AS RUBY SAID, the mission had been to save Apple. And in early 2000, it seemed by just about every measure available, that Steve and the team had accomplished that goal. They had rebuilt and revived the company’s suite of computers. They were starting to provide users with a solid and modern software foundation. Morale was high, and a sense of mission had been restored. Most important, Steve had visibly changed for the better as a leader and as a manager. Over the three and a half years since his return, he had come to recognize that taking this more incremental approach to computer development can result in the kind of equilibrium that allows you to build a business designed to thrive over the long haul.
Or so it seemed. In September 2000, Apple posted a dismal earnings report. Despite all these new products and fresh technology, the company’s sales continued to shrink. The stock price tumbled, falling from $63 in early September to $15 by the end of the year. Meager sales of the Cube were just the most obvious disappointment, but sales were stagnant across the board. It was beginning to look as if Steve had pushed the technology of personal computing just about as far as it could go. He had righted the ship, patched up Amelio’s holes, and gotten everyone rowing in the right direction. Apple was profitable again. But to complete Apple’s turnaround he would have to get back to the business of creating new kinds of products, the kind that puncture the equilibrium of an industry and create new business opportunities. Yet now, at the end of fiscal year 2000, Apple’s quarterly sales were less than when he’d arrived. And most of the gains shareholders had enjoyed since he returned had evaporated. As the headline of one of my Fortune stories put it, he was the graying prince of a shrinking kingdom. Something would have to change.
Chapter 10
Following Your Nose
It was Bill Gates who first mapped out the future of Apple. He did so on January 5, 2000, at the Consumer Electronics Show in Las Vegas, Nevada. Of course, he’d intended to lay out a game plan for Microsoft, not Apple. But that’s not the way things worked out.
CES was an up-and-coming trade show back then. For years it had been the gathering point for people making everything from car speakers to stereo systems to televisions, from electronic football games that beeped as you pushed the buttons to video cameras to home security systems. The arrival of computer companies transformed the event, and within a few years it would become the largest digital technology exposition of them all, drawing audiences upwards of 150,000 and all but paralyzing Sin City for a week each January. Apple didn’t attend CES. Steve preferred to announce his products in an environment he controlled.
Microsoft didn’t control CES, but it certainly overshadowed everyone else. Chairman Gates, who relinquished his CEO title to Steve Ballmer in 2000, gave the keynote speech eight years running. Gates was a natural choice as the show’s semipermanent celebrity speaker, and he used the dais as a bully pulpit. In 2000, Microsoft really was the computer industry. Some 90 percent of the world’s personal computers ran its Windows operating system. Its software managed not only desktop and laptop PCs but also the servers that stored and organized the data of the world’s biggest corporations, and that undergirded the information technology of most governmental bureaucracies. Inside ATMs and cash registers, at airline check-in counters, and on the decks of aircraft carriers, Microsoft software made the world’s most sophisticated technologies hum. If the consumer electronics universe was about to be thrown into turmoil, who better to hear from than the leader of the industry doing the disrupting?
That evening, Gates spoke to a standing-room-only crowd of more than three thousand people at the Las Vegas Hilton Theater, where he revealed how Microsoft would “usher in the ‘consumer-electronics-plus’ era.” PCs running the Windows operating system would become the central component of “home media centers” that would harness the Internet and interact with consumer devices and even household appliances, all loaded with Microsoft software. This would be a bonanza for consumers, he explained, because they would now get “personalized, convenient access to their favorite music, news, entertainment, family photos and email through an array of consumer electronics, including televisions, telephones, home and car stereos, and Pocket PCs.”
The speech was a forecast, a warning, and a blueprint. Gates posited a vision of what the home would look like after the realization and interweaving of a set of trends. There would be much more connectivity among devices, access to a new range of digital content and programming via the Internet, newly interactive video games played at home, and gizmos with responsive screens and software smarts to replace mere electronic gadgets with push buttons. This is what we are going to do to your world, Gates was telling the manufacturers of consumer electronics. It is coming whether you like it or not, because this is what digital technology does to an industry. So get on board, you old-timers tinkering with microwave ovens and car stereos and televisions and headphones. Here’s how you can fit in to your own future, which actually belongs to us!
Such was Microsoft’s power, at that moment, as the unquestioned ruler of the empire of computing. The company had so thoroughly infiltrated and then controlled every aspect of the world’s defining digital technology that it seemed obvious to most everyone attending CES that if this was the future Microsoft wanted, this was the future. The obvious implication that Gates left unsaid was that this would be an enormous bonanza for Microsoft, which, by establishing the specifications that all kinds of hardware manufacturers would need to follow, would ensure its own dominance in the next brave new world.
Ruling the market for new consumer electronics devices might have solved Gates’s biggest problem: the fact that Microsoft was no longer growing at the galloping 25-plus percent pace investors like to see in a tech company. Remember that when Bill and Steve got into the business, computing still belonged to the IBMs and DECs of the world, with their big, expensive machines sold into a market consisting of a few hundred corporations, governments, and universities. As Moore’s law drove prices down, PC manufacturers sold their wares to a galaxy of other businesses, both big and small, that could now afford powerful computing that would make them more efficient. But numerically speaking, the biggest potential audience of all was relatively untapped. Once you can sell computing to consumers directly, and once you get computing into products that become part of their everyday lives, the volumes become transformative. Consider this: According to researchers at the Gartner Group, 355 million personal computers—servers, desktop PCs, and laptops—were sold around the world in 2011. Some 1.8 billion cellphones were sold the same year. And that’s a number that doesn’t include all the other kinds of computing-based or networkable devices that might become part of a consumer’s life, including video game consoles, audio players, radios, thermostats, car navigation systems, and anything else that can become smarter through the power of connected computing.
Gates, who is perhaps the world’s shrewdest business strategist, saw this future coming. And he expected Microsoft to garner the same slice of this world that it had of the computing world. After all, who else could possibly define the standards for digital interaction between devices? This had been Gates’s game: envisioning and delivering the future. The scale of his concerns and ambitions dwarfed Steve’s. He wanted Microsoft software on billions of devices; Steve just wanted anything that would help him sell a few thousand more Macs each month. Gates was the only one who could reasonably think about dominating his awkwardly named but clearly inevitable “consumer-electronics-plus” era. He was powerful, and very, very smart: despite his penchant for dense verbiage, he had done a wonderful job describing the future of computing as we now have it, some fifteen years later. All he and Steve Ballmer had to do was execute the strategy. If they could, they would steer the company through its transition to this future, and in so doing return Microsoft to the kind of growth that investors wanted to see.
No one knew it at the time, but Gates’s speech that January morning in Las Vegas marked the apex of Microsoft’s hegemony. On
December 31, 1999, the company had been worth $619.3 billion, with a share price of $58.38. It would never be worth more.
Instead, a company still struggling to survive on the fringes of computing would execute Gates’s vision. It would do so by moving incrementally, by following its nose where the technology led, and by being opportunistic. Over the next few years, Steve Jobs would steer Apple toward a whole new rhythm of doing business. No one would have guessed it then, but the future belonged to Apple, not Microsoft.
WHEN WORD GOT back to Cupertino of Bill’s ambitious CES presentation, Avie Tevanian and Jon Rubinstein persuaded Steve to convene an emergency off-site executive staff meeting at the Garden Court Hotel in downtown Palo Alto to rethink where Apple was headed. “Bill Gates was already talking about what we would end up calling our ‘digital hub’ strategy,” recalls Mike Slade. “So I just cribbed his talk and pitched it to Steve at the off-site meeting. I said, ‘Shouldn’t we be doing this? We can’t let Microsoft do it. They’ll just screw it up!’ ”
Apple employees had never had much respect for Microsoft’s ability to create anything but ungainly, confusing, and half-baked technologies for consumers. The animus went back decades. Even though Microsoft Word, Excel, and PowerPoint were instrumental in the early success of the Mac, Microsoft’s unforgivable sin, from the vantage point of Cupertino, was its derivative creation of Windows. Steve was being expedient when he offered to abandon Apple’s long-standing lawsuit against Microsoft to seal the deal with Gates upon his return in 1997. But folks at Apple still considered Windows a rip-off of Apple’s ideas, pure and simple. Worse yet, they saw it as an inelegant theft, and one that got imposed on the world by a kind of bullying that Apple both despised and envied.
Steve’s team sincerely believed that a world defined by Microsoft’s “consumer-electronics-plus” vision would be as ugly as that godforsaken name. In 2000, if anyone needed evidence of how ham-handed Microsoft could be when it tried to befriend actual humans, as opposed to the corporate buyers it had always really cared about, all they had to do was open up Word or Excel or PowerPoint on a PC, where they would be greeted by an animated digital “concierge” called “Clippit.” An anthropomorphized talking paper clip that was intended to be an informal help center for users of the Office suite of productivity applications, Clippit was, in the minds of many users, a patronizing, useless abomination that was frustratingly difficult to banish from your PC screen. Time magazine would eventually call it one of the fifty worst inventions ever, right up there with Agent Orange, subprime mortgages, and the Ford Pinto.
The team at Apple could not abide the idea of letting the creators of Clippit establish the look and feel of whatever new world of consumer computing, communications, and digital media was emerging. They wanted the new consumer digital technologies to be held to the highest standards of elegance, beauty, and simplicity. Apple had always displayed a sense of style and design that was unmatched by anyone in the computing business. All you had to do was compare an iMac to the average PC.
Gates always knew that he could never hope to approximate Steve’s aesthetic sensibility. “He had an expectation of superlative things in his own work and in the products they would create,” he says. “Steve had a design mind-set. When I get to a hotel room, I don’t go, ‘Oh, this bedside table is so poorly designed, look at this, this could have been so much better.’ When I look at a car, I don’t say, ‘Oh, if I had designed this car I would have done this and this.’ People like Jony Ive and Steve Jobs are always looking at stuff that way. You know, I look at code and say, ‘Okay, this is architected well,’ but it’s just a different way of understanding the world. His most natural, innate sense was a world-class instinct about whether this or that object met certain standards. He had extremely high standards of what was shit, and what was not shit.” By those standards, Steve’s executive team was right: Microsoft and Apple had dramatically different notions of what constituted acceptable design, much less great design. If these applications and devices were to become as ubiquitous as Gates proclaimed, this was a rare opportunity to establish a benchmark for the functional and stylistic aesthetics of how the average person would deal with digital technology.
Apple had already dipped its toe into this emerging market with a well-designed but ill-chosen application called iMovie. It was introduced at precisely the moment when affordable digital video cameras from Japanese manufacturers like Sony, JVC, and Panasonic were beginning to hit the market. Steve had thought that an elegant and simple movie-editing application was just what the buyers of those cameras would need. iMovie was sophisticated software that radically simplified the tedious process of editing jerky amateur video into slick home movies with almost professional-quality production values. But if iMovie was proof that Apple could create cool consumer software, it was also proof that the consumer market could be diabolically hard to predict. iMovie was an elegant solution to a problem consumers weren’t yet dying to have solved.
In October 1999, Steve introduced iMovie as part of the rollout of a new generation of juiced-up iMacs. But sales were sluggish. Steve blamed himself for not explaining it well enough. So at an executive team meeting in December 1999, Steve gave early prototypes of new Sony digital camcorders to six of his top execs, asking each to shoot and edit his own four-minute home movie, with the finished productions to be shown in a week. He would pick the best of the bunch to show during his appearance at the January 2000 MacWorld in an effort to demonstrate how iMovie was something anyone could master over a weekend.
“Fred [Anderson], Ruby [Jon Rubinstein], Avie [Tevanian], Tim [Cook], Sina [Tamaddon], Steve, and me all made four-minute movies. I’ll be honest, it was a painfully cumbersome process, even for geeks like us,” remembers Slade. “You had to shoot the movie, then spool the video into the iMac, edit it, add music and credits, and then spool it back out onto the camcorder because the hard disk wasn’t big enough to hold both the original video clips and the finished movie, and we didn’t yet have recordable DVD drives. Many of us thought it was a pretty worthless strategy.
“But the movies were pretty funny,” he allows. “I had little kids back then, so I showed them playing in the leaves on a fall day with Van Morrison’s ‘Tupelo Honey’ as the background music. Steve’s was about his kids, too. And Fred, well, apparently his life was so boring that all he could do was make a movie about his goddamn cat. Tim Cook made one about trying to buy a house in Palo Alto, and how overpriced they were. I thought Ruby’s was the best, though. He had been on a business trip to Dallas on his birthday that week, so he made this totally deadpan movie of the highlights of his day, where he had scenes sitting alone in his hotel room, and in conference rooms, and other boring places showing himself saying ‘Happy Birthday, Jon. Woohoo!’ everywhere he went. And Sina made a beautiful one about his kids playing with their pets and jumping on the bed to a Green Day song.” (That’s the one Steve chose for MacWorld.)
The short little movies may have been fun to watch, but most of them had taken many hours to create. Movie editing, even when simplified by iMovie, was a process that required time, dedication, and skill. It was the kind of thing that a parent might do once in a while, but only in rare cases when he or she had a lot of free time over the weekend. It wasn’t until after the Garden Court off-site convened by Avie and Ruby that Steve acknowledged that Apple needed to create a much simpler consumer application than iMovie, something that users could engage with easily every day. The consensus at the meeting was that a digital music management application seemed like a good possibility. Rather than dig in his heels and insist on greater effort to make iMovie a hit, Steve chose to follow his team into the world of digital music. The big question now was whether Apple could move fast enough to make up for arriving so late to that party.
IT’S NOT SURPRISING that Steve had been so attracted to iMovie, since it was a piece of software designed primarily for parents. He and Laurene now had three children, after the birth of Eve in 1998, and
by the turn of the century had settled into a relatively predictable and normal domestic routine.
Steve’s ability to compartmentalize and focus, qualities that were helping him turn around Apple, also shaped the way he balanced his work and family life. Back when he had been leading the Mac team or driving NeXT, Steve had spent many a late night at the office as part of a small team trying to deliver the next great thing. But now his role at Apple was so different: heading up a company with thousands of employees, Steve managed everything through his small team of senior executives. Rather than hover over the shoulders of star engineers and programmers, he could do much of his work via email. So he would make it home for dinner almost every night, spend time with Laurene and the kids, and then work at his computer late into the night. He and I were iChat buddies at the time, and I would regularly see the green light on next to his name on my screen in the wee hours, an indication that he was logged in to his Mac. (iChat was Apple’s video chat application, and there were times when we used it to talk about business, although sometimes his son, Reed, then an early teen, would sneak up behind Steve and make faces at me as we talked.)
On a spectrum plotting how much time parents spend with their kids versus time they spend focused on their job, Steve would land far toward the latter end. Both he and Laurene knew Steve would always work very, very hard—it had been a basic assumption when they’d gotten married. “Neither of us had much of a social life,” says Laurene. “It was never that important to us.” Laurene often worked beside him at night, at first on Terravera, a small health food business she eventually sold, and then on College Track, her first philanthropic venture. They had adjoining studies; she’d run ideas past him, and on many nights he’d spend an hour or two talking over Apple business with her. They’d often catch a TV show before falling asleep, mostly The Daily Show with Jon Stewart after it launched in 1999. The bulk of the parenting did fall on Laurene, but they scheduled their lives to ensure that Steve was involved. The Christmas holidays were often spent in Hawaii, mostly at a bungalow at the Kona Village Resort on the Big Island.
Becoming Steve Jobs Page 28