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Steve Jobs: The Return, 1997-2011


Steve Jobs was not accustomed to boos, but there he was, on stage at the airy and decrepit Park Plaza Castle auditorium in Boston, absorbing a crescendo of unhappiness. It was 1997, the year Jobs replaced Gil Amelio and declared himself “interim CEO” of Apple (AAPL), saying he was too busy with Pixar and family to take over permanently. At the annual Macworld Expo that August, Jobs told the long-suffering Apple faithful that there was still hope for the computer company but that it would first have to put aside its all-too-consuming fixation with its dominant rival, Microsoft (MSFT).

“We are shepherding some of the great assets in the computer industry. If we want to move forward and see Apple healthy and prospering again, we have to let go of a few things,” said Jobs, dressed in his trademark outfit of that era, a sweater vest and pleated slacks. Microsoft, he announced, was investing $150 million in Apple and making a promise to develop Microsoft Office software for the Macintosh for the next five years. Bill Gates popped up on a 100-foot screen, appearing pedantic and flaccid in contrast to Jobs’s swagger. “The era of setting this up as a competition between Apple and Microsoft is over as far as I’m concerned,” Jobs said after Gates’s brief and awkward speech, trying to quell the disappointed audience, some of whom appeared to be in tears.

The détente forged on that August day was, in retrospect, a cold calculation by Jobs that Apple did not need to win the old battle for the PC in order to prevail in a dawning war for digital media devices and the Internet. It was also the first bit of evidence that despite his professed ambivalence, Jobs was fully committing himself to an Apple turnaround. Colin Crawford, who ran Macworld in the 1990s along with publications such as MacWEEK, recalls asking Jobs back then why he wanted to return to the company he had founded. “He sort of looked at me quizzically and said that his and Apple’s DNA were completely intertwined,” Crawford says. “He said that Apple’s brand was badly tarnished and that he intended to repolish it.”

It’s difficult to remember how far Apple had fallen. Just a few months away from bankruptcy, the company had a dwindling 4 percent share of the PC market and annual losses exceeding $1 billion. Three CEOs had come and gone in a decade; board members had tried to sell the company but found no takers. Two months after Apple’s deal with Microsoft, Michael Dell told a tech industry symposium that if he ran Apple, he’d “shut it down and give the money back to shareholders.”

Lucky for the shareholders that Jobs and not Dell (DELL) was at Apple’s helm. Apple’s market capitalization went from $3 billion at the start of 1997 [footnote 1] to $350 billion today—more than the valuation of Microsoft and Dell combined—making it the second most valuable company in the world. A single share, worth a little over $4 the day Dell spoke, is now worth nearly 100 times that. Much would be written about how Apple forever changed the way people communicate, entertain themselves, even the way they absorb information. Here’s a simpler way to sum up Apple’s influence, in four words: iMac, iPod, iPhone, iPad.

Jobs recognized that an industry dominated by Microsoft and Intel would not adapt smoothly in the era of personal media and communication devices. Those companies could not move quickly while in lockstep with their multiple partners in hardware and retail, and Jobs bet that they would not innovate rapidly or radically enough, since their profits relied on the preservation of an old regime. He also understood that in the fluid and rapidly evolving technology business—where new technologies are constantly disrupting the established winners—there was a chance to reshuffle the deck in his favor.

What Apple removed from technology products, Jobs liked to say, was just as important as what it added. He banished elements like separate numerical keypads, floppy disk drives, and computer mice with two buttons. With the help of Apple’s chief designer, a Brit named Jonathan Ive [footnote 2], he ushered in candy colors, gleaming metals with rounded edges, and cone-shaped Wi-Fi base stations. Apple’s commitment to industrial design was infectious. “His legacy of making design a strategic tool cannot be underestimated,” says Robert Brunner, a former Apple designer and now the CEO of the firm Ammunition Group. “Company after company comes in the door here, and in every conversation Apple is discussed. They want to do it like Apple. Steve raised the bar not just for the industry but for the world.”

Cool products demanded cool pitches. When Jobs rejoined Apple, it had more than a dozen ad agencies. He fired them all except Chiat/Day, which had created Apple’s famous “Big Brother” commercial for the 1984 Super Bowl. The 1997 “Think Different” campaign riffed with grammatical apathy off an old IBM slogan, “Think.” Jobs himself selected the famous figures who appeared in the ads, including Albert Einstein, Martin Luther King Jr., Frank Lloyd Wright, John Lennon, and his personal hero, Bob Dylan. He also briefly considered recording the voice-over himself (“Here’s to the crazy ones. The misfits. The rebels…”) before yielding to actor Richard Dreyfuss. For Jobs it was a deeply personal effort and a way to remind Apple’s employees, its customers, and perhaps himself what the company stood for. “You can’t talk about profit, you have to talk about emotional experiences,” he explained.

Jobs said this at a time when other PC firms believed computer buyers wanted boxy beige towers that sat under desks and connected to separate displays on top. Acting on instinct, Jobs bet that the new, more mainstream wave of PC buyers could be attracted to something else. So along came the iMac [footnote 3], a heavy, bulbous, all-in-one computer whose translucent casing came in five flashy colors. Reporters and consumers loved the iMac [footnote 4], and by 2000 Apple’s finances had recovered. “We’re in such a unique position,” Jobs told BusinessWeek that year, extolling the benefits of controlling both the hardware and software elements of the personal computer. “If we do our jobs right, no one else should be able to do what we can do. We should be in an incredible place as this convergence of computing and communications explodes in the next few years. I think it’s ours to lose.”

Not every battle was won. The Power Mac G4 Cube—a minimalist, miniaturized computer, encased in plastic with no display, keyboard, or mouse—flopped. But the Cube showed how to join ever increasing processing power with an aesthetic of clean surfaces and ease of use, a marriage that turned out much happier for the iPod, the cigarette-pack-size digital music player made of white polycarbonate introduced in October 2001. There were other MP3 players on the market, most of them smaller and cheaper. Even at an original price of $399, the visual distinctiveness of the iPod and the way it worked seamlessly with its iTunes music service, made it not just a cool product but an object of desire.

The iPod helped to propagate and commercialize the revolution in digital media first fomented by Internet file-sharing services such as Napster. To Jobs, though, it was also something else: the answer to Apple’s existential crisis. In a world dominated by Microsoft, where did Apple fit? It turned out that a company’s design talents, software prowess, and ability to exploit cheap but high-quality manufacturing in Asia could produce gorgeous and accessible consumer electronics.

“If there was ever a product that catalyzed Apple’s reason for being, it’s this,” Jobs said in the book The Perfect Thing by Steven Levy. “Because it combines Apple’s incredible technology base with Apple’s legendary ease of use with Apple’s awesome design. Those things come together and it’s like, that’s what we do. So if anybody is ever wondering, why is Apple on the Earth, I would hold this up as a good example.”

He called what happened next the “iPod halo effect.” Millions of people bought iPods and entered the Apple tent for the first time. They became more willing to consider an iMac, or to walk into one of Apple’s proliferating stores—a go-it-alone retail strategy that Jobs unveiled in 2001 with the help of a former Target (TGT) executive named Ron Johnson. Most pundits (including some at BusinessWeek) thought the stores were foolhardy. The move alienated existing Mac dealers and seemed like a lavish waste of resources to showcase a limited product line. But it allowed the company to preside over its own sales pitch and establish customer service hubs (brilliantly called Genius Bars) at a time when all these new customers needed their hands held as they waded into the digital waters.

Apple would not have been so insanely successful if Jobs also did not have a thick streak of the enforcer in him. The music labels succumbed, offering their songs for 99¢ over iTunes and, it turns out, cannibalizing their sales of albums, the most profitable part of their business. Then Jobs hammered away at the television networks and movie studios, adding TV shows and then movies to iTunes in 2006. His sense of entitlement was tested when federal regulators looked into Apple’s questionable backdating of options to top executives, which had increased the value of stock grants. Jobs would rail privately to journalists that he had done nothing wrong. The Securities and Exchange Commission ultimately charged two former executives of the company, and Apple promptly settled. “Jobs was one of these CEOs who ran the company like he wanted to. He believed he knew more about it than anyone else, and he probably did,” said Arthur Levitt, a former chairman of the SEC. “He’s among the best CEOs I’ve ever known, in spite of his irreverence, irascibility, and ego [footnote 5].”

There appeared a cloud in all this blue sky that would grow and darken. In a regularly scheduled Monday morning meeting in late 2003, Jobs gathered his management team into the fourth-floor boardroom in Building One of Apple’s headquarters in Cupertino and closed the door. Other executives also attended these meetings, but on this day, Jobs asked them not to come. He then invited everyone to move in closer, according to one participant, and told them that he had a rare but operable form of pancreatic cancer. “I’m going to need to lean on you guys for help,” he said. Some executives cried. The following year, after he had tried out a special diet to beat the cancer, Jobs had surgery, and his illness was publicly announced.

So began Jobs’s eight-year struggle, one that pitted a man’s desire to keep details of his illness private against a company’s duty to keep shareholders informed. Almost to the end, the man won out, with the company telling the public of developments long after they happened. It would be easy to explain this behavior as an arrogant desire to protect the stock price or an obsession with personal privacy. Above all else, though, Jobs was disciplined about what he revealed to customers and competitors. He likely thought news of his health was drawing attention away from his own finely crafted narrative for Apple.

Colleagues say Jobs continued to work harder than ever, even after his illness worsened. In his commencement address to Stanford’s graduating class in 2005, he said the crisis had convinced him to place bolder bets. “Remembering that I’ll be dead soon is the most important tool I’ve ever encountered to help me make the big choices in life,” he said. “Because almost everything—all external expectations, all pride, all fear of embarrassment or failure—these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose.”

Improbably, his greatest triumphs were still ahead. After Apple had experimented for years with the idea of building its own cell phones and even operating its own wireless network, Jobs finally convinced AT&T (T) to subordinate its brand to Apple’s in exchange for exclusive rights to sell an Apple phone to U.S. buyers. “This is a day I’ve been looking forward to for two and a half years,” Jobs said, introducing the iPhone in San Francisco in January 2007. “Every once in a while a revolutionary product comes along that changes everything.”

How boastful, how self-serving—and how right on the money. Apple exec Bud Tribble memorably dubbed Jobs’s charismatic ability to convince himself and others of almost anything “the reality distortion field.” With the iPhone and so much else, the field won. The device’s large display and touchscreen, and its seamless connection to the App Store, which became home to thousands of innovative programs for mobile phones, would alter the topography of the industry and propel Apple into its golden age. By the end of 2010, Apple had sold 129 million iPhones, which accounted for about 40 percent of its revenue.

And yet there was that cloud. After Bloomberg mistakenly released an unfinished draft of a Jobs obit in August 2008, Jobs joked publicly about his health, riffing off Mark Twain’s line that rumors of his death were greatly exaggerated. In January 2009, Jobs announced that a hormone imbalance was responsible for the noticeable drop in his weight and began a five-month medical leave, handing control of the company to Tim Cook, the chief operating officer. He told only a few colleagues and board members about the gravity of his condition. In March he underwent a liver transplant operation at Methodist University Hospital in Memphis, a fact not reported by the Wall Street Journal until two months later, after the markets had closed for the week. That spring, Apple board member Jerry York told the Journal that Jobs’s secrecy over the issue “disgusted him,” and he believed that Apple should have been more open with shareholders about his condition.

Jobs obviously disagreed. The man who wanted to control every element of Apple’s performance also wanted to control every detail about how his own situation was portrayed. At an event in San Francisco, he made an offhand quip to a CNBC reporter that Apple investors would like to see him gain weight. CNBC reported the remark on-air and on its website, which Jobs learned about just as another journalist entered a private room to interview him. “Fix it,” he screamed to his public-relations chief, who scurried outside to demand that CNBC remove the report from the Web. (It did.)

Despite his reputation for secrecy, Jobs had personal relationships with many members of the press and tried to dictate perceptions of the company. Apple, he liked to joke, was a “ship that leaked from the top,” and calls to reporters to manipulate a story often seemed part of his nightly routine. “Hi, this is Steve Jobs,” you could expect to hear when you picked up the phone. In one instance, Jobs called the editor of a news magazine to complain about a story that had been posted on its website, claiming the lead was inaccurate and off-the-record comments about a rival company had been included. Down came the story, and hours later back up went the fixed version.

In early 2010 [footnote 6] a new rival was obsessing Jobs: Google (GOOG). Its CEO at the time, Eric Schmidt, had sat on Apple’s board for two years, and Jobs felt he had forged personal friendships with founders Larry Page and Sergey Brin, with whom he often took long walks. Now the search giant was challenging Apple in the mobile phone business with its Android operating system, which was powering a new wave of touchscreen handsets that mimicked the iPhone. Jobs did not see this as a case of two companies competing. He considered it a personal betrayal.

Of course Jobs, like most artists, also borrowed liberally from the work of others. People credit him as an inventor akin to Edison, but his real genius was seizing upon existing concepts, simplifying and perfecting them, and then putting them forward at exactly the right moment. The iPad was perhaps the best example. Tablets running Microsoft software debuted in 2000 and went nowhere; they were really stripped-down PCs, complex and difficult to use. For years Apple’s marketing chief, Phil Schiller, and John Couch, its vice-president of education, wanted Apple to enter the tablet market, too, but Jobs never saw an approach he liked.

The iPhone changed his mind. Its simplified operating system and multitouch technology, derived from a company called FingerWorks that Apple acquired in 2005, would be perfect for a tablet. The iPad was ready by late 2009. Apple gave a few key developers early access, but in typical fashion swore them to secrecy and chained the devices to desks in windowless rooms. They were really nothing like the old Microsoft tablets. “The real insight was not shrinking the Mac, but growing the iPhone,” said Bob Borchers, a former senior director of marketing at Apple. The company introduced the device in January 2010 and sold more than 29 million tablets in the next year and a half.

Apple’s new surge seemed to embolden him. He doubled down both on his go-it-alone vision and his efforts to control the Apple narrative in the press. The iPhone and iPad did not run websites that used Adobe’s flash video format because Jobs thought it performed poorly on mobile phones and drained the battery. Users were directed to use Apple-sold apps instead. When the iPhone 4 was released that summer and many users complained of losing their signal when they gripped its base, Jobs replied to one customer by e-mail and told him to “just avoid holding it that way.” Apple later addressed the problem more sensitively by offering a software fix and by giving users a free case.

Jobs could control everything but his health, and by the summer of 2011, his condition left him no choice but to step down. “I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple’s CEO, I would be the first to let you know. Unfortunately, that day has come,” he said in a resignation letter on Aug. 24, handing over control of Apple to Tim Cook but retaining the title of executive chairman. “I look forward to watching and contributing to its success in a new role.”

In 15 years, Jobs had taken a floundering company that once seemed unlikely to grow past its painful adolescence and turned it into one of the most influential and valuable corporations in the world. He had changed culture, commerce, and the very relationship that people have with technology. The moving tributes that flowed in after his death—on Twitter and Facebook, at Apple Stores [footnote 7], and in statements from public leaders—spoke to his outsized impact.

Rumors about Jobs’s health had been buzzing around Silicon Valley all year, but anyone who knew him and read that resignation letter understood the end was near. He had been so good at distorting reality, so good at bending everyone—competitors, consumers, the press, and especially himself—to see the world his way. By relinquishing control, Jobs acknowledged that he had finally met the one force he could not charm or bully or out-think: his own mortality.
 
Footnotes:
1. Apple’s revenue in 1997: $7.1 billion
2. Jony Ive, hired by Apple in 1992, holds more than 300 patents.
3. The iMac was the first Apple product to use the “i” prefix.
4. The early iMac color spectrum included lime, strawberry, blueberry, grape, and tangerine.
5. Steve Jobs’s annual salary since rejoining Apple in 1997: $1
6. Apple’s revenue in 2010: $65.2 billion
7. At the end of Q2, Apple had 327 stores worldwide. The company plans to open 40 more in fiscal 2011.

Stone_190
Stone is a senior writer for Bloomberg Businessweek in San Francisco. He is the author of The Everything Store: Jeff Bezos and the Age of Amazon (Little, Brown; October 2013). Follow him on Twitter @BradStone.

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