Founders - #19 Becoming Steve Jobs

Episode Date: January 19, 2018

What I learned from reading Becoming Steve Jobs: The Evolution of a Reckless Upstart into a Visionary Leader by Brent Schlender and Rick Tetzeli.---Learning from great company-builders (0:30)Steve Jobs verbal mastery (5:00)The failed negotiations between NeXT and IBM (10:00) "But how can he be a turnaround expert when he eats his lunch alone in his office, with food served to him on china that looks like it came from Versailles?" (18:00)"You can't go to the library and find a book titled The Business Model for Animation. The reason you can't is because there's only one company [Disney] that's ever done it well, and they were not interested in telling the world how lucrative it was." (22:00) Bill Gates on Steve's simplicity (29:00)Steve Jobs on being an artist (33:00)Apple pays half billion dollars to rehire Steve Jobs (34:00)"The company is one of the most amazing inventions of humans, this abstract construct that is incredibly powerful." (38:00)Unlocking secrets (42:00)Who gives a fuck about the channel? (45:00)"It's not about how fast you do something, it's about doing your level best." (52:00)Deep Restlessness (55:00)"Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven't found it yet, keep looking. Don't settle." (59:00)Bill Gates on the negotiations between Pixar and Disney (1:08:00) ----Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work.  Get access to Founders Notes here. ----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — GarethBe like Gareth. Buy a book: All the books featured on Founders Podcast

In part because of the way Steve quarreled with Markula and Scott, in part because he so brazenly asserted his opinion as fact, and in part because, over the length of his career, he neglected to share credit for Apple's successes in the press, Steve developed a reputation as an egomaniac who wasn't willing to learn from others. It's a fundamental misunderstanding of the man, even during his youngest, brashest, and most overbearing years. While Steve looked to his elders at Apple for guidance, he also sought it out elsewhere. He didn't yet have the skills to build a great company, but he admired those who had pulled it off, and he would go to great lengths to meet them and learn from them.

None of these people were really in it for the money, he told me. David Packard, for example, left all his money to his foundation. He may have died the richest guy in the cemetery, but he wasn't in it for the money. Bob Noyce, co-founder of Intel, is another. I'm old enough to have been able to get to know these guys. I met Andy Grove, CEO of Intel, when I was 21. I called him up and told him I had heard he was really good at operations and asked him if I could take him out to lunch. I did that with Jerry Sanders, founder of Advanced Micro Devices, and with Charlie Spork, founder of National Semiconductor, and others. Basically, I got to know these guys who were all

company builders. And the particular scent of silicon valley at that time made a very big impression on me so that's from one of the first chapters of the book that i want to talk to you about today which is becoming steve jobs the evolution of a reckless upstart into a visionary leader and the author the two authors are Brent Schlenderler and Rick Tetzeli. And so long-time listeners of this podcast will know that I've already covered Steve Jobs by reading the authorized biography that Isaacson did on him. Isaacson spent some time with him right before he died and then published a book shortly thereafter. But I'm going to tell you why I think this book is so interesting to me.

And I'm going to tell you that by just reading to you why the author wrote the book. And here's what he has to say. I kept coming back to the time that many have described as his wilderness years, the dozen years between his first tenure at Apple and his return. That era from 1985 to 1997 is easy to overlook. The lows aren't as dramatic as the blowups of his first tenure at Apple, and the highs, of course, aren't as thrilling as those he engineered in the first decade of the 21st century. These were muddled, complicated times, and not the stuff of easy headlines. But those years are in fact the critical ones of his career.

That's when he learned most everything that made his later success possible, and that's when he started to temper and channel his behavior. To overlook those years is to fall into the trap of only celebrating success. We can learn as much, if not more, from failure, from promising paths that turned into dead ends. The vision, understanding, patience, and wisdom that informed Steve's last decade were forged in the trials of these intervening years. The failures, stinging reversals, miscommunications, bad judgment calls, emphasis on wrong values, the whole Pandora's box of immaturity were necessary prerequisites to the clarity, moderation, reflection, and steadiness he would display in his later years. I thought that

idea was really interesting. And after reading the book, I understood why the author chose to go down this route. And I've read a lot about Steve Jobs. And there's just some stuff in here that I haven't seen anywhere else. So it's definitely worth your time if you're trying to build a company. And I like what Steve was saying in the introduction, how he went to great lengths to learn from other people that have built companies. He talks about David Packard, obviously one of the founders of HP, Andy Grove, Jerry Sanders, Charlie Spork, all these other guys. It's almost like it's an explicit endorsement of this podcast. So there is another section in the chapter called I Didn't Want to Be a Businessman that I want to skip to right now. And this might be a little different from the other podcasts. There's just a lot of random

stuff in here. So I'm going to move through the book chronologically, but the timeline definitely does jump around. And this part I'm going to read to you right here was what I originally picked out for the intro because I think it's fascinating insight to Steve Jobs at 22. And what I really like about this book is, just like the whole reason to read biographies on company builders in general, is they don't start out great. They're just born like anybody else is. And they learn the skill over time. So let's jump to Steve Jobs and I think what most people picked up on one of his greatest skills, and that was his verbal mastery.

Oh, and before I start reading this, a lot of the highlights that I picked out for this podcast are actually direct quotes from Steve, which I found really interesting. So let's go right into the book. There's a long and wonderful extemporaneous quote from a New Yorker piece in late 1977 that offers rich proof of Steve's fully formed verbal mastery. Written at a time when the average reader knew so little about computers that a writer could delight in titillating terminology like naked computer and get away with obvious puns using the word bite and apple, the magazine's reporter encountered Steve manning the Apple computer booth

at a computer fair. I wish we had these personal machines when I was growing up, Jobs tells him, before continuing on for a total of 224 words. And now here's Steve directly talking. People have been hearing all sorts of things about computers during the past 10 years through the media. Supposedly, computers have been controlling various aspects of their lives. Yet in spite of that, most adults have no idea what a computer really is or what it can or can't do. Now, for the first time, people can actually buy a computer for the price of a good stereo, interact with it, and find out all about it.

It's analogous to taking apart 1955 Chevys. Or consider the camera. There are thousands of people across the country taking photography courses. They'll never be professional photographers. They just want to understand what the photographic process is all about. Same with computers.

We started a little personal computing manufacturing company in a garage in Los Altos in 1976. Now we're the largest personal computer company in a garage in Los Altos in 1976. Now we're the largest personal computer company in the world. We make what we think of as the Rolls Royce of personal computers. It's a domesticated computer. People expect blinking lights, but what they find is that it looks like a portable typewriter, which, connected to a suitable readout screen, is able to display in color. There's a feedback it gives to people who use it, and the enthusiasm of the users is tremendous.

We've always asked what it can do, and it can do a lot of things. But in my opinion, the real thing it is doing right now is to teach people how to program the computer. Before moving on to a booth where a bunch of kids, that was the end of the quote, by the way, before moving on to a booth where a bunch of kids were playing a computer game called Space Voyager, the reporter asks if Steve would mind telling us his age. 22, Mr. Jobs says. Speaking off the cuff to a passing journalist from a decidingly non-techie publication, Steeves finds so many ways to demystify for the average person the insanely geeky device that he and Woz had created. He understands their fundamental fear that computers may take over too much of modern life,

a fear he would capitalize on repeatedly, most notably in the Orwellian imagery of Apple's famous 1984 commercial. He sympathizes with their ignorance. He offers several analogies to comforting examples they will understand. Chevys, typewriters, cameras. Indeed, he makes using a computer seem no more complicated than taking a photograph, going so far as to call the Apple II domesticated. And yet he elevates both his company and its computer into something aspirational. He links this machine made a few months ago by some disheveled California misfits to Rolls-Royce,

the 73-year-old paragon of sophisticated industrial manufacturing and elite consumer taste. He even calls Apple a world leader, an absolutely unprovable claim that rockets the little company into the same league as IBM and DEC and bureaus, which were then the industry's giants. He was an extraordinary extemporaneous speaker, and McKenna helped him wield that tool to great effect. McKenna there is referencing one of Steve's first mentors.

It's Regis McKenna, I referencing one of Steve's first mentors. It's Regis McKenna, I think his name is. He's a famous marketer and advertising guy. The part I'm going to read to you now is an example of Steve Jobs' immaturity. And then I want you to remember this part because later on, we're going to compare and contrast Steve's actions here, negotiating with the company, with a deal he did with Disney and Pixar. And I'm not going to cover, again, this is not a chronological summary of Steve's life. This is just parts of the book that I found interesting. And so at this point in the book, he already has been ousted from Apple and he's already running Next. And it's,

you know, it's not going too well. And a large part of why it's not going well is, you know, mistakes that Steve is making. So let me tell you about the time that he was negotiating with IBM. Towards the end of the show at Davies Hall, Steve Jobs revealed what should have been the biggest news to come out of the event. Computer industry colossus IBM had decided to license the Next Step operating system for use on a line of its own engineering workstations. The vision of the world's biggest computer company running Steve's revolutionary operating system seemed a great endorsement. The basic agreement between the companies was that IBM would license the right to use Next Step operating system as a graphical interface in return for $60 million, a pittance for IBM, but critical operating capital for next.

The reason they're saying is that they're not making that much money. Their products are either non-existent or not selling well. And so they've been funded largely through Steve Jobs' own capital and then some outside investments as well. But again, they've been running on that for a few years. So they're going to have to do something quickly or, uh, before the company runs out of money. So let's go back to here, but critical operating capital for next, which was burning through its investors cash as the years dragged on. Many people believe that the arrangement might have broader implications and impression that Steve did nothing to dispel. IBM had an existing deal

with Microsoft to jointly develop a new operating system for future PCs called OS2. By announcing the deal with Next, IBM seemed to be indicating that it was not comfortable with Microsoft as its sole key partner. Indeed, within a few months of the Next announcement, it became clear that IBM and Microsoft were having serious issues working together. The tantalizing possibility that Steve's operating system might eventually power not only workstations, but also the personal computers of Apple's most feared competitor. If that ever happened, Steve's comeback would be complete. Now here's the problem, but Steve never seemed to quite know how to play his cards with IBM. He displayed an unsettled and juvenile mix of hubris and uncertainty.

Jobs could be bold and strong, as when he secured IBM's promised investment before any big blue exec had even laid eyes on the Next Step operating system. But he could also be plain just rude. Walking in late to one meeting with a suit of IBMers who had flown out to Next, Steve interrupted the proceedings with the dismissive pronouncement, "'Your user interface sucks.'"

Dan Lewin, who would meet with Steve to carefully plot their strategy before every IBM meeting, never knew what to expect from his boss. Sometimes Steve would completely undermine the groundwork the two had carefully laid. "'I'd sit there and literally kick him under the table, Lewin recalls. There was one meeting, for example, where he went in and actually told them, I really don't understand why you guys would want to help us.

That doesn't seem to be a good negotiating tactic. Psychologically and emotionally, signing on with IBM was every bit as complicated for Steve as begging Bill Gates to support his computer. Steve had always envisioned Next Step as the backbone of his own spectacular computer. He wanted to be the hero, not a secondary partner for a more powerful computer company. If IBM had exploited his operating system and sold a lot of computers running their version of Next Step, the glory would have been theirs, not his. It shouldn't have been surprising then

that Steve failed to make this important relationship work. He killed the IBM deal by failing to follow through as a good business partner. IBM's Bill Lowe, a veteran who had been instrumental in launching the PC back in 1981, had initiated the deal. But Lowe retired in 1990, and James Canovino replaced him. Canovino logically assumed IBM could use Next 2.0 version of Next Step on its machines. But Steve, who hadn't even met Canovino, held up IBM for more money, leading to another round of protracted negotiations.

He overplayed his hand. This line about protracted negotiations, keep that in the back of your mind too, because later on we're going to talk about how simple Bill Gates found negotiating with Steve Jobs actually was. The Steve Jobs in the future, that is. He overplayed his hand. Canovino stopped taking Steve's calls and just abandoned the project, although there was never any real announcement that it was over. It was a minor disappointment for IBM, ending its plan B fantasy of creating real alternative to Microsoft's new Windows graphical operating system for PCs. But it was a fatal blow to Next, ending its last real chance

to achieve the kind of scale that would have turned it into, as Steve had said in 1985, the world's next great computer company. Lewin quit Next in frustration months before the IBM deal dissolved. He was one of the first of the five original employees to leave Next. We owned the world when we were at Next, and it failed because of Steve, Lewin remembers. Steve invited Lewin to lunch two weeks after his resignation. Well, now that you're leaving, what do you really think? Steve asked him. You're going to go through every penny the way you're headed, said the now former head of sales, that's Lewin. At the time, Next still had some $120 million in cash. This company is just not going to happen. You may

own 51% of it or 58, whatever it is, but more than half the company worked for me. And I've been fighting with you because I believe in what I know we need to do to run this business. If you want to succeed, you need to listen to your people. Otherwise, you're doomed. Okay, so let's just keep that in mind for later on when uh steve is actually negotiating with disney for pixar so um i'm gonna skip ahead and like i said it's just a lot of random thoughts i don't know if there's much of a cohesive story here but we'll see how this podcast plays out um so skipping ahead okay so i have little, this actually has very little to do with this podcast. There's all these great anecdotes in the book

about Steve's time at Pixar and specifically what he thought of Ed Catmull and John Lasseter. And those are the founders and head animator of Pixar. And so I just want to tell you about what Steve thinks of Ed. I put this in here because eventually I'm going to get around to Ed Catmull's book and share it with you on the podcast. It's called Creativity Inc. I read it a few years ago. It's one of the best books if you

want to learn like how to manage creatives. And let me just, let me just read this here. Now, this is Steve talking about Ed. I liked him from the moment I met him, Steve told me once about Ed. He found him an intellectual match. Ed is a quiet guy, and you can mistake that quietness for weakness, but it's not. It's strength. Ed's really thoughtful and really, really smart. He's used to hanging around really smart people. And when you're around really smart people, you tend to listen to them. And the two men would eventually know each other and work together for 26 years. And they had a wonderful relationship that Ed talks about in, it's talked about a lot in this book, but it's also talked about in Ed's book as well. Okay, so I'm going to skip ahead.

And again, okay, so at this point, the CEO of Apple at this time is Gil Amelio. And this is the guy. He only spends, I think, 500 days. He actually wrote a book. I think it's called, like, My 500 Days at Apple. As the CEO of Apple, and this is after one long string of very disappointing CEOs and a really bad time for Apple's business and so Gil reaches out to Steve there he's the one that eventually buys next and brings Steve back and this is this is

really interesting so Emilio was an easy mark, and Steve knew it. He saw him as a stuffed shirt who enjoyed the fruits of being CEO, but knew little about selling personal computers. He believed that Emilio, who ascended to the CEO position after just one year on the board, had maneuvered himself into the gig by positioning himself a turnaround expert. But how can he be a turnaround expert, Steve asked, when he eats his lunch alone in his office with food served to him on China that looks like it came from Versailles? Again, I think that's another example of Steve Jobs' verbal mastery. And I also thought when I read that that echoed what we talked about on the Jeff Bezos podcast where

Jeff hires this this industry industry This industry executive from another another company and he comes in and one of the things he wants to talk to Bezos is about is about The executives in Amazon that want to travel should be allowed to sit first class. And it's this funny story in Brad Stone's book where Jeff says that's the stupidest thing he's ever heard, that that's not thinking like an owner. He starts slamming the table and everything. I think Steve's point, it's very similar to what he's saying, what Steve's saying about Amelio, that is. Amelio did himself no favors. This is hilarious. Rather than adapt to Apple, he seemed to try to get the company to

take on his personality. He had surrounded himself with top executives drawn mostly from the semiconductor industry he knew so well, and he was never effective in public situations. Once, while talking to a group at a dinner party that included Larry Ellison, Amelio tried to put his company's problems in perspective for the other guests. Apple is a boat, he said. There's a hole in the boat and it's taking on water, but there's also treasure on board. And the problem is everyone on board is rowing in different directions. So the boat is standing still. My job is to get everybody rowing in the same direction. After Emilio walked away,

Allison turned to the person standing next to him and asked, but what about the hole? That was one story Steve never got tired of telling. I think it's also an example, and I know it's only a few sentences from Gil, but an example of how the two, him and Jobs, were very different in communicating. That story is really confusing.

You have to keep track of a hole in the boat. There's people rowing. They're going in different directions. I guess there's treasure. And as people that were sitting there listening to it, they didn't really understand what he was saying. Okay, so I want to skip ahead. On the next page, so at this time, we're around 97.

So this is right before Steve is setting up Gil, obviously, to get him out of there because he comes to believe the guy's incompetent and he's getting ready to take over Apple. But in the intervening times, right? So Nexus is struggling, which we all know, but he picked up Pixar from George Lucas when George Lucas' Star Wars fame was going through a divorce. And he dumped, he wind up in in all told he dumps like 50 million dollars of his own money in Pixar and winds up being one of another success stories as we now know because eventually Pixar buys Disney and it makes Steve Jobs billionaire which I don't know how many people knew that Pixar made him a billionaire before Apple did. So this is really, this is Steve renegotiates with Disney.

And it's actually really, it's a great example of even in 97, after being in the wilderness for 12 years, that Steve's starting to get really good at what he's doing. So let's read about this. Like Rubenstein and Tevian, these are people that worked at Next, Lasseter and Catmull, these are the two main guys at Pixar, were keepers. So early in 1997, during the very months when he was studying the hapless Amelio, Steve decided he wanted to safeguard their future

by renegotiating Pixar's distribution contract with Disney. And he's going to be negotiating with CEO Mike Eisner, who Steve once described as evil. Toy Story had become the undisputed blockbuster of the 1995-1996 holiday season, eventually garnering $361 million in worldwide box office receipts. Some $45 million of that went to Pixar. That was a lot of revenue for a first movie, but meager fare when compared to what Disney pocketed for financing and distributing the film. Furthermore, Pixar had no share of the video rights, which of course would be substantial for a family film this popular. With work well underway on Pixar's next big movie, A Bug's Life,

Steve decided to write this wrong. So I don't know if you know the story, but I talked about it on the past Steve Jobs podcast. They put up Toy Story and Steve decides, hey, you know what? Toy Story is so great. Even before it was released, he sets up Pixar to IPO and he sets the IPO a week after Toy Story is debuting. So a lot of people at the time thought it was risky week after Toy Story is debuting. So a lot of people at the time thought it was risky because if Toy Story flopped, then the IPO could be affected. We know now in hindsight, Toy Story is widely successful.

IPO, I think it was the biggest IPO of 96, Pixar was, so it wound up working out. So Steve, again, he accepted this quote- accepted this, this, you know, quote unquote, bad deal with Disney because he had no leverage before they, they made Toy Story, which basically means they only get about 12.5% of the box office. And now he's like, okay, well, we had this huge success. We're going to, we're going to re re negotiate here with Eisner with work. So I just said with work well under, okay. So they're bug's life i already read that with 130 million of ipo cash in hand pixar didn't need disney to finance its films and if it could pay for its own productions why should it earn a mere 12.5 percent of box office receipts steve decided he wanted to

tear up the very deal that had saved the company just five years earlier. Nobody in Hollywood wants to take any risk, he told me a year later. He truly was proud that he and Lawrence Levy had studied Hollywood closely and had learned enough to understand how Pixar could cut a great deal in an industry that thrived on plundering the dumb money of starstruck outsiders. You can't go to the library and find a book titled The Business Model for Animation, Steve explained. The reason you can't is because there's only been one company, Disney, that has ever done it well, and they're not interested in telling the world how lucrative it was. Steve put in a call to Eisner and headed to Hollywood to renegotiate. What we wanted to do

with our new deal was far beyond what anybody else other than Disney had ever done, he crowed, and far more sophisticated because in Hollywood, there are very few relationships between companies. This is still Steve talking. There are relationships between companies and individuals like a major studio in Steve Spielberg or a small production company like Amblin in a studio. But there are very few relationships between peer companies. But that's how we wanted to think of ourselves in term of producing animated films We wanted to think of ourselves as a peer of Disney's own animation business. So let me just stop there Remember that story at the very beginning how he's comparing his year old Apple computer Company with things like Chevy and Rolls-Royce everything. I think very, he's doing this. Pixar had done one movie. Toy Story is a great movie. It's fantastic. But he's saying,

no, we're peers with Disney now. And think about the history that Disney animation had. I covered a little bit on the podcast I did about Walt Disney. So again, it's Steve Jobs using aspirational language to his own benefit and to his company's benefit. On the surface, his entreaty seemed arrogant, quixotic, and ungrateful. It had barely been a year since the debut of Toy Story, a film that had been made possible only by the endorsement and support of the world's most successful animation company. But as was true so often with Steve negotiated,

the audacity of his demand was matched by his cool and accurate appraisal of the landscape. Six years earlier, when Katzenberg, that's Jeffrey Katzenberg, was running animation and Disney had held all the power, Steve had quickly agreed to their terms. But now Eisner was at war with Katzenberg, who was building up DreamWorks Animation with the intent of besting Disney Animation. His new studio had set off a talent war, leading to, among other things, a series of escalating offers to Lasseter from both Disney and DreamWorks. Lasseter is, again, the head animator at Pixar. He used to work at Disney Animation, but he was working there. He idolized the company when he was younger, like most animators do, but he was in like the dark period of Disney animation and he hated it. So Steve was able to, I think Steve recruited him to Pixar. Maybe it was Ed. So I actually don't know. Don't

quote me on that. Somebody recruited him to what eventually would come Pixar and he just, he just would never leave. Steve saw the opportunity and calmly made the most of it. The IPO and Toy Story had changed everything about their relationship. Pixar held a lot more of the power now, and there was nothing Eisner could do. Steve's underlying threat to Eisner was simple. Give Pixar a new deal now, or the company would walk after its existing three-movie deal expired. Losing Lasseter and Pixar to Katzenberg or another studio would have been disastrous for Disney. Again, this is now a more mature Steve understanding the leverage. In the end, however, the negotiation wasn't as fraught as it might have been.

For us to go in there and say we'd finance half of all our films, well, they hadn't heard that very often, Steve told me. Michael appreciated that, and all of a sudden, we were no longer a production company. We were a co-financier. Eisner was offended by Jobs' temerity, but the terms of the new deal were fair, giving each side half of all profits. On February 24th, 1997, a new five-movie deal was signed. Strand by strand, Steve was wrapping up the remaining loose ends of his decade in wilderness. So let me go skip ahead. There's a lot of anecdotes in this book that has to do with Bill Gates. And it's just the fact is one of the authors was a – the main writer in the book was a technology reporter for, I think, Fortune magazine. So he had a close relationship with Jobs and Gates.

So he compares and contrasts them a lot. And when I was reading that, I was like, you know what? I don't know if it's happened, but it'd be interesting to read a book where it's just dedicated to that because there's a lot of similarities with a lot of paradox between the two guys as well. But I want to bring up the fact of what I want to hit on constantly is, and we see this in Apple's products, probably more so when Steve was alive, but that simplicity was his cornerstone. And he meant like simplicity in marketing, simplicity in the products you make, simplicity in everything.

And so this is Bill Gates on Steve Jobs' simplicity. This is what I was telling you about. In this story, Gates is going to compare and contrast how it was working with Emilio compared to when Steve took over. So at this point, Emilio's out, Steve's back in charge, and that's where we're at in the timeline. While he worked with a team on a new product planning and yet another round of restructuring,

Steve also took on a unique project he had been handed by Anderson. Anderson's the CFO he recruited to try to help turn around Apple's finances, which were in dire, dire straits at the time. While he worked, oh, I just read that part. So Anderson, Steve also took on a unique project he had been handed by Anderson. Okay, and this is the project to convince bill gates to continue to support the macintosh with new versions of the company's productivity applications like excel and word which microsoft would soon begin to bundle into a suite of productivity programs to be called office

early in 1997 gates had said that he couldn't guarantee that Microsoft would build a new version of Office for the Mac. His reluctance made sense. With Macintosh sales and a tailspin following the introduction of Windows 95, it was more difficult for Gates to justify the expense of supporting the Mac. Microsoft also made good money from its Macintosh software, but as Mac sales tanked, so too did Gates' enthusiasm for supporting Apple. I I'm just gonna interrupt the story real quick what I just said about it'd be interesting to read a book and maybe it's already already been done about comparing and contrasting these guys because there's

almost like an inverse relationship so Steve becomes way more famous and rich first Bill Gates still has Microsoft and then you know Steve it gets kicked out of Apple Bill Gates continues in Microsoft when Steve Jobs net worth is decreasing in when he's at next Bill Gates I think becomes the youngest billionaire ever from no mistaken and then there's this is great these other great stories where they're talking about Steve's fundamental flaw it next was he was selling to businesses and he's made obviously to sell to consumers and Bill Gates is the the inverse of that he made his money selling to businesses yeah he's made obviously to sell to consumers and Bill Gates is the inverse of that.

He made his money selling to businesses. Yeah, there's just, I think there's a lot of, there's an interesting book somewhere in there. Okay, so back to the book. Reaching an agreement with Microsoft was absolutely critical to laying the foundation for Apple to be saved, recalls Anderson, but Amelio couldn't get it done. If Gates said no to Steve, Apple could have found itself in the same position as Next had been back in 1988. Without Microsoft's applications, which had become the de facto standard tools used in most businesses, Apple, like Next, might cease to be relevant. Apple did bring a stick to the negotiations.

The company had a long-standing patent suit against Microsoft, alleging that Windows, which largely replicated the conventions of the Mac's graphical user interface, infringed on Apple's own intellectual property. Many observers thought Apple had a good case, and Gates really wanted it settled. But Amelio had insisted on a variety of ancillary agreements and never could close the deal. When Steve called on Gates, he kept things simple. He explained that he would be willing to drop the patent litigation, but for a price. Not only did he want Microsoft to publicly announce

a five-year commitment to provide office for the Mac, he also wanted his powerful rival to publicly announce a five-year commitment to provide office for the Mac, he also wanted his powerful rival to publicly and financially make clear that this was an endorsement of Apple's new direction by purchasing $150 million in non-voting shares. In other words, Steve wasn't asking for a loan. He was asking Bill to put his money where his mouth was. It was classic, remembers Gates. I'd been negotiating this deal with Emilio, and Gil wanted six things, most of which were not important. Gil was complicated, and I'd be calling him on the phone, faxing him stuff over the holidays. And then when Steve comes in, he looks at the deal and says,

Here are the two things I want, and here's what you clearly want from us. And we had the deal and says here are the two things i want and here's what you clearly want from us and we had the deal done very quickly i did stumble upon upon this random paragraph that i thought was really interesting and it's in the the chapter called bozos bastards and keepers and uh it's the note i left myself with steve jobs on being an artist i watched bob dylan as i was growing up and I watched him never stand still. Steve would tell me about a year later in an attempt to explain why he finally dived back into Apple. If you look at true artists, if they get really good at something, it occurs to them that they can do this for the rest of their lives and they can be really

successful at it to the outside world, but not really successful to themselves. That's the moment that an artist really decides who he or she is. If they keep on risking failure, they're still artists. Dylan and Picasso were always risking failure. This Apple thing is that way for me. I don't want to fail, of course. When I was going in, I didn't know how

bad it really was, but I still had a lot to think about. I had to consider the implications for Pixar and for my family and for my reputation and all sorts of things. And I finally decided I don't really care. This is what I want to do. And if I try my best and fail, well, I tried my best. Absolutely love that part. All right, so let's skip ahead. Okay, so this is another paragraph that I found was interesting. I almost read the note I left, but it'll give away the punchline. So let me just read this to you. Still, even though Steve had been disciplined about cutting the company down to its proper size,

so let me just tell you what's going on here. He took over Apple. Apple bought Next, next I think for like four hundred sixty million dollars And then one of the things Jobs was adamant about is canceling all these contracts The CEOs had done previous Apple CEOs had done where they're taking Apple's operating systems and letting Computer hardware manufacturers use it And of course, we know that's not, Steve hated that. So they had to, let's see. So they had to buy this company. They had to buy basically these companies that they had contracts with so they could cancel

the contracts. And so that's just the background for this paragraph. Let me go back to the beginning. Still, even though Steve had been disciplined about cutting the company down to its proper size, nobody could really be sure that he was the man to lead Apple forward. Despite declining to receive a salary, Steve was an expensive, unproven bet. Some $450 million of Apple's $816 million loss for 1997 could be attributed to the acquisition of Next and to the purchase and liquidation of Power Computing. That was one of the computing companies that was licensing the macOS or whatever it was called at the time. One way to understand that number is to realize that Apple had paid out more than half a billion dollars for two acquisitions whose assets

were whose asset value mere months after the deal were concluded to be just one-fifth of that number now here comes a punch line a more revealing way to think of it to think of it is that Apple had just shelled out more than a half a billion dollars to rehire Steve Jobs what's crazy to think about that sentence is not only that a company has spent out half a billion dollars to rehire somebody, but it was unquestionably worth it looking backwards. I think at the time Steve comes back, the market cap of Apple is like five or seven billion, something low like that. And fast forward to today, it's over $900 billion. Okay, so let's skip ahead a little bit. I love this part.

This is called disliking formality. Steve didn't give his team much formal feedback. During the U.S. versus Microsoft antitrust case, says Tevian. This is the lead programmer at Next, and then Steve takes him with him to Apple. Microsoft subpoenaed all my personal records at Apple. So I'm sitting down with our lawyer, George Riley, and he says, I've gotten your file from HR. He pulls it out, and there's one piece of paper in it, something meaningless. He's like, Avi, where's your file?

Where's your annual reviews and all that? I told him that I never had an annual review. Steve't believe in reviews he disliked all the formality his feeling was I give you feedback all the time so what do you need a review for at one point I hired an executive coach so I could do three 360 reviews with my own team he was a really good guy and I tried to get Steve to talk to him but he wouldn't in fact he asked me what do you need that for? That's a waste of time. The reason I put that out, not only do I feel like philosophically aligned with him on that point,

but I do feel like a lot of the stuff that modern corporations do is fake work. And in this case, they're writing reviews maybe to cover their own ass or just because they like busy work, but they're not actually adding value to the company. Skipping ahead again. I love it. Again, Steve just has these really interesting thoughts. So now this is the author doing an interview with Steve, and they're just having a conversation.

And these two paragraphs I thought were very enlightening. One day I asked him if he had come to enjoy the process of building companies now that he was trying to do so for the third time. No, he started as if I were a fool. But if he didn't enjoy building companies, he sure had a thoughtful and convincing way of describing why he kept doing it. The only purpose, now this direct quote from Steve, the only purpose for me in building a company

is so that the company can make products. One is a means to the other. Over a period of time, you realize that building a very strong company and a very strong foundation of talent and culture in a company is essential to keep making great products. Now, this is really insightful. The company is one of the most amazing inventions of humans. This abstract construct that's incredibly powerful. Even so, for me, it's about the products. It's about working together with really fun, smart, creative people and making wonderful things. It's not about the money.

What a company is then is a group of people who can make more than just the next big thing. It's a talent. It's a capability. It's a culture. It's a point of view. And it's a way of working together to make the next thing and the next one and the next one. I love that. Okay, so skipping a little ahead, the note I left on this section was quality as a strategy. And this part reminded me, if you listen to the podcast I did on the founder of Patagonia, Yvonne Chouinard, I think that's how you pronounce it. He had this really interesting idea of quality as a strategy. So he believed that if Patagonia makes the best products in class, not like second best, not third best, literally the best products, that everything else will take care of itself. So Steve is kind of echoing this thought here. Just as important,

Johnny was impressed by Steve. So that's Johnny Ive. So sometimes I had actually had to look up how to pronounce his name because I've heard it Joni Ivey and all this other stuff. But according to Google, it's supposed to be Johnny Ive. Hopefully that's right. So just as important, Johnny was impressed by Steve. Thousands of Apple employees had scattered their resumes across Silicon Valley as they tried to abandon Emilio's leaky ship. And Johnny had resolved to look around himself, but he quickly saw that Steve and Amelio couldn't have been more different. Amelio described himself as a turnaround king, Ive remembers, so he was focused on turnaround, which is mainly about not losing money. The way you don't lose money is you don't spend it, but Steve's focus was completely different,

and it never changed. It was exactly the same focus from the first time I met him right to the very end. The product. We trust if we do a good job and the product's good, people will like it. And we trust that if they like it, they'll buy it. If we're competent operationally, we will make money. It's that simple. So Johnny decided not to leave Apple, a choice that would lead to the closest and most fruitful creative collaboration of Steve's entire career, even more symbiotic than his original partnership with Steve Wozniak. All right, so let's keep skipping ahead here. Okay, so this is really interesting. At this point, they're creating the iPod.

And so this part is about unlocking secrets. Out of all the various aspects of computing, Steve was always most fascinated with the contact point between a person and a computer. It was the user interface that had made the Macintosh seem the epitome of a personal computer in its time. There were good reasons that Steve found this point of interaction so critical. If the point at which a person interacted with a machine was complicated,

he or she would likely never unlock its secrets. Most people don't care about the innards of the computer. They care only about what's on the screen and what they can get to through that screen. Steve understood the profound importance of this form from the very beginning of his career. It was part of what distinguished him from so many other computer makers. Most of whom were engineers who believed that a rational customer would, of course course care deeply about the insides of his or her computer and i think what we all know is from studying human behavior we can't design systems for rational people because they don't exist um so this a few pages uh later and this is from the if you read the book uh from the chapter called following your

nose and they're continuing to talk about the iPod. And now this is Steve. We followed where our own desires led us, Steve explained, recalling how much his team had hated the existing music players on the market. And we ended up ahead. The iPod had accelerated Apple's creative metabolism, instilling a new organizational discipline that would make the promise of frequent, market-churning, incremental improvements, the kind that Bill Gates had lectured Steve

about in that joint interview in Palo Alto a decade ago, into a breathtaking new kind of rapid-fire technological innovation. Learning about new technologies and markets is what makes this fun for me and for everyone at Apple, Steve once told me a few years after the iPod's debut. By definition, it's just what we do, and there are lots of ways to do it. Five or six years ago, we didn't know anything about video editing, so we bought a company to learn how to do that. Then we didn't know anything about MP3 players. But our people are smart.

They went out and figured it out by looking at what was already out there with a very critical eye. And then they combined that with what we already knew about design, user interface, materials, and digital electronics. The truth is we'd get bored otherwise. In another interview, Steve said, Who cares where the good ideas come from? "'If you're paying attention, you'll notice them.'" When his focus had been directed entirely on fixing Apple's own problems,

Steve had almost missed the digital music revolution. Now that Apple was on more solid footing, he was focused outward again, and paying attention very carefully. I love this point he's going to make here. When I came back, Apple was like a person who was ill and couldn't go out and do or learn anything, Steve explained. But we made it healthy again, and we've increased its strength. Now, figuring out how to do new things to do is what keeps us going.

Okay, so I want to skip ahead. In the very next chapter, it's called Do Your Level Best. And this part is who gives a fuck about the channel. And they're still talking about the iPod. And they've created a beautiful device. Now they're working on distribution channels. Remember, Apple is not selling their own products at this time. As a mass market consumer electronic device, they've created a beautiful device now they're working on distribution channels remember apple is not selling their own products at this time as a mass market consumer electronic device the ipod would eventually be sold of course of course all the usual places best buy circuit city big big box department stores and even the computer retailers like comp usa steve disdained all these outlets this is a great sentence his obsession with his products continued well after they'd been manufactured. The tacky, low-margin hustle of these chains ran completely against the minimalistic aesthetic of his products and the clean exuberance of his marketing. Again, keeping everything simple and tight.

We're in 1998, okay? So keep that in mind. In early 1998, just a few months after his return to Apple, he asked his chief information officer, Niall O'Connor, to come up with a proposal for an online store where Apple could sell its computers directly to customers, much like Dell Computer was doing with such great success. O'Connor then asked Eddie Kue,

who was then an IT technician in the human resources division, to sketch out an initial version of what the store might look like from a programmer's perspective. I don't think Nael thought I was his best person, says Kew, but he did think I could deal with Steve for some reason. Kew, who had never met Steve and knew little about e-commerce or retailing, sought advice from a number of people, including the head of sales, Mitch Mandich. Give me your best ideas, Mandich told him, but it won't matter because we'll never do it. It would piss off the channels. What they mean by channels is the stores and distributors that had traditionally sold Apple's computers.

One week later, Q, O'Connor, and Mandritz and others attended a meeting to review the initial proposal. Q handed his presentation to Steve. He made it visual because everyone told him that Steve preferred visual presentations, and he put it on paper because everyone had told him Steve hated sitting through slides, especially in small meetings. All the research seemed to have gone for naught. Steve looked at his pages, handed them back, and said, These suck. Despite his gruff initial reaction, Steve asked the others in the room about Q's proposal and about the basic idea of selling direct to customers online.

The executives around the table started to talk about all the problems they had foreseen with an online store, tying customized, trying, excuse me, tying customized purchases into a manufacturing system that had been built to create computers with standardized configurations, not having any research indicating what customers actually wanted to buy, yada, yada. I'm going to skip over this part

because you know what the problems would be if you're not looking for the potential. And finally, the potential for alienating Apple's existing retail partners like Best Buy and CompUSA. Mandich, who was senior enough to know that an interesting discussion was developing, kept silent. Finally, one of the senior guys opposing the idea spoke up. Steve, he asked, isn't all this pointless? You're not going to do this.

The channel will hate it. Q, this is the guy, Eddie Q, Q, who didn't know any better, turned to him immediately. The channel, he exclaimed. We lost $2 billion last year. Who gives a fuck about the channel? Steve perked up. You, he said, pointing at the senior exec, are wrong. And you, he continued, looking at Q, are are right by the end of the meeting he had asked q and o'connor to create an online store where buyers could customize their purchases and to have it completed in two months the online store went up on april 28 1998 as q prepared to drive him home to drive excuse me as q prepared to drive home that evening he walked past steve

steve's office to tell him they sold more than $2 million worth of computers in just six hours. That's great, said Steve. Imagine what we could do if we had real stores. Nothing would ever be enough, Q realized. He liked the challenge. So you can see Steve didn't really celebrate that. He knew at his core that Apple would need their own stores. So Steve recruits the vice president, I think a target, this guy Johnson, to design the Apple stores. And this is a story that's probably well known, of the amount of maturity that this Steve Jobs in the late 90s had compared to when he was at Apple the first time. And I would say, basically, reinforces the thesis of this entire book. By late 2000, Jobs and Johnson had a prototype they liked. But on

Tuesday morning in October, Johnson woke up with an epiphany. The layout of the stores, which revolved around areas selling particular product lines, was all wrong. Steve and the executive team had been discussing one subject endlessly in their Monday morning meetings, the digital hub. That's just basically how all Apple's products are going to work together. It's an idea that now we live in reality of, but at the time it was just an idea that Steve and some of his execs had. Johnson realized that the stores should be laid out. It actually comes from a speech that Bill Gates gave at CES in like 2000. And I forgot what he called it.

He called it like Personal Computers Plus or something. But Jobs liked that idea, built on it, and renamed it Digital Hub. Johnson realized that the stores should be laid out to match the concept, with an area built around music and another built around movies and so on. It was, once again, a counterintuitive thought. And yet, it was also, once again, a thought that would serve customers better than the common approach that Apple had been on the verge of embracing. That morning, Johnson joined Steve for a previously scheduled review of the prototype. On the car ride over to the prototype hangar, they basically built an entire Apple store in an airport hangar. And that way they could walk

through and actually see what the customer would see before they built the store. Johnson told Steve that he thought they had gotten it all wrong. Do you know how big a change this is, Steve roared? I don't have time for this. I don't want you to say a word to anyone about this. I don't know what I think of this. They sat for the rest of the short ride in silence. When they arrived at the hangar, Steve spoke to the assembled group. Well, he said, Ron, that's Ron Johnson,

Ron thinks we've designed our stores all wrong. Johnson waited to hear where this line of thought would go. And he's right, said Steve. So I'm going to leave now and you should just do what he's going to tell you to do. And Jobs turned around and left. I don't know why I find this funny. Later that day, after he returned to Apple's campus, Johnson went to see Steve. You know, Steve told him, you reminded me

of something. Now this direct quote from Steve, obviously, you know, you reminded me of something I learned at Pixar. On almost every film they make, something turns out to be not quite right. And they have an amazing willingness to turn around and do it again till they do get it right. They have always had a willingness to not be governed by the release date. It's not about how fast you do something. It's about doing your level best. I love that idea. And again, I think it shows what the author is trying to teach us is that he's constantly learning. Yeah, he might've been arrogant, but it takes a level of humility to constantly learn from other people,

even if you are high on your own supply. So on the same page, this is, I have to introduce, you know, we have this ongoing segment on Founders called Critics Don't Know Shit, and this is Steve Jobs' version of that. So further down the page, right after he's telling Johnson what he learned at Pixar

and telling the other guys to listen to Johnson, they talk about critics. One critic after another pointed to the fact that Gateway, so they're criticizing the idea that Apple opens their own stores. They're like, you stupid idiot, what are you doing? One critic after another pointed to the fact that Gateway, perhaps the most marketing savvy of all the window, of all the PC makers, had recently shut down its own chain of more than 100 retail stores because of poor sales.

But just as Jobs had no use for typical market research, when formulating product strategy, he dismissed Gateway's misadventures as irrelevant. When we started opening stores, everyone thought we were crazy, he told me. But that was because the point of sale had lost its ability to communicate with the customer. Everybody else was selling computers that were the same thing. Take off the bezel or company nameplate, and it's the same box made in Taiwan. With so little differentiation, there was nothing for the salespeople to explain except the price.

So they didn't have to be very sophisticated. And those stores had tremendous turnover in their sales force. So what he's doing right there is similar to what we talked about on many of the podcasts on Elon Musk, especially the ones on when I talked to you about the e-book that Tim Urban from Way But Why, it's also a blog post, talks about. And I think it's working for first principles. So, again, the conventional wisdom is, you know, these other companies are failing at this,

and you're just trying to do the same thing. It's like Steve's like, it's not the same thing at all. You guys are selling a product that everybody else has. Nobody has Apple. Really good idea. On the next page, this is just a random thing, and I think it shows, again, more growth in Steve and maybe a fundamental misunderstanding,

but people most likely think in their mind that Steve was a terrible micromanager, and at the beginning of his career he certainly was, but now, this is past the year 2000, Johnson is giving a speech at Stanford and he said, Steve was the best delegator I ever met. He was so clear about what he wanted that it gave you great freedom. I love this part. Okay. So here's a few paragraphs I just put together. They don't appear together, but they're all expounding on the same idea. So many of you guys will know who Jim Collins is.

He sells these books like Built to Last, Good to Great. They're business books basically. And he has – so this is now the author talking. Jim Collins has a wonderful phrase to describe an essential characteristic of great leaders. Deep restlessness. So Collins definitely, he says, Collins applies a phrase to Steve. I'm going to skip a little bit. Collins believes this restlessness is far more important and powerful than simple ambition or raw intelligence.

It is the foundation of resilience and self-motivation. It is fueled by curiosity, the ache to build something meaningful and a sense of purpose to make the most of one's entire life. Steve's restlessness hadn't always been an advantage. When he was younger, his attention could flip from one project to another, as happened when the Apple III development effort suddenly seemed mundane after he'd seen the potential of the graphical computing at Xerox Park. Founding Next so shortly after leaving Apple under a cloud in 1995 was abrupt, as was his purchase of the computer graphics engineering team that would become Pixar. Back then, his restlessness sometimes seemed like impulsiveness, but he never gave up. He didn't ever quit on Pixar or Next.

The things he was trying to do, says Collins, were always hard. Sometimes those things beat him up, but the response to fighting through that suffering can be tremendous personal growth. Yeah, I just really like that idea. I've never heard of deep restlessness tied to founding companies or building something. All right, so let's skip ahead. There's not too much more that I want to share with you. But there are. Actually, there's a little bit. Okay, so this part I found interesting.

So this is back to Johnny Ive, and he's explaining here why the iPhone had to come before the iPad. During one of their regular brainstorming walks around the Apple campus, Steve told Johnny Ive that he was beginning to think differently. So at this time, they're developing the iPad. They're doing a tablet computer, and everybody's really excited about it, and then Steve makes a drastic change. So Steve told Johnny Ive that he was beginning to think differently. Steve wanted to shelve the project. I've recalls. I was so surprised because I was so excited about it, but one of the observations he made, and this is classically brilliant. Steve was that this is now a different quote from Steve. I don't know that I can convince people that a tablet is a product category that has real value, but I know that I can convince people they need a better phone. What he really wanted was to try to sell a whole new category of device. That to him was

worth the risk. Okay, skipping ahead. This is how he spent his time. This is really interesting. I think there's like this, I don't know how to describe it, this fetishization of entrepreneurship and founding companies now. And a lot of it has nothing to do with actual work. It's just looking like a founder, an entrepreneur, whatever the hell that means. But check out how Steve spends his time. If you look closely at how he spent his time, says Tim Cook, you'll see that he hardly ever traveled and he did none of the conferences and get togethers that so many CEOs attend. He wanted to be home for dinner. This is part of his genius, I think, especially after he was diagnosed with a sickness.

He just cut everything out that wasn't important. And for him, the two things that were important were his family and Apple. And so traveling to conferences or going to these CEO dinners, they were not going to help him make better products. So skipping a little bit ahead, Steve Jobs' commencement speech at Stanford is probably one of maybe the most viral commencement speech of all time. And you might be familiar with it. I'm not going to cover the whole thing. I want to share this part from it that I highlighted. And personally, I think it's probably the most important thing he's ever said.

Because not only does it apply to founders, but it applies to everybody in life. And I don't think any of us can escape it. So this is now an excerpt from his speech. I didn't see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life. During the next five years, I started a company named Next, another company named Pixar, and I fell in love with an amazing woman who would become my wife. Pixar went on to create the world's first computer animated feature film, Toy Story,

and is now the most successful animation studio in the world. In a remarkable turn of events, Apple bought Next, I returned to Apple, and the technology we developed at Next is at the heart of Apple's current renaissance. And Lorene and I have a wonderful family together. I'm pretty sure none of this would have happened if I hadn't been fired from Apple. It was awful tasting medicine, but I guess the patient needed it. Sometimes life hits you in the head with a brick. Don't lose faith. I'm convinced that the only thing that kept me going was that I loved what I did. You've got to find what you love. And that is as true for work as it is for your lovers. Your work is going to fill a large part of your life. And the only way to be truly satisfied is to do what you believe is great

work. And the only way to do great work is to love what you do. If you haven't found it yet, keep looking, don't settle. As with all matters of the heart, you'll know when you find it. And like any great relationship, it just gets better and better as the years roll on. So keep looking until you find it. Don't settle. Okay. So, okay. So here's a quick story on Steve's interpersonal growth.

And this is, again, from somebody I highly respect. And if you haven't read Creativity, Inc. yet, please read it. It's amazing. This guy named Ed Catmull wrote it. He's a co-founder of Pixar. He didn't tell them to do anything. He just told them what he thought. Sometimes, Catmull says, if it were a big

enough of a gut punch, he'd go for a walk with the director. So they're talking about, even though Steve wasn't an animator, they would ask him to preview what they were working on before the movie's finished, and he'd give them their honest opinion. So every once in a while, he would do these one-on-ones with the director of the movie they're working on. Sometimes Catmull says if it were big enough of a gut punch, he'd go for a walk with the director, meaning this is what he's talking about there. They're in a group, but if Steve had a critique that he thought would be embarrassing to the director, he didn't say it in person. Steve was this incredibly intelligent, strong-willed person who made things happen,

but at the same time he enabled people. He was always big on going for walks with people. So he would take the director out on a walk where you talked more slowly, you think through things, just talking, just a friendly back and forth talking. His goal was to help make them a better movie. Excuse me. His goal, I skipped that part. His goal was just to help them make a better movie.

It always made it easier for the director to move forward. It wasn't ever like, oh, you screwed up. It was, what are we going to do to move forward? The past can be a lesson, but the past is gone. He believed that. This kind of one-on-one mentoring was something Steve learned over time. Early on, if somebody didn't measure up, Steve wouldn't hide it, says Catmull. This kind of behavior wasn't something I ever saw during his last 10 years. Instead, he would take you off in private and turn what could have been an embarrassing thing into something that actually became very productive and bonding. He learned. He had taken the mistakes that he had made internalized and processed them

and made some changes end quote at this point Eisner got kicked out of Disney and that was good for Steve because Steve hated him he's replaced by this guy named Bob Iger who Steve for over a year because one of the first calls after Iger becomes um CEO to Disney he calls Steve Jobs even though he didn't have a relationship with him because he knew Disney Animation was screwed and they needed Pixar. And Eisner was kind of bumbling that relationship. So over this course of the year, and the book goes into more detail than I'm going to share here, Steve develops such a strong relationship with him.

He actually becomes really good friends with him. And he actually tells Bob, friends with him and he actually tells bob um that bob eiger that is um that is bob was one of the first person people that steve tells that his cancer returns so steve obviously his family knows and the people at apple don't even know yet so that just tells you the kind of bonding they had uh over the over their negotiations okay so here we go i agree to his own personal due diligence of course one day he flew up to Pixar for a series of one-on-one meetings with the directors of Pixar's next few movie movies uh let's see we had only one movie cars left to distribute he recalls and people within Disney had spent months poo-pooing the idea for the next movie about a rat in a restaurant in Paris

so I go up to Pixar and for six or seven hours, the directors pitch me every single upcoming movie. I see a couple of movies that they didn't wind up making, one called Newt and another one project about dogs in New York City. I also see work in progress from Ratatouille, Up and WALL-E. Disney hadn't seen any of this. And I went back to my guys,

including the general counsel of Disney and told them that it wasn't even close. The richness of the creativity, the quality of the people was so obvious. We had to do this deal. With Lasseter and Catmull, remember, these are Steve's main guys at Pixar, feeling more comfortable, Steve homed in on the final details of a deal. He didn't overreach by demanding a premium over Pixar's market value. Believing that Pixar might someday be purchased, investors had already overvalued Pixar with a very high market cap of around $5.9 billion. Steve and Iger settled on a price of $7.4 billion. They agreed that Pixar and Disney

would get equal billing on every film. They even agreed to a side deal that Catmull and Lasseter had proposed. To ensure that Disney wouldn't ever change the culture of Pixar, Iger agreed that his company would never change or cancel any of the 75 items on a list of Pixar cultural touchstones that Lasseter had drew up. The list protected the cereal bar in the dining room, the annual paper airplane contest, the employee car show, and the right of animators to do whatever they like to their office spaces, and so on. Iger knew, and this is really interesting, Iger knew that the price he had paid could not be justified by any conventional reasoning. There wasn't an analysis in the world that would make the deal pencil out, he says.

But he argued to the Disney board of directors that the deal had more potential than can ever be captured by the numbers. He wound up being correct about that. If Catmull and Lasseter could revive Disney animation, and if both studios, rather than Pixar alone, were creating memorable characters, the ancillary revenue from theme parks, merchandise, and other divisions would soar. All the way back to Walt's time, says Iger, Disney had been most successful in terms of its bottom line and its reputation when animation had been strong. Remember, it's been weak for a while, a long time before they bought Pixar. Iger also knew that many so-called experts thought he was nuts for inviting Steve Jobs to join the board of directors as Disney's biggest shareholder. Many people who were deeply involved in the process

told me that bringing Steve in as the biggest shareholder was the dumbest thing I could do, Iger remembers. I won't name names, but one of the investment bankers we used told me, he said, you're a brand new CEO who's going to try to run Disney. Jobs is going to be in your life at a level that will drive you crazy. You don't have the clout to fight that. If you want to run this company in an unfettered way, don't do this. Iger trusted his gut. Steve and I had talked about the fact

that he was going to take all stock and hold it. In a minute, I'm gonna tell you what Bill Gates says about this too. It's really funny. I knew that there was some risk in letting him into the tent. On the other hand, I had a good relationship with him and I felt I could benefit from having Steve Jobs around.

And if for some reason it didn't work out for me, Disney would still have Steve Jobs and that would be a great thing. That's really actually wise on Iger's part. Now here comes the part I love about Bill Gates. Like many others, Bill Gates was astounded by what Steve had been able to negotiate. This is a quote from Bill Gates. When he has the upper hand, he's good at using time, says Gates. You know, he would just wait people out. Just look at how much of the resulting company ends up being owned by this fairly small and, yes, very high-tech, very brilliant animation studio. So what Steve Jobs is talking about is they're doing a stock deal, so they wind up owning a large part of Disney. Oh, I guess he's going to say it right here. Continuing Gates quotes.

They end up owning a very substantial percentage of the entire Disney ABC ESPN entity. It's owned by a little animation studio, exclamation point. That took three rounds of negotiations. And by the time the acquisition is being done, Disney is just flat on its back saying, take me.

Because of the political dynamics of Disney at the time, they needed that win, and Steve knew they needed it. And this next paragraph is exactly why I wanted to share this on the podcast and why I think this book is worth your time. Selling Pixar to Disney was a singular triumph. Steve had gotten Lasseter and Catmull the corporate parent they needed for their unique institution to thrive for decades. He even put the two of them in a position to revive the greatest animation studio of all time, Disney.

And he'd done this by developing in the space of less than a year a trusting relationship, in fact, a friendship, with the man who had been the go-to executive for one of the two people he most detested. They're talking about Eisner because Eisner and Iger worked very close together. Compare

this with the wary antipathy Steve displayed during the next IBM negotiations and you realize just how much Steve had changed over the intervening years. That's a great way to wrap

this up. So I want to share one other thing before we're done. And this is this great quote by Marc Andreessen, who a lot of people know. He's an engineer, Netscape founder, now famous venture capitalist, really just an interesting person. If you ever get to listen to any podcasts with him, I'd recommend because the dude has a wonderful mind. He also wrote the foreword for this book but this is going to

come in the back and this is how i want to close out this podcast and the reason he's got a very counterintuitive thought here the iphone marked the emergence of a new form of computing that was more intimate than what had been called personal computing my theory about the turnaround of apple is that they have accomplished is what they have accomplished is relatively underappreciated since andreessen mac iphone and ipad are all unix supercomputers packaged into a consumer form factor that's basically what they did that's the part that no one talks about because everyone's so design obsessed. He leans forward to drive home his point. That iPhone sitting in your pocket is the exact equivalent

of a Cray XMP supercomputer from 20 years ago that used to cost $10 million. It's got the same operating system software, the same processing speed, the same data storage, compressed down to a $600 device. That is the breakthrough Steve achieved. That's what these phones really are, exclamation point. And with that, I am going to close out the podcast. If you want to learn more and get the full story, I recommend buying the book. So on past podcasts, I said, hey, if you want to buy the book and support the podcast at the same time, you can go to Founders Podcast. And you can see all the links for all the books and everything there.

So what I started doing recently, the last few podcasts, and I do it for myself even though I wish more podcasts would do this. As I started timestamping different subjects that I talk about, and you can see it. So if you go to your podcast feed, most of you, I think like 90% of you listen to this podcast on either the Apple podcast app or on Overcast, both of which have like beautiful ways to display like descriptions of podcasts, similar to the way YouTube videos do. So if you click on more on the Apple podcast or just scroll over on Overcast, you'll see that on every podcast I'm going to do moving forward, it'll have a timestamp and then a general idea of what I'm talking about then. But what I also did is when you expand that out on both apps, it makes every link I put

in the show description clickable. So if you want to buy this book and support the podcast, you don't even have to go to Founders Podcast anymore. I made it easier so you can just do it right from your podcast app. And hopefully you like that. It's just easier for me because a lot of times, so I leave my books highlighted with posts and notes and everywhere because I go back to specific ideas I want to revisit. But I also think the reason I did this for myself is these podcasts are kind of like my audio notes on the books I read.

So sometimes I just want to know, you know, like I'm looking at the one I did on Let My People Go Surfing, the one on Yvonne Sherard and Patagonia, and his idea of being an 80 percenter. Now I know, okay, if I want to rehash that idea, I go to about four minutes in the podcast and I can get right to that idea without having to listen to the whole thing over and over again. So I just wanted to

update you on that. That's all I got. No ads this week. If you want to support the podcast, buy the book and or leave a review wherever you're listening to this podcast on. Even if you don't listen to it on Apple Podcasts, if you can review on Apple Podcasts, that's really helpful just because that's where the largest podcast audience is and it just exposes these ideas to more people. Thanks. I'll talk to you next week.