Valley of Genius

by Adam Fisher

  Guy Bar-Nahum: Ruby is always cursing. He’s a very ruthless and smart and disgusting person, and basically, according to the legend, he said to Tony, “It’s time to shit or get off the pot!” And he did that to him in a very theatrical way, during a staff meeting: in front of maybe twenty, twenty-five people. And Ruby enjoyed putting Tony on the spot in a very, very public way. He told Tony, “Look, man, I’m not continuing this meeting. I’ve had enough. You either join, or we just kill your project.”

  Jon Rubinstein: It wasn’t really true, but…

  Guy Bar-Nahum: Tony was really put on the spot, and he really didn’t know what to do; he kind of hesitated.

  Tony Fadell: I am like, Wait a second! I have a company and there are people over there working on this other thing. How am I going to do this? I was just like “Whoa!” So I just got in my car and I started driving through the hills of Saratoga and Los Gatos. So I go up to Skyline Drive. I wind up those roads. And I am just sitting there going, What am I going to do? What am I doing? Apple had… they liked to say, “single-digit market share.” It was literally 1 to 1.5 percent of computer sales in the US, nowhere else in the world, just in the US. One and a half percent! And the stock had crashed, and I am like, Why am I going to join Apple? I love the place, but why am I joining?

  Guy Bar-Nahum: Why would he sell for cheap the iPod to Apple? Was it fear? “I can’t do it myself—I need a full company behind me to actually make it.” Was it a discussion with Steve? Some reassurance?

  Tony Fadell: I had a very pointed conversation with Steve, going, “Look, let me tell you, I was at General Magic and I watched them come out with a great product and not be able to market it and sell it. I am going to pour my life into this. I am going to build a team. But at the end of the day when we are going to be going up against Sony, how do I know you are going to be able to sell and market it?” And Steve just said, “Look, I will devote the entire Mac advertising budget to this if you can pull this off.” I said, “Really?” and he goes, “Yes.”

  Jon Rubinstein: Now what start-up is going to ever be able to do that? Right? The Mac had a large installed base, a tremendous fan base that was very very attached to Apple.

  Ron Johnson: This is about when the stores launched: May 2001. The stores had a good start, in terms of the Mac faithful.

  Jon Rubinstein: We had a captive market, right? So if Apple released the iPod, and if we could get 10 or 20 percent of the installed base to buy iPods, it would be dramatically successful.

  Ron Johnson: But the challenge for the stores was not to serve the faithful. It was to reach new customers. And so the iPod was our chance to really make a difference.

  Jon Rubinstein: Our demographics were terrible, and we hoped the iPod would bring more younger people in.

  Tony Fadell: Now, everything is half-truths so I was like, Okay, Steve is saying the right things but will he really do it? Then in the back of my head I am like, If we do not run like hell we are going to get canceled. Because I saw so many projects get canceled. I am like, I’ve got to build the team, and we’ve got to ship this by Christmas, because if we do not ship by Christmas we are dead as a product. It was 24/7 working for that six to eight months, depending on how you count.

  Michael Dhuey: He hardly ever slept. He would send e-mails at two or three in the morning. It gave the appearance that he was a vampire.

  Jon Rubinstein: The fear was Sony or some other big consumer electronics company was going to come after us and actually kick our butt. And so we kept the pace of innovation such that there was no way anyone was going to get in front of us.

  Guy Bar-Nahum: We basically hired twenty or thirty people, some of them from inside Apple—all the lost souls within the company, people who had fought with their managers and needed something new to do.

  Michael Dhuey: We were put in a separate building, and we had security badges so only people in our group could open the doors to our area. It was pretty high security. You couldn’t tell anyone what you were working on.

  Jon Rubinstein: Why give a heads-up to your competitors? Why let Sony know you’re working on an iPod?

  Guy Bar-Nahum: It was: You show up, you have computers you need to set up, networks, and you can’t really use the company, because of secrecy, and you just don’t know who to talk to, so you just do it yourself. It was all asses and elbows, and that’s where we shined, really.

  Michael Dhuey: The funny thing is that almost nothing on the iPod was actually done by Apple. Underneath the hood it was a lot of stuff grabbed from other parts of the industry.

  Guy Bar-Nahum: By luck, Tony found this one company that actually made platforms for MP3 players. I don’t know why they did that, because there was no market for it. And that company was Portal Player in Kirkland, Washington.

  Sanjeev Kumar: We were from the PC industry. We had not done anything in consumer electronics and frankly did not know much about MP3 music at the time—except that Napster was a big thing and lots of people were downloading digital music.

  Guy Bar-Nahum: So they had a solution: software and hardware—basically all of the under-the-hood stuff that you need in order to create an MP3 player.

  Sanjeev Kumar: We had the main processor and the hardware interfaces for all your storage devices, displays, and input devices. In addition, we had all the software to run the processor. It was something we’d been working on for two years.

  Guy Bar-Nahum: The other part was Pixo. Pixo was a bunch of geezers that left Apple to create a software framework for cell phones. And we needed this kind of technology for iPod.

  Andy Grignon: So some friends of ours from Apple reached out. They said, “Hey, we’re making this new thing, and we’d like to see if we could use your software. Can you make us an example application?” And we were like, “All right, what do you guys want?” They were like, “Just a sample MP3 player.” I’m like, “Great!” So we whipped up a sample MP3 player app. But what was funny was we didn’t know what we were building! We never saw the form factor. We never saw anything. It was just “make your stuff work” and that was it. Obviously it was an iPod, right? But we just made a sample app. And to this day in every iPod that’s ever shipped, “TMP3SampleApp” is what gets launched when you turn on your iPod.

  Guy Bar-Nahum: We took all these code bases, and we just very hackily kind of threw them together with bubble gum and masking tape. We put them together in a very haphazard way, because if you have a finite amount of time, right, a finite amount of resources, you really lower the bar on the software, right? You bring it in.

  Sanjeev Kumar: Apple was very pragmatic. They had their date to launch and they had absolutely no problem in dropping a feature if that feature was going to be a roadblock to shipping on that date. Obviously you can’t ship something that doesn’t work, but the iPod specs in the beginning and what we launched were two very different things.

  Guy Bar-Nahum: And it worked, but if you challenged it a little bit, it was going to crash. So we shipped software that was really alpha level.

  Sanjeev Kumar: That first iPod was really a science project.

  Jon Rubinstein: We had to get it done.

  Wayne Goodrich: The evening before the launch, Steve was looking at it and playing with it and Jon Rubinstein was walking up the aisle and just as Jon got there, Steve pushed his glasses up on his head and looked at the screen and he goes, “You know, I really wish we’d been able to get color on this thing.” And then Jon just patted him on the back and said, “Next version, Steve, next version…”

  Mike Slade: The introduction was in that little tiny Town Hall war room, and it wasn’t even very crowded.

  Steven Levy: I was in New York, working at Newsweek. We were consumed by 9/11, so I wasn’t going to go to California for, you know, what seemed at the time like not a major product announcement.

  Mike Slade: 9/11 happened a month before the iPod came out.

  Steven Levy: Apple asked me if I wanted one, and of course I did. So they hand-deliver
ed it to me the day it was released. It came with CDs because they didn’t want us to steal music to put on it. So they figured that in case we didn’t own CDs they would give us a stack of them, all Steve Jobs’s favorite music: Bob Dylan Live 1966, Glenn Gould’s Goldberg Variations. That night or the night after I was going to a Microsoft event in New York. The latest version of Windows was going to come out. So I brought my iPod and sat next to Bill Gates at the dinner and pulled it out of my pocket and said, “Have you seen this?” And he said no, and I handed it to him. And he fiddled with the dials and played with it, trying to understand it. It was like he was an alien that had the power to suck up all the information on a piece of technology. So there’s this little tunnel between him and the iPod, and he got all the information, and he handed it back to me and said, “This is only for Macintosh?”

  Mike Slade: People forget that it was designed as a Mac-only niche-y add-on: no power cord, assume FireWire, all these things that no self-respecting MBA would ever green-light because it limited the market size. Steve didn’t care. He just wanted it to be good.

  Ron Johnson: So it really wasn’t a product for Windows people. If they wanted an iPod, they’d have to buy a Mac.

  Jon Rubinstein: The goal of the iPod was not to change Apple at the time. The goal was to sell more Macs. You bought your iPod, so you’d spend money on that. And that then locked you into the Mac ecosystem.

  Steven Levy: I liked it from the beginning. To me the most exciting thing about the iPod was the shuffle thing. You could take all your music and shuffle it, and it would all be yours but there would be the element of surprise, too. It was like a radio station where every single selection was a song you liked. To me it was a metaphor for the digital age. A symbol of the promise of the digital age.

  Jon Rubinstein: We only sold a few hundred thousand of that first product.

  Ron Johnson: So the iPod was not successful. It was a good product, but a low-value product from 2001 to 2004.

  Steven Levy: In 2004, I noticed the thing was taking off in a cultural sense. The iPod itself was a thing: You would walk through the streets and you would see someone else with these white ear buds, and it was like a secret society—you were part of this cult. The iPod was a fetish object, an object of lust for the people who owned it. It could deliver music, better than anything before it. The fact that it looked beautiful just amplified how much people loved it.

  Sanjeev Kumar: Even though the initial volume for the first few years of iPod were not that big, and the revenues were not that big, it created the halo effect. Apple products became cool again.

  Ron Johnson: But the iPod wouldn’t have changed the music world without the iTunes Music Store.

  Mike Slade: The iTunes Music Store comes in late ’03.

  Jon Rubinstein: The iTunes Music Store allowed you to actually buy a track at a time, for ninety-nine cents, and download the music directly in iTunes. So you didn’t have to buy CDs or records or anything else anymore. You could download directly from the store and get the latest music. So it was very cool, and pretty exciting.

  Mike Slade: Steve is the one who made it happen, because at first the labels just said no to everything. They were just like, “Yes, we’re doing our own thing, fuck off,” over and over. They were the worst people I’ve ever dealt with in the entire galaxy, but Steve convinced them to let him do it on the Mac.

  Jon Rubinstein: We put together a pitch to the music companies: “Look, we’re at 2 percent market share with the Mac—we are not successful, so you have no downside to licensing us the music. You can do this experiment and it will cost you nothing.” If we’d been wildly successful in the market, there’s no way they would have licensed it to us. We didn’t matter, so they could license to us and who cares, right? “Run the experiment, what do you have to lose? If you don’t do this, it’s just going to get stolen anyway.” And so we kind of got away with it, because it didn’t matter. Now, they probably ended up doing deals they probably regretted later, but that’s how it all kind of played out.

  Nolan Bushnell: I tried to do a digital jukebox in 1992 or ’93, and to get the rights from the record companies was just impossible! Fast-forward ten years: Steve got all four of the major record labels to let him sell tracks for ninety-nine cents. That was a negotiation! And I really appreciated that he was able to do that, because I had gone down that same path and failed. So you gotta say, “Attaboy, Steve!”

  Sean Parker: It turns out that it’s a lot easier to get a deal done with the record labels after their business has collapsed. The music business went from a $45 billion global industry to a $12 billion global industry. It’s a much easier conversation at that point. There is no hypothetical. You don’t have to get them to believe that this catastrophic event is going to occur. It’s already occurred.

  Ali Ayar: The iPod took advantage of the fact that Napster existed. The fact that you could put “a thousand songs in your pocket”? Where are you getting a thousand songs?

  Jon Rubinstein: People were stealing music, yes, no question about it.

  Steve Wozniak: Then Steve did a strange thing.

  Ron Johnson: Several members of the executive team, most notably Phil Schiller, and probably Jon Rubinstein, convinced Steve to open up the product to Windows. That was like heresy to Steve.

  Steve Wozniak: He went open.

  Ron Johnson: Mac was a closed ecosystem, right? But he made the decision to open it up to Windows.

  Steve Wozniak: He okayed it. He said, “You don’t have to have a Macintosh to use an iPod. We’ll write iTunes for Windows.”

  Mike Slade: People didn’t really think that the iPod was going to be a viable product for Windows, because it was a pain in the butt to hook it up to FireWire. It was kind of a hack for a Windows user until the USB 2.0 iPod came out. That’s one of the reasons why the music companies were willing to give him the Windows option.

  Jon Rubinstein: By then it was, “You’re kind of pregnant, so it is too late to back out now.”

  Ron Johnson: It was a huge economic impact for the music industry, because before if you used to have a great song, you’d get $15 because you sold a record. Now that song was worth ninety-nine cents. It disaggregated the album.

  Guy Bar-Nahum: iPod basically freed Apple from the PC wars. Apple was entrenched in this losing war. It was like World War One: suffering and bleeding and losing territory and losing cultural relevance until iPod came and opened up the big sky of the universal app that is music. Today it looks small, but back then it was infinitely bigger. Music crosses cultures, and operating systems, and everything that was limiting the growth of Apple. It was a big thing.

  Steve Wozniak: Apple didn’t grow in size ever over the Apple II days until the iPod. And it didn’t grow in size when he introduced the iMac. It all started with the iPod—and it was the openness.

  Sanjeev Kumar: It brought Apple back from the brink.

  Andy Hertzfeld: They were making literally billions every week from the handheld music players.

  Ron Johnson: The iPod gave Steve confidence that when we’re not competing with a monopoly, Apple could win, because we got up to almost 90 percent market share on music players.

  Steve Wozniak: The openness made our revenues double, our profits double, our stock double—and the board gave him billions of dollars in stock and eight jet airplanes.

  Ron Johnson: So the feeling was, Wow, we can do this!

  Yves Béhar: Before the iPod you couldn’t really go to any meeting anywhere, and say, “Look, design is important and central to a business.” We couldn’t go do that as designers, because the minute you would say this to Microsoft, Compaq, HP, anybody in the business, they would laugh you out of the room, because you were basically taking the example of a loser: Apple. So the iPod really is what put design front and center. It really gave the hardware guys a show-off moment, a win.

  Jordan Ritter: Of course I had wanted it to be Napster, but I didn’t really care. I knew that someone would b
reak through all these asinine people, companies, and industries that were saying no. And there it was. There it was. Finally!

  The more philosophically minded had a different reaction. They felt that Jobs had sold out. He saved Apple, yes, but that big win came at a big cost. Jobs betrayed the power-to-the-people ideals that had animated his youth, early Apple, and the personal computer movement as a whole.

  John Markoff: I was super disappointed. For me iTunes meant that the PC was becoming an entertainment device. I was still back in the bicycle-of-the-mind world. For me it was about augmentation: “Steve, where are the better tools for writers and thinkers?” We actually had that conversation, and he blew me off.

  Alan Kay: When Steve came back to Apple he was not the same Steve. He was a very effective Steve, but he had lost his zeal for what computers are really good for socially—like education. Completely lost it. And you know I would try to get him back interested in wheels for the mind—“Remember that, Steve?”—instead of dumbed-down user interfaces.

  John Markoff: Steve didn’t look backward very much. NeXT and the Mac were really targeted at this notion of augmentation that Engelbart had thought up years before: Computers were these tools that could really enhance your ability to do intellectual work. Steve was turning the computer into a new entertainment device—first with audio, but later with video.

  Jon Rubinstein: The early Steve was the bicycle-for-the-mind thing: “How do you enhance human creativity, human capabilities, by using computers?” With the iPod that got extended into: “How do you make people’s lives better?” The side effect, of course, was that people tuned out.

  Steve Wozniak: To me, it looks like, “Oh my gosh, they could walk out in front of a car!” You think a whole bunch of negative thoughts because you’ve grown up another way, but it’s really not bad, it’s just different. They have their way, we have ways from the past, and they can be very, totally different, and yet that doesn’t make one of the ways bad compared to the other.

  Alan Kay: I used to get after Steve and he didn’t care, because he was selling it to people who were just happy to continue the dumbing down. It’s bad, really bad. Most people can’t see it. People don’t have any idea what a computer is. They are just using it to play movies on. This is the corruption of consumer electronics—using a computer basically for convenience rather than for actually doing primary needs. If you think about it, this is completely fucked up.