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.
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For example, many times in an interview I will purposely upset someone: 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
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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. I 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
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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 d
on’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
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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 standpoint, 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.
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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
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make sure the work is as good as it should be and to get people 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.
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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 will
ing 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.
What advice would you give someone interested in starting their own company?
A lot of people ask me, “I want to start a company. What should I do?” My first question is always, “What is your passion? What is it you want to do in your company?” Most of them say, “I don’t know.”
My advice is go get a job as a busboy until you figure it out. You’ve got to be passionate about something. You shouldn’t start a company because you want to start a company. Almost every company I know of got started because nobody else believed in the idea and the last resort was to start the company. That’s how Apple got started. That’s how Pixar got started. It’s how Intel got started. You need to have passion about your idea and you need to feel so strongly about it that you’re willing to risk a lot. Starting a company is so hard that if you’re not passionate about it, you will give up. If you’re simply doing it because you want to have a small company, forget it.
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It’s so much work and at times is so mentally draining. The hardest thing I’ve ever done is to start a company. It’s the funnest thing, but it’s the hardest thing, and if you’re not passionate about your goal or your reason for doing it, you will give up. You will not see it through. So, you must have a very strong sense of what you want.
Whether it’s baking bread or—
It doesn’t matter what industry it is. There are very successful bak-eries. There are very successful semiconductor companies. You name it, it doesn’t really matter. What matters is that you feel very, very strongly about it. You have to need to run such a business and know you can do it better than anyone else. You have to really want it because it’s going to take a lot of work, especially in the early stages.
What keeps you doing it? You could spend more time with family.
I come to Pixar and I come to NeXT every day. I come to them for two reasons: one, because what each company does is really great; and, two, because of the extraordinary people. I get to hang around many incredible people all day. That’s why I do what I do.
In the Company of Giants Page 3