What 12 Years of Failure Taught Steve Jobs About Success

That is Steve Jobs at Rock Bottom, and that is a Steve Jobs that we've almost never seen before. And he was very close to being completely forgotten and written out of history. Everybody knows about Steve Jobs' legend, the myth, the man who shows us the future. But very few people see this period where he walks through the wilderness and fails over and over again. And I want to talk about that with you today. Looking forward to it, Shane. I think the right place to start is leading up to the original, I wouldn't say firing, but the original leaving from Apple and the coup attempt to a scully. And can you walk me through sort of what happened in the year two leading up to that that led to that? Steve Jobs was a brilliant young man. He was a visionary. He co-founded Apple with Steve Wozniak and his garage, and in 1984, he released the Macintosh computer. This was game-changing because you have to remember, in the 1980s, using a computer was really difficult. A lot of them were the size of a room, and the whole idea of a personal computer that sits on your desk was entirely new. Steve took the technology of the past and made it available to everybody. He called it the bicycle for the mind. The Macintosh, it was a cultural success. It was out there, people were talking about it. But the reality is that it was not a commercial success. It just wasn't selling. And so because sales were weak, Apple entered a crisis in 1985, a year after the Macintosh was released. And meanwhile, Steve had brought on John Scully, the CEO of Apple. He was going to provide adult supervision. And so he would be the guy who would turn Apple from a scrappy little startup into an actual corporation. But this did not go as planned for Steve. So because of all these failures with the Macintosh, the inventories were piling up. Apple was just not really doing that well anymore. That's piling up. They had to lay off workers for the first time in 1985. When all of this reached ahead, Steve just found himself being pushed out of the company. He was impossible to manage. He was extremely difficult. He was so convinced of his own brilliance, and he was brilliant. But so convinced of his brilliance that he would storm into meetings. He would yell at people. He would tell them you're not doing your job right. And they would say, Steve, you're not even my boss. One of the things that we often forget about Steve Jobs is that he was not the CEO of Apple. He ran the Macintosh division. So his job was simply to build the Macintosh. But he would go to every other office and say, hey, you guys are idiots. What are you doing? And they would say, Steve, we don't report to you. Apple got a lot of complaints. They went up to John Scully, the CEO. John was getting tired of him because he could not manage Steve. And so in the end, they made the decision that Steve has to do something else for a while. Steve actually tried to launch a coup d'etat against the CEO, John Scully. It was early 1985 and he said, here's what I'm going to do, it's a plot. I'm going to get a speaking gig in China. And then John Scully, once I tell him, he's going to want to join me too. So what happened? Steve invited him out and then Steve Bale said I have other plans. And then the plan was that Steve was going to walk into the boardroom when John Scully was gone and tell them that John had to be ousted. And he wanted the board to make him the CEO. So Steve Jobs tried to become the CEO of Apple, but he failed. He wasn't ready. He led Scully to believe that he was on the flight. Somebody told Scully that he wasn't going. And then he showed up at the meeting the next day and Scully was there. And that forced the decision. Yes, so Steve Jobs had arrived old named John Lewy Gasse. And Gasse was the head of Apple France, very successful in the company. And was sort of being groomed to be the next Steve Jobs. And so Steve decided to tell John Lewy Gasse about his plot. He met him in the parking lot. He said, here's what I'm going to do. I'm going to overthrow the CEO of Apple. And so John Lewy Gasse that night is at the CEO's house and pulls him aside and says, I got to tell you about what Steve Jobs is going to do to you. If you go to China, you might not have a job anymore. One of the battles going on at the time that my memory serves me correct is the open Macintosh computer or Mac, what was it called the Mac too? Yes, the Macintosh too. Yes, so the open one that was, now I can't create it where people could put their own components in, take it apart. That was keeping them afloat. And Steve's version of the computer, which was closed and sort of more controlled, which is a theme I think we're going to talk about a lot today, was the reason that Apple was facing financial struggles because it wasn't selling. Right. Steve, he did have a brilliant vision. He wanted a computer to be an end-to-end product. The same company he thought should control everything from the hardware to the components to the software, the mouse, the keyboard, everything, which is kind of like what the iPhone is today. The problem though is that in the 1980s, this was not a practical way of doing business. A lot of consumers were business consumers. They would have a nice big PC in their office and they could take out cards and take out slots. They could customize it however they needed. That's what the world wanted, but Steve failed to see that at the time. He thought that his vision was so smart that people would be down a door to buy his computers, even if they were closed. But he quickly realized that that's not what the world actually wanted. This will come back again in this story. So he gets ousted. He leaves Apple. He's still very well off. He's got over 100 million I think. And then what happens next? It's September 1985, so he has spent the summer in Europe. And so this is the summer where he's really getting a taste, his first taste of what it's like to be without Apple. And you have to remember, Steve's an intense guy. He was spending long nights, long days. His whole life was Apple. And people around him remarked that he didn't have any real friends. He probably had no identity either, right? Because all of his identity was tied to being the co-founder of Apple. Absolutely. His entire identity, his being was Apple. And so having that torn away from him, being pushed out and told you're not needed here anymore, what they did is they gave him a new made-up unit. And they said, you leave, so you're not going to work on the Macintosh anymore, which is your baby, that was his creation. And they say, you're going to get a lonely office across the street. He nicknamed it Siberia. And then everybody just ignored him. I mean, it was the fall of Steve Jobs that entire summer. And then finally, he said, I'm headed off to Europe. I can't take this anymore. And so he spent that whole summer, this winding summer of just exploration of, you know, looking at paintings and museums and going to coffee shops. This was a rare moment when he had to stop and he had to reflect and look inward and figure out what he was doing wrong. And so in the end, Steve decided that he could not stay at Apple. Okay, so what happens next? He comes back from Europe. He decides that he's going to leave Apple. And he wants to go into the next phase of his career. So he's 30 years old. And he says, I am going to make the most cutting-edge computer for the leading science laboratories. The university departments. I'm going to make the best computer that can be possibly available on the market. And it's going to be a computer that's going to allow students in dorm rooms to cure cancer. But there's a problem. To make that, he's going to have to poach five Apple employees. And these ones are especially talented. So he goes in, he tells John Scully the CEO, I'm taking these five with me. John Scully freaks out. So what Apple does next is one of the most dramatic things I've seen a company do to one of its co-founders, they decide to sue him. In an effort to prevent him from starting or to control what he does when he starts? It's both. They don't want him to start the new company. The way that Apple looked at Steve was a bit schizophrenic in a way. He was the spiritual heart of the company. And it wasn't many ways his company. But then the other worry, they accused him of stealing intellectual property. Of course. Steve was working on a new computer at Apple. It's called the 3M machine. And the 3M machine, it's this idea of a super computer essentially. So more powerful than a Macintosh. You know, more powerful than the typical PC of the day. But that would be the kind of computer that could be used for scientists and researchers and also intelligence agencies. And so Steve decides that this is the computer he's going to make at his new company, which he calls next computer. And so he takes these five co-founders with him. He starts next. And then he's spending money like crazy at this point. And I think there's a logo story. Tell me the logo story. Steve is such a perfectionist. He's a man of high taste. And especially from the fortune he had built at Apple, he had really gotten that champagne taste. And he only wanted the best. This is the opposite of the younger Steve, the guy in the garage with the holes in his jeans. And he hadn't showered for days. Yeah, who washes his feet in the toilet. That's that Steve, but this is Steve at 30 and now he's elevating his surroundings since he's no longer building a startup. That's not how he sees it. He wants to start at the top shelf. And so one of the first things that Steve does is he sets out to craft a logo. So he only wants the best logo from the best graphic designer in the country, a man named Paul Rand. And so Steve approaches Paul Rand and says, I want you to give me the best logo you can. And Paul Rand's response is, you'll pay me $100,000 for the logo. You'll only get one shot and you can't change your mind. That's that. Well, the use of the logo or not, and $100,000 at the time. I mean, it's a lot of money now, but at the time, it's like an insane amount of money. I mean, even today, that's an insane amount of money for a startup. And in 1985 and 86, the number is astronomical. And so people are looking at this and scratching their heads and saying, so what exactly is Steve Jobs doing? And this logo, it's a classic. People still study it, design school still study it. But at the time, people were wondering, well, what does this mean for the company expenses? And so as a result of spending $100,000 on a logo, company expenses suddenly become paid to $100,000. Like that's become the normal unit of spending at this little startup. And meanwhile, Steve has invested $7 million of his own money in next computer. So when every expenditure is $100,000 and you're only running on $7 million without a product, you're already in trouble. So Steve started off on the wrong foot. He did get a beautiful logo. But he was too far ahead of the market and what the market wanted from him. And he wanted the computer to be beautiful in and of itself. There's a whole story around the cube. The cube was a perfect object that Steve wanted to create. And so he wanted his computer to be literally a perfect cube, 90-degree angles. So it's a beautiful item. I mean, absolutely gorgeous. But manufacturing it is just a pain in the neck. It's almost impossible. And so they had to go to a specialist mold shop and they had to use a special system for lining it up. It was a $500,000 sanding line in 1986 that would sand every computer. Steve in deciding that he wanted to build a perfect cube for a computer. He's automatically added millions of dollars and expenses that are going to accrue over time just by choosing a perfect cube. So in the end, Steve had created this masterpiece of arts, this masterpiece of technology. But it was so impractical that I mean, the cost was just going to get out of control. It was so expensive. He priced himself out of the market. Right at the start. He priced himself out of the market because he predicted that everybody's going to want to buy this. They're going to see how smart Steve jobs is. And then Steve is going to be proven right in the end. He's going to get back at Apple and have an even cooler computer than Apple does. This reminds me of something John Machee told me when I was interviewing him, the founder of Whole Foods. And he said you have to meet the market where it is. Right. The market for a $10,000 computer in 1986. A perfect cube that looks gorgeous is extremely, extremely niche. And even today, no person in their right mind would actually buy this thing. And are people giving him feedback that like no, you shouldn't be doing this or this is too expensive or nobody will buy this or or is it sort of like the classic story of nobody wanted to give Steve bad news? This is one of the surprising things I found. I always assume that people were scared of Steve jobs and he would yell at them and curse and they would just go quiet and run away. That's something that we see in movies, but that's actually not how things played out in real life. Steve hired people because he wanted them to talk back. He wanted people with edge. He would go out there. He would pose these really hard interview questions. He would say, are you the best person in your field? And if you hesitated or said, I don't know, he would say, well, the interview is over. I only want to talk to the number one person. So go find them for me. And then we'll talk. You know, it just shows like that's what Steve wanted. He wanted people who would defend themselves, defend their ideas. They weren't afraid to stand up to him and say, hey, Steve, let's do it this way. One of the reasons Steve would be so difficult with people was because he was trying to get them to push back. He was saying, I have this force of personality and I want you to show me why your idea is not totally stupid, please. That was the idea. I love that. In terms of challenging people even if he believed them, he just wanted to see that they believed in their own ideas that they had bought things through. Right, right. You're going to stand up to yourself. Also, you're going to engage in intellectual combat. That's what he wanted. Not just combat with Steve, but intellectual combat with the whole team. They would all get together in a room with Steve. Steve liked to hold these retreats. They would go stay at a nice hotel and gather in the conference room. And Steve would come out and say, okay, so give me your best ideas. And then everybody, the software team, the hardware team, the marketing team, the sales team, they would all have to stand up one by one and fight for what they believed in. And if Steve thought they weren't fighting enough, he would push them harder. He would say, no, this is not good enough. It's really not good enough. They were not scared of Steve. They were not cowering in front of him. They were telling Steve exactly what was going to happen. And they would tell him, Steve, you hired me because I'm the best software developer. I'm the best in my field. And I'm telling you that this is not going to work. And Steve ignored them anyway. Why was he ignoring them? I think that he was trying to build a monument to his own genius. You know, Steve was really immature at this stage in his life. I saw emails where his executives would give him the numbers and say, look, literally if you don't raise this much money by this date and sell this mini-cube computers, the company is going to fail. And Steve would say, well, we don't have to worry about that because we're going to sell 25,000 computers this year. And they would say, Steve, we're not going to sell that because we don't even have a distribution network set up. Like there's literally no one selling the computer out there for us. So how are we going to sell it? And he would say, I know it's going to work because I tried it today and it's a great computer. It's a great product. So of course, it's going to work. Is this the reality distortion field where he's not allowing anything into his perception and then trying to create a picture of something that's completely untrue? Like, did he know he was lying or did he actually believe it? I think he actually believed it. I think that he did say things that he did not know for sure to be true. But I don't think he ever saw himself as outright lying. Here's what I learned about his reality distortion field. And this is what made it so dangerous. It wasn't just about convincing other people that his ideas were infallible. It was also about convincing himself. And he would listen to people sometimes. But other times, if it clashed too much with his vision, he would dismiss them. His biggest fault was building a monument to his own genius, his own vision and thinking that that would be enough for the market and enough to beat Apple and get revenge on Apple. And so he's not learning, but he's getting a lot of feedback and he hasn't quite the moment of learning, I think, is the hardware division failure? Is that like when that's his lowest point? Walk me through this. That is Steve Jobs at rock bottom. And that is a Steve Jobs that we've almost never seen before. So what happened? Steve was piling up debts. He was refusing to kill the hardware division. So the next cube was not succeeding. The sales were just a few dozen a month. I mean, it was ridiculous. I even looked at the numbers and I thought, how could any business survive with this? And so instead of killing the hardware, Steve kept going around to different investors and saying, we have something great coming. Invest a bunch of money. He went to Canon. Canon gave him a hundred million dollars and got a board seat. It took very little convincing. So Ross Perot, his other investor, Ross Perot got a board seat and invested 20 million dollars at the start. These investors were surrounding him and the effect was interesting. The effect was magical thinking. It was Steve putting on a magic show. And as a result of Canon investing and Ross Perot investing and IBM set up a deal, that automatically raised the valuation of next and gave it credibility. So even though the whole company was smoke in mirrors, they were still raising more and more money. So they were creating a bubble. The next hardware was not selling. Steve would not give it up. And then finally, in 1993, the company was on the verge of bankruptcy. Literally one weekend away from just closing the doors completely. And so Steve Jobs and his hardware chief, John Rubenstein, who was also one of the creators of the iPhone later called up Canon their investor and said, it's a cram down. Give us 20 million dollars now or else we're closing. And so the Canon investors said, well, I guess we have no choice here because we're going to lose all of our investments if this company goes up and smoke. Every few years, a new platform earns its place at the top of every smart advertiser's media plan. The people who find it early build advantages that are very hard to close. Apple oven just had the most remarkable run in ATEC history and now they've opened that engine to businesses like yours. Over a billion people play mobile games every day focused not scrolling with no feed competing for their attention. Apple oven puts your brand in front of the right customers and optimizes purely for your growth. Brands like Wayfair, Kitch, Ridge, and Nectar are already scaling on it. Well, most of their competitors don't even know what exists. Ready to find your next million customers? Go to apploven.com/shane and launch your first campaign today. I built an AI version of myself with Hagen. Today, I'll have a dig up an old prediction that I made and we'll each grade it. Let's give it a shot. Hey Shane, you once predicted that long form would beat short form for anything that actually mattered. Grade that prediction today. Hey, I was directionally right, but I underestimated just how much short form would become the front door to long form content. I agree you were right, but for the wrong reason, you thought attention's bands would recover. They didn't. People just got better at choosing when to go deep. Right call? Lucky logic. Well, I got the right answer with the wrong math, but I'll take it. That's Hagen. Record yourself for 15 seconds and get an AI avatar that delivers professional video on demand. Your first three videos are free at Hagen.com/tkp. That's h-e-y-g-e-n.com/tkp. So leading up to this sort of like the 1990-1993, the software was getting really good. When it first came out, it was pretty buggy, but everybody loved their software. The hardware division is what's sort of like killing it, but IBM wanted to license just their software, didn't they? Right. Next computer was revolutionary in its software. The hardware was the failure and we look at the hardware and think, oh, this company failed, but the software is where the future actually lived. And this is where the vision and the future for looking of Steve Jobs comes in. He was working on software in 1986 that by the year 2007 would be the foundation of the iPhone. That's how far ahead of his time he was. He had come upon a relatively novel technology called Object-Oriented Programming. For anybody who wasn't an adult in the 1980s who doesn't remember what it was like using a computer, if you wanted to develop an app or basically do anything significant, it took a ton of code. You had to go through line by line of code and it was inefficient. There would be one mistake in there and then that one mistake would just crash the whole system. And then you had to go back through the whole thing. Programming a computer was miserable. Steve from his visits to Xerox Park saw what was called Object-Oriented Programming, which is the foundation for Apple products now. This is the drag and drop. So everything is an object, so you might have the button object, the click here object. You might have the image object. Object-Oriented Programming was automation for software. He was building software at the time using drag and drop and like all of next was but the problem is they had no install base and nobody else is building software for next. So there's no reason to purchase next because it's very niche market. Steve made that mistake early on because he wanted to once again control the hardware and the software together. Next step was the name of his operating system. This is the operating system that tapped into the power of objects, but the problem was that it was confined to his next hardware which no one wanted to buy because it was too expensive. Over time a lot of customers clients came into the office and said, "Look, Steve, the reason we're buying your beautiful cube computers is not because it's a beautiful cube." Nobody cares about that. We're buying it because we want to use your powerful software for financial trades. Yeah. Out of its time, like speedy financial trades back when this is a new thing, we want to buy it for healthcare. Satellite imagery. Satellite imagery intelligence work. The CIA loved it. The NSA loved it. It had a removable optical disk, a new thing at the time that the CIA agents could destroy and toss out so nobody could find it. It really was a machine that was ahead of its time. The hardware was just so unworkable because it was so far into the future. But the software was where the real power was here. But he was playing on hardmoot. He had opportunities in front of him, IBM came to him wanting to give him money and license software. The government was trying to buy a whole bunch of computers, walk me through those two stories where he sort of self-sabotages. He totally self-sabotages. The whole world would look different today if this had gone in a different route. This is one of the stories that blows my mind about Steve Jobs. Ross Perot is his investor. Ross Perot, for people who don't remember, he was a technology magnet from Texas, a billionaire. One of the greatest investors of his era also ran for President twice on an independent ticket. This is who Steve Jobs brings on board. Everybody who worked with the two said it was a really funny pairing because Steve is Mr. Birkenstocks, California Mystic. And then Ross Perot, the straight-laced Texas, the military veteran who's going to run for President. These two guys were so far apart that it should have been obvious that it wasn't going to work out in the end. One of the handshake deals of this partnership is that Ross Perot promises to mobilize his sales force to sell next computers to the federal government, the military, and intelligence agencies. And so there are intelligence contractors and spies coming around during these years to the next headquarters. These guys would show up. I heard really funny stories. They would never carry a business card and they would say, "Hey, my name is Sally. My name's Bob." They wouldn't ever say their real name. And Steve decided in the end that he doesn't want to sell to the federal government because that's not who Steve is. He's all about democratizing computers. He wanted to sell to schools, you know, to dorm room students. That's the sort of audience that he goes after. But Steve blew this up and it was a disaster because he had millions, hundreds of millions potentially in government contracts being lined up for him. And then he said, "I don't want to do this. I changed my mind. I don't want to sell to the feds." So Ross, I'm not doing this. And this blew up their relationship. Ross quit. He was so frustrated, so angry with Steve. They were literally at the boardroom table with the contracts. They were literally at the table, ready to sign the contract. And Steve said, "I'm not doing this." So I just want to give people context here. So we're 1993 at this point. The hardware division has just been bankrupt. He goes to canon. It's like I need 20 million dollars by Monday or else we're shutting the doors to the whole company. He's refused to sell to government despite them trying to give him money, literally lining up to give him enough money to more than stay afloat. And his partnership with IBM had blown up. So Steve was alone. He was completely alone. He had driven out his co-founders. All five of them had left because they were so tired of working with Steve. He had alienated all of his investors. Canon, his only remaining investor, was no longer responding to his emails. His developers were all out. They said, "I'm tired of this. I'm not going to develop software for a machine that no one's using a machine that is now closed and failing." So this was Steve at rock bottom and even Fortune Magazine published this article and said, "Steve Jobs might be a stink oil salesman." They used that exact phrase, "Stink oil salesman for Steve Jobs." When I was looking at Steve Jobs at rock bottom, I thought, "Oh my God, this is the Steve Jobs we never see. You never see Steve being accused of being a scammer. You never see Steve almost bankrupt. He was almost personally out of money. He was burning through about $50 million a year, according to the people who knew him. He was investing his own money into these businesses because he didn't want to take them public. So if the businesses went under, then Steve Jobs would go under. He was very close to being completely forgotten and written out of history. Was he funding Pixar at the same time? When did Pixar come into the picture? Steve Jobs was personally funding two companies next computer and Pixar from 1985 to 1995. In late 1995, Pixar had its IPO because of Toy Story, which was a major success, and that's actually what saved Steve in the end financially. He became a billionaire as a result of the IPO that might have never happened. That's crazy. So he's funding both of these companies. He's running out of cash. Cannon comes in and funds him. What changes in that moment? Because that's the lowest point. That's where everything turns around in this whole story, and he starts to become the legend of Steve Jobs that we know and love. It's the realization that he's alone and almost a complete failure in business. It's also his marriage to Lorraine and having children with her that started to rehabilitate him. He started to realize that there are bigger and greater things out there when it comes to life. comes to starting a family and having kids. These moments, it was these years, 1993 to '95, that were enormously transformative for him, both professionally and personally. And having Lorraine around really started to tame him, make him mature, also realizing that he had to back off. One of the reasons Pixar was successful was because Steve was not involved day to day. The deal that they had Seabot Pixar from George Lucas and the deal, the agreement, was Steve stays out of creative decisions. That's gonna make things easier for us. So Ed Kappel, John Lasseter, two luminaries at Pixar, they were the ones who actually made the creative stuff happen. You know, most people don't realize that Steve Jobs was credited as a producer of Toy Story, but the reason you don't realize that is because he wasn't really the face of the project anymore. It wasn't like the Apple where you saw Steve and Apple together. You can't separate the two. But with Pixar, once he backed off, things worked great. Steve did what he did best. He would give the presentations, convince people to invest. You know, he would eventually sell Pixar to Disney, a brilliant masterstroke of business. But the creative hands were left to do what they did best. And so Steve learned to finally trust people. He steps back a little bit from next is that. - He stepped back, not just a little bit. He stepped back by a Y gaping margin. He realized just how damaging his actions had been, just how damaging his need for total control was. And so he allowed his executives at next to takeover. One of the things that next executives quickly realize is that the only way to save the company, which was $400 million in debt. You know, remember, this is a small startup that hasn't even produced a successful product in nine years. It's literally been making a loss for nine years. The moment he hires some real financial professionals, there was a new CFO named Dominic Trumpot, who is from Belgium and came in and looked at the situation and said, you know, this is pretty bad. I don't know if we can save this place, but we'll do what we can. The moment that that team came in and looked at the books and told Steve what they need to do, that's when things changed. And now next, for the first time ever in the year 1994, posted a very small profit and finally came out of that nine years of endless unprofitability and finally, was starting to look like a real business. Once ironically Steve Jobs was gone. - Was he gone or was he just more hands off? - He was gone in the sense that he went to Pixar more. Pixar became his maybe. He loved Toy Story, which they were creating at the time. He really loved this idea of technology being used to create beautiful cultural items. So what next computer was doing, the only way that they could survive was by creating enterprise software. - And he had no interest in that. - He was like, I'm not doing that. Why would I do that? I'm gonna sell the next great computer to the next no-but-winning scientist. Like that's what the company is. But once his financial advisor has said, look, I mean, if you don't change this, it's gonna go under your $400 million in debt, you have no choice. Steve backed off. He was not interested in enterprise computing. I mean, come on, Steve Jobs, he watched the events that he gave, the product launches during this time. And he does not look like Steve Jobs at all. He's not wearing that black turtle neck. He doesn't have the scruffy beard. He doesn't have the glasses. He's wearing an Armani suit with a white button down shirt and a red tie. And at one point, he even gave an interview. And he said, the future of our company is gonna be like IBM. - And this is like 93 to 95. - This is 93 to 95. He's Steve Jobs, the corporate salesman, walking around the conference room floor with his conservative dapper suit and shaking hands and saying, hello, would you like to buy my enterprise software? Are you a financial firm on Wall Street? We can sell to you. - Oh my God, that's amazing. And so Pixar are IPOs and that gives Steve a lot of financial freedom. Really gives him leverage over the Apple transaction, which is coming, but at the time, Apple was struggling. So it's important to contextualize this, I think. Why are they struggling? What's going on at Apple? - Apple grew into a big corporation and like many successful startups that grow, it got feature-rightists as they call it. It got the syndrome of bureaucracy, the syndromes of making too many products of having too many people. By the time, John Scully, the Apple CEO of the time, by the time he was pushed out of the company, the company had something like 70 product lines. No company can survive by making so many products, especially if they're not selling. - So they couldn't say no to anything. Steve's sort of like not checked out, but not as involved at next as he was. Apple's thinking of buying BOS as a means of saving themselves. I think is my recollection of this, but then a voicemail changes everything. - This is one of the luckier stories in Silicon Valley history. If this story had gone any differently, the story of Apple would have not happened. Apple might have literally gone out of business. There would be no iPhone, no iPod. None of this would have happened. Apple was entering a crisis and the crisis was on many fronts. They had released a product, a laptop that was exploding. The batteries would ignite on fire. They had to recall it. Apple was having failure after failure across the board. And one of the things that they had to upgrade was their operating system. And so I don't know if Shane you used Apple computers back in the '90s. If you remember what it was like, there would be crashes and freezes and they had this thing called the spinning beach ball of death, a little beach ball. I think that shows up and it just spins around and around and around. And it means that the computer was trying to load something, but it just can't load it. So it sits there for an hour. It really was a miserable experience trying to use an Apple computer in the year 1996. Gill Emilio was the CEO appointed to come in and turn around the company. He also brought in another executive named Ellen Hancock who was the CTO. And they were both looking together at a new operating system. How can we stop this silly crashing operating system, this beach ball of death, nothing works? How can we upgrade this? And the only way that we can do it is by acquiring another company. So they only had a number of months until bankruptcy. Apple was going to go bankrupt eventually. It was hemorrhaging cash. And so they had to do something quickly and they had to acquire an operating system. Let me tell you about the best new product that I've used in the past five years. It's the Matic vacuum. This thing vacuums, it mobs, Matic does everything. Other robots bump into things, but the Matic sees things. It actually avoids the problems. And the Matic automatically adjusts between my carpeted surfaces and my hardwood floors. It's also super easy to schedule. I have it run every night while I'm in bed and every morning I wake up to clean floors. Messes happen and when they do, Matic rolls into action. Go to Maticrobots.com today and put Matic to work for you. (gentle music) Ever hit 3 PM and feel like your brain just quit? For a lot of people, that's not caffeine or sleep. It's electrolytes and water alone won't fix it. That's why I drink element every day after lunch. Zero sugar, no dodgy ingredients, just a real dose of sodium, potassium and magnesium. I know you're all thinking electrolytes are for athletes but you don't have to be an athlete to benefit from it. And it tastes great. Stay sharp in the afternoon and grab a free account sample pack with any purchase at drinkelement.com/tkp. That's drinklmnt.com/tkp. So Apple looks to buy the competitor basically to the next step, which is a BOS. Right, and that is run by none other than the greatest rival to Steve Jobs, Jean-Louis Gasse, the same man who taddled on him about trying to oust the CEO and got him pushed out of Apple in the end. This is a moment of revenge for Steve if he can find a way to get his OS back into Apple. Apple wasn't really looking at next computer. Nobody was really taking it that seriously. There was an employee, a manager named Garrett Rice who was a middle of the line manager at next. He and his friends were watching all of this happen and they knew that their technology was superior. And they were just so annoyed because they had spent years and years and years all those long nights creating this beautiful operating system. And meanwhile, Apple goes over to Gasse's company, BOS, and they say, "Hey, we want to acquire it." you guys, but they knew that next technology was so much better. So Garrett picks up the phone just randomly and says, "Okay, I'm going to call Apple and just see what happens." He calls an executive, and remember, this is a middle manager. He gives him a pitch. He says, "You've got to look at this because this is cutting edge." The executive calls back and says, "I'm leaving Apple, but you should talk to our Chief Technology Officer, Ellen Hancock. Here's her number." He calls her, leaves the voicemail. And to his surprise, she calls back, and she says, "Okay, we want to take a look at this, this next step OS." And from there, that's where the story just turns around. And so Apple ends up buying next step. Does he go back and become CEO? What happens? It's not that simple. It's a winding road back. Steve actually did not want to return to Apple. Apple came to him. They said, "We want your operating system. We think that this is going to be a major acquisition." Steve was thinking, "Well, I just want to stick with Pixar because I really loved Toy Story. The IPO was great. Steve agreed, finally. I will return to Apple, but only as a part-time advisor." And he said, "I don't want a fancy title. I don't want a fancy office. I'm just going to be an advisor. I'll go around Apple, I'll meet with engineers, I'll give them feedback, but I'm not going to lead the company." If I decide I don't like this, I'm going to ditch Apple. I'm just going to go back to Pixar. When Steve returned, they wanted to set up a ceremony for him. He would arrive in a helicopter, and the Apple employees would all hold up little digital candles to recognize the return of their great-saint Steve Jobs to this. But because the Apple employees, from their perspective, it's like our heroes coming back to save us. Yes. I know at the time that he was reluctant and unsure. Steve comes back, and he just sees disaster. It's a disaster zone. He talked about this. Just nothing worked at Apple. I mean, literally, you would try to get anything done, and it would just get killed by bureaucracy, infighting, competition. Steve quickly realized that he had to put his people in Apple. Even if Steve was not the CEO, he wanted his hardware and his software chief at Next Computer to run hardware and software at Apple, because those are the only two people who could turn around the company. And so his people, John Rubinstein, Avi Tavanian, two legends in the story of Apple, Steve put them in power, and finally, they were able to make good decisions. So how does he get sucked in to running it? He was so reluctant. At one point, he sold almost all of his Apple shares out of frustration with leadership there. He wants to return and take over the company doesn't sell all of his shares. And he even said later, he said, the reason I did it is because I was just, I was in a fit of depression. I didn't like Apple. What was happening here? So he cashed out. He said, goodbye. You know, and he was thinking of going back to Pixar. Interestingly, the one person who tried to pull him back in was Larry Ellison, a guy in the news a lot now. Larry Ellison was Steve's best friend in the sense that Steve, you know, Steve didn't have a lot of friends, but this was one of the few people that you could call a friend of Steve's. The pair were kind of similar in a lot of ways, strong personalities, force of will. And Larry wanted to set up a hostile takeover of Apple. He thought it would be such a thrilling experience, just a thrill to, to be able to go into Apple and force a board vote and get the shareholders behind you and just take over Apple from the current CEO and save it. That was his vision. But Steve differed from that because, you know, Steve, when he was younger, would have gone along with that would have said, yeah, of course, Apple's mine. I'm going to go back in, fire the CEO and put myself in a CEO. But the older Steve realized that the hostile strategy was not going to work because he was entering unfriendly ground. He was no longer going to be the saint of Apple. The angelic halo was going to disappear and people were going to question him and say, well, why is Steve Jobs partaking in a hostile takeover of a company he co-founded? Steve decided that he wanted to be welcomed back if he was going to return and he didn't want it to be wanted. He wanted to be wanted, he wanted to be seen. He wanted people to see his vision and his products. He did not want to go in there anymore and pointlessly yell at people. And don't get me wrong. He was still difficult, but having been through this crucible of next computer, he realized that you do have to step back and you have to let events unfold as they need to, rather than you trying to seize control at every moment. He's still difficult to work with, but why do so many talented people stay with him? He brought the best out of them, and they all said that they said, working for him was the hardest experience of my life, but it was also the most beautiful. They said, yeah, you know, I had hard nights, I cried, I suffered, I didn't see my family for days sometimes, I was at the office sleeping on the sofa, but they said, yeah, it was the hardest time of my life, but Steve was special because he could reach into my soul and he could bring the best out of me. He looked at me, he looked through me, they would say, and he would reach right in and give me the level of creativity that I wanted, that I didn't realize I had inside me. I think that's fascinating, because I just think about this, right, and it's like a lot he is reputation externally for being really tough on people. And then internally, he was really tough on people, but they stayed, and I kind of have been trying to think about this in my head, and one of the ways that I've framed this is that he had standards for himself and other people that they couldn't see, and because they couldn't see these standards, they were higher than they knew they were capable of, but by pushing people towards higher standards, he got the best out of them. Right. Steve had high standards for himself in the sense that he saw himself as somebody who was going to shape the future of the world. He was going to shape the arc of history. He always had these grandiose expectations, but at next what he learned was how to bring good expectations to the people around him, to lift them up rather than tear them down. Once he transitioned to that stage and realized that lifting others up, people who do great work, once you bring them into that pressure cooker of talent, you bring them in, you put them in a room together, you force them to defend their ideas, and you acknowledge them when they do great work. There's a famous interview that just resurfaced recently, and it shows Steve reflecting, it's the year 1996, after all this drama at Next in Pixar, he's finally coming out of the wilderness, and he's reflecting, and he's saying, you know, something interesting happens when you're the CEO leading great people, when you have talent around. The pyramid gets inverted. You're no longer the boss up top telling people what to do. Or the CEO at the bottom, and your job is to allow your talent to do their best and to keep them around, because your talent, they can get another job in a minute. So you better do what you can to keep them around, or else you're going to fail. So if you had to summarize the lessons he learned, what are the key lessons that he learned through this period at Next? The first is trusting your people. The second is the importance of bending your vision, knowing when to stick to your guns, and knowing when you need to back off, and you need to work with the world around you. Steve originally thought that a great idea was what mattered. If you build the great computer, the world will find it, and they will buy it, and you will be a success. But that's not how the world works. He realized that you need to work with your rivals sometimes. He called Microsoft Bill Gates the Arch Enemy. This is like the first thing he did when he returned to Apple as CEO, signed a deal with them. They were going to produce word for Apple, and they were going to invest $150 million to save Apple. The younger Steve would have never done that, because that would have been a cardinal sin against the Holy Church of Apple. I mean, the Apple fans already saw it as controversial. That saved Apple. That's $150 million. It was the injection that kept them afloat, and it saved them. If that had not happened, they would have run out of money. This is Steve, the pragmatist. This is Steve who's learned through repeat failures that you have to work with people. Even if you disagree with them, even if you think they're taste sucks, and you think that their products are terrible, if they have a pot of money, and they can help you you have to do the handshake. You have to find a way out, because he learned that to achieve his hardware, software unity, to achieve that total control. You have to build scale first, and how do you build scale? You make deals with people, you get investors, you get distributors, but you have to make concessions. You can't do everything exactly as you start out planning to. Talk to me about the Gates Jobs rivalry and what you learned about that and any cool stories you heard. That was a lot of fun covering the Bill Gates, Steve Jobs, frenemy relationship. These two guys, they would take a crap on each other at any chance they could. They would get out in public and they would insult each other's ideas and say this is stupid. So what was the disagreement that they were having? One of them Bill Gates believed that software should fundamentally be flexible and available to everybody. It should be on every computer regardless of the hardware. That's what Windows was. Windows was the operating system that loaded on almost every PC in the world and that's why Bill Gates was so successful. That Steve Jobs was the polar opposite in almost every way and he believed that beautiful technology has to be within the world's garden. You can make beautiful software but it has to be on your beautiful hardware too. So this was a theme in this entire period, Steve and Bill sparring back and forth over whose idea was better and who's going to win in the end. Interestingly, if you were sitting around in 1995, this is the year that Windows 95 came out, major business success, you would have thought that the open system makes more sense. Bill Gates and Microsoft are the future. But if you're sitting around in 2026 and looking at all this, it looks more like the closed ecosystem, the Apple ecosystem is actually the success. Are there any fun moments in the Steve Jobs, Bill Gates rivalry where they prank each other or poke each other intentionally and they come to mind? In 1988, Steve released the Cube Computer and this is Steve's big return. It's going to be his moment where he's returning to that stage. It's been a few years since he was ousted from Apple and now finally we get to see Steve Jobs, the Prince of Tech in the flesh again, releasing this beautiful Cube Computer. What's the first thing that Bill Gates does? He goes up in front of the press and he literally says, "I'm not developing software for this, I'm going to piss on it." Bill Gates just goes on this tirade in public and says, "You know, Steve Jobs doesn't know what he's doing. It's just a Cube. It's painted black." He says, "I could do that too. I could paint my Cube's black. Why is that a special thing?" One of the things I found in my research turns out this has never been published but Bill Gates actually wrote an apology to Steve but it was sort of like a non-apology apology. I read the letter and it was really hilarious because he's like, "Dear Steve, you saw the comments that I made in the media in which I called your product stupid and silly. I just want to apologize for that but I also want to let you know that everything you've done is wrong here and all this tech is not going to work and I think your idea is stupid but I'm sorry anyway." It must have taken a lot for Jobs to go to Git when he was turning around when he was saving Apple. It took a lot and it was extremely controversial even within Apple because for the Apple faithful to turn to their greatest villain Bill Gates, the man who is like, you know, the 1984 Big brother to them, that's how they see him and it shows you how far he'd grown. It shows you the new Steve. How do we go from the transition between Steve's back, he's part time, he's trying to like stay out of things or not be involved, he's selling his Apple stock to Steve running as in-term CEO which he never really wished until. So the summer of '97 is a time of deep reflection for Steve because he doesn't want to be the CEO yet. He still loves Pixar, his wife Lorraine is also opposed, has been opposed to him returning to Apple in the first place. One of the things that executives told me at Apple this time is that one of them actually said this phrase, "Apple kills you." Apple, it's such a stressful place that you're going to grow old, you're going to get sick, and you're going to die young. An executive told me that's how bad Apple was in 1997. Everybody around Steve doesn't think that he's going to become the CEO, and finally it was a phone call to Andy Grove, one of his very earliest mentors, CEO of Intel. He calls him at an odd hour and just says, "Andy, I want to talk." So we've been interviewing these candidates, CEO of Apple, we don't really like any of them. And Andy Grove has a reputation for being a straight shooter and he literally told Steve Steve, "I don't give a shit about Apple." And that was that. It hit Steve really hard and Steve told this story later. He said, "That's what I realized that I do give a shit about Apple." He realized the contrast couldn't be starker. He was jolted and he thought, "Well, wait, I do care. This is my love. This is my company." And so he said, "I will become the interim CEO." And that's what happens. Oh, that's crazy. October 1997, Steve Jobs is appointed the interim CEO of Apple and returns to enormous fanfare and we all know how the story ends. The rest is history. The rest is history. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online makes sense? There's no place like Chrome. Check responses set up require compatibility and availability, very 16-plus. One of the first things he does when he takes over a CEO is kill 70 of these AD projects. Right. He killed 70% of Apple projects upon taking over as the interim CEO. He wasn't even the full CEO yet. And Steve decided he wanted to be called the ICEO. This is the first ever I mentioned in Apple, the predecessor to the iPod and the iPhone. And so Steve as the ICEO decides we're killing 70% of projects that are just not working. He brings in his operating system from next with its beautiful programming, the objects, the new technology, and he turns it into the foundation for everything that comes after. It becomes the software that's going to power Apple's renaissance. It goes on to lead to the building of the iPhone, the iPad. It percolates throughout Apple and it becomes the basis for anything that's made at Apple. You have to look at the next step software to understand where Apple is today. Just recently I asked one of the very senior Apple software designers from the time who knew Steve, I asked him how many products today at Apple really come from next. And he looked at me and looked like he thought it was a funny question. And he said, all of them, that's crazy. One of the things that I don't think gets enough attention, Steve, is the role that Lorraine played in his life. Talk to me about that. Lorraine was the woman who softened him. Steve, as a younger man, was always a bit aimless in his personal life. He knew that he wanted a family that he wanted to settle down. But there was a hole in his soul and he just couldn't find that. But Lorraine had a way with him. And everybody who was around the couple during these years recounted that just how Steve by giving birth to their son together, read by raising a family together and having that presence of Lorraine in his day-to-day life, he became less of a professional robot, somebody who goes to work every day and somebody who started to treasure simple family moments. He had a child before Lorraine. And treated her horribly. When did that change? How did that change? Lisa was his first daughter and born with a different woman. But Steve denied paternity and refused to help her take care of her, even said at one point that she would be disinherited. But after they met Lorraine, it was in the 1990s that she was brought back into the fold and they started to repair their relationship. Lorraine clearly played an influence and that was at the birth of Reed. He was both Lorraine created structure in his life, a structure outside of Apple. And I think that Steve, as he got older, was able to not just be an Apple guy anymore, but was able to decent for his life among family, among next, among Pixar. He had different parts of his identity so he wasn't going to suddenly crash if one part went wrong. Let's switch gears a little bit and do more like rapid fire answers. Talk to me about the shithead hero roller coaster. You were either a hero one day or a shithead on another. Steve would walk into a room. If he liked your idea, you were a hero. But the next day he would change his mind and say you're a shithead because suddenly he doesn't like it. How did he keep so many talented people working for him? He brought the best out of them. He inspired them and he pushed them to their very limit. How did he make decisions? He told people to talk back to him. back and disagree with me and we'll find the answer through disagreement. Did you ever apologize to people? Yes, interestingly. He would throw them on the hero shithead roller coaster and then he would occasionally apologize a few days later for being so nasty to them. Would you do it in public or would you do it in private? He would write them a letter. Was he clear with apologies? Did you see any of these letters? What did they look like? So those specific letters, I didn't see those but people recounted them to me. Steve apologized in writing and he would be specific about the apology but he also expected the conversation to be over. That was it. That was it. But we're done. Did he have empathy for other people? Yes. That surprises me. He learned empathy. He lined up top flight medical care for employees who were suffering but not himself. But not himself. He learned empathy for others but he wouldn't give empathy to himself. One thing that doesn't make sense to me there is it sounds like Steve learned to learn from feedback and people around him during these time at next. And yet when it came to his own medical treatment, he insisted on doing things his way despite the advice of doctors, friends, loved ones, family. How do you reconcile that? Steve said it changed completely. He was still the same person at his core and he still had the reality distortion field. But that's the mindset that goes behind his decision not to get treatment. He consulted a psychic about his medical condition. He relied on holistic vegan foods to try to cure his cancer. But that's not how it works but that is classic Steve. Steve learned the power of inspiring the people around him but he never completely learned to be 100% honest with himself. Reading your book it struck me that he was naturally resilient but he had to learn discipline. That's exactly right. He was resilient in the face of failure after failure. Once he learned discipline, his resilience became the foundation for his success. What can we learn from his resilience? Like how do you teach people to be that resilient? Like he persisted. He was so determined. If you're in hard times, you treat it as the foundation for what might come after. That's where the resilience comes from. If you're only focused in the current moment, then it's easy to give up. But failure could be the foundation for success later. What is success for you? Success is waking up in the morning and having the family and the friends around you who really make life great. It's walking into a coffee shop and being able to sit down and enjoy yourself and enjoy the moment, enjoy the moment, enjoy whatever it is that you're doing. Whether you're writing a book or building a company or making a movie, it's being able to just sit down and to do that and to enjoy these moments as they come.