Before his death on Oct. 5, 2011, Steve Jobs made sure that the elevation of Tim Cook, his longtime head of operations and trusted deputy, to chief executive officer of Apple Inc. (AAPL:US) would be drama-free.
“He goes, ‘I never want you to ask what I would have done,”’ Cook recalls in the Dec. 10 issue of Bloomberg Businessweek. “‘Just do what’s right.’ He was very clear.”
In Cook’s first 16 months on the job, Apple has released next-generation iPhones and iPads and seen its stock price (AAPL:US) rise 43 percent. Though it hasn’t yet expanded into new product categories (AAPL:US) (still no Apple TV set), the company has changed in significant ways, largely because of Cook’s calm and steady influence. In his most wide-ranging interview as CEO, Cook explains how Apple works now, talks about the perception that he’s “robotic,” and announces the return of Apple manufacturing to the U.S.
Question: How has Apple changed since Oct. 5, 2011?
Cook: The first thing to realize is that all the things that have made Apple so special are the same as they have always been. That doesn’t mean that Apple is the same. Apple has changed every day since I have been here. But the DNA of the company, the thing that makes our heart beat, is a maniacal focus on making the best products (AAPL:US) in the world. Not good products, or a lot of products, but the absolute best products in the world.
Slideshow: Tim Cook at Apple
In creating these great products we focus on enriching people’s lives -- a higher cause for the product. These are the macro things that drive the company. They haven’t changed. They’re not changing. I will not witness or permit those changes because that’s what makes the company so special.
There are lots of little things that change, and there will be lots of little things that change over the next year and the years thereafter. We decided being more transparent about some things is great -- not that we were not transparent at all before, but we’ve stepped it up in places where we think we can make a bigger difference, where we want people to copy us. So there are things that are different, but the most important thing by far is, the fiber of the place is the same.
Question: The decisions that you’re alluding to -- more transparency into the supply chain (AAPL:US), doing corporate matches for employees’ charitable donations -- were those things that you’d thought, “You know, I want to bring that to the culture. I can’t wait to introduce them.” How did those inflection points come up?
Cook: My own personal philosophy on giving is best stated in a (John F.) Kennedy quote, “To whom much is given, much is expected.” I have always believed this. Always. I think that Apple and Apple’s employees have done enormous good and can do even more. One of the things that we have done is match our employees’ charitable contributions, where they select who they want to give to. So it’s not some corporate committee deciding, but it’s our 80,000 employees (AAPL:US) deciding what they want to do, and then we match it.
You know, it’s clearly something I wanted to do, yes. But others wanted to do it, too. Our transparency in supplier responsibility is an example of recognizing that the more transparent we are, the bigger difference we would make. We want to be as innovative with supply responsibility (AAPL:US) as we are with our products. That’s a high bar. The more transparent we are, the more it’s in the public space. The more it’s in the public space, the more other companies will decide to do something similar. And the more everybody does it, the better everything gets. It’s a recognition that we need to be super-secretive in one part about our products and our road maps. But there are other areas where we will be completely transparent so we can make the biggest difference. That’s kind of the way we look at it.
Question: You were CEO on an interim basis twice before. How is the experience of being permanent CEO different from those two stints?
Cook: There were actually three times. There was Steve’s first surgery back in ’04. Then a medical leave for half a year and then ’11. Not that there wasn’t public focus on those, but that public focus tended to be quick, and then it sort of flipped back to Steve. This has been different. This, you know. (Pause.) This has been different. So I have had to adjust to that. I’m a private person, so that’s been a bit of a surprise for me, not something I would have predicted. Maybe I should have.
Question: Rex Tillerson is the CEO of Exxon (XOM:US), which is at any given moment the second-most valuable company in the world. I’m guessing 10 percent of our readers know who he is. I’m guessing less than 1 percent could spot him on sight. By virtue of Steve Jobs and his legacy and by virtue of Apple living in everyone’s pocket, you’re famous. I mean, really, globally famous.
Cook: I don’t feel famous. You know, I lead a simple life. My life is incredibly simple. But what’s changed is that, yeah, people recognize me. They may think, “I have seen him before. You know, the CEO of Apple” or whatever. And so it has been a bit of adjustment for me, because for years I had the privilege of being anonymous. There is a great privilege in that if you’re a private person. So it’s a bit different. I love Apple deeply, and I’m having the time of my life. Obviously, if I could rewind the clock, Steve would still be here. He was a dear friend -- much more than a boss. But I love being CEO of Apple (AAPL:US). I love it. It’s just something I have to, and continue to, adjust to. If you have some ideas there of how I can do it better, I would love to hear it. (Laughs.)
Question: Would you describe yourself as a shy person? If so, what would you tell a shy person about how to go about not just being a public face, but also being a source of inspiration for 80,000 employees?
Cook: Would I describe myself as being shy? (Pause.) No, I wouldn’t say I’m shy. I don’t think a shy person would stand on a stage and give a presentation or do communications meetings with numerous people and this sort of thing. But I’m not a person that puts value in being recognized. This doesn’t drive me. I am driven by great work and seeing people do incredible things and having a part in that. So it’s more of a feeling inside that drives me, not a public recognition that drives me. Maybe that makes me a bit different.
You mentioned the Exxon CEO. It’s interesting to me -- and I think this is a privilege for Apple -- just like we’re sitting down at this table today, I get e-mails all day long, hundreds, thousands per day from customers who are talking like you and I are talking, almost like I’ve gone over to their home and I am having dinner with them.
They care so deeply about Apple they want to suggest this or that or say, “Hey, I didn’t like this,” or, “I really love this,” or tell me that FaceTime has changed their lives.
I received an e-mail just today where a customer was able to talk to their mother who lives thousands of miles away and is suffering from cancer, and they couldn’t see her any other way.
But the point is they care so much they take the time to say something. It’s not a letter like you might think is written to a CEO. It’s not this formal kind of stuff. It’s like you and I are having a discussion, and we’ve known each other for 20 years, and I want to tell you what I really think. I love it. I don’t know if there’s another company on earth this happens with. It’s just not people from the U.S. These are people from all over the world. I look at it, and I go, “This is a privilege.”
Is there another company in the world where their customers care so much they do this? I don’t think there is. Other companies I’ve worked at, you might get a letter every six months, and it was, you know, “I want my money back,” or something sort of terse. There was no emotion in it. So I think this is really something incredible.
It’s one of the things that I knew about Apple even back 15 years ago when I was in the interview process with Steve. Apple was this company going through all of these hard times. Customers got angry with Apple and would yell and scream -- but they would keep buying. If they got mad at Compaq they would just buy from Dell. There was no emotion there. It was a transaction.
With Apple, my first day at work I crossed a picket line to get in the building! There was a picket line of customers who were protesting, because Steve had decided to kill the Newton device. And it was because they cared so deeply about it. And I thought, “This is amazing.” I still remember it like it was yesterday. I was walking to the lift that day and thinking, “Oh my God, my life is different.” It was so great. It was so great.
You know, I have been involved in hundreds of new product announcements, hundreds of product withdrawals. At one of the companies I worked at, not to mention any names, we’d put (new products) in the lobby. We’d get on the employee intercom system and say, “Come look at them,” and nobody came. They didn’t even care.
So I think you’re right. I don’t know the gentleman from Exxon. But I think the likelihood that’s going on there is zero. I’ve talked to many other CEOs who look at me like I have three heads when I talk about getting hundreds or thousands of customer e-mails in a day. It’s a privilege. It’s like you’re sitting at the kitchen table. You’re a part of the family. And we have to continue to honor that.
Question: You seem to be an enormously responsible person. Is that accurate?
Cook: I love the company. A significant part of my life is Apple. Maybe some people would say it’s all of my life. I would say it’s a significant part. And you know, I feel both a love for it (and) I feel a responsibility. I think this company is a jewel.
I think it’s the most incredible company in the world, and so I want to throw all of myself into doing everything I can do to make sure that it achieves its highest, highest potential.
Question: Nothing hardens faster than the details of a CEO’s bio. Every story about you mentions the following: You’re a Southern gentleman. An Auburn football fan. Always early to work, always the last one to leave. None of it is negative, but do you recognize yourself in those descriptions or do you find yourself a little bit distorted? If so, would you like to correct a few things?
Cook: I think when you start reading about yourself, it’s almost -- it’s like a caricature. It begins to sound like someone else. That’s probably a better question to ask people that really know me versus me. I hate talking about me. You know, it’s not something I do well or do a lot. I generally avoid it.
But I would say that the person you read about is robotic. There are some good things about that, perhaps. (Laughs.) Discipline comes to mind. But it sounds like there is just no emotion. People that know me, I don’t think they would say that. I certainly am not a fist-pounder. That isn’t my style. But that and emotion are two different things. One is just a way of expressing it, basically. So, anyway.
Question: How many products does Apple have now?
Cook: Well, we have few. You could almost place every product that we (make) on this table. I mean, if you really look at it, we have four iPods. We have two main iPhones. We have two iPads, and we have a few Macs. That’s it. And we argue and debate like crazy about what we’re going to do, because we know that we can only do a few things great. That means not doing a bunch of things that would be really good and really fun.
That’s a part of our base principle, that we will only do a few things. And we’ll only do things where we can make a significant contribution. I don’t mean financially. I mean some significant contribution to the society at large.
You know, we want to really enrich people’s lives at the end of the day, not just make money. Making money might be a byproduct, but it’s not our North Star.
Question: How does that calculus work when you’re considering product refinements versus new product lines?
Cook: The way we look at things is we will argue and debate about what to do with both existing products and new product lines. And when we get an idea that’s great enough, we put all of our energy into executing that. We’re fortunate. We find ourselves in two markets right now that are extremely fast- growing and extremely large -- that’s the phone space (AAPL:US) and the tablet space. The PC space is also large, but the market itself isn’t growing. However, our share of it is relatively low, so there’s a lot of headroom for us.
The MP3 market has shrunk. It’s shrinking because people are listening to music on their phones, but it’s still big. We sold 35 million iPods last year, and we love music. I still use a dedicated music player in the gym every day, and I think many people do. Clearly they do, with what we’re selling.
So each of those product lines has a great future by themselves, but obviously we also talk about what else we can do. We always have. And we’ll argue, debate and collaborate. And I mean argue and debate in the greatest sense of the words because they -- you know, I never wanted to remove that. It’s a great culture. And it’s clear that we can do more. At the right time, we’ll keep disrupting and keep discovering new things that people didn’t know they wanted.
Question: I’m not going to ask you about an Apple TV, because I know you’re not going to say if it exists or when it’s coming. But what I do want to know is -- there must be enormous pressure, both on you and on your teams, to continue to create breakthroughs. How does that affect you?
Cook: There’s more pressure that comes from within than from the outside. Our customers have an incredibly high bar for us. We have an even higher bar for ourselves.
So we want to do great work -- and yeah, people are always talking about what we may do next and when it might happen -- but honestly we’re driven much more internally by great people who want to do great work.
As I look around the table at the executive team (AAPL:US), arguably, at least in my opinion, we have the best designer in the world, the top silicon expert in the world, the best operational executive in the world, and the best leaders in marketing, software, hardware and services. These are people that have very high standards that are driven to do things beyond what other people have thought. And I think it’s that ambition and that desire and that thrust for excellence that make creating new things even more likely.
Question: Let me drill down on this one more time.
Cook: Please. Go ahead.
Question: Even superheroes brood, right? Even people with superpowers who are used to doing miraculous stuff -- I’m putting myself in their shoes and imagining that the masses are out there giving Apple love because you’ve created behavior- altering technology. I would imagine that would get to people at Apple once in a while, and that it’s partly your job to figure out a way to say to them, “Trust the process. Trust us.”
Cook: Two things. One, I wouldn’t call it a process. Creativity is not a process, right? It’s people who care enough to keep thinking about something until they find the simplest way to do it. They keep thinking about something until they find the best way to do it. It’s caring enough to call the person who works over in this other area, because you think the two of you can do something fantastic that hasn’t been thought of before. It’s providing an environment where that feeds off each other and grows.
So just to be clear, I wouldn’t call that a process. Creativity and innovation are something you can’t flowchart out. Some things you can, and we do, and we’re very disciplined in those areas. But creativity isn’t one of those. A lot of companies have innovation departments, and this is always a sign that something is wrong when you have a VP of innovation or something. You know, put a for-sale sign on the door. (Laughs.)
Everybody in our company is responsible to be innovative, whether they’re doing operational work or product work or customer service work. So in terms of the pressure, all of us put a great deal of pressure on ourselves.
And yes, part of my job is to be a cheerleader, and getting people to stop for a moment and think about everything that’s been done. I mean, just take this year. You know, take the last 60 days: iPhone 5, whole new iPods, including a new iPod touch and iPod nano, a fourth-generation iPad, the new iPad mini, a to-die-for MacBook Pro that’s the best Mac we’ve ever done. And so you look at all this, and you go, “Oh my God. How could one company do all of this?” And it’s not like we have that many people. As a matter of fact, that’s a secret. You know, small teams do amazing things together.
All of the people around the table have been there for a while, and they’ve lived through different cycles. So they have a maturity, but they still have their boldness. They’re still ready to burn the bridge. And this is great. Because there is no other company like that anymore.
I mean, no company would have done what we did this year. Think about it. We changed the vast majority of our iPhone in a day. We didn’t kind of -- you know, change a little bit here or there. IPad, we changed the entire lineup in a day. The most successful product in consumer electronics history, and we change it all in a day and go with an iPad mini and a fourth- generation iPad. Who else is doing this? Eighty percent of our revenues are from products that didn’t exist 60 days ago. Is there any other company that would do that?
Question: But as a technology consumer and user, and a heavy one, I’m always interested in the new. So unlike, say, (Procter & Gamble Co.), where there’s a dependability factor, a lot of your brand is “Here comes something new. We’re going to change your behavior again.”
Cook: This is the reason we exist. This is the reason we keep working, and it’s the reason people want to work at Apple.
Question: In the past few weeks you replaced two members of your senior executive team, mobile software head Scott Forstall and retail chief John Browett. How did those moves make Apple better, which is a polite way of saying, what was wrong?
Cook: The key in the change (AAPL:US) that you’re referencing is my deep belief that collaboration is essential for innovation --and I didn’t just start believing that. I’ve always believed that. It’s always been a core belief at Apple. Steve very deeply believed this.
So the changes -- it’s not a matter of going from no collaboration to collaboration. We have an enormous level of collaboration in Apple, but it’s a matter of taking it to another level. You look at what we are great at. There are many things. But the one thing we do, which I think no one else does, is integrate hardware, software and services in such a way that most consumers begin to not differentiate anymore. They just care that the experience is fantastic.
So how do we keep doing that and keep taking it to an even higher level? You have to be an A-plus at collaboration. And so the changes that we made get us to a whole new level of collaboration. We’ve got services all in one place, and the guy that’s running that has incredible skills in services, has an incredible track record, and I’m confident will do fantastic things.
Jony (Ive, senior vice president of industrial design), who I think has the best taste of anyone in the world and the best design skills, now has responsibility for the human interface. I mean, look at our products. (Cook reaches for his iPhone.) The face of this is the software, right? And the face of this iPad is the software. So it’s saying, Jony has done a remarkable job leading our hardware design, so let’s also have Jony responsible for the software and the look and feel of the software, not the underlying architecture and so forth, but the look and feel.
I don’t think there’s anybody in the world that has a better taste than he does. So I think he’s very special. He’s an original. We also placed Bob (Mansfield, senior vice president of technologies) in a position where he leads all of silicon and takes over all of the wireless stuff in the company. We had grown fairly quickly, and we had different wireless groups.
We’ve got some really cool ideas, some very ambitious plans in this area. And so it places him leading all of that. Arguably there’s no finer engineering manager in the world. He is in a class by himself.
And Craig (Federighi, Apple’s senior vice president of software engineering) is unbelievable. We don’t subscribe to the vision that the OS for iPhones and iPads should be the same as Mac. As you know, iOS and Mac OS are built on the same base. And Craig has always managed the common elements. And so this is a logical extension. Customers want iOS and Mac OS X to work together seamlessly, not to be the same, but to work together seamlessly.
These moves take collaboration to a whole different level. We already were, to use an industry phrase that I don’t like, best of breed. But it takes us to a whole new level. So that’s what it’s all about. I know there has been a lot written on that, but that’s really what’s behind it.
Question: What’s your relationship like with Jony Ive? What bonds you to him?
Cook: I love Jony. He’s an incredible guy, and I have a massive amount of respect for him. What bonds us? We both love Apple. We both want Apple to do great things. We both subscribe to the same principles. We believe in the simple, not the complex. We believe in collaboration. We both view Apple as here to make the best products in the world. So our values are the same.
And whether you ask me about “Tim and Jony” or “Jony and Bob” or whatever, my answer would be the same. If you look at the top 100 people at Apple, you’re going to find very different people, very different personalities, very different styles. We’re not a Chiclet company. We don’t put people through a machine where they come out and talk the same, look the same, think the same. We really value diversity with a capital D.
We want diversity of thought. We want diversity of style. We want people to be themselves. It’s this great thing about Apple. You don’t have to be somebody else. You don’t have to put on a face when you go to work and be something different.
But the thing that ties us all is we’re brought together by values. We want to do the right thing. We want to be honest and straightforward. We admit when we’re wrong and have the courage to change.
And there can’t be politics. I despise politics. There is no room for it in a company. My life is going to be way too short to deal with that. No bureaucracy. We want this fast- moving, agile company where there are no politics, no agendas.
When you do that, things become pretty simple. You don’t have all of these distractions. You don’t have all of these things that companies generally worry about.
You don’t have silos built up where everybody is trying to optimize their silo and figuring out how to grab turf and all of these things. It makes all of our jobs easier so we’re freed up to focus on the things that truly matter.
You know, I’ve got experience with other companies. Apple’s a jewel. It’s a privilege to be in an environment like that. I have seen the results of things not being like that. It’s no fun. It sucks the life out of you, and so I guard that. There is nothing I won’t do to guard that. Let me just put it like that.
Question: How do you interact with design? You don’t have meetings. You don’t have a formal process. Do you just wander down, and you and Jony look at stuff?
Cook: I wouldn’t say we don’t have meetings. I wouldn’t go that far. I’m talking about how the kernels of ideas are born. We want ideas coming from all of our 80,000 people, not five or three. A much smaller number of people have to decide and edit and move forward, but you want ideas coming from everywhere. You want people to explore. So that’s what I was talking about before.
We have an executive team meeting. It’s every Monday at 9 a.m. Religiously, all of us are in that meeting. We spend four hours together. We talk about everything in the company that’s important -- everything. We go through every product that’s shipping, how it’s doing. We go through every new product (AAPL:US) that’s on the road map -- what’s going on, how the teams are doing, and any key issues there are. We might argue and debate current issues. We might argue and debate future road maps.
We may get to a point where we say, “You know, this one we’ve got to go off site and really brainstorm about it in a bigger way.” By keeping that cadence and being religious about it -- people don’t travel during that time; everyone is there, and they’re not delegating -- it makes the company run a lot smoother. You don’t get out of sync because you’re constantly coming together.
Now that’s just one thing. Here’s another example. Every Wednesday we’re meeting with product divisions. So a subset of the (executive team) will meet with the Mac division and spend several hours going through Mac. The following Wednesday we’ll spend several hours going through iPhone, and then we’ll go tick-tock, tick-tock again. And so you have meetings like this not just for yourself, although it’s critical for yourself, but you do it because it helps the company run.
Question: Do you get walking-around time?
Cook: Yeah, and it’s critical. And it’s not just not walking around on campus. We have a lot of stores. So I’ll walk around our stores. You can learn a tremendous amount in a store. I get a lot of e-mails and so forth, but it’s a different dimension when you’re in a store and talking to customers face to face. You get the vibe of the place.
Not allowing yourself to become insular is very important -- maybe the most important thing, I think, as a CEO. Now fortunately, I think it would be really hard for a CEO of Apple to become insular, but maybe it could happen. I don’t know. But between customers and employees and the press, you get a lot of feedback. The bigger thing is processing and deciding what to put in the distraction category versus where the nuggets are.
Question: How is Apple’s tablet strategy different from Samsung (Electronics Co.)’s or Amazon’s or Microsoft’s?
Cook: Again, if you look at our North Star, we’re focused on making the best products, so ours is very product-centric. We care about every detail. We’re also marrying hardware, software, and services. If you think about Android, it’s more like the Windows PC model. The operating system comes from company A. Company B is doing some integration work, and maybe the services come from yet somewhere else. I think we know the kind of customer experience that produces.
In fact, there are all these tablets that have come out -- there were a lot of tablets that came out last year as well -- and the usage of them appears to be very low. Certainly the data that I’m seeing suggests -- and this is all third-party data -- that over 90 percent of the Web-browsing traffic from tablets are from iPad. You may have seen the data over the weekend from IBM that was Black Friday sales that showed the iPad was used in more e-commerce transactions than any other device. And that’s more than all Android devices combined, tablets and smartphones.
Since these statistics do not correlate with unit sales, it suggests to me that the iPad user experience is so far above the competition. The iPad has become a part of their lives, instead of a product that they buy and place in a drawer.
And so the advantage for us in having some competition is the more products that are out there, the more attention a category gets. The more attention the category gets, the more people that are in the buying and consideration process. I think that’s actually good for us.
Question: Have you played with the Surface or Galaxy?
Cook: I have, yes. Both of those -- and some others. What I see, for me, is that some of these are confusing, multiple OSs with multiple UIs (user interfaces). They steer away from simplicity. We think the customer wants all the clutter removed. We want the customer to be at the center of everything. I think when you start toggling back and forth between OSs and UIs, etc., I don’t think that’s what customers are looking for.
I think that customers want tablet-optimized apps. You know, we have 275,000-plus apps that have been optimized for the tablet. If you just stretch out a smartphone app on a tablet, it’s an awful experience. It’s not what customers want. I think it’s another reason that usage is so low on these other tablets.
I don’t doubt that there will be units sold in other tablets. It’s happening today. It will happen in the future. But what I strongly believe is that many people that are doing so might feel good initially if they pay a low price, but will bring it home and start to use it, and they’re no longer satisfied. That good feeling is gone. And those people don’t repeat purchases.
Let me give you an example of this. I was thinking about this the other day. Look at netbooks. Many people thought netbooks were the coolest thing ever. Many companies hyped them. In fact, the sales boomed, and then what happened? They crashed, because they were awful! They were flimsy products with crappy, cramped keyboards. They were underpowered. They were just awful.
So we never went into that category. We never put any time into it. A great product doesn’t mean an expensive product. It means a fair price. The iPad mini is all the way down to $329. This isn’t an expensive product. So when we can do great products and achieve a great price, we feel great. But what we wouldn’t do is say, “We’ve got to have something for this price, and then let’s see what we can do for it.”
That’s not how we think. We think about the product and making a great product that we want to use. When we can do that and achieve another price point, that’s great. But our customers have a high expectation, and we’re not going to try to pass off something -- we would never do that. That’s not how we think.
Question: It strikes me that Apple Maps was a very rare instance of Apple thinking about corporate strategy before thinking about the customer experience. Is that fair?
Cook: No. No, it’s not how I would characterize it. I would characterize -- well, let me back up for a minute. The reason we did Maps is we looked at this, and we said, “What does the customer want? What would be great for the customer?” We wanted to provide the customer turn-by-turn directions. We wanted to provide the customer voice integration. We wanted to provide the customer flyover. And so we had a list of things that we thought would be a great customer experience, and we couldn’t do it any other way than to do it ourselves.
We set on a course some years ago and began to do that. So it wasn’t a matter of saying, “Strategically it’s important that we not work with company X.” We set out to give the customer something to provide a better experience. And the truth is it didn’t live up to our expectations. We screwed up.
So what are we doing? We’re putting all of our energy into making it right. And we have already had several software updates. We’ve got a huge plan to make it even better. It will get better and better over time. But it wasn’t a matter that we ... decided strategy over customers. We screwed up. That’s the fact.
Question: Samsung is one of your biggest suppliers. They’re also one of your biggest competitors and an opponent in litigation. Is that awkward?
Cook: Life is a complex thing sometimes, and yes, it’s awkward. It is awkward. I hate litigation. I absolutely hate it. For us, this is about values. What we would like, in a perfect world, is for everyone to invent their own stuff. We love competition.
But we want people to have their own ideas and invent their own stuff. So after lots of trying, we felt we had no other choice. We tried every other avenue, and so we’ll see what happens in the future.
Question: You know the Lee family at Samsung. Does it affect how you interact with them? How do you defuse that when you have to talk as partners?
Cook: We can separate in our minds the different portions of their company. They’re a big company and have different divisions and so forth. So that’s kind of how I try to think about it.
I’m not saying this is the same, but for years we have worked with people who we also compete with. I mean, Microsoft is an example. They provide Office, and so they’re a developer- partner, but they’re also a competitor. Intel is a partner on the Mac, but they are obviously trying to get into the mobile business.
So it’s not different for us. It’s not unique. It’s not the first time where we have competed and cooperated. This is something that we get up every day doing. The thing that is different is the added litigation burden. I hope this works out over time.
Question: You’ve done a lot of work to add transparency to the manufacturing process, in particular to the conditions of people who are working on Apple products. You’ve known Terry Gou at Foxconn (Technology Group) for 20 years.
Cook: A long time.
Question: When you asked him to change some things, what specifically did you ask him to change and how receptive was he?
Cook: I found him to be very receptive. We had been in the auditing mode for some time and publishing annual reports and working very hard to correct things that we found, and so forth. We’re still doing tremendous auditing, but in addition to that we’ve enlisted the Fair Labor Association to provide additional audits. They bring expertise of looking at different industries.
It’s total transparency. They publish their own results and so forth. We’re the only technology company that’s doing that.
Terry agreed to open his facilities to our auditors and the FLA auditors. It was a requirement from us, but he agreed.
If you look at our website, we’re publishing working hours for almost a million people across our supply chain. Nobody else is doing this. We are very much managing this at a micro level. And you know, maybe as important as that, we are training workers on their rights. We have trained 2 million people, and we’ve brought college courses to the factories where people can begin to earn their degrees.
So we’re doing a number of things that I think are really great, really different and industry-leading. I think no one is looking at this as deeply as we are or going as deep in the supply chain. We’re back to the mines. We’re going all the way, not just at the first layer. And in addition to that, we’ve chosen to be incredibly transparent with it. I invite everyone to copy us.
Question: I understand there are Apple employees staying in the dorms at these factories.
Cook: We have executives that have stayed in dorms. It’s not unusual. Honestly, this wasn’t to see what life was like in a dorm. It was that we worked so closely with these manufacturing partners and in the manufacturing plants (that) it’s convenient to do. And actually several of our people wind up doing that.
In addition, we have hundreds of people that reside in China in the plants on a full-time basis that are helping with manufacturing and working on manufacturing process and so forth. The truth is we couldn’t innovate at the speed we do if we viewed manufacturing as this disconnected thing. It’s integrated. So it’s a part of our process.
Question: You said you now track down to the mines. What’s left in the supply chain that’s unknowable?
Cook: There are always things that are unknowable. I think that anyone that thinks they have it all down is not looking hard enough, not looking deep enough, or not raising the bar. From our point of view, we don’t want to find zero issues. If we’re finding zero issues, our bar is in the wrong place. So we begin to raise the bar to find issues, and we keep doing this. If you’re doing that, you’re always finding something. That’s the way we look at it.
It sort of goes back to that Kennedy point I made with regard to our matching contributions. We have been given a lot. We earned it, but we have a responsibility to leave the world a better place.
Question: You were instrumental in getting Apple out of the manufacturing business. What would it take to get Apple back to building things and, specifically, back to building things in the U.S.?
Cook: It’s not known well that the engine for the iPhone and iPad is made in the U.S., and many of these are also exported -- the engine, the processor. The glass is made in Kentucky.
And next year we are going to bring some production to the U.S. on the Mac. We’ve been working on this for a long time, and we were getting closer to it.
It will happen in 2013. We’re really proud of it. We could have quickly maybe done just assembly, but it’s broader because we wanted to do something more substantial. So we’ll literally invest over $100 million. This doesn’t mean that Apple will do it ourselves, but we’ll be working with people, and we’ll be investing our money.
Question: On that subject, it’s 2012. You’re a multinational. (AAPL:US) What are the obligations of an American company to be patriotic, and what do you think that means in a globalized era?
Cook: (Pause.) That’s a really good question. I do feel we have a responsibility to create jobs. I don’t think we have a responsibility to create a certain kind of job, but I think we do have a responsibility to create jobs.
I think we have a responsibility to give back to the communities, to pick ways that we can do that ... and not just in the U.S., but abroad as well.
I think we have the responsibility to make great products that we can recycle and that are environmentally friendly. I think we have a responsibility to make products that have a greater good in them.
That’s the one that is most important of all, because a cigarette company could give back things and environmentally dispose of their product or something like that. But we want to provide a product that changes people’s lives in some way. We spend a lot of energy focusing on education. We created iBooks Author and gave it away for free. We wanted to reinvent the textbook and reinvent the classroom and try to really go a long way to solving the student engagement problem. It doesn’t solve every problem in education, but it solves a very important one, right?
And so I think we do have a responsibility for all these things. I’ve never thought a company’s measurement of job creation should be limited to the number of employees working directly for them. That’s a very old-time way of measuring. Our iOS platform allows developers to work as entrepreneurs and sell their applications to a worldwide market that didn’t exist previously. The mobile software industry was nascent before the iPhone. Now you’ve got hundreds of thousands of developers out there.
Unlike other companies -- at least I know of no other large companies -- almost all of our R&D is sitting in California. It’s a part of our model. We do this because it’s important for people to run into each other and discuss ideas and collaborate. We’re building a multibillion-dollar headquarters to house them in what we think will be the center of creativity. We’re building a campus in Austin for people in Texas. We’re building three data centers -- adding to the one we have in Maiden (North Carolina) and establishing new sites in Oregon and in Nevada.
So jobs can come in many different ways. I think if you fairly look at it -- we’ve had this estimated by other parties - - we’ve created about 600,000 jobs in the U.S. They all don’t work for Apple. We’re part of a global economy. Over 60 percent of our sales are outside the United States. So we have a responsibility to others as well. But this is our home market, and I take all of those very seriously -- jobs, education, giving back, the environment.
Question: Not many people know that Apple has a hedge fund, Braeburn Capital.
Cook: I wouldn’t call it a hedge fund.
Question: How would you describe it?
Cook: It’s an entity that manages Apple’s cash (AAPL:US). So I wouldn’t call it a hedge fund because -- at least the way I think of a hedge fund, it’s -- if you look at (Braeburn’s) investments you would find the most conservative investments known to man in there. (Laughs.)
Question: And from what I hear about the returns ...
Cook: That’s intentional. We don’t view ourselves as an investment bank or a mutual fund with an aggressive charter. The goal is capital preservation. I have to say, in the last several years that has not been an easy task. I think the guys have done a remarkable job in this.
Question: How often do you check in on it?
Cook: I don’t get into the decision to invest in this municipal or this corporate bond or this T-bill or anything like that. We have a treasury department and a chief financial officer that’s fantastic, and they do those things. I was obviously involved heavily in the decision to distribute some of the cash but not the investment in bonds and so forth.
Question: One of the few negative things said about you is that you’re not a product guy. You’re a logical guy. You’re a systems guy. You have an engineering background. Given that you’re a product company, does that cut you? Is that something you would refute?
Cook: I think people should decide how they want to describe me themselves. But I’ll tell you what I do. Whether there’s something that I think I know really well or I don’t know at all -- and there’s a huge range there -- I always enlist other people, because the people around the table are phenomenal people.
And I’ve always found even when I thought I knew the most that there was something more that could be added and make it even better.
I’ve never felt that I had to know it all, do it all, any of those things. I think you could have an S on your chest and a cape on your back and not be able to do all those things. I know of no one that can do all that. Maybe there are, but I’m not. So I rely on a lot of people for a lot of different things.
Question: What’s the role of intuition in your job?
Cook: It’s critical. It’s extremely critical. The most important things in life, whether they’re personal or professional, are decided on intuition. I think you can have a lot of information and data feeding that intuition. You can do a lot of analysis. You can do lots of things that are quantitative in nature. But at the end of it, the things that are most important are always gut calls. And I think that’s just not true for me, but for many, many people. I don’t think it’s unique.
Question: An anecdote that’s now part of your biography is that Steve Jobs told you, “Don’t think what I would do.” Is that true, and if so, can you tell the story?
Cook: Yeah, sure. One weekend he called me, and he said, “I’d like to talk to you.” This was in summer of ’11.
I said, “Fine. When?”
In typical Steve fashion he said, “Now.”
“Great. I’ll be right over.” (Laughs.)
So I go over to his house, and -- I still remember how he started this discussion. He said, “There has never been a professional transition at the CEO level in Apple.” He said, “Our company has done a lot of great things, but has never done this one.” The last guy is always fired, and then somebody new comes in.
And he goes, “I want there to be a professional CEO transition, and I have decided, and I am recommending to the board that you be the CEO, and I’m going to be the chairman.”
Of course, we had talked about me being a successor before, so it wasn’t the first time I had heard that, but the conversation occurred at a period of time when I felt Steve was getting better, and I think he felt this way as well. So from that point of view, I was a little surprised. I asked again, “Are you sure?” He said, “Yes.” I would go, “Are you sure,” and he said, “Yes. Don’t ask me anymore.”
So we started talking about what it meant. Again, this is when I am thinking, and I’m certain he’s thinking, that this is going to go on for a long, long period where he’s the chairman and I am CEO. So I’m trying to understand -- how does he see this working? He had obviously thought very deeply about it.
And as a part of this, I asked him about different scenarios to understand how he wanted to be involved as chairman. He said, “I want to make this clear. I saw what happened when Walt Disney passed away. People looked around, and they kept asking what Walt would have done.” He goes, “The business was paralyzed, and people just sat around in meetings and talked about what Walt would have done.”
He goes, “I never want you to ask what I would have done. Just do what’s right.” He was very clear.
He was making this point, and he says, “I hope you listen to my input if I want to input on something.” I said, “Of course.” (Laughs.) But he was so clear, and I have to tell you that it’s probably removed a tremendous burden from me that would have been there otherwise. And he repeated this much closer to his passing. I think in the second instance, I think he did that because he knew it would lift a burden. It was his way of making sure Apple would not be burdened by the past.
More so than any person I ever met in my life, he had the ability to change his mind, much more so than anyone I’ve ever met. He could be so sold on a certain direction and in a nanosecond (Cook snaps his fingers) have a completely different view. (Laughs.) I thought in the early days, “Wow, this is strange.”
Then I realized how much of a gift it was. So many people, particularly, I think, CEOs and top executives, they get so planted in their old ideas, and they refuse or don’t have the courage to admit that they’re now wrong. Maybe the most underappreciated thing about Steve was that he had the courage to change his mind. And you know -- it’s a talent. It’s a talent. So, anyway.
Question: Do you miss him?
Cook: I do, every day. He was a friend, and it’s -- I guess the external view of that is that he’s a boss, but when you work with someone for that long, for me anyway, the relationship is really important. You know? I don’t want to work with people I don’t like. Life is too short. So you do become friends. Life has too few friends.
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