the divisions, that the Macintosh was the future of Apple, that we needed to rein back expenses dramatically in the Apple II area, that we needed to be spending very heavily in the Macintosh area. Things like that. And John’s vision was that he should remain the CEO of the company. And anything that would help him do that would be acceptable. I think that Apple was in a state of paralysis in the early part of 1985. And I wasn’t, at that time, capable, I don’t think, of running the company as a whole. I was 30 years old. And I don’t think I had enough experience to run $2billion company. Unfortunately, John didn’t either. So anyway, I was told, in no uncertain terms, that there was no job for me. It would have been far smarter for Apple to let me work on the next…I volunteered. I said, “Why don’t I start a research division?” And give me a few million bucks a year and I’ll go hire some really great people. “We’ll do the next great thing.” And I was told there was no opportunity to do that. So, my office was taken away. It was… I’ll get real emotional if we keep talking about this. Anyway… But that’s irrelevant. I’m just one person, and the company was a lot more people than me. So that’s not the important part. The important part was the values of Apple over the next several years were systematically destroyed. |
I then asked Steve for his thoughts on the state of Apple. Remember, this was 1995, a year before he would go back to Apple. Remember, too, that when Apple bought NeXT a year after this interview, Steve immediately sold the Apple stock he received as part of the sale. | Apple’s dying today. Apple’s dying a very painful death. It’s on a glide slope to die. And the reason is because…When I walked out the door at Apple, we had a 10-year lead on everybody else in the industry. Macintosh was 10 years ahead. We watched Microsoft take 10 years to catch up with it. Well, the reason that they could catch up with it was because Apple stood still. The Macintosh that’s shipping today is 25% different than the day I left. They’ve spent hundreds of millions of dollars a year on R&D. A total of, probably, $5 billion on R&D. What did they get for it? I don’t know. But it was…What happened was the understanding of how to move these things forward and how to create these new products somehow evaporated. And I think a lot of the good people stuck around for a while. But there wasn’t an opportunity to get together and do this ‘cause there wasn’t any leadership to do that. So, what’s happened with Apple now is that they’ve fallen behind in many respects, certainly in market share. And most importantly, their differentiation has been eroded by Microsoft. And so, what they have now is, they have their installed base. Which is not growing, and which is shrinking slowly, but will provide a good revenue stream for several years. But it’s a glide slope that’s just gonna go like this. So, it’s unfortunate. And I don’t really think it’s reversible at this point in time. |
What about Microsoft? That’s the juggernaut now. And it’s a Ford LTD going into the future. It’s definitely not a Cadillac. It’s not a BMW. It’s just…What’s going on there? How did those guys do that? | Well, Microsoft’s orbit was made possible by a Saturn V booster called IBM. And I know Bill would get upset with me for saying this, but of course it was true. And much to Bill and Microsoft’s credit, they used that fantastic opportunity to create more opportunity for themselves. Most people don’t remember, but until 1984 with the Mac, Microsoft was not in the applications business. It was dominated by Lotus. And Microsoft took a big gamble to write for the Mac. And they came out with applications that were terrible. But they kept at it and they made them better, and eventually, they dominated the Macintosh application market. And then used a springboard of Windows to get into the PC market with those same applications. And now they dominate the applications in the PC space, too. characteristics. I think they’re very strong opportunists, and I don’t mean that in a bad way. Japanese. They just keep on coming. They were able to do that because of the revenue stream from the IBM deal. But nonetheless, they made the most of it, and I give them a lot of credit for that. The only problem with Microsoft is they just have no taste. They have absolutely no taste. And what that means is…I don’t mean that in a small way, I mean that in a big way. In the sense that……they don’t think of original ideas and they don’t bring much culture into their product. And you say, “Well, why is that important?” Well, proportionally-spaced fonts come from typesetting and beautiful books. That’s where one gets the idea. If it weren’t for the Mac, they would never have that in their products. And so, I guess I am saddened, not by Microsoft’s success. I have no problem with their success. They’ve earned their success for the most part. I have a problem with the fact that they just make really third-rate products. Their products have no spirit to them. Their products have no spirit or enlightenment about them. They are very pedestrian. And the sad part is that most customers don’t have a lot of that spirit either. But the way that we’re going to ratchet up our species is to take the best and to spread it around to everybody, so that everybody grows up with better things and starts to understand the subtlety of these better things. And Microsoft’s just… It’s McDonald’s. So that’s what saddens me. Not that Microsoft has won, but that Microsoft’s products don’t display……more insight and more creativity. |
So, what are you doing about it? Tell us about NeXT. | Well, I’m not doing anything about it. Because NeXT is too small of a company to do anything about that. I’m just watching it. And there is really nothing I can do about it. |
Next, we talked about NeXT, the company Steve was running in 1995 which Apple was soon to buy. NeXT software would become the heart of the Mac in the form of OS X. | Well, maybe the best thing, since we don’t have much time, is I just tell you what NeXT is today. The innovation in the industry is in software. And there hasn’t ever been a real revolution in how we created software. Certainly not in the last 20 years. Matter of fact, it’s gotten worse. While the Macintosh was a revolution for the end user to make it easier to use, it was the opposite for the developer. The developer paid the price. And software got much more complicated to write as it became easier to use for the end user. So, software is infiltrating everything we do these days. In businesses, software is one of the most potent competitive weapons. The most successful business war was MCI’s Friends and Family in the last 10 years. And what was that? It was a brilliant idea and it was custom billing software. AT&T didn’t respond for 18 months, yielding billions of dollars’ worth of market share to MCI, not because they were stupid but because they couldn’t get the billing software done. So in ways like that and smaller ways, software is becoming an incredible force in this world. To provide new goods and services to people, whether it’s over the Internet or what have you. Software is going to be a major enabler in our society. We have taken another one of those brilliant original ideas at Xerox PARC that I saw in 1979, but didn’t see really clearly then, called object-oriented technology. And we have perfected it and commercialized it here and become the biggest supplier of it to the market. And this object technology lets you build software 10 times faster and is better. And so that’s what we do. And we’ve got a small-to- medium-sized business and we’re the largest supplier of objects. We’re a 50-to-75-million-dollar company. Got about 300 people. And that’s what we do. |
The end of the third show, actually is the one moment where we do look into the future…as Channel 4 has asked us to do that. And so what’s your vision of 10 years from now with this technology that you’re developing? | Well, I think the Internet and the Web… in software and in computing today. I think one is objects, but the other one is the Web. The Web is incredibly exciting because it is the fulfilment of a lot of our dreams that the computer would ultimately not be primarily a device for computation but metamorphosize into a device for communication. And with the Web, that’s finally happening. And secondly, it’s exciting because Microsoft doesn’t own it, and therefore, there’s a tremendous amount of innovation happening. So I think that the Web is going to be profound in what it does to our society. As you know, about 15% of the goods and services in the US are sold via catalogs or over the television. All that is gonna go on the Web and more. Billions and billions. Soon tens of billions of dollars’ worth of goods and services are gonna be sold on the Web. A way to think about it is that it is the ultimate direct-to-customer distribution channel. Another way to think about it is the smallest company in the world can look as large as the largest company in the world on the Web. So I think the Web…As we look back 10 years from now, the Web is going to be the defining technology. The defining social moment for computing. And I think it’s going to be huge. I think it’s breathed a whole new generation of life into personal computing. And I think it’s going to be huge. Just forget about what we’re doing. Just as an industry, the Web is gonna open a whole new door to this industry. |
And it’s another one of those things that it’s obvious once it happens, but five years ago, who would have guessed? | Right. That’s right. Isn’t this a wonderful place we live in? |
I was keen to know about Steve’s passion. What drove him? | I read an article when I was very young in Scientific American, and it measured the efficiency of locomotion for various species on the planet. So for bears and chimpanzees and raccoons and birds and fish. How many kilocalories per kilometer did they spend to move?And humans were measured, too. And the condor won. It was the most efficient. And mankind, the crown of creation, came in with a rather unimpressive showing about a third of the way down the list. But somebody there had the brilliance to test a human riding a bicycle. Blew away the condor. All the way off the charts. And I remember, this really had an impact on me. I really remember this that humans are tool builders, and we build tools that can dramatically amplify our innate human abilities. And to me…We actually ran an ad like this very early at Apple. The personal computer was the bicycle of the mind. And I believe that with every bone in my body that of all the inventions of humans, the computer is going to rank near, if not at, the top as history unfolds and we look back. And it is the most awesome tool that we have ever invented, and I feel incredibly lucky to be at exactly the right place in Silicon Valley, at exactly the right time, historically, where this invention has taken form. And as you know, when you set a vector off in space, if you can change its direction a little bit at the beginning, it’s dramatic when it gets a few miles out in space. I feel we are still, really, at the beginning of that vector. And if we can nudge it in the right directions, it will be a much better thing as it progresses on. I think we’ve had a chance to do that a few times, and it brings all of us associated with it tremendous satisfaction. |
But how do you know what’s the right direction? | Ultimately, it comes down to taste. It comes down to taste. It comes down to trying to expose yourself to the best things that humans have done, and then try to bring those things into what you are doing. Picasso had a saying. He said, “Good artists copy. Great artists steal.” And we have always been shameless about stealing great ideas. And I think part of what made the Macintosh great was that the people working on it were musicians and poets and artists and zoologists and historians who also happened to be the best computer scientists in the world. But if it hadn’t been for computer science, these people would have all been doing amazing things in life in other fields. And they brought with them, we all bought to this effort, a very liberal arts air, a very liberal arts attitude that we wanted to pull in the best that we saw in these other fields into this field. And I don’t think you get that if you’re very narrow. |
One of the questions I asked everyone in the series was,”Are you a hippie or a nerd?” | Oh, if I had to pick one of I’m clearly a hippie. All the people I worked with were clearly in that category, too. |
Really? Why? Do you seek out hippies, or are they attracted to you? | Well, ask yourself, “What is a hippie?” This is an old word that has a lot of connotations, but to me, ‘cause I grew up…Remember that the ’60s happened in the early ’70s, right? So we have to remember that. And that’s sort of when I came of age, so I saw a lot of this. And a lot of it happened right in our backyard here. So, to me, the spark of that was that there was something beyond what you see every day. There is something going on here in life…Beyond just a job, and a family, and there is something more going on. There is another side of the coin that we don’t talk about much, and we experience it when there’s gaps, when we just aren’t really…When everything is not ordered and perfect, when there is a gap, you experience this inrush of something. And a lot of people have said all throughout history, you find out what that was. Whether it’s Thoreau, or whether it’s some Indian mystics, or whoever it might be, and the hippie movement got a little bit of that, and they wanted to find out what that was about, and that life wasn’t about what they saw their parents doing. And of course, the pendulum swung too far the other way, and it was crazy, but there was a germ of something there. And it’s the same thing that causes people to wanna be poets instead of bankers. And I think that’s a wonderful thing. And I think that that same spirit can be put into products, and those products can be manufactured and given to people, and they can sense that spirit. If you talk to people that use the Macintosh, they love it. You don’t hear people loving products very often. Really. But you could feel it in there. There was something really wonderful there. So, I don’t think that most of the really best people that I’ve worked with have worked with computers for the sake of working with computers. They’ve worked with computers because they are the medium that is best capable of transmitting some feeling that you have, that you want to share with other people. And before they invented these things, all these people would have done other things. But computers were invented, and they did come along, and all these people did get interested in school or before school, and said, “Hey, this is the medium that I think I can say something in.” |
What talent do you think you consistently brought to Apple and bring to NeXT and Pixar? | I think that I've consistently figured out who really smart people were to hang around with. No major work that I have been involved with has been work that can be done by a single person, or two people, or even three or four people. Some people can do one thing magnificently, like Michaelangelo, and others make things like semiconductors or build 747 airplanes—that type of work requires legions of people. In order to do things well that can't be done by one person, you must find extraordinary people.
The key observation is that, in most things in life, the dynamic range between average quality and the best quality is, at most, two-to-one. For example, if you were in New York and compared the best taxi to an average taxi, you might get there 20 percent faster. In terms of computers, the best PC is perhaps 30 percent better than the average PC. There is not much difference in magnitude. Rarely you find a difference of 2 to 1. Pick anything.
But, in the field that I was interested in-originally, hardware design—I noticed that the dynamic range between what an average person could accomplish and what the best person could accomplish was 50 or 100 to 1. Given that, you're well advised to go after the cream of the cream. That's what we've done. You can then build a team that pursues the A + players. A small team of A + players can run circles around a giant team of B and C players. That’s what I’ve tried to do. |
So you think your talent is in recruiting? | It's not just recruiting. After recruiting, it's then building an environment that makes people feel they are surrounded by equally talented people and that their work is bigger than they are. The feeling that the work will have tremendous influence and is part of a strong, clear vision—all of those things. Recruiting usually requires more than you alone can do, so I've found that collaborative recruiting and having a culture that recruits the A players is the best way. Any interviewee will speak with at least a dozen people in several areas of this company, not just those in the area that he would work in. That way a lot of your A employees get broad exposure to the company, and—by having a company culture that supports them if they feel strongly enough—the current employees can veto a candidate. |
That seems very time-consuming. | Yes, it is. We've interviewed people where nine out of ten employees thought the candidate was terrific, one employee really had a problem with the candidate, and therefore we didn't hire him. The process is hard, very time-consuming, and can lead to real problems if not managed right. But it's a very good way, all in all. |
Yet, in a typical startup, a manager may not always have time to spend recruiting other people. | I disagree totally. I think it's the most important job. Assume you're by yourself in a startup and you want a partner. You'd take a lot of time finding the partner, right? He would be half of your company. Why should you take any less time finding a third of your company or a fourth of your company or a fifth of your company? When you're in a startup, the first ten people will determine whether the company succeeds or not. Each is ten percent of the company. So why wouldn't you take as much time as necessary to find all A players? If three were not so great why would you want a company where thirty percent of your people are not so great? A small company depends on great people much more than a big company does. |
But, what about the need for speed when taking your product to market? Wouldn't recruiting in this manner take away time from getting your product to market quickly? | You'd better have great people or you won't get your product to market as fast as possible. Or, you might get a product to market really fast but it will be really clunky and nobody will buy it. There are no shortcuts around quality, and quality starts with people. Maybe shortcuts exist, but I'm not smart enough to have ever found any.
I spend 20 percent of my time recruiting even now. I spend a day a week helping people recruit. It's one of the most important things you can do. |
If finding the A players is so important, how can you tell who is an A player and who isn't? | That's a very hard question. Ultimately there are two paths. If a candidate has been in the workplace for a while, you have to look at the results. There are people who look so good on paper and talk such a good story but have no results behind them. They can't point to breakthroughs or successful products that they shipped and played an integral part in. Ultimately the results should lead you to the people. As a matter of fact that's how I find great people. I look at great results and I find out who was responsible for them.
However, sometimes young people haven't had the opportunity yet to be in a position of influence to create such results. So here you must evaluate potential. It's certainly more difficult, but the primary attributes of potential are intelligence and the ability to learn quickly.
Much of it is also drive and passion-hard work makes up for a lot.
When you recruit you're rolling the dice. No matter what, you're rolling the dice because you've only got an hour to assess the candidate. The most time I spend with somebody is an hour and I must then recommend whether we hire the person or not. Others will recommend, too, so I won't be the only one but I'll still have to throw my vote in the hat. Ultimately it comes down to your gut feeling. Your gut feeling gets refined as you hire more people and see how they do. Some you thought would do well don't and you can sense why. If you study it a bit you might say, "I thought this person was going to do well but I overlooked this aspect," or "I didn't think this person would do well but they did and here's why." As you hire people over time your gut instinct gets better and more precise.
Over time, my digging in during an interview gets more precise. For example, many times in an interview I will purposely upset some-one: I'll criticize their prior work. I'll do my homework, find out what they worked on and say, "God, that really turned out to be a bomb.
That really turned out to be a bozo product. Why did you work on that?" I shouldn't say this in your book, but the worse thing that someone can do in an interview is to agree with me and knuckle under.
What I look for is for someone to come right back and say, "You're dead wrong and here's why." I want to see what people are like under pressure. I want to see if they just fold or if they have firm conviction, belief, and pride in what they did. It's also good every once in a while to really piss somebody off in an interview to see how they react because, if your company is a meritocracy of ideas, with passionate people, you have a company with a lot of arguments. If people can't stand up and argue well under pressure they may not do well in such an environment. |
You mentioned how important it is to find good people, regardless of the time to market issue. Yet, when you first started Apple it seemed as if you were just hiring people as fast as you could. | In the early days of Apple we were just trying to hire people that knew more than we did about anything and that wasn't hard because we didn't know a lot. The problem was not that we could find people who knew more than we did. That was easy. The problem was that we were pretty quick studies and before too long, we knew more than they did and we'd ask questions that they couldn't answer because they never really thought about it.
That was tough because we'd sometimes hire good people and they didn't have the ability to grow as fast as we needed them to grow, because in any young company your perspectives are changing monthly as you learn more. People have to be able to change and adapt and really be able to see things from new points of view. If they get stuck in their own points of view, it gets very difficult. |
What do you mean by getting stuck in their own points of view? | I'll give you an example. One of the reasons why Apple was successful was because we built the [computer] dealer channel. The dealer channel did not exist before Apple built it. And, one of the things Apple did to build the dealer channel was to finance it by extending dealers credit when they were really not creditworthy.
So, we were extending credit, and when dealers were going broke, we ate the cost of goods—that's part of the cost of building the channel. We quickly realized that we would have a lot less credit exposure if we could get our product to the dealer very fast because then they would not have to stock a lot of inventory. So, we created big distribution centers in several places around the country and dealers could get product shipped to them within twenty-four hours. This way, the dealer wouldn't have to stock much inventory, and we wouldn't have to extend them much credit.
After this system was established, I once asked Fred Smith [the CEO of Federal Express] how much would it cost to ship a Mac anywhere in the country directly from Apple to the customer within two days. He thought about it, did his calculations, and said about $27.10 went back to Apple and analyzed our current distribution system which by this time took about three weeks from the factory to the customer. And, even worse, we found out that it cost us $57.
So, I proposed to our people that we completely eliminate the distribution warehouses, have FedEx just pick up Macs at the back of our factories, and have our computers link into Federal Express' tracking systems in order to eliminate paperwork and get the product from the factory to the customer within 48 hours. This way we would eliminate several hundred jobs and tons of computer systems, tons of bricks and mortar, while still getting the product to the customer three weeks sooner. But, I got my head shot off because people couldn't change their perspective. |
Explain that a little more. What do you mean by "people couldn't change their perspective?" | Well, generally it's because people never know or forget what they're really doing—that is, what the benefit is to what they're really doing.
Our distribution centers forgot that what they were really all about was getting product from Apple to its customers really fast. They thought they were about a whole lot of other things like personal relationships with the customer. They had taken over some sales functions, and it became a real mess. Eventually, the industry went the way of mail-order. Dell Computer was built on that model. Apple could have done what Dell did much sooner.
But, usually, people never think that much about what they re doing or why they do it. They just do it because that's the way it has been done and it works. That type of thinking doesn't work if you're growing fast and if you're up against some larger companies. You really have to out-think them and you have to be able to make those paradigm shifts in your points of view. |
In addition to finding the right people, you also stated that building the environment of the company is important. What things can management do to create the right environment and culture of a young company? | Hewlett and Packard, of course, set the tone for the modern intellectual property-based company. They did such a good job of it that the rest of us have only built on their foundation. I'll explain this in a different way than they did. Most of the companies here create intellectual property. They are pure intellectual property companies. Some are different: Intel, for example, has billions of dollars in factories, but most companies don't.
Most of the companies in Silicon Valley succeed or fail based on their ability to have breakthrough ideas and implement those ideas. The implementation is primarily intellectual property—writing software and figuring out designs of one type or another. When your primary product is essentially bits on a disk or on a wire, your primary assets are human capital, not financial capital. And, since demand for people is greater than the supply, you must offer those people something more than a paycheck and stock options. You must offer them the ability to make larger decisions and to be a part of the core company. That involvement is what drives much of this fun.
For example, you want people to make key company decisions without you even knowing it. They'd better have access to most of the company's information, so you'd better have an open communication policy so that people can know just about everything, otherwise they will make important decisions without the right information. That would be really stupid. Generally technology companies are very open. Generally they are driven by the meritocracy of ideas, not by hierarchy.
If there is someone really good four levels down—and you don't listen to them—they'll go somewhere else that will listen to them.
Hierarchy takes on a different meaning when people you work for are your coaches, not your bosses. If you're in Silicon Valley, you're your own boss because you don't have a contract. Silicon Valley does not work on contracts the way some industries do. If you don't like the way things are at one company, and if you're good, then you can leave anytime and go anywhere else. In fact, headhunters are calling you every week. All you have to do is take one of those calls and you're out of there. The whole power structure of an intellectual property-driven enterprise of good people is turned upside down. The CEO has the least power and the people with the most power are the hotshot individual contributors. They work as pure individual contributors and have more power than anybody because they come up with product.
Now, I'm exaggerating a little because middle managers are extraordinarily important—they hire and nurture these talented hotshots.
Fundamentally, though, it would not be too distorted to say that the traditional corporate pyramid is completely inverted. That's the way it ought to be. Silicon Valley has pioneered the way that many businesses will need to be run as we enter the next century, where more and more companies are pure intellectual property interests. |
That's nice from a theoretical standpoint. But from a practical stand-point, what does that mean? Does having access to information and "knowing just about everything" mean that a talented programmer can walk in your office and open your file cabinet whenever he wishes? | No. That wouldn't be appropriate because that's not showing respect for individuals and I'm an individual too. What it means is that employees can know things. We get the whole company together once a month and tell everybody everything that's going on. More companies are doing that but many don't. |
And you also ask for suggestions and inputs. | Sure. That happens constantly. We'll stand up and say, "We just lost this order and here's why." Or, "We just won three orders and this is how the new product's coming, and this is how another product is slipping."
Whatever it might be: good news or bad news. And we talk about strategies. Once a year we go offsite for two days and bring the whole company, even the receptionists—we figure they might as well know what's going on too. We discuss company strategy: where we're going, where we're screwing up, and our plan for the coming year. We refocus and resynchronize everything once a year. We have heated discussions at those meetings, too. It costs a lot of money, but is incredibly valuable. |
We've talked about the talent that you bring to companies. What do you think your weaknesses are when it comes to management? | I don't know. People are package deals; you take the good with the confused.
In most cases, strengths and weaknesses are two sides of the same coin. A strength in one situation is a weakness in another, yet often the person can't switch gears. It's a very subtle thing to talk about strengths and weaknesses because almost always they're the same thing.
My strength probably is that I've always viewed technology from a liberal arts perspective, from a human culture perspective. As such, I've always pushed for things that pulled technology in those directions by bringing insights from other fields. An example of that would be—with the Macintosh-desktop publishing: its proportionately spaced fonts, its ease of use. All of the desktop publishing stuff on the Mac comes from books: the typography, that rich feel that nobody in computers knew anything about. I think that my other strength is that I'm a pretty good judge of people and have the ability to bring people together around a common vision. |
Well then, when are your strengths-judgment of character and liberal arts perspective-your weaknesses? | In certain cases my weaknesses are that I'm too idealistic. Realize that sometimes best is the enemy of better. Sometimes I go for "best" when I should go for "better," and end up going nowhere or backwards. I'm not always wise enough to know when to go for the best and when to just go for better. Sometimes I'm blinded by "what could be" versus "what is possible," doing things incrementally versus doing them in one fell swoop. Balancing the ideal and the practical is something I still must pay attention to. |
In terms of going for the best, you have a widely held reputation of being extremely charismatic-someone who is always able to draw out the best in other people. How have you been able to motivate your employees? | Well, I think that-ultimately, it's the work that motivates people. I sometimes wish it were me, but it's not. It's the work. My job is to stretch beyond their best. But it's ultimately the work that motivates people. That's what binds them together. |
Yet, in the case of the Macintosh you got tremendous output from people. Regardless of the type of work, not everybody can elicit that type of commitment. | Well, I'm not sure I'd chalk that up to charisma. Part of the CEO's job is to cajole and beg and plead and threaten, at times-to do whatever is necessary to get people to see things in a bigger and more profound way than they have, and to do better work than they thought they could do.
When they do their best and you don't think it's enough, you tell them straight: "This isn't good enough. I know you can do better. You need to do better. Now go do better."
You must play those cards carefully. You must be right a lot of the time, because you're messing with people's lives. But that's part of the job. In the end, it's the environment you create, the coworkers, and the work that binds. The Macintosh team, if you talk to most of them—a dozen years since we shipped the product—most will still say that working on the Mac was the most meaningful experience of their lives. If we'd never shipped a product they wouldn't say that. If the product hadn't been so good they wouldn't say that. The Macintosh experience wasn't just about going to camp with a bunch of fun people. It wasn't just a motivational speaker. It was the product that everybody put their heart and soul into and it was the product that expressed their deep appreciation, somehow, for the world to see.
So, in the end it's the work that binds. That's why it's so important to pick very important things to do because it's very hard to get people motivated to make a breakfast cereal. It takes something that's worth doing. |
Let's shift gears here. What should be the role of venture capitalists in starting new businesses? | In the old days venture capitalists helped a company a lot. They were mentors. |
More so than today? | Yes. The reason is very simple. In the old days venture capitalists were people who had run businesses or major parts of businesses. Don Valentine was the vice-president of marketing at National Semiconductor when he became a venture capitalist. Venture capitalists were people that had done substantial work in successful startup companies and were bringing their expertise and experience as much as their money.
But the industry grew so fast that it outstripped the ability to grow people of that caliber. Many VCs [venture capitalists) don't have that experience. They just bring money. Not that there's anything wrong with money, but it's unfortunate because things are very different now. I hear VCs sitting around arguing about whether to change CEOs or not. That's not what they ought to be talking about. They ought to be helping the companies make it. |
So, if you were a young entrepreneur without money today, would you still go to them? | If you want to start a company and you're young, the best thing in the world is to find someone who's done it-who has experience and expertise and is looking to invest a little money. If that person happens to be a venture capitalist, so be it. If that person happens to be a private investor, so be it. If that person happens to be someone from a successful company that cashed in their stock options and is willing to invest a little bit, so be it. It doesn't matter what they call themselves. It matters who they are. It matters that they've had the experience. |
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