Afford Anything - Steve Jobs Hated the Name “Genius Bar.” How He Came Around, with Ron Johnson

Episode Date: October 9, 2026

#757: Ron Johnson turned down a $120,000 Goldman Sachs offer to unload trucks for $40,000, and that detour led Steve Jobs to hire him to build the Apple Store. Years later, he took over JCPenney and watched it fail for a reason that had nothing to do with his vision. Ron Johnson created the Apple Store and worked directly for Steve Jobs for 12 years, after bringing designer products to Target. He later served as CEO of JCPenney and is the author of Shop Different. In this episode, we discuss: How to weigh a lower-paying job that teaches you more How to set goals big enough that people work harder How to persuade a team whose top priority is not getting fired How to change a strong-willed boss’s mind Why a bold plan fails without trust, and how to build trust first What a rush of early customers can hide about a new business How to get out of your head when you’re overthinking a decision Whether you’re weighing a career risk, building a business on nights and weekends, or trying to get people behind a bold idea, this conversation shows what it takes, and what it costs to skip a step. ⏱️ TIMESTAMPS Note: Timestamps may vary slightly depending on dynamic ad placements. (02:14) Why a few columns made Steve Jobs furious (08:44) How he talked Steve Jobs into shopping malls (15:33) Why he turned down $120K to unload trucks (22:10) Why big goals beat small improvements (29:24) How to sell a risky idea to cautious coworkers (37:02) The $30 tea kettle that caught Steve Jobs’ eye (46:02) Why a record-breaking opening day was misleading (56:26) How a hotel inspired the Genius Bar (1:14:40) Why JCPenney failed: trust, not vision (1:35:54) How to escape analysis paralysis 🔗 RESOURCES MENTIONED 👉 Would you turn down $120K for work you love? Find out what’s really driving your money choices: https://affordanything.com/fiire 👉 Ron’s Book, Shop Different: https://amzn.to/4yFA1SH  👉 Ron’s website: https://ronjohnsonshopsdifferent.com Learn more about your ad choices. Visit podcastchoices.com/adchoices

When Ron Johnson was 24, he received a job offer for $120,000 a year. He turned it down in order to take a job that paid only $40,000 per year. That decision started a chain of events that led to Steve Jobs personally hiring him to design the Apple stores. In this conversation, you are going to hear from Ron Johnson, the designer of the Apple store, and later, the CEO of JCPenney, how to manage your company. career, how to deal with brilliant but tough leaders, how to weigh a lower paying job that will teach you more against a higher paying job that would be just a paycheck, how to set goals that are big enough that it inspires everybody around you to work harder, and how to get out of

your head when you're overthinking a decision. This is a masterclass in business, so buckle up. Welcome to the Afford Anything podcast, the show that knows you can afford anything, but not everything. This show covers spot killers. Financial psychology, increasing your income, investing, real estate, and E for entrepreneurship. That is the subject of today's episode. But it's not just entrepreneurship.

This is business career. This is for anyone who has a job or has ever had a job or who might have a job in the future. This is such a masterclass in career strategy. So Ron Johnson, as I said, turned down $120,000 offer straight out of grad school. got this massive starting salary from Goldman Sachs, said no thank you, and went to unload trucks for 40 grand a year. That started the chain of events that led to him working directly with Steve Jobs, like they were cell phone buddies and talked to each other every night, directly for Steve Jobs for 12 years. He created the Apple stores. If you've ever gone into an Apple store at a mall, that is Ron Johnson's design.

It's his vision. it's his brainchild. Steve Jobs hated malls, and Steve Jobs hated the name Genius Bar. Ron Johnson's the one who got him to come around. And later, Ron went on to become the CEO of J.C. Penny. And he's the author of a book called Shop Different. There's so much we can learn from him. Here he is. Ron Johnson. Hi, Ron. Hello. It's nice to see you. It's nice to see you too. Thank you for coming here. We've been chatting a little bit behind the scenes. The first thing that I said, to you is I apologize for the fact that this this room, this building has some columns. Yeah. You nearly got, almost got fired over columns. Can you tell us that story? That was interesting. You know, after a lot of time in the retail industry, kind of after a period of Target, I went to work at Apple to create the retail stores. And Steve Jobs had hired me to work

directly for him. And we'd spent a lot of time together, you know, designing the stores and getting out of blocks. And one day, I was coaching my son, who at the time was five years old, his soccer team in Menlo Park, California, and the phone rang. It was a Saturday morning. There was Steve, and that was an uncommon for him to call. But I answered the phone, and I was out in the field, and I said, Steve? And he said, Ron, what's with the effing columns?

What's with the forest? And I said, North Shore. We had just opened a store that morning, and it was in a mall in suburban Boston. The only way we could do it, it was holding up a third floor of a building. There were some columns in the back corner by the Genius Bar. And Steve didn't like columns. You know, we had never formally said, we will not do a store without columns, but we all knew he would rather have a column free space.

And he was really upset. And he felt like I broke his trust by not telling him. him. Because we kind of had developed an unwritten rule that I had the freedom to do anything I wanted unless I felt like he might think differently. And then I should just talk to him about it. And I knew when we approved the store that Steve probably wouldn't like it. But I also, this was 2001.

The Internet's new. Boston's a long way from the Bay Area. You know, we'll probably get by. but then people sharing photos of the store and Steve intensely curious had looked it up. That was really tough. It was like probably my toughest day at Apple because I really disappointed him, I felt. The reason that that story stands out, the reason that I began by asking about it, number one, it shows the level of attention to detail that a store across the country has some columns.

for someone running a company that is that big at that scale to have that level of detail over something that is really a detail and to care so intensely that it stands out to you as one of the worst days of your career, there's a lot of power in that story. Yeah. Well, it really is a testament to Apple and really attribute to Steve.

Steve is a perfection. Now, that was his strength. He wanted to create things that were perfect. He set very high goals. His North Stars were, we're going to put a thousand songs in your pocket. We're going to reinvent the phone. We're going to create animated movies. And we'll only do it one year because they've got to be great.

You know, Steve was always about being as close to perfect as you could be. And in a physical space, you want something that's pure. just like an Apple design product is pure. And so to Steve, that was really important. Now, it's not going to affect the sales of the store. It's in the back corner of a 6,000 square foot store. The Collins probably took up 10 square feet. But they imply that where else did they not pay attention to detail?

Steve and I had a great relationship. I got to work with him for 12 years. I was with him in his bedroom, the week before he passed, you know, saying goodbye. You know, so we had a very close relationship and a great relationship. And in those kind of things, you don't want to disappoint someone who has invested so much time in you. Right. A year before that, when Steve realized that if Apple store succeeded, the first impression people would have of Apple would not be a product they own, it'd be a physical store.

because we set the stores out to reach the 95% who had never bought an Apple product. Right. Well, we're going to identify them as they walk through the doors of a store. Once he knew that, he also realized that, you know, different than everything else he does at Apple, he won't have control of it. Meaning at Apple, he goes to the ID lab with Johnny once a day and looks at what he's working on. He approves every ad as it comes through from Shiat and the marketing teams. he talks to Phil and he gets to have his hands on everything.

With the stores, when you're doing a global network of stores, someone's got to walk the streets and pick the real estate. Someone's got to design the store that fits in the context. So it fits in and stands out, but it fits in most importantly. Someone's got to hire all the people. So Steve said, given the impact the stores will have on our brand, you don't have to know how I would think about everything. And so what time your kids go to bed?

And I said, 8 o'clock? 8 p.m. And he said, can I call you? I said, yeah, I'm free tonight. He goes, no, every night for about a year. And I said, okay. And he said, and we'll talk about everything. We'll talk about our families.

And that was fun because my daughter actually had a locker next to his daughter. Jobs was J.O. and Johnson was J.O. And so coincidentally, they were in the same grade at a middle school in Palo Alto. And we had a lot to talk about. But Steve wanted me to know how he thought. And that's a big investment. I'd never had a leader who delegated so well, but invested so much time to help me understand his point of view. And so when the columns showed up, early in our relationship, we'd open our first door in May.

this was August. This is just probably our fifth store. And there he finds one with a big surprise. You know, it was early in our relationship from a let it go. Let Ron be responsible for this. You know, it was just a moment where I think I broke his trust. I see. Yeah.

You know, he disliked columns, but you were able to move him on many things that he initially disliked. He also disliked malls. Yeah. He disliked shopping malls. And I actually didn't know that malls were relatively recent. And they started in Minnesota. The indoor enclosed mall.

First one, 1957, maybe 50. I was born in 58. It was like a year before I was born. Two miles before I was born was the first enclosed shopping mall. Right. And the idea was that you needed a climate-controlled space. Sure. And so the big innovation was turning all of the storefronts inward.

Correct. But Steve hated it. He hated the idea of a shopping mall. And when he first came to you and you proposed putting Apple stores in shopping malls, initially he hated that idea because he hated shopping malls. How did you get through to him on that one? Well, what's interesting about Steve is, you know, everyone thinks he was a strong-minded, strong-willed dictator.

He wasn't at all. He wanted the best ideas to win, and they always did. So Steve was incredibly curious. asked a lot of questions, had a very open mind. But he told you what he immediately intuited. So when I met Steve, I had just come off a pretty big success at Target. He wanted to think about opening stores. He wanted to talk to me about it.

We met, spent about three hours talking. And during that conversation, he said, okay, the big part of the conversation was the decision we made at that. first conversation was who's our target market you know i said well who are you going to go after in the stores he said well we've got about five percent of the computer market all apple had at that time was computers right this is the year 2000 2000 four products two desktops two portables windows had won the pc warr steve said well our max appeal to creative pros and we're to be creating these applications like imovie that had come out and i think there are a lot of consumers who would love creative apps. So I think if we can get at the creative

consumer, you know, we can double our market share. And I said, I think that probably is an achievable goal. But I said, you don't need stores to do that. And I said, what I don't understand is I'm from Minnesota. I work at Target. We don't even use email at Target. That's right. We don't use email. We don't have personal computers. I don't have a personal computer. Right. The story that you tell about when you first met Steve, he asked you to email him. And your first thought was, I've never sent an email before. I've never sent an email. And I said to him, he said, no, is that at the end of that conversation, let me finish my story. I'll tell you about that. But, you know, I said to Steve, you know, half of America has never bought a personal computer. You haven't lost the race. You've lost the race on the first 50 percent. And that was mainly being bought for work. There's an open. field out there to go after everyone else who is scared of technology. They'd understand why it could improve their lives. I said, now, if you want to go after everybody, you need stores. And I would

love to take on that challenge. Just like I brought signed to all at Target, I would love the challenge of trying to bring the technology to the people that don't use technology and don't understand why it matters. He got real excited about that. He said, I like that. He goes, so then where would you put stores? And I said, you'd have to go where your target audience lives and shops. And that's the mall. He said, I hate malls. They're crowded. They're filled with crappy stores. Yeah. I said, but that's where your target customer is. At the end of that, a little more talking, I had to leave. And he said, when can you come back? I said, I can come back in two weeks. he said but why don't you think about what you do at the stores and just send me an email with some ideas I said I would Steve but I've never set an email I don't have a computer crazy thing to say to

Steve Jobs especially when you're trying to be recruited to leave his stores but honestly that's what made the store special because you know I was a retail guy living in an analog world Steve was a technologist living in a digital world I could see the world through the the eyes of our customer. He saw the world through the eyes of what the technology could do. All innovation, creativity is revealed through conversation. It's not imagining something. When I imagine something, I'm having a conversation with myself.

But then I then take that conversation to someone else like Steve. And when you put two different geographies together, you come up with new ideas. and so for me, the mall is where to put a store. To Stevie, he didn't like that. But the next time I saw him, first thing he said, he said, Ron, I'm going to offer you the job. I was kind of surprised because I had met him once. He goes, I want you to join the executive team at Apple, which is a big deal.

And I said, that's great. And he said, and we should put the stores in malls. I said, wow. He came around really quickly. If we don't go to malls, people have to get in their car and drive 10 miles to go to an Apple store. I don't think they'll do that. If we're in the mall, they have to walk 10 feet out of their way. And he said, we have a chance to talk to them.

I said, you're exactly right. But that, you know, was a pattern that we had together because we would have conversations all the time, and we would disagree. And Steve was famous for wearing his opinions on his sleeve. Steve once said, because I really value kindness, the highest form of kindness to me is telling the truth. no matter how difficult it might be, people deserve to know where they stand, where I stand.

So Steve was very direct, but the best idea is always one. And I think anybody who worked with him closely would say that. I'm going to take this in chronological order. Sure. I'm imagining that right now there are probably plenty of people in the audience who are sitting there listening to this thinking, wait a second, how are you in a position in which you would meet Steve Jobs once and then get the job offer? And so I want to take this back a little bit to your days at Target. Sure.

Starting with toys and then going to kids and reimagining so much around the target experience. Right. If I go back even a little further, I was 24 years old, graduated. from Harvard Business School. Everyone wanted the hot jobs, the jobs that paid the most that had the quick track record of success. Didn't you intern at Solomon brothers? I interned at Solomon.

I had interviewed along with probably 100 classmates for the M&A group at Goldman Sachs. And I actually got picked for that job, one of two or three that got selected. And that was going to pay me at the time. you know, $120,000 a year, which was a lot of money in those days. But I had this belief that this is a time to figure out what I want to do for a lifetime. And when I thought of being a banker for a lifetime, I didn't get very excited. Right. No significance.

Right. But I love stores. Yeah. And I thought, what if I became a retailer? As I thought more about that, I thought, well, if I'm going to be a retailer, the retailers I admire. all started at the bottom. And I said, if I'm going to be a really great retailer, I need to know how the employee who's on the floor,

where most your employers are every day, what it's like to do that job. So I took a job, and they paid me a lot. They paid me $40,000, which is a lot for a retailer. So you took a one-third pay cut from what you otherwise could have been making at the age of 24. Yeah, and probably a 100% status cut. Yeah. You know, because at that time, when you're in your 20s, you know, you want to meet people, you're going to meet girls, you know, wasn't dating anybody.

What do you do? I unload trucks at a Mervyn store. Yeah. You know, it's not quite like I'm on Wall Street and I do big deals and would you like to go to a great dinner? Right. But obviously, I didn't care about that. But when I looked at the retail industry, there were a lot of young people who were leading retailers. Mickey Drexler at that time was 84.

had gone to the gap to turn it around. And he was like 31 years old. And it was the CEO of the gap. And I thought, well, if it's a young person's industry and there's no politics in retail, you know, if you're running a store, you can compare your store to all the other stores. And a store leader can have a huge impact on the outcome of a store.

If you're a buyer and you're picking the merchandise, you know, what you select has an immediate impact on the revenue view department. So I said, this is a meritocracy. If I put my head down, I can get to a pretty senior job pretty quickly. And I could do something I'd love for a lifetime. So I just went and started out unloading trucks. And then I got to straighten out clothes in the men's department. I used to love to get that floor perfect every day.

And got to cashier, you know, never really led people in the store because I was only there six months. I went to headquarters to do some inventory planning and different things. But before you knew it, I was at Target, which was back in Minnesota. I went there after five years at Mervins and I took over the toy department. I had my first or second really big buying responsibility. And toys was a big thing for Target because in retail for a big general merchant, as goes toys at holidays, so goes the company. But the thing about toys is that you, You can't mess it up because if you screw up the holiday season, you're screwed for the year. Right.

It's unforgiving. It's a very unforgiving department. Yeah. And I had great success in toys. But I did it different again. You know, so you were kind of getting into it. Why would Steve hire me? I had a 10th seeded, trust my instincts and take big bets.

So I took over the toy department. And at that time, Toys R Us had 40% market share in toys. Target had 8%. But what Target did like the others, because you're competing with someone big like toys, you tried to jam as many little toys as you could into the space you had. Right. To have a broad assortment. But the world was moving to specialty stores, getting very narrow.

And I said, how do we become the destination for the most wanted toys? So, for instance, Lego. Everyone love Lego, and even today people love Lego. Well, Target carried a handful of the most popular sets. I said, imagine a Lego store within Target. What if we took over two of those long physical called gondolas, created an aisle filled with Lego. And what if we put out, just like they do in the Legoland,

models of these big displays to inspire you? And we'd be taking away space from putting out products to show. a display. But especially retailing was moving into the merchandising and how you present things was important. Well, we did that. And we didn't just do it Lego. We did it with boys toys with, you know, some of the big incoming categories that were on TV. Right. So we went narrow and deep and really made big presentations. And it was fabulously successful. People like Lego said, I'm going to give all the inventory that's short to target because they're the destination. They're my best partner. So I had done that in my first vine job I target. And that got me promoted quickly

to kids. Right. And you were around 30 at this time. 30 years old. Yeah, exactly. 30. So what I'm here, just to pause and kind of reflect at the meta level, what I'm hearing are big risks that you took in your 20s. Like, number one, the risk of earning one third of what you otherwise could have earned. I don't think a lot of 24-year-olds would do that. Right. You know, would get a hundred and twenty-and-dollar job offer and say, no, I'm only going to make 40. That inherently was a risk. Right. And then making a big bet on rethinking how you present toys in, again, in a category that is so

unforgiving, right? In a category that if you screw up November, December, you're not making that back in March. It's a risk in a risky field. Correct. What gave you the wherewithal, especially in your 20s when you hadn't yet established yourself, you're still forming your professional identity at that age? What gave you the wherewithal to be able to take those kinds of risks?

I believe that there's no such thing as limits in life. I was an athlete. And until someone ran a four-minute mile, nobody thought it was possible. But once someone broke four minutes, everyone started to break four minutes. So the limit was in your head. It wasn't truly a limit. When I was in high school, I played soccer. My two sports were soccer and baseball,

and I got a chance to be captain of both teams. So I was a pretty good little athlete. And when I became a captain of the soccer team, though, there were only two juniors, and we were co-captains. So I didn't really earn anything. But to me, it was an honor. It was a leadership experience. And we had nobody coming back.

we had only won two games, but I was at a school that was known for winning state championships. You know, the banners of the basketball gym were filled with 1980, all these championships, this football team. We were a really good suburban high school

with great sports teams, but we just weren't a good soccer team. So when I became captain, I called a meeting right in the fall for captain's practice, for as an early thing, a year ahead of the season. And 100 people showed up. And I said, well, I'll tell you what I want to do.

I want to go to the state tournament. Anybody want to join me. And all these hands went up. They were all excited. Yeah. And, you know, even though we'd won two games and there were only two returning starters, kind of a tall, big idea. But I said, you know, the reality, if we're honest,

all the good athletes play football in the fall. People play soccer. They're getting in shape for hockey in Minnesota. Yeah. So if we get serious about soccer, and what if we started playing every Sunday night in the fieldhouse? We had a big fieldhouse indoors. And what if we all went to camp in the summer? And what if we played on summer leagues?

Every day I'll go up on next summer and I'll kick the ball at 9 in the morning. You can join me. We made a goal, a big goal, and a big dream. And we got behind that. And the next year, believe it or not, we tied our first game. We made the state tournament, which was four teams, and we were number one rated in the state. The lesson was, you're only limited by your imagination. Most people have said, well, if we go out and win five games, that'd be a big improvement.

Right. And when you accomplish something like that, you understand the excitement and the passion that gets behind when you pursue a big goal. I spent a year becoming a great soccer player. And I ended up being an All-American high school soccer player. You know, because I worked so darn hard. And I had a good season, scored a lot of goals, went to Stanford, started as a freshman. Because I had a big dream. So then once you do that, you get your work.

Why not have big dreams? It's easier to get someone to work great pursuing a big goal than improvement. So if I'd gone into toys and said, oh, it's risky. let's keep our assortment really broad. Right. We would have done fine. We had done well like everyone else, but we wouldn't have had a chance to be great.

So the safe choice, which most people pick in business, allows your career to progress at a pretty natural rate. People are looking for leadership. They're looking for someone willing to step out and take wise risks. You know, you've got to use wisdom. But it becomes a,

addictive, doing big things becomes addictive. So the next job you get, what can I do in a similar way will really move the needle here? And I did that in kids. And then I did it and just home at Target. And that's what got me to meet Steve. When you're taking risks and dreaming of big goals, the thing that strikes me is that necessarily there are certain things that you're not doing in order to focus on that goal. High school soccer is a perfect example because if you're that focused on soccer, you're not in band or whatever.

Especially into your career, how did you think through those opportunity costs? I didn't worry about failure. You know, I am a preternatural or whatever, I say optimist. I've always been a believer that glasses half full, never half empty. I think I grew up in a family that I was such self-esteem because I was loved by my parents.

They were encouragers. I just never let the downside risk getting away of the thrill of victory. I guess that's just not my nature. You know, I didn't grow up in a real wealthy family. So not going to Goldman. The net present value of a life wasn't how much money I made. it was the people I was with, the work I was doing, the joy I was experiencing. You know what I mean?

Right. And I knew that then. And even today, you know, people ask, what do you do every day? I said, I try to do things I love with people I love in places I love. If I don't have all three of those, I should make a change because I really value positivity. So risks were easy for me to take. Wow. You know, I didn't really spend a lot of time worrying about the downside.

Right. Yeah. Well, I'll give you another one. So when I took over the kids' area. Yeah. I take her to this area Target and the kids department was doing pretty well. Our biggest weakness was we had a small area for kids. And I couldn't go convinced Target to double the size of the kids department.

But if we were going to win, we had to have more choices of clothing. Right. Well, why does the gap kids look so great? they must be great merchandisers. And then I looked a little closer and I realized they didn't have a little toddler department, a little girls and a little boys department, a big girl or big boys. They had one kid's department. And they offered the same styles to all of the size ranges.

And so when I got to Target, we had all those different things. And I said, well, let's take a risk. Let's take the boys and girls. And instead of having a little girls and a big girls, size four to seven for boys and eight to 20. Let's just do four to 20. Well, if we did that, we could offer twice as much assortment. And suddenly we have breath and we've got focus. But to do that, we would have to redo everything we knew about sizing, all our patterns, everything. And people thought I was crazy. After six months where customers had to adapt to what's

going on at Target, the business was fabulous. And even today, you go to Target, that's how they size their clothes. Right. That was a big risk. Right. But it led to a big win. That risk in particular, you had customer feedback. Correct. You know, so your customer feedback was telling you, hey, our kids grow so fast that we're buying two sizes bigger than their current size. Just so that they don't outgrow their clothing. And that means that our kids, when we initially buy this article of clothing, our kids are drowning in it. And with the split sizes, it also means that if you're just kind of naturally a skinny kid or a short kid or a slow grower, now you're wearing like some cartoon dinosaur that's like just not age appropriate. So you're like, you're the shrimpie

kid already and now you're getting picked on because your designs on your clothing are stupid. You essentially, you had a lot of customer feedback that supported the decision. I agree with you, but I wish you had been a target at the time saying that. Because nobody had Target believed you. Because people don't want to change. But you're exactly right. Parents would buy big sizes. So when we collapsed sizes, we had a four or five.

They'd get a five. The kid would wear it at four and five, and they'd get twice as long. It saved money. It's simplified everything for parents. Now you've got put yourself in the shoes of you're going into a team. You're a brand new leader. You're young. they think you're the toy guy.

You don't know soft lines. Even though I'd worked at Mervyn's, but they didn't know that. And I want to change how the industry sizes close in every store in the world other than the gap. That's a big change. And so you can have all the arguments in the world. Getting people to support that is hard. It wasn't easy, but it's a big change. But for me, once I had that idea, I couldn't not do it.

I had to persuade my teams with every skill I had that was the right thing to do. And eventually did. It took about a month. We made all the changes and targets never looked back. Yeah. But when you're persuading people, so I'm thinking about incentives, right? And most people in corporate, from what I have heard, most people are not like you. their incentive is to not get fired.

Correct. It behooves them to be more conservative because most people do not get fired for mediocrity, but they do get fired for blunders. So when you're trying to convince a team, their incentive is to not get fired. They know that they have a better likelihood of being able to not get fired if they say, like, let's just, let's test it. Let's do a little end cap and test it and take that more conservative route. you're essentially going against their incentive structure when you're trying to convince them.

How do you do that? Obviously, the best reward for anyone in a company is to do something that performs spectacularly well. So when I took over kids, I had six senior buyers who were probably on average 40 years old. I was 31 maybe. they had probably on average been in their position five years. Out of those six, maybe one would get promoted again to like a divisional. So they were at the peak of their career. They had young families.

What they care about most is keeping their job, supporting their family. And the way to do that is to make plan. Don't beat it by too much because you get a tougher plan the next year. You know, just kind of. Yeah. Keep chugging along. But. Take your goal and make your numbers.

So for a lot of CEOs, they kind of like that because they don't want to take a big risk either. You know, but I guess. Because the board could fire that. You know, the way I looked at it, you know, Target was in a battle with Walmart. I was a business school student. Walmart and Target were the two big discounters. And they were now going head to head for the first time in their lives. because Walmart had basically decided to move from rural locations to suburban.

And so Walmart was opening stores right across the year from Target. And our sweet spot, which was the well-to-do suburbs of America, well, how do you beat Walmart? Right. That was the real strategic question. And you're not going to beat them just doing what you've all of has done, right? The world was going upscale back then. people are getting more money.

Like for the home example, the big winners are especially stores like Pottery Barn and William Sonoma in Crate and Barrel, and they had prices that were double targets. And because Target's home department wasn't very interesting, people would buy their groceries to Target would then go across the street to the mall to crate and barrel to buy things for their home.

Well, it seemed to me pretty obvious. Let's go after the crate and barrel customer. And so when I took over home, we went after design. That was, to me, playing it safe. Because Target had to find a way to beat Walmart. We couldn't let Walmart beat us. And if we didn't make moves from a merchandise perspective, Walmart's going to win because they had a lower cost structure. So we had to push hard on the merchandise at the edges to really bring in a new customer to Target.

That wasn't playing it safe. That was doing the right thing. And that's how I had to talk to the team. You know, we're here working for Target. We're not working for ourselves. This is about your job. This is about making sure Target wins. And we had to make sure Target wins in home.

Right. Just like we had to make sure Target won at toys for holiday. And then I had to persuade the team that this was the right way to win in toys. This is the right way to winning kids. This is the right way to win in home. And once you do that, they all get aligned and they're on board and they go. And then the results were amazing. We made every number every time when I was at Target.

And my toy department made every number every year. My kids department in the first year, I think, missed a couple after that blew them away. The home area, every senior buyer made every number, their sales goals, their margin goals, their turnover goals. Because we grew their revenues so high that it just carried it. I do think it's incumbent on people to be bold and to be bold in a wise way, I guess. So at this point in the chronology, you've had success at Target. You've taken some big risks. They've paid off.

You've been successful at Target. How did Steve Jobs hear about you? When I took over the home area, I had this, probably the biggest idea I'd had in my career today. You know, at that time, there were two categories in merchandise that people largely thought about. Basic merchandise, you know, toothpaste, washing detergent, food, and fashion, mainly apparel in some of the home merchandise. The beauty basics drew a lot of traffic, but it was low margin because it's very competitive. You got to have your crest toothpaste priced right.

And people like Walmart have low prices. You can't compete. But on fashion, you can make a lot of money. But the problem with fashion, you have to mark it down because it's here for the winter season. the coats go away to make room for the swimsuits. And so if you don't buy it right, you end up taking a lot of markdowns. And so it turned out we didn't make that much more money in fashion than we did on basics. But I said there's another category that could have the markup of fashion,

but never have to be marked down. And that would be design. Because there were items that had been emerging like the Alessie Michael Graves Tea Kettle. that had been the icon in New York in the 1980s. Right. You know, if you lived in New York, you wanted one of those on your stowtop. Right. And that sold for $150.

And our highest-priced tea kettle at Target was $9.99. What if we could do a Michael Graves tea kettle for $30? That'd be an incredible value. And it would be probably priced about where a crate and barrel starts their tea kettles. And that's where our customers are going to buy home. So what if we did a design collaboration at Target? She got Michael Gray's to design for Target. And we brought in all this merchandise and changed how he packaged and presented and marketed.

And it was very successful. And that began, you know, two decades plus of design a target. We all see Isaac Mizrahi, all these people come to Target to do design for Target. That started when I was in home. I remember you saying that you knew it was going to be successful when you were at a store and you saw a guy and girl flirt and then exchange phone numbers. Exactly. In front of the fixture. Yeah.

That was amazing. The day it launched, I got my car and I told Karen, I'm not going to be with the kids today. I'm going to run around and look at our presentations. I used to get so excited. I went to probably 15 or 20 target stores that day all over Minneapolis and St. Paul. and ran in to see how it looked because some stores had a little bigger gondolas, some less, and could they execute?

I went in this one store in Minnetonka, Minnesota, and I saw this really attractive young guy and this very attractive young girl, and I was standing near them, and there were some headers that talked about who Michael Grace was. And the guy was saying, oh, yeah, no, I'm familiar with Michael Graves. He's this great architect. He had just read the thing.

And the girl's looking at them and they're both. And then they bought something. And I just kind of observed this. And I said, this is the audience for trying to get. Right. And that's what I knew. It appealed emotionally. It wasn't a functional purchase.

Up until then, everything you'd buy a target in the home was functional. Right. I need to cook. So I'll get a set of pots and pans. I need a kitchen utensil. I need a clock. I'll buy a clock. That works.

Now, suddenly we had Michael Gray's clocks and Michael Gray's kitchen tools that were beautiful and fit in your hand because the handle was like an egg, a form that fit everybody, but it made it distinguished. And we sourced those with target's strength with volume sourcing, so we could bring design at a low price. The bottom line is it put Target on the map, but Steve had just come back to Apple. Steve loved design. He always had. They had just launched the IMAQ. and it was a success culturally, but it only sold to the Apple install base.

And so Steve was starting to feel like I'm back at Apple, I've done the best I can with the product, but I'm still not winning. And he concluded that his problem was not the products, but their go-to-market strategy, how customers saw them. And he was right because 95% of the people use PCs. And so the people working at the technology stores were young kids, mainly gamers who lived on PCs.

And so someone come in and say, I'm interested in Mac and they say, why would you do that? They're twice as expensive. The software comes out later. Let me help you buy a PC. And there are a lot of more choices. Right. Steve started to think that if Apple's going to win, it's got to have more influence on the point of sale. So he wanted to open his own stores.

And so he asked a recruiter, find out who's done all that design. stuff at Target because I really think that's well done. And so they reached out to me and I decided at that time, I'll go talk to Steve. What made you take that call? What made you take that meeting? Well, the frustration I had in the Target is everything I was doing, I felt like I was pushing water uphill. And I got it done. But I felt like increasingly my vision for Target was much bigger than my peers and it was a battle. The other thing is at Target, I was a very good merchandiser. If you're a good merchandiser, they want you to be a merchandiser.

Well, there were other parts of retail I thought would be fun to work on, like real estate and store design and all that stuff. So when I had a chance, I said, if I get a good opportunity, I should think about it. So when I met Steve and we talked, he said, look, you'll have a chance here. You'll be the only retailer in the company. You're the first one. you can do whatever you want, but you can do the whole thing. You can pick the locations.

You can design the service philosophy. You can design the stores. You can kind of do it all. And I thought, wow, that'll give me a chance to grow. I was kind of doing what Mickey had done 10 years before at the gap, where he came in and rethought everything. The store design, the presentation, the merchandise, and it was fabulous.

And I now to get to do that for a beloved brand. And even though Apple had a little market share, I figured, well, if I could get America to buy Michael Graves tea cuddles, I could figure out how to get someone to buy a Mac. You mentioned earlier that Steve would call you every night at 8 p.m. after your daughter had gone to bed and would just talk to you during those early conversations when you had just joined. What were those conversations about? Like, how did you absorb his philosophy, his vision, his way of thinking in those calls? I don't know. We talked a lot about Pixar. You know, like, movies. He'd tell me what he's working on. We talked about our kids. I'll never forget the time he asked me about my faith. Because he said, Ron, he goes, I know you want to love our customers. And he goes, don't you teach like Sunday school for your kids? I said, yeah. He said, tell me about

your faith. And we spent a couple nights talking about, you know, my faith, how I practiced that at work, what it meant to me. It was a very deep conversation, very unexpected. A day or two after those conversations, Steve called me up and he said, Ron, can you stop by the office? I have something I want to give to you. And I walked in and he handed me a movie, a DVD of a movie. It was brother, son, sister, Moon, the story of St. Francis of Assisi. A lot of people might not know this, but he became a saint. Right. But he was living in a Cici. Italy, and he created a movement that gave away everyone gave away everything they had to the poor. Right.

And Steve said, I had a charity's named after him. Charities named after him. And Steve, he goes, I really admire. This is one of my favorite movies. He said, watch it. That was Steve's way of saying to me, Ron, I appreciate that you've made a choice to have a certain faith. I might not do that myself, but I'm a spiritual person. And that was kind of the green light to go love our customers.

That's the way I looked at it. Right. You know, but that's how Steve work. You know, intensely curious. He wanted to understand my faith and why that was important and how that impacted my work. And he could learn from that. The next 10 years I work with Steve, he became a kinder, gentler leader. There's no doubt as he aged.

And it could have been the challenge with Camden. answer is dealing with. It could have been just maturity, could have been his family, could have been the teams he worked on, could have been Apple's emerging success, which became phenomenal. But Steve became a kind or gentler person. I think part of that is just we're all influenced by the people were around. And I think seeing the store succeed with that philosophy. Yeah. You know, had an impact. So, but the point is, the conversation, Steve, I had that first year, had a huge influence on our relationship. I absolutely knew how he thought about things.

If you're going to talk about things like faith and family, and, yeah, you're going pretty deep. You know, we also talked about all the Apple stuff. So it was a real profound experience for me to spend that much time with Steve. That's beautiful. Tell us about the first store that you opened. It had a blockbuster opening weekend.

which may have led to a bit of overconfidence. Walk us through that. Yeah, no, so we had worked on our stores for about a year and a half. May 19th, 2001, we opened two stores the same day, one in a mall outside of Washington, see at Tyson's Corner, in McLean, Virginia, and one down in the Santa Fernando Valley in Glendale. Turns out the same mall I had unloaded trucks for Mervyn's. Just the world's big circle.

both stores had an interesting start. 30 minutes before we opened, nobody was in line, maybe 50 people. But then the East Coast store opened three hours ahead. They had thousands of people in line. Well, I had gone to open the store in L.A. And I remember at 9.30, half hour before we opened, we had a small line.

And I was nervous nobody's going to come. So I called Steve. I said, Steve, I hate to tell you, I think I blew it. I don't know if it's the location. I don't know if we should have advertised. I told you we didn't need to advertise. We're in malls.

We're paying rent. That's our advertising. I said, nobody's here. He said, no, have faith. They'll come. 30 minutes later when we opened the store, I looked out, and I saw the line going on and on. And after a few people got in, I went for a walk.

And went down the hall, around the corner, past pennies, across the bridge into the parking lot. That day we had 7,000 people visit the Apple store. Wow. And it was a party. And I was there until it closed. And we had huge volumes way over what we planned. And I looked at the team and I said, wow, it worked.

You know, but it turned out that Apple had announced probably two weeks before a new portable computer, the iBook. Steve had gotten Tim to ship some to us early to have them available. Well, the Apple fan base who came to the opening, they had a chance to get a new eyebook. Now, I didn't know at that time how important product launches were for Apple, and I hadn't really studied that 80% of our revenue came from selling iBooks, and we had 7,000 people there and we had sold maybe 100 iBooks.

Well, they're at a high price. That's a lot of revenue. What happened at our opening is we had a great launch. So we learned that the stores would attract the Apple faithful, but it didn't mean we could attract a PC switcher or someone who hadn't bought a computer, and it didn't mean we could convince them to buy a computer. You know, as you went through the fall,

our revenue for the stores was about two-thirds of our plan. You know, they weren't doing as well as we needed them to do. And then as we opened our 16th store, September 11th happened. A lot of people were scared to go to shopping walls. And we're opening a lot of stores. And you know, see, the early days of the Apple store, I mean, we were doing very high revenue for a retail store. But they were well below we needed to be successful. So in my view, the stores were not doing well.

You know, just because we had traffic, you know, we had to make money. or it would be a big investment for Apple and Apple couldn't afford it. The first store was May 2001. You just mentioned that by September 11th of 2001, you already had 16 stores. We opened 27 the first year, the first by Christmas. That's an incredible volume,

opening 16 stores in the six months between May and September. Yeah. That's what the board thought. Yeah. A lot of people thought that. Yeah. But to me, it was necessary. If you believe the problem is we need more point-of-sale advocacy,

he asked the question, how many stores would it take for us to have appropriate distribution in the U.S.? And we had concluded it was about 300. And that's the U.S. only. Apple's going to need 500 plus stores around the world. Well, opening 25 the first year, which was our plan, it would take us 12 years to get to the right number of stores in the U.S. That's a long time.

Right. You know, so if strategically you believe this is critical, this go-to-market is as important as the next product we do. You got to commit. Right. Then you've got to improve and learn. But to Steve and I, it wasn't a risk at all. We actually wanted to go faster.

But we went at a pace we thought we could control the quality. Yeah. That was the driver. How many great sites could we get because we had great real estate? Yeah. How many good stores could we build? How many great teams could we hire? Right.

Quality was always the governor. And we concluded that 25 a year was about the right number, one every two weeks. We could do that. It's a little unfathomable to me how to maintain quality at a pace of a new store every other week. I mean, again, for all of the reasons that you just mentioned, you need to find a great site, like a great location. You need a great store leader. That's where like going to malls. It's pretty easy to know where the best spot in the wall is. And so we had a great real estate person. We had brought in from the gap who knew all the landlords. So picking real estate wasn't

difficult. You know, once we designed the store, it was just repeating the design because we were building stores that all look the same. Right. You know, some had columns, which they shouldn't have, but they were fundamentally the same store. We had to hire and train people. I can find leaders who've done this before, who have opened lots of stores in a row that are with mature retailers like the Gap, for example. Gap was opening hundreds of stores a year.

So to open 25 for a Gap leader would not be very hard. So to me, it didn't seem daunting to open a store every two. it seemed like the right amount. Let's move ahead a little bit. In November of the first year of the stores, we created our first non-Mac product, an iPod. It was only available to the Mac. And it didn't do very well.

But it was our first non-Apple computer. Three years later, Steve got convinced to bring it to Windows and bring it to everybody. So the iPod went to Windows, and we came out with a nano, which is a smaller, lower-priced iPod. Well, when that happened,

we had 100 Apple stores. We had them also in the United Kingdom. We had them in Japan in the big cities because we had built, built, built 25 a year for four years. 80% of America is 15 miles of an Apple store, and they all came to check out the iPod. and they came to buy the iPod. And the iPod became the first great Apple product that went to everybody.

Right. It's hard to separate Apple having that success without the stores. And so that commitment to building out that Steve and I shared, we've got to build out our distribution network, even it's going to take a while, was the right thing to do. It's hard to imagine Apple today without its stores. I think when the iPhone launch, what's a touchscreen going to feel like? You know, cell phone stores didn't even have products you could try.

They were just dead products you could look at and fold in your hand, but they weren't loaded with the software and all that. You know, so we had done things very differently. I think it'd be hard pressed to believe Apple would have been quite as successful with the products. Well, if the stores as a place to try, to discover, to get help, you know, on and on. Yeah. You know, in business, you've got to make these tough decisions sometimes.

You have to go and you got to believe and you got to make things successful. The iPod, we made successful. We made a lot of changes. We got smaller. We went to Windows. We created a music store. So you could buy music. We did that at 99 cents a song.

We had to make that. be successful. It wasn't when it started. That's how business is. And that's where it takes a real commitment. They're great companies. They believe in what they're doing. They commit. Apple's a great company. The Apple stores were great stores because we committed. Other than the Apple store, what do you think made it work? You know, when you talk about iTunes, I mean, when you talk about buying songs, that was revolutionary as well. Oh, those worked because they were great ideas. and the experience was so well designed. The iPod, once people had it,

and once they could access all their music, you know, once it started to shuffle in it, you didn't have to listen in the same order all the time, and once we had these great ads to inspire people, those silhouettes, it was an amazing product. To have all your music in your pocket to carry it around was life-changing for people. So the Apple product was the most important thing.

The stores, I think, got it into people's hands quickly. And then the word of mouth took over. You know, the products were great because they were so well designed. And the software was so great. And you didn't have to buy an album and get, you know, 15 songs, three of which you really wanted and 12 you didn't. You could buy a song for 99. sense. The iPad changed everything because Apple thought differently, you know, about every aspect of it.

When it came to some of the decisions that you made inside the store, like calling it a genius bar, Steve wanted to call it the geek bar. Yeah. How did that decision come about? And why? Yeah. Well, more interesting is why would you put a bar? Yeah, yeah. But, you know, that came about like anything you do through a conversation. I had an off-site with 80s. 18 people, very diverse people. Lee Klau, who had created the think different campaign, longtime Apple ad person. Dan Walker had led HR for the gap,

a very diverse group of people. When we started the meeting, I said, to get to know each other, why don't we all share, we were sitting in a big circle about 18 people, I think it was, your best ever service experience. And they all knew that we,

we're going to design the Apple store, retail store. But 16 people talked about a hotel. Their best service was at a hotel. And so we paused and I said, well, why are you all bringing up hotels? Did you not get the message? We're designing the store. But it turns out, nobody in a hotel is on commission.

They're not there to get you to buy something today. They succeed by you having. such a great experience, you'll come back again the next trip or you'll tell a friend. It was all word of mouth. So they really were in the service business where most stores are in the selling business. How do I transact? I quickly switched to me. I said, okay, what if we design the Apple store as if we were designing a five-star hotel,

what would that look like? And we spent the whole rest of the meeting imagining a five-star hotel jammed inside a retail store. So that impacted the people, the experience. But, you know, what do hotels have? They have a bar. So what would a bar look like in a store? Well, when you think about a bar, a bartender is a really friendly, well-connected person, knows all the restaurants in town because they have conversations all day with people that are hanging out at the bar and they know everything. I said, what if we had people that instead of dispensing alcohol dispensed advice?

And what if that's where you came if you had a problem with your computer? Let's put a bar in for service. And I called Steve. I said, I got a great idea for service. We're going to put it in a bar and we're going to put it in the center of the store. We're going to celebrate the fact that you're going to have a lot of questions. Technology is hard. We're not going to run away from that.

We're going to celebrate. but we've got an answer. It's called a bar. He said, that's great. Well, let me know we're going to call the bar. And then one day I was looking at playing the Think Different campaign again, where Apple celebrated genius. And I said, what if we called it the genius bar?

I'd like that be great. I called Steve. I said, Steve, I got the name. And he said, what is it? I said, genius bar. I said, just like that ad campaign you created and you came back to Apple, we're going to call it the genius bar. He said, do you know what a bad idea that is?

I said, why is that? He said, because anybody who's going to staff that bar, you want to be friendly and they can talk to people, anybody who can know computers, they're geeks. I've worked with people my whole life. They have no personalities. They have no people skills. I said, oh, he goes, if you want to call it the geek bar,

maybe it'll work. Well, I thought about it. And then I realized people that work in stores are young. So we're not going to be hiring these 40-year-olds who have been tinkering with computers and our geeks. We're going to be hiring these young people who get on computers for gaming. And we only have to hire, like at that time, we were opening one store per city. In Minneapolis, we'll need three or four geniuses. There's two million people in Minneapolis, St. Paul.

We can go find a young person who loves technology and has good with people. So I called Steve back at night. I said, Steve, I want to take another run at the Genius Bar. It's absolutely right name for the bar. It'll tell the customer we're really smart. But more importantly, people are going to come out of the woodworks to get that job. Because who wouldn't want to be the Apple Genius, the smartest Apple person in the state of Minnesota? People are going to come out of the woodwork to work for Apple and to be the smartest Apple person in town.

And he said, that's compelling. He goes, I still not sure it's a great name for the bar. I said, okay, but that's what I think. The next morning I came to work. I happened to walk in with Nancy Heinen, who is a general counsel, and she goes, hey, Ron, what's the genius bar? I said, why do you ask? Steve asked me to trademark it.

So Steve went, you know, in one day from terrible idea, I'm not sure to great idea, let's trademark it. And that became the name of the bar. But it says more about Steve than it does about me. The best idea is always one. Right. In this brainstorming session where you were saying, all right, what is it that hotels do that makes the service so great?

What were some of the ideas that you didn't pursue? Well, that's a good thing. Oh, yeah. Put beds in the store. What we got from there was warm welcomes. You know, when you go into a hotel, you're greeted at the door by a concierge who welcome to the hotel let me help you get checked in you know our stores started with a warm welcome we ended up pattering it after the ritzcarlton

because they were like 30 the top 100 stores in the world and they actually let us send our first 10 store leaders to open ritz carlton hotels and from that we learned the importance having a credo that you write down which are your daily standards and we got so much from the hotel, even the idea of creating an experience that would be wonderful. You know, we didn't have a pool, but we said, what if we took people on rides like an amusement mark in the Apple store? A ride's kind of thrilling, and when you finish a ride, you want to tell people I did it. Imagine if they came to the Apple store and they, you know, could take a picture with a camera and we could take a picture of them and we could put it in the computer and we could adjust it

and send it to them in an email or to a friend. That'd be kind of a cool. That's like going went on a ride. It's a ride at an Apple store. But so much came out of that offside that informed the Apple store. And then we put a theater in every store, you know, just because we wanted to create an experience. I don't remember what didn't come out. I'm sure there were a lot of ideas we shot down that day. At this point now, 25 years later, I remember what we did from that. I don't have a good answer for what we didn't do. I'll broaden that question out then to as you look back, are there things in your life that you didn't do? You know, good ideas that you discarded because you can't do everything.

Yeah, no, there were a few. There are a few stores I really wanted to do. You know, one was in Paris. You know, when I was there in the left bank, which I think is one of the coolest parts of Paris, you know, the sixth, Orandi Small, there was an old market. that was being redeveloped into a little shopping center. And it's now done today. Apple is a store in there.

Well, I wanted to develop the entire market for Apple. I wanted to build the biggest Apple store in the world right in Paris. Wow. And I wanted to put into that store and effect a museum, which celebrated everything Apple, you know, and it would have the original Apple twos and all the products.

And it just, because Paris is a city of museums. It's a city of stores. It's a city of history. The city of history. And I don't know why. I just really wanted to do that. And we ended up not doing it because people thought it was too crazy. But I think if Apple had done that, you know, we never built a store too big.

We never built a store where we dreamed. that it didn't, the performance exceeded the dream. I remember we opened a store in Hong Kong and we took over almost 10 retail spaces and we opened the entire storefront to Hong Kong Harbor and we had a whole floor, 100 seats at a genius bar and the original ones had five stools. People thought we were crazy. And that store opened up in 2011 as a, I was leaving Apple. In 2012, it did a half a billion dollars. And our Fifth Avenue store,

which is our biggest, best store in the world, you know, famous store in the world, had finally grown to half a billion dollars. We did that our first store in Hong Kong with that 100-foot genius bar. So we never built a store that was too big. I was in Paris two weeks for a birthday party of a friend. And I walked by the market and I walked around the market and I looked at the stores there and it's just kind of a nice little shopping mall with a Uniclo store at an Apple store and a couple others. And that could have been the greatest Apple store in the world.

So I have regrets. What is your experience walking around markets recreationally these days? I love going to stores. I love it. I get goosebumps when I see something great in a store. You know, I love when I see people. You know, it's really easy as a retail guy to know people that have done something very courageous.

Right. And when I see that, it inspires me. Fortunately, the retail world, there's a lot of industries where everything happens behind the scenes. Right. And I kind of enjoy cars. Well, you can see a glimpse of what a car is going to be in a few years. you don't get to see them making the car.

But in retail, it's all out in front of you. It's a public industry. So all you have to do is walk down a great shopping street and you'll see the next generation of retail and what everyone's thinking about. And it's really inspiring. I'd like to ask you about the next chapter of your life, the one that came after Apple.

You were the CEO of JCPenney's. Yeah. Tell us about that transition. Yeah, it was, I had now been at Apple for a, dozen years. Everything we did was great. It was very successful. And I had combined with Target, about 25 years of retail success. And I was turning 50. And I kind of thought, I'm either going to spend the rest of my career at Apple, you know, it was kind of a hobby for me, or I will take on one more retail opportunity. And as I thought about that, I really looked back and I loved the challenge

are doing really hard things. I love bringing design to Target. I loved creating the Apple stores. I said, if I did something, I should do something really hard. Something significant. Within a year or so, I got a call from a recruiter. It said two guys, Bill Ackman and Steve Roth,

had taken a big stake in JCPenney because they thought it would be a good investment. And they're looking for a board member. They get a third board seat. Would you like to be on the board of pennies? And I thought about it. I said, you know, that could be kind of fun. I mean, I remember when pennies opened up at Soutdale Mall when I was 10 years old.

You know, I remembered looking at Pennies when I was in Mervyn's, as a kid's buyer, kids divisional at Target because they were really good kids retailer. You know, I remembered parking at Pennies whenever you go to a mall because it was the least crowded store. You could always get a parking place to remember where your car was. Yeah. Penny's had been a part of my life for a long time. And so I met Steve and Bill and talked about the Department of Stern Industry and how I thought it not only could just survive, it could thrive, but people had to be willing to change.

And Stephen Bill said, wow, we'd love to have you join the board. So I went out to meet the board members. But right prior to going out there, they had a board meeting and then the current CEO got in a car accident. It turns out long-term CEO was 66 years old. and it made the board start to think about succession. Right. And after meeting me, the board called and said, you know, we were wondering,

would you be interested in becoming the CEO of Jason Penny? Well, I had now spent time thinking about it. I had gotten the inkling of what I would do if I were the CEO. And I thought, well, this could be a really great next chapter. What if I went to transform the department store, an American institution? You know, if I could bring design, to the masses at Target.

If I could bring computers to the masses, maybe if I could bring a reinvented department store to people, and that would be a really good next challenge. So I accepted the job to go become the CEO of JCPenney after 12 years at Apple. When you stepped into it, how was it similar to or different from what you had expected it to be? Well, it was completely different.

Unfortunately, when I was going to be announced in June to become the CEO. Steve called me after he had supported my leaving. Very supportive. I was surprised. He called to tell me, Ron, I got some very confidential news, but I only have six months to live. Wow. And he said, can you stay till I'm gone?

Well, three days later, they're going to announce me as CEO. It's becoming public information. And I said, of course, I'll stay. So I called up pennies and told the board that I was going to come to be CEO, but I could start until probably November of that year. They announced me the next day, or three days later. But I had six months where I had to be kind of finishing up at Apple, but begin to get to know the JC Penny's team.

So I talked to Steve and I talked to Pennies and I said, why don't I spend one week a month with the Penny's team? Three weeks with Apple and Steve was very supportive of that. But as I did that, I got to know the leadership team at Pennies. And it became very clear to me they did not want to change. You know, where I saw a department store, even though the stock was below where it had been in 1963, this is, you know, 40 years later. Right. From the team's perspective, there had been 60 department stores.

There were only four left, and they had survived. And they were the department store for the lower income part of America. and there wasn't a problem with what they were doing. The problem was with their customer base. So they felt like they were doing a great job. And Mike had told them they were the best in the world at sourcing and the best at this. And so as I got to know them, I realized, this is a team that doesn't think they have to change. And I'm only coming to change.

So I actually went to the board. I called up Backman after about three months. I said, I don't think I can do this. And he flew out that night on a plane and came out to have dinner. He said, you got to do this. I said, no, I don't. He said, yes, you do. And he said, why don't we do this? We have a board meeting come up in three weeks. Come on out. Tell the board your vision. Let's see if they'll support it. I said, sure. So I came out and I told the board that, you know, if I come, you know, I'm not coming to run JC Penny. I'm coming

to transform it. I really believe there's a period here where if you have the courage to make change, you'll get to the other side. But if we don't, just like the other department store, it's a dying institution. The business model is tired. Nobody likes, no one shops at coupons outside of a few department stores. The world's going to everyday pricing. The world's going to new merchandise, direct-to-consumer. These direct-to-consumer stores like Warby Parker and, you know, they're going to need a place to put their stores.

We can take our low-price real estate and create a venue for, for them and we can become a place for young people shop and discover new ideas. And I went to the whole vision. Right. And they said, no, we'd love to do that. And they said, we're all in. I said, I'm not sure the team is. And Mike Olman said, I think you're misreading.

And we're on. These are warriors. They want to change. So I decided to come. And then I started November and December. I remember telling the board, well, here's our vision. And in retail, you've either the time to make a big change is spring. after Christmas, the inventory goes down.

That's a slow season. Let's go get started. And we either do it this February or a year from now. And I need your advice because I think this February could be too soon. But the board said, what do we have to lose? Let's go. And I got excited when they were excited. And I said, let's do it.

But the reality, it set in motion everything that made the Pennies thing fail. You know, because I had barely got to know the Penny's team. It wasn't their vision for JCPenney. It was Ron's vision. And nobody wants to implement someone else's ideas. They want to understand it. They want to be a part of it. And so it's set up just a terrible transformation.

And we changed everything three months later, especially the pricing. We ran an ad that kind of insulted our customer. Sales went down. Now, we had planned sales down 15%. They went down 20. To me, that was pretty close, you know. What's 5%? When I was at Apple in 2002, salesman down 38% for the year.

This was 20% one quarter. We were transforming processors. Here we're transforming pricing and other things. But to the investors and to others, they said, why would you let Ron fire your customer by getting rid of coupons? There are people that love their coupons. All these people have been shopping there for years. I know he wants to find a new customer.

Why would you fire your customer? And nobody understood it. There were a lot of shorts that got into the stock and they were very aggressive, you know, challenging my being the leader of the company. It's just really difficult. And after a year of fighting to, you know, have transformed J.C. Penny, it was exhausting for me. You know, I had had 25 years of success. I'm commuting to Dallas. It wasn't fun.

You know, I just told the board of the truth that if, look, I still believe in what we're doing. But if you want to make a change, I won't get it in your way. If you want to go back to the old model, the sooner you go back, the better. You know, as that was kind of my way of getting it out, and I think in my heart, I hope it's Iran, we're going to go back. Because I just didn't have the courage to get through that. And I was at a weak point in my life, and I was missing my kids.

And they were now 14, 14, 15, 14, 16, going through high school. And I'm out in Dallas alone in a hotel. room every night and getting pillared by the press, you know, every day. I thought pennies would be under the radar thing. It became a real big business story for some reason. And it was very difficult. So when I look back, what made Apple work is the team. They were all bought in. But I built that team one hire at a time. One store at a time. We built it together. You know, I took an Apple vision for how you win, how Apple would do things, to a company that at 100 years of history with very built-in expectations and people and talent levels. And, you know, I just did not do a good job

managing the transformation. And so I really failed not from a vision perspective, from a leadership perspective. When it comes to leadership, and particularly communicating a vision. It almost ties back to our much earlier conversation around the vision at Target. When incentives are different, when entrenched ideas are different, when you're trying to get people to buy into something that's risky, with the benefit of hindsight now, looking back on that, how do you lead?

And particularly how do you, what have you learned about getting that buy-in? Yeah, the most important thing I think you need. It's not the story. It's really important to have a compelling story, but it's to have trust. You know, the employees you're trying to convince to move another direction, they have to trust your judgment. They have to trust you. They have to believe in you.

They should know you. So I target. When I had the kids area, I had a team of 10 people. and I had to convince them to make a change. Well, they all knew me really well. I'd see him every day. You know, I'd go out to dinner with them, you know. It was a small team.

Right. So when I went to kids, I had succeeded at toys. Ron Scott, he's a well-like guy. He's now been at Target for a couple years. He's taking a new responsibility. I got six senior buyers. I could establish trust. When I went to Apple, I hired the team.

Steve was very supportive of me. You know, what Steve believed, people trusted. I got trust naturally because Steve had selected me and he supported the vision that we developed together along with my team. When I went to Pennies, nobody knew me. And if anything, they saw me as this rich tech guy who had been very successful,

a very visible guy, probably saw me as being very arrogant. I mean, they didn't realize that I had spent more time in apparel than I had in technology. But that was old, Ron. Right. What I did at Apple,

just crowded out everything else. And so I didn't take the time to build trust. And I think you see that in so many ways. You know, when a new politician comes in, you know, in our country, you know, you have, It's a Democrat, then it's a Republican.

The Republicans don't trust the Democrats. The Democrats don't trust the Republicans. When you want to make change, it helps to have trust. Right. You know, people like Kennedy, they seem to earn the trust of the American people. Obama earned the trust of the American people. Great leaders like Sam Walton earn the trust of his teams. I think the big thing you need when you're going to make a transformation,

need time to build trust. And that leads to believe. And I didn't have that because I moved way too fast. You know, so for example, if I'd come in for a year and I got to know all the team members and worked with them and said, hey, here's the vision of what I think for JCPenney. Sometime, a year from now, we're going to make a big bet. We haven't figured out how we're going to implement it yet, but I want you to understand why. And it'd get to know me. and for investors, if we had reduced our expenses like we had to do anyway,

if we had reduced our inventory, if the stock price had gone up, you know, just a nice 10, 20 percent. People would get to know me as a CEO. I could explain the vision. We could figure out how do we handle these long-term customers who are dependent on coupons? Is there a way to transition them into the new pricing and let them know why we're doing it and why it's good for them

and how they benefit? But, you know, if we had taken our time, we could have built a better transition plan. We could have earned the trust of all of our stakeholders, board members, employees. The speed was the mistake. Not earning trust was the downfall, in my opinion. And then for me, it was not having the courage to stick it out. because I hadn't been faced with that kind of challenge in my career. When a team is not bought into the leader's vision, on a day-to-day level, how does that manifest?

In dishonesty. You know, and people telling you I'm on board. It's back to that early conversation we had about people want to keep their jobs. Yeah. Think about pennies. You know, people that got to be a divisional or a senior person in a penny. They were the ones who couldn't get promoted at Target or Macy's. Penny's wanted someone who worked at Target because they were the young superstar. So I worked at Gap. They're coming to lead the home, the men's area at Pennies because they couldn't get promoted at a gap. They're the kind of people that were good, but not good enough to survive, thrive, where they were. So now they come down to Pennies, there's no other department strategy to go to.

They want to keep their job. they went there to move their family to a low-cost living area in Plano or Frisco. You know, they're about their families. So how do they survive a leader like me? They pretend to go along. You know, they say, yeah, sure, that's a good idea. But behind the scenes, they go, this is crazy. Why are we doing this?

But they don't have the courage to tell you why it won't work. So I got kind of blindsided because I had people, very senior people, saying, oh, the team's all on board and they're all in. But behind the scenes, I learned they're telling them, don't worry in six months, he'll be gone. And that means you're getting, you're not getting honest feedback. I'm not getting honest feedback from the team. And I never got honest feedback from the team.

I did a little bit, but not generally, I didn't. Right. But I could feel it. Yeah. Because I've got good EQ. I could feel the team wasn't brought in. And that was what made it hurt. And then with lack of honesty.

feedback, you don't have enough information to know how to iterate. You really don't iterate. After I was done, I talked to Safra Katz, who's a good friend, who's the president of Oracle, lived in the Bay Area, and she said, Ron, when you took over pennies, how many of the leadership team did you keep? I said, all of them, I filled open positions with some people I knew, but I kept them all. She goes, well, do you know, at Oracle, when we do an acquisition, we let 100% of the existing leadership team go.

Wow. She goes, all it takes is one passive-aggressive person that's respected by that team and the business transition will fail. Wow. You need to replace them all. I kept them all.

So again, learning. Now I'm not saying you have to replace small. I don't know if I agree with Safra, but it really said to me, you've got to be really careful in these transitions because the people that have been there are the ones who are respected by the troops. Right. They're the ones who are probably been implementing the old strategy. You know, if they don't get on board, they want to survive.

You know, it's going to be much more difficult. You know, I'm not the expert on how to execute a great transformation. I'm pretty good at building something new like we did Apple and even at Target. But, you know, I learned a lot of lessons through pennies. What's next? For me, uh, I think I've, yeah, I think I've, yeah. my chance to lead large organizations. I'm 67. Everything you do takes a good decade. So I decided, you know, after 12 years after leaving Apple this time, to tell the story

of the stores. So for the past three years, I've been working on a book published by Harper Collins called Shop Different, How Retail Revealed Apple's Genius. And I think it's a great book. And I hope that I can, you know, use that to really teach. teach and train and mentor young leaders? And is there something in my career that can help them perform better? You know, to me, it's not about doing something more. It's about sharing some of the lessons I've learned through, Mike. Of the segment of our audience that

would identify as entrepreneurs, almost all are bootstrapped small businesses. And they would be in e-commerce. And not even like a Warby Parker, like the type of e-commerce that also has a retail footprint. These are people who are running an Etsy store. They've got something on Amazon. They've got their own website. Maybe they've got a W-2 job and they're working on it in the evenings and weekends with the goal of going full-time in a year or two.

Do you have any words of wisdom for people? I think that group would love the book. And the reason I say that, you know, for me, I enjoy books. When I look back on my retail career, I would read a book like, like in search of excellence, you know, which came out in 1982 or principal-centered leadership by Stephen Covey and 87. Marianne Williamson's A return to love. Yeah.

And I'd read a huge impact. But I'd read a book. And in that book, I typically find one nugget that just connected with my soul. Yeah. And then I would bring that to work. But I was reading the book, entertaining books, thoughtful books. looking for something that could influence how I did my work. The way the book's written, it's written like a novel.

It's not written like a business book. You feel like you're in the room with Steve and I when I met Steve. Right. When we created the stores. What was Steve thinking when we created the iPhone? What was Steve thinking as we imagined the retail stores? And I think to have exposure to, you know, how Steve thought, how Ron thought, how Apple thought,

has got to somehow stimulate something that will make you a different Etsy creator or entrepreneur. You write about how thinking different is doing different, is acting different. You know, it's interesting. The last line of the think different ad is, you know, the people that are crazy enough to think they can change the world are the ones that do. Now, you can read that as the ones who change the world. They do change the world. Or they're the ones who do.

Who do. At one point, there's a great video you get on the internet about Steve said it's the doers that change the world. You talked about how some of the great painters create their own inks. Because the inks that they have to buy aren't good enough for them. Right. And through creating the ink, it reveals a new way. to paint or a new way to put paint on a canvas. And I think that's true. I think most people that changed the world are doers. You know, the people that Steve celebrated, you know, Amelia Earhart.

Her dream was to fly around the world. But she got there by flying. Right. Not by thinking about flying. Not thinking about flying. And so I really believe that Picasso created, you know, great painting in cubism by experimenting on paper. Right. What if I looked at things from a different perspective? And eventually, the art that he imagined showed up and it became what we recognized as genius. You know, so I think doing is really important.

And it's fascinating. In the age of AI, we're in the Just Do It generation because general knowledge is, you know, a query away. So you have time to do that. things. And it's easier to do things because you get advice really quickly. If you want to program, you don't need to have an engineering degree. You've got to become an expert of using plot in today's world. Right. And you can create great software. You know, so the world's changed. Really, the value is what's your North Star? You know, what's your dream? What do you want to

accomplish? And then you just got to go do it. I really am an AI optimist. I think it's going to change the world for good. You know, it's going to create more new jobs and it's going to replace old jobs. Absolutely. I really believe. Yeah. We're seeing that now. I mean, the economy's resilient. Jobs are still growing. You know, for every time you read about someone laying people off. Right. You know, you hear about someone starting a new division. Because when companies make more money, the CEO's got to invest in growth. They've got to invest in new ideas. So AI will help you become more efficient and find new ways to make money and that's what we're seeing. Profits are growing great at companies as the implement AI. Right. But most people are using it to perform better and not to

replace workers. But you'll replace some, but you'll invest in something new. So people have to be adaptable. It'll be different than when I went, you know, I could be a retailer for life. You know, maybe you won't be able to do that in the future. You have to be more flexible. But I think AI is going to change your world for better. Do you remember when the internet first came out and there was all of this hand ringing around, it's the, this is the death of brick and mortar? Yeah, and a lot of people still think that.

Yeah. But it's absolutely not true. You know, retail has thrived in the age of the internet. Now, it took about 10 years for retailers to build their online channel and integrate them into what we call Omni Channel. But you look at Walmart, it's been worth a trillion dollars in the last year. When the internet was created, it was about a hundred billion dollar company.

So Walmart, the biggest retailer in the world is ten times as valuable digital and physical as it was with physical alone. Tired retail never works. So we've experienced tired malls closing down and becoming condominiums and health clubs. We've experienced tired retailers go out of business. like, you know, what's happened with the luxury department store, you know, the closing of a lot of tired sack stores and tired Neiman stores, there were too many and they weren't kept current. That tired retail doesn't work, but the technology change of online shopping was the rebirth of many retailers as they became more productive. And they went to Omni Channel.

technology always works that way. We can immediately see what it's going to impact. You know, online's going to impact bad stores, no doubt. We couldn't imagine when it came out how Omni Channel would let you buy online and pick up in store. And it would let companies like Target instead of having big regional warehouses, turn every store into a regional distribution center and ship to customers within seven miles really fast. You know, we couldn't imagine in 2000 the benefit of Omni-Channel retailing. Today it's been actualized.

You know, so retail's great. AI's already improving the shopping experience online. It's also improving the shopping experience in stores. How that nets out will happen over the next 20, 30 years. But I'm sure it's going to be for the better. Back at the time, when other. people had that pest I'm assuming. Oh, I was the store believer. Yeah, yeah. I was always a store. I was a store optimist. Yeah. And I knew technology, yeah, but I knew people would always prefer stores. Right.

We are social animals. How did you refute the pessimism when you heard it? Well, we just, like Apple, people thought we were crazy to open stores. Dell was winning. Dell was selling computers online. They didn't have stores. Gateway was closing down stores. They just had bad stores. Yeah, they didn't understand retail. They did it all wrong. Obviously, Apple proved that with its stores. So I don't know how you referred to it, but it was very clear to me that

we've been buying things in stores for 800 years. Stores are a big part of the fabric of society. We're social people. We need to try and we buy clothes to improve how we look. We try those on.

We look in the mirror and fitting room. That's just part of what we do. Now you can buy online. It's getting more efficient to buy online. But the reality is 40% of clothes bought online and returned. It's a really tough business model to do online apparel. We all have an inner voice that's the most important voice. And that's based on our personal geography, where we grew up, where we worked, believe.

Then there's outer voice, which is what you hear on the outside. That's what the pundits say. You know, the outer voice is saying stores are. dying. That's Mark Andreessen's opinion. My inner voice, as a lifelong retail guy who shops, who's a connector with people, believe stores would thrive. You know, you've got to trust your inner voice. That's what I believed. And that's why I went to Apple. That's why I was willing to work with Steve to open the Apple stores. Turns out I was probably right on the Apple stores that they would work. That's where you got to trust your inner voice. Same thing to

day, there's all these debates on what's the future of AI. We have a lot of different opinions out there. My encouragement is believe your inner voice. And what you do as a doer is what's going to change the world. But it's unknowable today what the true impact of AI will be. But I think we all have opinions. And I encourage you to get onto the field and do something. I know from many conversations I've had with members of this audience, since we're on the subject of doing, those who do, I know that there are many people who are afflicted by analysis paralysis. The vein of overthinking, what would you say on the subject of having that bias towards action, you know, becoming a doer? Yeah, yeah. What would you say to somebody who just has a tendency towards overthinking?

Well, here's what I'd say is every decision we make, we use our head and we use our heart. We use our mind and we use our instinct. So if you're having an analysis paralysis, you probably are too reliant on your mind. And not enough on your instinct. And you got to step away and say, why don't I spend a little time listening to my inner voice? why don't I put the spreadsheet down and take a walk if I'm in the retail business

and I'm having an analysis paralysis why don't I leave my computer and go visit stores for a while and see what my inner voice says your inner voice you experience in the real world you experience that talking to people

you experience that observing real people real behavior your real thing. And so if you're having an analysis paralysis thing, I think you're in your head too much. And you've got to get back in touch with your heart, your intuition, your instinct. And we all have that. And we rely on it for many parts of our life. A lot of people just don't think they can rely on that for work. But it's as important to work as it is to your personal life. Beautiful. Well, thank you for spending this time with us. Where can people find you if they'd like to learn more and where can they find the book? Yeah, that's great. No, I,

actually have a website called Ron Johnson ShopsDifferent.com. You can go there to order the book, but the book is available from all your traditional bookplaces. But if you want to learn about me, Ron Johnson Shopsdifferent.com. Thank you, Ron. What are three key takeaways that we got from this conversation? Key takeaway number one. Measure your career in what you learn, not in the dollars that you make. So at the age of 24, Ron graduates from Harvard Business School and he lands one of the most competitive jobs in his class, M&A at Goldman Sachs, pays him $120,000 a year. That's what it offered to pay him. And he turns it down and takes a $40,000 job unloading trucks at a Mervyn store. And he does it. He picks retail specifically because he believes that retail is

more of a meritocracy, because the store's results sit on the scoreboard next to every other stores. So a hard worker at a retail outlet can move up fast. And so, So he picks it because he likes the competition, because he likes the challenge, and because he can see himself doing this for the rest of his life. So if you are weighing a job offer or a career change or thinking about starting a side business, hold it up to Ron's three-part test. And you've got to step away and say, why don't I spend a little time listening to my inner voice? Why don't I put the spreadsheet down and take a walk?

If I'm in the retail business and I'm having an analysis paralysis, why don't I leave my computer and go visit stores for a while and see what my inner voice says? Your inner voice you experience in the real world. You experience that talking to people. You experience that observing real people, real behavior, real thing. That is key takeaway number one. Key takeaway number two, pitch your boss on the problem that your boss, boss already has. Ron wants to call Apple's in-store help desk. He wants to call it the genius bar.

Steve Jobs hates the name. And Steve's reasoning is that anyone who knows computers is a geek with no people skills, so they should call it the geek bar. But Ron holds his ground. He thinks it over and he calls Steve back that night with a new argument that is aimed right at Steve's worry about hiring. Ron says, you know what? The name is going to bring applicants out of the woodwork because who wouldn't want to be the smartest apple person in Minnesota? Ron addresses Steve's concern. Ron pitches Steve on the problem that Steve already has, which is Steve is worried about hiring. And what that means for you is that if you are trying to get the green light on a project or trying to get a promotion or trying to get a raise, trying to be persuasive, especially to,

to someone in your career who outranks you, treat that first know as a clue and find the argument that solves the problem that your boss is grappling with. He said, that's compelling. He goes, I still not sure it's a great name for the bar. The next morning I came to work. I happened to walk in with Nancy Hinen, who was a general counsel, and she goes, hey, Ron, what's the genius bar? I said, why do you ask? Steve asked me to trademark it. So Steve went You know, in one day from terrible idea, I'm not sure to great idea, let's trademark it. That is the second key takeaway. Finally, key takeaway number three.

When you're stuck, close the spreadsheet. There are a lot of side hustlers who know this trap. You research, you build the model, you compare options, and you never launch. Ron says that every decision uses both your head and your heart. And if you're stuck in analysis paralysis, you're leaning too hard. you're leaning too hard on your head. Physically get up. Go where your customers are.

For Ron, that means walking into retail stores. For you, it might mean go have coffee with three people who would actually buy the type of thing that you make, right? Or go to a craft fair or to a conference or like go where your customers physically are. And that's going to get you out of your head and into more into your being. You know, I didn't grow up in a real wealthy family.

So not going to Goldman. The net present value of a life wasn't how much money I made. It was the people I was with, the work I was doing, the joy I was experiencing. And even today, you know, people ask, what do you do every day? I said, I try to do things I love with people I love in places I love. If I don't have all three of those, I should make a change. Those are three key takeaways from this conversation with Ron Johnson, the designer of the Apple Store and the former CEO of JCPenny's. Thank you so much for being part of the Afford Anything community.

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