Becoming Steve Jobs

by Brent Schlender

  “That impression of eternal youth,” Nocera wrote, “is reinforced by some guileless, almost childlike traits: By the way, for instance, he can’t resist showing off his brutal, withering intelligence whenever he’s around someone he doesn’t think measures up. Or by his almost willful lack of tact. Or by his inability to hide his boredom when he is forced to endure something that doesn’t interest him, like a sixth grader who can’t wait for class to end.” Looking back, it’s clear that Nocera had landed on something few people, including Jobs, wanted to see—the fact that the Steve Jobs of 1986 was too raw, too self-centered, and too immature to successfully pull off the balancing act required of a big-time CEO.

  About the time Nocera had started his reporting, Steve hired a new PR agency, Allison Thomas Associates. He had gotten to know Thomas when she was steering a state commission on industrial innovation, a project that solidified California’s support for high-tech companies and led to corporations getting a tax credit for donating computers to schools, among other initiatives. Steve wanted to reposition his image, to move past all the stories about his erratic behavior. Thomas, who became close to Steve over the years, found a way to discuss the problem without setting him off: What could be done about “the other Steve,” the one who came off seeming arrogant and mean? It was an ingenious approach that helped the two work closely for several years. But in the end “the other Steve” won out: Steve badgered Thomas incessantly, urging her to cut off all communications with any reporters who criticized him. She would quit in 1993, a few weeks after Jobs paged her three times during the inauguration of President Bill Clinton, which she was attending in Washington, D.C.

  AFTER ONE OF NeXT’s early board meetings, Steve pulled aside Susan Barnes, his CFO. “When my life is over,” he told her, “people will give me credit for all the creative stuff. But no one will know I actually know how to run a business.”

  As Steve started NeXT, it was true that he did know certain key things about running a computer business. He was a strong, if somewhat confounding motivator, and a restless innovator. He had shown himself to be a good negotiator with parts suppliers, often getting Apple better prices in its early days than its volume had really justified. He could synthesize big ideas, and he could see how different technologies could be combined into something that added up to a whole lot more. “He knew about inventory terms, he understood the mechanics of capital investment, he knew cash flow,” says Barnes. “He did understand this, and starting Apple had taught him things you can try to teach an MBA. But he actually knew them. [They were] survival skills.”

  Steve craved recognition for this, and spoke often about how well he was going to manage NeXT, and how much he had learned from the mistakes Apple had made during its years of unfettered growth. “This is really the third time around for me and a number of other people at NeXT,” he told me. “When we were at Apple, we spent half the time fixing things that were breaking, whether it be an employee stock ownership plan, or a parts numbering system, or a way of manufacturing a product. At NeXT we have the benefit of having the experience of growing a company from zero to a couple of billion dollars before, and we could anticipate some of the more sophisticated problems that we didn’t anticipate the first or second time around. It gives us a certain level of confidence which enables us to take more risks. We’re working much smarter. We’re thinking things through more, which results in more getting done with less work.”

  It sounded good. But much of it was chutzpah and self-delusion. When he started Apple, he had not presumed that he knew how to run a business—he was willing to rely, at least for a while, on his mentors and bosses. Now, however, he acted as if he knew everything, from payroll and engineering to marketing and manufacturing. He was out to do absolutely every little thing right this time. You could see it in his body language. Whenever someone nattered on about a subject Steve believed he knew well—knew better than anyone else, in his opinion—he would look away, tap his feet, shift restlessly in his seat, and behave like a teenager undergoing physical torment until he could finally break in and say his piece. And of course all this was done in a way that was obvious to everyone else in the meeting.

  Steve’s overbearing need to weigh in on everything—to get those “twenty thousand decisions” exactly right—slowed everyone down. This micromanagement was the primary example of the fact that Steve did not know how to prioritize in any kind of holistic way at this stage of his career. Remember how he wanted the group at the first Pebble Beach offsite to decide on NeXT’s top priority: a great machine, on-time delivery, or a price tag under $3,000? It was the wrong question. NeXT absolutely needed to do all three things. But Steve couldn’t keep his company focused on what mattered when he couldn’t focus himself efficiently.

  Steve was unable to effectively manage all the cash that he had been able to raise. NeXT was bankrolled by $12 million that Steve put in in two stages, as well as by investments of $660,000 each from Carnegie Mellon and Stanford, and $20 million from H. Ross Perot, the idiosyncratic businessman who offered to back NeXT after seeing the episode of The Entrepreneurs. (“I found myself finishing their sentences,” Perot raved to Newsweek.) The investments gave the young, productless company an exorbitant valuation of $126 million in 1987. (Two years later Canon, the Japanese camera and printer maker, would kick in $100 million more, raising the overall valuation of the company to $600 million.) Steve touted the investments as proof of concept. The Carnegie Mellon and Stanford money showed that the schools were anxiously awaiting his computer. Perot’s endorsement just underscored the size of the potential market, and was evidence that the most innovative businesspeople understood Steve’s greatness, potential, and maturity. Perot swore that he’d keep a close eye on his investment: “This is going to be hell on the oyster,” he said in the Newsweek article covering the deal, equating himself in his folksy way to the sand that irritates the oyster to create the pearl inside. But in truth Perot was hands-off with the man he viewed as a young genius. Years before, he had decided against investing early in Microsoft, missing out on billions of dollars as the company’s stock soared, and this time he was determined to roll the dice on one of those brilliant techies from the West Coast. Steve promised to be a careful steward of the cash. In the Entrepreneurs video, he repeatedly urged his staff to conserve resources, to the point of complaining about the hotel room rates they were getting. Despite having seen him throw money around at Apple, Barnes was initially hopeful that Steve might change his ways. “I thought he’d be better when it was his own money,” she remembers. “Boy, was I wrong.”

  Most great Silicon Valley startups start out lean and simple. The advantage they have over established companies is the focus they can bring to a single product or idea. Unencumbered by bureaucracy or a heritage of products to protect, a small group of talented folks is free to attack a concept with speed and smarts. Eagerly working hundred-hour weeks, the employees want little more from the “company” than that it pay the bills and get out of their way. They know that if they execute their idea so successfully that their enterprise grows big, at some point they’ll have to deal with the rigors and strains of a corporation. But generally that’s a worry that’s tackled later. At the beginning, corporate trappings can just get in the way, and distract from the all-consuming job of creating an object of desire.

  As he had explained to Nocera, Steve enjoyed the spirit of a startup. But his definition of lean and mean had been changed by his experience at Apple. “Living on the cheap was difficult for him after he’d lived the high life there,” says Barnes. Jobs had enjoyed the benefits of Apple’s resources and size, of its manufacturing prowess and rich marketing budget. Despite what he said about wanting to repeat the experience of the Apple II and the Mac, what Steve really wanted at NeXT was the garage spirit of a startup meshed with the safety, status, and perks of the Fortune 500. It wasn’t a combination he could pull off.

  The first sign of his extravagance came early, when Steve paid P
aul Rand $100,000 for his beautifully designed NeXT logo. Choosing Rand to design the logo was an indication of Steve’s ambition: Rand’s most famous logo is the one still used by IBM. His prestige was such that Steve agreed to Rand’s stringent terms that all he’d get for his hundred grand was a single draft—take it or leave it. Fortunately, Jobs loved everything about it. He loved the logo, and he loved the way it was presented in a classy booklet explaining in detail how Rand had arrived at his notable design, including the philosophical rationale for the lowercase e and the four vivid colors set on black. The day the members of Team NeXT were given copies of the manifesto, Lewin found himself reflecting on when he had first met Steve in 1977 as a Sony salesman based in an office near Apple’s headquarters on Stevens Creek Boulevard. He recalled the way Steve had lovingly fondled the Sony sales materials, making note of the fine paper stock and professional design: “Steve was a freak about Sony, right? Why did people spend fifteen percent more for a Sony product? Steve would walk into our office, and look at the paper and feel the paper that Sony printed their brochures on. It wasn’t the products, it was the tactile feel, the surface and the presentation that mattered to him.” But NeXT was a startup, not a mature, successful company like Sony with billions in revenues, for whom such a pamphlet would be pocket change.

  Extravagant expenditures soon became standard operating procedure at NeXT, especially when it came to the company’s headquarters. The Palo Alto offices featured expensive, custom-designed furnishings, Ansel Adams prints, and a kitchen with granite countertops. And when NeXT moved into bigger offices in Redwood City in 1989, no expense was spared. The lobby featured long, lush leather couches imported from Italy. The crowning touch was a floating staircase designed by world-famous architect I. M. Pei, who designed the glass pyramid entrance to the Louvre that opened that year. The staircase was a ravishing predecessor to the showy stairways that now grace some of Apple’s retail stores.

  Steve’s spendthrift ways extended throughout the company. “Our information system,” he told me proudly in 1989, “is designed for a company with $1 billion in annual sales.” (NeXT’s 1989 sales would top out at just a few million dollars, leaving the company at least one hundred times short of that $1 billion mark.) But he justified his spending by explaining that he was creating the infrastructure of a Fortune 500 company from the ground up. Unlike Apple, he told me, “We were able to make the investment up front to do it right the first time. Let’s get the best people we can find, and let’s brainstorm and strategize, but let’s just do it once. And let’s have it be good enough to last for a number of years. It will take a little more startup expense, but it will pay many, many times over in the coming years.”

  The centerpiece of Steve’s spending was a state-of-the-art manufacturing facility to churn out NeXT computers—a factory designed to be the envy of the world. The plant, fifteen miles across the bay from Redwood City, in Fremont, was small, but it was a marvel. Steve took me on a tour of the place, just before it went into production in 1989. The factory was nearly empty; Steve explained that the place had been designed to operate with few people. He took great pride in every detail, pointing out the robots and machines that had been repainted in the tones of gray that he had specified. The production area was on a single floor about the size of a large restaurant. With no one around on that quiet day, it seemed like something of a Potemkin factory—an empty shell for show—but Steve claimed it had the capacity to produce up to 600 machines a day, which was the equivalent of, yes, $1 billion worth of hardware in a year.

  The place had been laid out by an army of manufacturing system engineers—for a while, there were more PhDs working for NeXT’s manufacturing division than for its software arm. It would be flexible, capable of steadily serving a just-in-time manufacturing scheme. The robots would handle almost everything that required great dexterity, including some of the assembly tasks that Woz and Jobs had performed themselves when making the Apple 1: they placed the chips on the circuit boards, soldered everything into place, and tested and measured to make sure everything was right. A human would step in to do one final check, and would handle the final assembly and pop boards into their appropriate slots inside the magnesium cube.

  Steve was right—the place was indeed a paragon. This was at a time when Japanese manufacturers had chased most American companies out of the semiconductor fabrication business and were held up as object lessons for automakers in Detroit. He hoped that his pristine factory would give the world glittery proof that American high-tech manufacturers could still excel. More important, he felt that the seeming perfection of the place and his obsessive focus on its details sent a message to employees: if you aim for perfection in everything you do, you’ll achieve greater results than you could ever imagine.

  It was a lovely principle. But it didn’t come close to justifying spending outrageous sums on a state-of-the-art factory to build computers for which there was not yet any demand. Steve could easily have outsourced manufacturing; by the late 1980s the computer industry had grown to include a host of contract manufacturers right there in Silicon Valley that could build a highly demanding product like the NeXT computer. The cost would have been far less. For all its beauty, from the lush landscaping out front to the meticulously crafted wheeled tables on which the computer components rolled through the assembly process, the NeXT factory turned out to be a sinkhole. Forget producing 600 computers a day: the factory never produced more than 600 machines in a single month.

  IN THEORY, THERE’S nothing wrong with a state-of-the-art factory, a beautiful office for your employees, or a fancy logo. It’s just that in decision after decision, Steve failed to account for the trade-offs that accompanied his fanciful choices. Steve couldn’t distinguish between the extraneous and the critical. As CEO of a fledgling company, that was his key responsibility. At NeXT, he utterly failed to do this.

  Steve decided early on, for instance, that the NeXT computer should have an optical disk drive for storing information, rather than a standard hard drive. The optical disk drive had two great advantages: its disks could hold up to two hundred times as much information as the standard hard drive of the time, and they were removable. Steve heavily promoted the idea that regular folks could essentially carry around their life in data, moving from one computer to another armed with their own personal optical disk. It seemed that he wanted to enable the utopian idea of a mobile population carrying its key information with it. (Today, of course, we can access much more data from our smartphones or tablets, but the data resides in the so-called “cloud.”) However, the optical option had many problems, primarily that its drives retrieved information from the disks very slowly. Steve had chosen a vision—the potential of abundant storage—over the customers’ real need—the convenience of data speedily available. When the NeXT computer did finally hit retail stores in late 1989, competitors like Sun happily cast it as a slowpoke compared with their hard-drive-based machines.

  Many of the features of the NeXT computer seemed intended primarily to dazzle. Like a standard-issue PC, the NeXT computer consisted of four devices: a keyboard, a mouse, a cube containing the computer, and the monitor. Its designer was Hartmut Esslinger, the German industrial aesthete who had worked with Steve on the first Mac. Esslinger was another expensive choice, a world-class designer who was just as uncompromising as Steve. He ordered up a true cube, with sharp right angles as opposed to the infinitesimal curves found on the edges of the machines from other manufacturers, including Apple. Those curves on the conventional machines weren’t so much an aesthetic choice; they were a concession to manufacturing realities. Creating a perfect cube with true sharp angles required expensive custom molds, which could only come from a specialty metals shop in Chicago. Esslinger and Jobs also insisted that the case be made from magnesium, which is far more expensive than plastic. Using magnesium was a choice, like Jobs’s selection of cast aluminum for the Apple III’s case eight years earlier, that had a significant downside. Magnes
ium had certain advantages over plastic, but it was much harder to machine perfectly, leading to more flaws in the manufacturing process.

  Designing a computer laden with details like these made building it for $3,000 absolutely impossible. The flourishes just added up too fast. “The business plan,” says Lewin, “called for a cube whose material cost was fifty dollars, without the motherboard. Steve went off on this fantasy of wanting the paint job to be of the same quality as some titanium tone arm he’d seen on a four-thousand-dollar turntable. So he sends three people off to General Motors to learn how to do paint that way—Perot had been on the board there, and GM knew how to paint metal better than anyone in the world. And so we figured out how to do that. But that cube that was supposed to cost fifty dollars all-in? The paint job alone cost fifty dollars. It was really fantasyland.”

  Even more damaging were some of Steve’s aesthetic fiats about the inside of the machine. One in particular stands out. In a typical production sequence, engineers are told the specifications a computer must achieve; they design circuitry to meet those demands; and only then do they wrestle with the question of exactly what size and shape the computer’s circuit board must be. Steve reversed the process at NeXT. He told George Crow and his hardware engineers that the circuit board for the NeXT computer would have to be a square that fit exactly into the magnesium cube. A square was an odd configuration for the engineers. Insisting on the exact shape of the board, Steve severely limited the engineers’ ability to create something inexpensive that met the computer’s specifications. He added an unnecessary level of complexity, meaning yet more money spent for more engineers working more hours to accommodate a design that contributed nothing meaningful to the final product.