How a Deal With the CIA Changed the Future for Steve Jobs and Apple

[MUSIC PLAYING] Welcome to Tech News Briefing. It's Friday, September 4. I'm Isabel Busscott, a reporter for the Wall Street Journal Leadership Institute. This week marks the beginning of a new era for Apple. CEO John Ternes officially took the reins from Tim Cook. He became executive chairman of Apple's Board of Directors after 15 years as chief executive. It was a period of transformative growth for the company, which went from a market capitalization of about $350 billion to more than $4.5 trillion. While it might be hard to imagine our lives without the tech giant, its success wasn't a guarantee. After being ousted from Apple in the 1980s, Steve Jobs' new company, Next, was struggling until it struck a key deal that gave it the funding it needed to stay afloat until Jobs ultimately returned to Apple to shape the foundational operating code of the iPhone. That deal was with the CIA. Over the years, leading edge Silicon Valley tech companies and the US government have had a complicated relationship. The standoff between the Pentagon and leading AI lab anthropic earlier this year is just the latest example. But the Gulf between the two isn't actually as wide as many people think. That's according to Sharon Weinberger, former national security editor for the Wall Street Journal, and the author of a new book, Valley of Death, How Big Tech Is Fueling the Future of War. Today, we're sitting down with Weinberger to talk about how much of a debt Apple actually owes the CIA and whether we have it to thank for the iPhone. Sharon, take us back to 1986. Where was Steve Jobs and what was he doing? So he had been essentially banished from Apple, kicked out after co-founding it, and had gone on to form a new company called Next. Hi, I'm Steve Jobs, and I make computers. As humans, we're all tool builders. We create tools that amplify inheritabilities that we have, tools like the bicycle, telescope, language, mathematics. But the neatest tool we've ever created is the computer. He could kind of pursue exactly what he wanted to do, which was this very beautiful, very high-end computer with amazing graphics and processing and innate networking capabilities. It was also super expensive and hard to sell. And that's where we were around 1986. And Next was approached by some agents from the CIA. What did they want? There was a senior CIA official by the name of Joe Ramello and a colleague of his Jeff Harris who went on to lead the nation's secret satellite agency, the National Reconnaissance Office. They were very interested in what was going on in the computing revolution. And they had followed Steve Jobs' career. I mean, he was still very famous at the time. What they were specifically interested in for the intelligence community is what could these computers with their capabilities offer for sharing satellite imagery and interpreting satellite imagery. And so they were sort of on a scouting trip. They were out in California because they were working with other companies out in the Bay Area. And they literally just dropped in at next headquarters. And they couldn't say what they were after. They just said they wanted to meet with Steve Jobs. Okay, and did they eventually meet with Steve Jobs? They did. They didn't give a lot of details. And Steve Jobs, at the time, did not have a security clearance and said to them, well, don't tell me anything I shouldn't know. I don't want to have to remember what I'm not supposed to remember. They just wanted a certain number of computers for the intelligence community. And they wanted to be able to make modifications to them. I mean, next was still relatively new in production capabilities, how many, how fast could they produce. And it was certainly very enticing for Steve Jobs because the company was having serious problems. His new computer, called Next, is a $6,500 workstation aimed at higher education, students, and teachers. And while it may be revolutionary, today's unveiling was 10% science, 90% hoopla. The computers, the cubes, as they were called, were just too expensive for most of their target customers. We know Steve Jobs is sort of this counter-culture figure, almost, he practiced Buddhism. What was it that actually made him say yes to this? I think it was financial necessity. I think we have this modern myth about Silicon Valley. There's elements of truth in it that's the bastion of counter-culture and anti-militarism. And there are so many people scratching their head about this renaissance of interest in Silicon Valley now getting involved in weapons manufacturing. And part of what I found so intriguing about this story is that idea of this massive gulf between the Pentagon and Silicon Valley has always been something of a partial myth. Silicon Valley was born on Pentagon funding. It eventually separated from it when it moved into personal computing and the computing revolution. But when it needed Pentagon dollars, when Steve Jobs is the best example of that, they were there to serve. So next and the CIA strike a deal. Tell us a little bit about the process of how these computers were then packaged and shipped. There were modifications that they wanted to the computer. They wanted a faster processing chip and some higher end graphics. And so, literally, the next computers would sort of roll off the assembly line out of the warehouse into these unmarked trucks where they were taken to other locations of CIA contractors who did the modifications off site. And then were shipped off and military transport airplanes to the destinations around the world and to DC. And when I interviewed former next employees about this, it was an open secret that there was classified work going on. A lot of senior people knew-- I mean, because how could you not know? There weren't many customers. And suddenly, there was this big federal contract. But they also knew not to ask too many questions. One former senior employee told me these people would show up. And they'd be like, I'm Jack. I'm Jill. I'm Sally. And they wouldn't have business cards. And they wouldn't give last names. And they would just say I'm from the government. So people knew that next had some sort of work in the secret world. But most people didn't know what it was, what it was doing, what it was for. And most importantly, what its contribution was. Did Steve Jobs even know what these computers were going to do? Not exactly. I mean, he certainly had a good idea. And one of the outgrowth of this contract was he was put in for what's known as a top secret SCI clearance, one of the sort of the highest forms of clearance. And he did end up lecturing at the CIA. He did end up going into classified facilities. I'm sure he had a pretty good idea of what they for. I mean, certainly knew at some point that the National Reconnaissance Office was the end customer. But what people told me is even the people working on it didn't truly understand what was going to be the impact. So tell us a little bit more about exactly how the computers were used. I understand it was something akin to the way we experience what the internet is today, which didn't exist back then. Yeah. So what people from the computing community remember next as was that it had sort of innate networking capabilities. And so it also made great early contributions to the World Wide Web. But on the military side as well, it basically gave the intelligence community a closed internet network. It had all these capabilities that computers had just never been used for before that sort of pre-saged what happened later with Apple. And then what we think of with modern computing and what we can do with it. It gave the intelligence community for the first time real networking capabilities. They could share imagery, taking us back to late '80s, early '90s. The idea that you could just ship a picture off to someone was fantastical. The idea that military commanders for the first time could see the satellite images themselves and make interpretations and think about it. That was really revolutionary. And I don't think all of that was really totally envisioned at the start of the contract. Which stories from tech history stick with you? If you're a listener on Spotify, leave us a comment with your thoughts. Coming up. We're diving into how that funding ultimately reshaped the future of next Apple and Steve Jobs himself. That's after the break. So after the collapse of the Soviet Union, the core raison d'être of spy agencies changed a little bit. And you wrote that Steve Jobs wasn't really destined to play a role in that area. What did he do after that? And what happened to next? Steve Jobs went back to Apple was able to take over the company again and really lead it. I think that Apple is back on track. And I hope that what we've shown you today shows you how we are going to springboard ahead into the future of Apple computer. And the operating system next step from next became the foundations for OS, for the operating system of pretty much all of the Apple products now. It's why, next while not quite in the popular lexicon, among people familiar with computer history, it has this sort of legendary status because it was so important for what Apple became. And here's the part that people I interviewed really tried to impress on me. And there may be some people out there who disagree. Because when I first heard about this story 10 years ago, what I thought was an urban legend, a former Pentagon official, and he sort of have joking, he's like, "Oh, the spy saved Apple, the spy saved Steve Jobs," but the people I interviewed actually made that argument to me quite persuasively, where next wasn't necessarily going to go bankrupt. It had financial backing from people like Ross Perot, but it was doing terribly. And the way it was explained to me was that the federal contract, the intelligence dollars, the CIA money, that went into next, it gave Steve Jobs breathing room to mature as an entrepreneur, prove he could do something, and used it as a springboard to go back to Apple. That rather than sort of this abject failure of a company, I mean, it was never a huge financial success, but it was able to do certain things and prove certain things that would not have been possible without that large CIA contract. So is it fair to say that Apple wouldn't really exist today in its current form without the CIA having provided that funding that kept next afloat? I'm not sure that I want to make that backward looking forward, looking prediction about the future, but I think we can safely say that it changed the trajectory of Steve Jobs and it changed the trajectory of Apple. But I think the most interesting post script on the history is, well, okay, why didn't Apple become this major military contractor? I mean, we see this now with Amazon, for instance, which has huge military and CIA contracts for cloud computing. But Steve Jobs, it wasn't that he was for against working for the government, but he didn't need it anymore. When he went back to Apple at about that time, the military market was collapsing as US defense spending plummeted with the end of the Cold War just as the consumer market for computing was exploding. So Steve Jobs didn't need the CIA anymore, he didn't need the military, he had this massive consumer market and wow, what a job he did with it. That was W.S.J. contributor and former national security editor Sharon Weinberger. And that's it for tech news briefing. If you're a listener on Spotify, be sure to leave us a comment. Today's show was produced by Julie Chang. I'm Isabel Busquette, a reporter for the Wall Street Journal Leadership Institute. We had additional support this week from Melanie Roy, Jessica Fenton and Michael Laval wrote our theme music. Our supervising producer is Katie Ferguson. Our development producer is Aisha Al-Muzlim. Chris Dinsley is the deputy editor of audio for the Wall Street Journal. And Lee Tommalad is our senior director of shows. We'll be back later this morning with TNB Talk Minute. Thanks for listening. [BLANK_AUDIO]