That October, Iger also asked his board of directors to allow him to explore the outright purchase of Pixar. As he recalls it, “This was my first meeting as CEO, and I hadn’t been the absolute choice of everyone in the room. I looked around and they were all a little taken aback. A third didn’t know what to say, a third were really intrigued, and a third thought this was ridiculous, but since it’s never going to happen anyway, let him go ahead.” A couple of days after the MacWorld event, Iger called Steve. “I said, ‘I’ve got a crazy idea. Maybe Disney should just buy Pixar outright.’ Steve paused, and then he said, ‘That might not be the craziest idea in the world. And anyway, I like crazy ideas. Let me think about it!’ He called me back a couple of days later.”
Iger and Steve were now speaking just about every day, and their relationship was building into one of mutual respect. Iger was pleasantly surprised by Steve’s honesty—his primary source on the Apple CEO had been Michael Eisner, who had painted a somewhat less than flattering picture. Steve, meanwhile, began to realize that Iger was smart, as well as straightforward, a combination that Steve appreciated, according to Catmull. Iger was a welcome change from Eisner, who Steve had found plenty smart but deeply political and evasive. At the very beginning of the negotiation, Iger simply laid his cards on the table. “My wife told me that the average tenure of a CEO is three and a half years,” he told Steve. “Mine will be less unless I fix Animation, and getting there goes through you. I’ve got a problem; you’ve got a solution. Let’s get this done.”
Steve asked Lasseter and Catmull to come visit him at his home in Palo Alto. When they showed up, he wasted no time dropping his bomb. “I’m thinking about selling Pixar to Disney,” he explained, before laying out the reasons he was now considering such a move. He revealed that, as part of the deal, the two of them would have to run Disney Animation as well as Pixar. “If you guys say no, we’re not going to do it. But the only thing I ask of you is that you get to know Bob Iger.”
Catmull flew down to Burbank for a one-on-one dinner with Iger. But Lasseter, who was particularly wary, asked Iger to fly up and have dinner with him at his home. So Iger flew to Charles M. Schulz–Sonoma County Airport in Santa Rosa, where Lasseter picked him up and drove him to his home near the wine country town of Glen Ellen. “We sat and talked until the wee hours,” Lasseter remembers. “We talked about the importance of Disney Animation, the importance of bringing it back. I told him all I could see was the risk of dividing my time, and he said, ‘Well, I look at it the other way. I see it as giving you a bigger canvas because I think you can handle it.’
“Then he said, ‘The number one thing is, I don’t want to change Pixar,’ ” Lasseter recalls. “He said, ‘I was at ABC for two acquisitions. The first one, with Capital Cities, was great. I learned a lot from Tom Murphy, the Cap Cities CEO. And then Disney bought Cap Cities/ABC, and everything about it was bad.’ ”
Just as Steve had, Lasseter and Catmull grew comfortable with Iger, and as they talked over the deal with Steve they came to see other benefits. Being part of Disney would mean that Pixar would be protected in ways it couldn’t as a stand-alone public company. “Our board,” says Lasseter, “did amazing due diligence. They told us that having one hit per year for a decade going forward was already built in to our valuation. And since the shareholders, whom the board represented, would always want growth, eventually that one-movie-per-year model was not going to cut it. We would have to start making television shows, or many more movies a year.” It did seem, he decided, that the best way for Pixar to cement into place the way of life it loved was to sell itself to the company it had battled for so long.
Iger did his own personal due diligence, of course. One day he flew up to Pixar, for a series of one-on-one meetings with the directors of Pixar’s next few movies. “We had only had one movie, Cars, left to distribute,” he recalls, “and people within Disney had spent months pooh-poohing the idea for the next movie, about a rat in a restaurant in Paris. So I go up to Emeryville, and for six or seven hours the directors pitch me every single upcoming movie. I see a couple of movies that they didn’t wind up making [one called Newt, and the other an unnamed Lee Unkrich project about dogs in a New York City apartment building]. I also see work in progress from Ratatouille, Up, Wall-E. Disney hadn’t seen any of this, and I went back to my guys—including Alan Braverman, the general counsel—and told them that it wasn’t even close. The richness of the creativity, the quality of the people, was so obvious. We had to do this deal.”
With Lasseter and Catmull feeling more comfortable, Steve homed in on the final details of a deal. He didn’t overreach by demanding an exorbitant premium over Pixar’s market value. Believing that Pixar might someday be purchased, investors had already overvalued Pixar with a very high market capitalization of around $5.9 billion. Steve and Iger settled on a price of $7.4 billion. They agreed that Pixar and Disney would get equal billing on every film. They even agreed to a side deal that Catmull and Lasseter had proposed: To ensure that Disney wouldn’t change the culture of Pixar, Iger agreed that his company would never change or cancel any of seventy-five items on a list of Pixar cultural touchstones that Lasseter drew up. The list protected the cereal bar in the dining room, the annual paper airplane contest, the employee car show, the right of animators to do whatever they like to their office spaces, and so on.
Iger knew that the price he had paid could not be justified by any conventional reasoning. “There wasn’t an analysis in the world that would make the deal pencil out,” he says. But he argued to the Disney board of directors that the deal had more potential than could be captured by the numbers: if Catmull and Lasseter could revive Disney Animation, and if both studios, rather than Pixar alone, were creating memorable characters, the ancillary revenue from theme parks, merchandise, and other divisions could soar. “All the way back to Walt’s time,” says Iger, “Disney has been most successful in terms of its bottom line and its reputation when animation has been strong.”
Iger also knew that many so-called experts thought he was nuts for inviting Steve Jobs to join the board of directors as Disney’s biggest shareholder. “Many people who were deeply involved in the process told me that bringing Steve in as the biggest shareholder was the dumbest thing I could do,” Iger remembers. “I won’t name names, but one of the investment bankers we used told me that. He said, ‘You’re a brand-new CEO who’s going to try to run Disney. Jobs is going to be in your life at a level that will drive you crazy. You don’t have the clout to fight that. If you want to run this company in an unfettered way, don’t do this.’ ” Iger trusted his gut. “Steve and I had talked about the fact that he was going to take all stock, and hold it. I knew there was some risk in letting him into the tent. On the other hand, I had a good relationship with him, and I felt I could benefit from having Steve Jobs around. And if for some reason it didn’t work out for me, Disney would still have Steve Jobs and that would be a great thing.”
Like many others, Bill Gates was astounded by what Steve had been able to negotiate. “When he has the upper hand, he’s good at using time,” says Gates. “You know, he would wait people out. Just look at how much of the resulting company ends up being owned by this fairly small—and yes, very high tech, very brilliant—animation studio. They end up owning a very substantial percentage of the entire Disney-ABC-ESPN entity. It’s owned by a little animation studio! That took three rounds of negotiations, and by the time the acquisition is being done, Disney is just flat on its back saying, ‘Take me.’ Because of the political dynamics of Disney at the time, they needed that win, and Steve knew they needed it.”
Selling Pixar to Disney was a singular triumph. Steve had gotten Lasseter and Catmull the corporate parent they needed for their unique institution to thrive for decades. He’d even put the two of them in a position to revive the greatest animation studio of all time, Disney. And he’d done all this by developing, in the space of less than a year, a trusting relationship, in fact a frie
ndship, with the man who’d been the go-to executive for one of the two people he most detested. Compare this with the wary antipathy Steve displayed during the NeXT/IBM negotiations, and you realize just how much Steve had changed over the intervening years.
It was a deeply personal negotiation, one that tested both Iger and Jobs right up until the end. After both boards had signed off, the announcement was set for Tuesday, January 24, 2006. Iger flew up from Los Angeles to be with Lasseter, Catmull, and Steve in Emeryville when they announced the deal to the Pixar staff. But with about an hour to go before the announcement, Steve surprised Iger by suggesting that the two of them go for a walk around the campus. Steve had something important to tell him.
Iger excused himself for a minute to chat with Braverman, his general counsel. “I’m not sure what he wants,” Iger confessed. “Maybe he wants to get out of the deal. Maybe he wants more money.” Then Iger and Steve left the building. Steve led him to a bench in an isolated nook on the campus. They sat down, and there, he put his arm around Iger’s shoulders. Here is how Iger recalls what happened next:
He says, “Bob, there’s something really important I’ve got to tell you. I’ve got to get this off my chest with you, and it’s really important as it relates to this.”
I ask him, “What is it?”
He says, “My cancer is back.” This is January of 2006. Since the operation there’s been no hint to the outside world that he has cancer again. So, of course, I ask him to tell me more. He talks about spots on his liver, chemotherapy.… I pressed him for more details. He said, “I’ve made myself a promise that I’m going to be alive for Reed’s graduation from high school.”
So I say, of course, “How old is Reed?”
He tells me that Reed is fourteen, and will be graduating in four years. He says, “Frankly, they tell me I’ve got a fifty-fifty chance of living five years.”
“Are you telling me this for any other reason than wanting to get it off your chest?” I asked.
He says, “I’m telling you because I’m giving you a chance to back out of the deal.”
So I look at my watch, and we’ve got thirty minutes. In thirty minutes we’re going to make this announcement. We’ve got television crews, we’ve got the board votes, we’ve got investment bankers. The wheels are turning. And I’m thinking, We’re in this post Sarbanes-Oxley world, and Enron, and fiduciary responsibility, and he is going to be our largest shareholder, and I’m now being asked to bury a secret. He told me only two people know this. Laurene and his doctor. He told me, “My kids don’t know. Not even the Apple board knows. Nobody knows, and you can’t tell anybody.”
Basically, thanks.
I have to make a decision sitting on this bench with him whether I can even go through with this deal. I don’t even know. So I took a chance, and I said, “You’re our largest shareholder, but I don’t think that makes this matter. You’re not material to this deal. We’re buying Pixar, we’re not buying you. We’re going to hype the fact that you become the largest shareholder, but that’s not how you value the deal. You value the deal on the assets of Pixar.”
So we announce the deal.
The two men walked back into the building, the one that Catmull and Lasseter would name the Steve Jobs Building after his death. Iger had just sworn himself to secrecy, but he felt he had to tell Braverman. He felt he needed a second opinion. Braverman quickly agreed that Disney could go ahead with the deal. Steve went off to find Lasseter and Catmull and brought them into his office. He put his arms around the two of them. As Catmull explains, “He looked at us and said, ‘Are you guys good with this? If you say no, I’ll send them away right now.’ And we both said we were okay, and Steve just started weeping. We just held each other for the longest time. He loved this company.”
After Steve and Iger signed all the papers, the four men walked out into the atrium to tell the staff. Rumor of a deal had leaked out the day before, but the employees were nonetheless shocked when Steve confirmed that Pixar was in fact being sold to Disney. “The problem was that Ed and I had gone through this three-month journey of getting to know Bob Iger, doing our due diligence, and eventually realizing this was the right decision to do,” Lasseter recalls. “But everybody else in the company was in the same place we had been when Steve first mentioned the idea to us, of ‘How can you do this?’ Standing up in front of them in that moment was very hard. This gasp went through the crowd, like, ‘Oh my God.’ I’ll never forget [A Bug’s Life producer] Katherine Sarafian sitting down right in the front, just weeping when Steve said it.”
IGER TOLD TWO other people about Steve’s cancer. That night he told his wife, the television journalist Willow Bay. A day later he let Zenia Mucha, Disney’s communications chief, in on the secret. Steve’s cancer recurrence wasn’t publicly revealed until 2009, when he finally had to take another medical leave from Apple to get a liver transplant. “In that three-year period,” says Iger, “I always knew exactly what was going on with Steve medically. He and I would talk all the time, and since I kept things secret he confided in me. I knew about the trips to Rotterdam, or Amsterdam, and heard about the radioactive receptors that would attach themselves to cancerous cells.”
Before the deal had been announced, Steve had talked to Laurene about revealing his secret to Iger. They both felt that it was the right thing to do, given the magnitude of the sale. Their discussions had revolved around a single question: Could Steve really trust Iger to keep the secret? Steve told her they could. “I love that guy,” he told Laurene.
Chapter 15
The Whole Widget
Taking care of Catmull, Lasseter, and their staff was a deeply satisfying resolution to what had turned into one of the great joys of his life—the Pixar adventure that had started as such a curious whim. But it was also just one small element of the most productive period of Steve’s life, which happened to be the four years immediately following his return from abdominal surgery in the fall of 2004.
During these years, Steve’s cancer didn’t overshadow Apple’s daily operations. The board of directors discussed succession plans, but most members did not know that the cancer had spread past his pancreas. Steve’s occasional tiredness seemed reasonable, both for a man who had turned fifty in 2005 and for someone who had had cancer. He would take a few days off here and there to see his doctors and get treatments, but he worked from home a fair amount anyway, so that wasn’t alarming. Of course, Steve’s colleagues continued to worry that the cancer would recur, and looked for signs that it had come back. But there was nothing unusual to see until the summer of 2008, when Steve abruptly seemed to be losing weight in alarming fashion.
What the world did see was an effective and visionary leader at the height of his powers. These were complicated years for Apple, but Steve handled almost every challenge in exactly the manner he wanted. He had fallen into leadership at such a young age, but he was comfortable in that role now, and justifiably sure of his capacity to guide Apple’s tens of thousands of employees to the goals he set for them. During these years, he would ensure the company’s continued success in personal computers by engineering a deft switch to a new kind of microprocessor; ruthlessly and successfully managing some major transitions in his executive team; and optimizing and building upon the efficiency and ambition of the company’s product development “treadmill,” as Tim Cook describes it. This is also when he delivered what is likely to be remembered as the most notable product of his life, the iPhone, and then improved even that by pivoting once again into a strategy he personally had not wanted to pursue, thereby transforming the application software business in an almost Gatesian fashion.
These are the years when he got almost everything right. They are also the years that show most completely how he had changed, and that manifest the prolifically creative person and the genuine business genius he had become. “I am who I am,” Steve liked to say. This was most true during the last seven years of his life.
AFTER HIS FORAY
into music, Steve knew that even he had underestimated the potential of a digital hub of Apple products linked to a computer. As the world of computers subsumed the world of consumer electronics, Apple steadily improved the experience of enjoying and managing music, photos, and videos on personal electronic devices, making the various technologies coherent in a way that no other company came close to matching. Apple promised to provide a simple and yet magical (to use one of Steve’s favorite adjectives) encounter with technology at every stage, as opposed to the disjointed and geeky mess that served mainly to confuse consumers when they tried to coordinate products from different companies. Purchasing music or computers from Apple online was almost too easy, while shopping in the company’s gleaming glass emporiums, staffed with all those smart young men and women and the whiz kids at the Genius Bar, could be a form of entertainment in itself. Apple was even starting to do a pretty good job of tying it all together via Wi-Fi, although this was the trickiest link in the continuum. Steve embraced the marketing adage that every single moment a consumer encounters a brand—whether as a buyer, a user, a store visitor, a passerby seeing a billboard, or someone simply watching an ad on TV—is an experience that adds either credits or debits to the brand’s “account” in his imagination. The “Apple experience” was an unprecedented merger of marketing and technology excellence that made customers want to come back for more.
Becoming Steve Jobs Page 38