Return to the Little Kingdom

by Michael Moritz

  I thought that I could learn more about Silicon Valley, the start of a new industry, and life at a young company by focusing on one firm rather than by trying to come to grips with many. I was interested in whether image matched reality and whether public statements corresponded with private actions. I wanted to concentrate on the years before Apple became a publicly held company, examine the atmosphere that nourished the founders, and find out how their personalities came to affect the company. To a lesser extent I also wanted to come to terms with the conventional questions: Why? when? and how? “In the right place at the right time” clearly explains part of Apple’s success but dozens, if not hundreds, of other people who started microcomputer companies have failed.

  For some months I enjoyed a carefully circumscribed freedom at Apple. I was allowed to attend meetings and watch progress on a new computer. But the company I saw in 1982 was very different from the little business that filled a garage in 1977. Consequently, I have scattered these corporate snapshots throughout the book. This isn’t an authorized portrait of Apple Computer nor was it ever supposed to be a definitive history. Apart from documents that were leaked, I had no access to corporate papers. The name of one character who appears briefly in the narrative, Nancy Rogers, has been changed, and some of the people mentioned in the text have either left the company or assumed different titles. I discovered quickly enough that writing a book about a growing company in an industry that changes with dizzying rapidity has at least one similarity to the production of a computer. Both could always be better if every new and enticing development were included. But like an engineer I had to bolt down and ship. So this is about Apple’s road to its first one billion dollars.

  “Can we ship your party?” Jobs asked.

  A large set of French windows rinsed the California sun. The filtered light, which had the long wash of fall, played along a rumpled line of suitcases, garment bags, backpacks, and guitar cases. The owners of the luggage were seated around a stone fire-place in generous crescents of straight-backed chairs. Most of the sixty or so faces fell into that blind gap that camouflages those between their late teens and early thirties. About a third were women. Most wore androgynous uniforms of jeans, T-shirts, tank tops, and running shoes. There were a few paunches, some occasional patches of gray hair, and more than the average run of spectacles. Some cheeks were unshaven and a few were still swollen with sleep. Several blue-brimmed polyester baseball caps carried the silhouette of an apple with a bite gouged out of the side and, in black lettering, the words MACINTOSH DIVISION.

  At the front of the group, sitting on the edge of a steel table, was a tall, slight figure in his late twenties. He was dressed in a checked shirt, bleached jeans, and scuffed running shoes. A slim digital watch ran around his left wrist. His long, delicate fingers had nails that were chewed to the quick, while glossy black hair was carefully shaped and sideburns crisply trimmed. He blinked a pair of deep, brown eyes as though his contact lenses were stinging. He had a pale complexion and a face divided by a thin, angular nose. The left side was soft and mischievous while the right had a cruel, sullen tint. He was Steven Jobs, chairman and co-founder of Apple Computer and general manager of the Macintosh Division.

  The group waiting for Jobs to speak worked for Apple’s youngest division. They had been bused from the company’s headquarters in Cupertino, California, across a range of pine-covered hills for a two-day retreat at a resort built for weekenders on the edge of the Pacific. Sleeping quarters were wooden condominiums with stiff-necked chimneys. The wood had been bleached gray by the wind and the spray and the buildings were set among sand dunes and spiky grass. Collected together in the clear morning light, the group formed the footloose confection typical of a young computer company. Some were secretaries and laboratory technicians. A few were hardware and software engineers. Others worked in marketing, manufacturing, finance, and personnel. A couple wrote instruction manuals. Some had recently joined Apple and were meeting their colleagues for the first time. Others had transferred from a division called Personal Computer Systems, which made the Apple II and Apple III computers. A few had once worked for the Personal Office Systems Division, which was preparing to introduce a machine called Lisa that Apple intended to sell to businesses. The Macintosh Division was sometimes called Mac but the lack of an official-sounding name reflected its uncertain birth. For the computer code-named Mac was, in some ways, a corporate orphan.

  Jobs began speaking quietly and slowly. “This,” he said, “is the cream of Apple. We have the best people here and we must do something that most of us have never done: We have never shipped a product.” He walked with a springy step to an easel and pointed to some plain mottos written in a childish hand on large, creamy sheets of paper. These he converted into homilies. “It’s Not Done Until It Ships,” he read. “We have zillions and zillions of details to work out. Six months ago nobody believed we could do it. Now they believe we can. We know they’re going to sell a bunch of Lisas but the future of Apple is Mac.” He folded back one of the sheets of paper, pointed to the next slogan, and read: “Don’t Compromise.” He mentioned the introduction date planned for the computer and said, “It would be better to miss than to turn out the wrong thing.” He paused and added, “But we’re not going to miss.” He flipped another page, announced, “The Journey Is the Reward,” and predicted, “Five years from now you’ll look back on these times and say, ‘Those were the good old days.’ You know,” he mulled in a voice that rose half an octave, “this is the nicest place in Apple to work. It’s just like Apple was three years ago. If we keep this kind of pure and hire the right people, it’ll still be a great place to work.”

  Jobs pulled a torn white plastic bag along the table, dangled it by his knee, and asked in the tone of someone who knows what the answer will be: “Do you want to see something neat?” An object that looked like a desk diary slipped from the plastic bag. The case was covered in brown felt and fell open to reveal a mock-up of a computer. A screen occupied one half and a typewriter keyboard the other. “This is my dream,” said Jobs, “of what we’ll be making in the mid- to late eighties. We won’t reach this on Mac One or Mac Two but it will be Mac Three. This will be the culmination of all this Mac stuff.”

  Debi Coleman, the division’s financial controller, was more interested in the past than the future and, much like a child hoping for a familiar bedtime tale, asked Jobs to tell the newcomers how he had silenced the founder of Osborne Computers whose portable computer had been putting a dent in Apple’s sales. “Tell us what you told Adam Osborne,” she implored. With a reluctant shrug Jobs waited for the anticipation to build before embarking on the story. “Adam Osborne is always dumping on Apple. He was going on and on about Lisa and when we would ship Lisa and then he started joking about Mac. I was trying to keep my cool and be polite but he kept asking, ‘What’s this Mac we’re hearing about? Is it real?’ He started getting under my collar so much that I told him, ‘Adam, it’s so good that even after it puts your company out of business, you’ll still want to go out and buy it for your kids.’”

  The group alternated between the indoor sessions and alfresco sessions on a bank of sun-parched grass. Some foraged in a cardboard box and donned T-shirts that had the computer’s name racing across the chest in a punky script. The retreat seemed a cross between a confessional and a group-encounter session. There was a nervous, slightly strained, jocularity but the old-timers who had attended previous retreats said the atmosphere was relaxed and low-key. A couple of the programmers muttered that they would have preferred to stay and work in Cupertino, but they lounged on the grass and listened to briefings from other members of the group.

  Some picked at bowls of fruit, cracked walnuts, and crumpled soft-drink cans while Michael Murray, a dark-haired marketing man with dimples and mirrored sunglasses, rattled through industry charts and projected sales rates and market share. He showed how Mac would be introduced between the more expensive office computers made by competi
tors like IBM, Xerox, and Hewlett-Packard and the cheaper home computers sold by companies like Atari, Texas Instruments, and Commodore. “We’ve got a product that should be selling for five thousand dollars but we have the magic to sell for under two thousand. We’re going to redefine the expectations of a whole group of people.” He was asked how sales of Mac would affect Apple’s office computer, Lisa, which was a more elaborate computer but built around the same principles.

  “There is one disaster scenario,” Murray admitted. “We could say Lisa was a great exercise for Apple. We can put it down to experience and sell ten.”

  “Lisa is going to be incredibly great,” Jobs interjected firmly. “It will sell twelve thousand units in the first six months and fifty thousand in the first year.”

  The marketing sorts talked of ploys to boost sales. They discussed the importance of trying to sell or donate hundreds of Macs to universities with gilded reputations.

  “Why not sell Mac to secretaries?” asked Joanna Hoffman, a perky woman with a faint foreign accent.

  “We don’t want companies to think the machine is a word processor,” Murray retorted.

  “There’s a way to solve that problem,” Hoffman countered. “We could say to the secretaries: ‘Here’s your chance to grow into an area associate.’”

  There was a discussion of improving sales overseas. “We have the kind of hi-tech magnetism that can attract the Japanese,” Hoffman mentioned. “But there’s no way they can succeed here while we’re here and we’re going to succeed there regardless.”

  “We were very big in Japan until recently,” Bill Fernandez, a beanstalk-thin technician, observed in a pinched staccato.

  Chris Espinosa, manager of the writers who prepared the computer’s instruction manuals, slopped in his sandals to the front of the group. He had just turned twenty-one, and as he pulled some notes from a small red backpack he announced, “You all missed a great party.”

  “I heard there was free acid,” somebody piped up.

  “It was for sale outside,” Espinosa chortled.

  “Can we ship your party?” Jobs asked sharply.

  Espinosa blanched and settled down to business. He told his colleagues that he was having difficulties hiring qualified writers, that his staff needed more Mac prototypes to work with, and that Apple’s graphics department wasn’t geared to cope with some of his demands. “We want to make books that are gorgeous,” he said, “that you read once and then keep on your shelf because they look so great.”

  The work sessions were broken up by coffee breaks and by walks along the beach, some Frisbee games on the grass, a few scattered poker games, and a fuchsia sunset. Though dinner was served at long canteen tables, it bore no hint of the mess hall. Clutches of Zinfandels, Cabernets, and Chardonnays stood on every table but the breadsticks disappeared more quickly. After dinner someone who looked like a demure orthodontist, with thinning silver hair and owl-eyed spectacles, performed what, in computer circles, amounted to a cabaret act. The figure wearing a Mac T-shirt over a long-sleeved dress shirt was Ben Rosen. He had turned a reputation gained as a Wall Street electronics analyst, the industrious publisher of an informative, sprightly newsletter, and host of annual personal-computer conferences into a career as a venture capitalist. Before he started investing in computer companies his comments had been sought as much as his ear.

  For the Mac group Rosen worked from a casual script of observations, wisecracks, tips, and industry gossip. He gave a brief survey of some of Apple’s competitors and dismissed Texas Instruments as “a company for the case studies of business schools,” though by way of an afterthought he added: “They are supposed to announce their IBM almost-compatible computer in three weeks.”

  “What price?” Jobs asked.

  “Twenty percent under the comparable price,” Rosen replied.

  He talked about low-priced home computers and mentioned Commodore: “I have a few notes about Commodore that I can tell in polite company. The more you know about the company the more difficult it is to be sanguine.”

  Some of the frivolous rustle disappeared when Rosen started to talk about IBM whose personal computer had been providing severe competition for Apple. “One of the fears about Apple,” Rosen noted, “is IBM’s future.” He admitted to being impressed by a recent visit to IBM’s Personal Computer Division in Boca Raton and described what he thought were its plans for three new personal computers. Then he looked around the room and said: “This is the most important part of Apple Computer. Mac is your most offensive and defensive weapon. I haven’t seen anything that compares to it.” He quizzically mentioned another industry rumor: “One of the things going around Wall Street is an IBM-Apple merger.”

  “IBM already said they weren’t for sale,” Randy Wigginton, a young blond programmer, shot back.

  Members of the Mac group started to ask questions. One wanted to know how Rosen thought Apple’s stock would perform. Another was eager to find out when a personal-computer software company would turn a $100 million in sales, while one with a strategic inclination wondered how Apple could ensure that computer dealers would make room on their increasingly crowded shelves for Mac.

  “We have a crisis looming,” Jobs told Rosen, from the back of the room. “We’ve got to decide what to call Mac. We could call it Mac, Apple IV, Rosen I. How’s Mac strike you?”

  “Throw thirty million dollars of advertising at it,” Rosen said, “and it will sound great.”

  Rosen was the one interlude in a string of presentations by every manager of a department at Mac. They provided an abbreviated tour of a computer company and numbed everyone with a welter of facts. The snappy presentations were interrupted every now and again by applause at some piece of good, or unexpected, news. The engineering manager, Bob Belleville, a soft-spoken engineer who had just come to Apple from Xerox, said, “At Xerox we used to say it was important to get a little done every day; at Mac it’s important to get a lot done every day.” The main hardware engineer, Burrell Smith, blushed fiercely, said he didn’t have enough material to last ten minutes, and played his guitar. The designer of the computer case lit some candles, sat in a chair with his back to the others, and played his remarks from a cassette tape. Others told about problems meeting the standards for electronic devices set by the FCC.

  The programmers relayed their progress on the software. Matt Carter, a burly man with a beleaguered look, who was responsible for part of the manufacturing, rattled through a quick course in factory layout and showed a film of what Apple’s new production line for Mac would look like. He talked about carousels and bins, automatic inserters and linear belts, prototype builds and pricing commitments. Another manufacturing man told about defect rates, improvements in output per person per day, and material handling. The last prompted Jobs to promise: “We’re going to come down real hard on our vendors. We’re going to come down on ’em like never before.” Debi Coleman, the financial controller, gave her version of Accounting 101, explaining differences between direct and indirect labor costs, inventory control, fixed-asset tracking systems, tooling analysis, inventory valuation, purchase price variance, and break-even levels.

  At the tag end of the retreat, Jay Elliot, a tall man from Apple’s human resources department, introduced himself. “I’m a human-resources manager,” he said. “I really appreciate being here. Thank you for being here. At human resources we try to leverage top performers—”

  “What does that mean in English?” Jobs snapped.

  “Human resources,” Elliot stumbled, “is typically viewed as a bureaucratic, bullshit organization . . .”

  Once Elliot recovered, he suggested ways of coping with the need for recruitment. The projected organization chart for the Mac Division was dotted with little boxes filled with the initials TBH. These stood for “To Be Hired.” Elliot said his department was swamped with fifteen hundred résumés a month and suggested panning recruits from the names of Apple’s owner-warranty cards.

  “No
body any good sends in their warranty card,” Jobs said. He leaned over the back of his chair and addressed Andy Hertzfeld, one of the programmers. “Andy, did you send in your warranty card?”

  “The dealer filled it in,” Hertzfeld said.

  “See?” said Jobs, swiveling around in his seat.

  “We could put ads on ARPANET,” Hertzfeld suggested, referring to the government-funded computer network that links universities, research establishments, and military bases. “There would be legal problems with that but we could ignore them.”

  “We could put ads in newspapers but the catch factor is kind of low,” volunteered Vicki Milledge who also worked in the human resources department.

  “What we should do,” Jobs said, “is send Andy out to the universities, let him hang out in the labs and find the red-hot students.”

  After Elliot finished, Jobs embarked on a soliloquy. He fingered a gray, glossy folder that contained a summary of progress on Mac and warned everyone to carefully guard all company documents. “One of our salespeople in Chicago,” he said, “was offered a complete sales introduction plan on Lisa from somebody at IBM. They get everywhere.” He returned to the easel and a final flip chart that carried the picture of an inverted pyramid. At the bottom a band was labeled MAC and succeeding layers carried the Words FACTORY, DEALERS, SUPPLIERS, SOFTWARE HOUSES, SALES FORCE, and CUSTOMERS. Jobs explained the triangle and pointed to the succession of bands: “We have a major opportunity to influence where Apple is going. As every day passes, the work fifty people are doing here is going to send a giant ripple through the universe. I am really impressed with the quality of our ripple.” He paused. “I know I might be a little hard to get on with, but this is the most fun thing I’ve done in my life. I’m having a blast.” A trace of a smile appeared on his face.