Tech Brew Ride Home - (IHP Bonus) Mike Slade on Steve Jobs' Return To Apple

Episode Date: April 30, 2023

Another bonus episode from the Internet History Podcast. As promised, Mike Slade is back to tell stories from the period 1998 through 2004, when he was Special Assistant to Steve Jobs. Background details on the iMac, the iPod and the iPhone and more! Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the Internet History Podcast. I'm your host, Brian McCullough. So regular listeners will know that about a year ago, I had Mike Slade on the pod,

and we talked about Starwave and a bunch of early web stuff, but as you'll know, if you listen to that episode, Mike was also a close confidant of Steve Jobs, and Steve asked him to come on for about six years. starting in the late 90s, as Steve's personal consigliary at Apple when Steve returned to Apple. And in that episode, we said that Mike needed to come back on the show and talk about all that stuff. And that's something that you guys have been strenuously requesting ever since that episode dropped. So today, here it is, now that I've done a...

enough research to do this conversation justice. Today is Mike Slade telling the story of Steve Jobs' return to Apple. Mike Slade, thanks for coming back on the Internet History podcast. My pleasure. It was fun last time. So, right, we tease last time that you needed to come back and tell some of your Apple stories. So that's what we're going to do today. Let's just start with Steve asking you to join him back at Apple.

Were you still at Starwave when Apple bought Next? Yeah, what happened was Apple bought Next in late 96, and I was still at StarWay and running it. And I had stayed in close touch with Steve after I stopped working at Next. And we saw each other a bunch and talked in the phone a lot. And I visited him a couple times in Palo Alto for various business trips. And then in early 97, this deal closed where Disney bought part of Starwave, and we became kind of a, like, we were sort of like Czechos-Lawakia. We were part of Disney, but we were still independent.

And so I was the chairman and CEO of Starwave, and I spent about half my time working with people with Disney on stuff and half my time at Starwave. And so I took some time off, and then that fall I was on a big long vacation in Turkey. and Steve had by that time kind of become sort of the, he'd gotten rid of Emilio, and he called me up and wanted me to run corporate marketing for Apple. They already had Phil Schiller and product marketing, and they wanted me to, he wanted me to be all kind of his branding guy. And I would have loved to do it, but I couldn't really leave. I kind of had a bunch of handcuffs,

and I was sort of in charge of this crazy, complicated joint venture between Starwave and Disney and ESPN and ABC News. So I couldn't really come. And so I stayed in touch with him. And then finally, through most of 1998, we did all this complicated negotiating. And eventually, I was free at the end of 98. This complicated deal happened where Disney bought out Paul and then flipped most of the company into Infoseek. And we all became shareholders of Infoseek and we did well financially.

And I was just a consultant at this point. So finally, in November of 1998, I was free. and I told Steve I was going to be free, and he wanted me to come work for him. And I said I couldn't really work there full-time because I had little kids at home and stuff. And so we agreed that I would work there part-time. So I joined his executive staff in November of 1998. And what I did most of the time was I'd come down to Apple typically two days a week, sometimes one day a week, but usually two days a week.

And I'd come down on Monday morning, and I'd usually go to five or six meetings in the two days with him. So I'd go to his Monday morning executive staff meeting, which went from 9 to about 1230 usually. and that was me, Steve, Fred Anderson, the CFO, Nancy Heinen, the head of legal, a guy named Mitch Mandich, who ran sales, a guy named Tim Cook, who ran sort of supply and logistics, John Rubenstein who ran hardware engineering, Avi Tavian, who ran software engineering, Phil Schiller, who ran product marketing, me, and I think that was it. I think that was it at the start. Your role is basically just be consigliary and just like a sounder. Yeah, you know, it's hard to imagine how little people, at a place like Apple got the Internet in late 1998, but they were just sort of starting to figure it out. And so I was both a consigliary and kind of a guy who had no agenda,

so I could give sort of an honest take on stuff without protecting any turf or anything. And Apple was a much different company then. There was no iPod, and there was barely an IMac, and there was no I-Book yet, and a lot of their business was worrying about how many Power Macs and power books they were selling and just trying to get it going. And so I went to basically five or six meetings each week. So I'd go to the staff meeting and then oftentimes Steve and I would have lunch together because my office was right next to his. And then we'd wander around campus.

We'd usually go visit Johnny in the design lab. And then there was a meeting every Monday afternoon with Avi's group. it was Avi and all of his direct reports who were designing Mac OS10. MacOS 10 didn't exist yet in late 1998. They were still creating it, and it was a very complicated piece of engineering because they had to combine the old Mac operating system

and the next operating system into this new thing that ran old code and had new apps. So there was a lot of work being done user interface for it and all the other stuff for it. And so there was a meeting every week behind closed doors with all of Bobby's direct reports who included Scott Forrestall and a bunch of other guys who people know about,

and I would help him do that. And then after that, I'd usually go collapse, because I'd been up since 4.30 in the morning flying down. And then on Tuesday, there were usually a couple of meetings with this guy named Sina Tamad, and that's the other person who was a direct report, I forgot, who ran, originally he ran service, and then they created an apps division,

and he started the apps division. So Sina created iMovie, iTunes, I-Foto, I-D, etc. And we would do that meeting on Tuesday morning, and then often I would work on some other special projects. And then usually the ad agency came up either Monday afternoon or Tuesday afternoon, and I'd meet with them too. So that was Steve and Lee Klau, and a guy named James Vincent, who worked for a shy of day, and me and often Phil Schiller. And we'd just work on whatever we were working on for advertising. And then I usually fly home after that. Well, before we – that was my week.

Before we get into all the stories like the iPod and the IMac and all that stuff, just to back up a second because you knew him, In your opinion, did Steve always yearn to go back to Apple? Because he plays at Koi, of course, at the time. But do you feel like he always wanted to go back? Yes, always. He always talked about what I worked at Next. Always, always, always. So, you know, I worked at Next from early 91 until late 92,

and he was always talking about Apple. Now, it's worth noting that Next's hardware strategy was intricately involved with Apple's hardbrush strategy. So next strategy was to use the same CPU that Apple used and leveraged the Motorola relationship. And then their plan, they were always a step ahead of Apple because they were smaller. So each time a new rev of the 68, 30, or 40 came out,

and then this new risk chip they were building the 8810 was going to come out. Apple was slow and next was fast, and next would beat them to it at whatever rev it was. So they were kind of intricate, and they had some people who had worked at Apple, Apple and things like that. But, yeah, he always thought that the people running Apple weren't doing a very good job, and he yearned for it, even though, you know, Next business was more kind of corporate focused

than consumer-focused in those days. We were selling the big corporations and the CIA and people like that and less to consumers. So he was always sort of torn by the fact that he had to worry about these corporate customers, even though his instincts were consumer. And, you know, I always thought he was put on this earth to sell things to consumers, not to corporations, always. It's good that it worked out. When he does come back and you're sitting in on these meetings with him,

I read, you know, early on, I read a scene where, you know, when he first gets there, Steve calls a big meeting with all the upper level management types, and he basically says to them, all right, go around the table, tell me who you are and what you can do for me. So was a lot, was the main part of the strategy at the very beginning, just finding who the superstars are, who the, who the superstars are, who the bozos are and then arranging the talent and getting

Apple back in shape? Yeah, I visited a couple times in 97 or 98. I kind of forget which, before I came back to work there. And I remember meeting some people, like, there was a guy who was there for a while who left in charge of marketing named Gereena DeLuca, whose

teeth couldn't really make up his mind about. And so he went through a period of time where he was working with the old crew at Apple. But by the time I actually started working there, you know, most of those people I named, on the exact team were either new or had worked it next. So Avi and Rubinstein and Nancy Heinen and the Sina Tamaden had all been next executives. And so I knew them, Steve knew them, and we all kind of like could finish each other's sentences. Tim Cook was new to Apple and was

10 times better at what he did than the people who had been in charge of it. Like it was it was criminal, how much better he was. They had done it so poorly. The sales guy had also come from next Mitch Mandich. And so everybody kind of knew each other. And the only hold-op from Apple was Fred Anderson. And then Phil Schiller had worked at the old Apple and then left and had been, he'd been at Macromedia for a while. And then there'd been this spinoff from NACs called Firepower Systems that John Rubinstein ran that Cannon owned.

And Phil was the head of product marketing for that. So everybody kind of knew each other. And so Phil was a huge apple of us. So anyway, yes, to answer your question, Steve said to me one time, look, and I'm sure he had said this to other people. goal is half the people here are good and half are bozos, I've got to keep the good ones from leaving and get rid of the bozos as soon as possible. So I think every time you met with somebody who was trying to figure out which bin to put them in, the bozo bin or the good worth keeping bin, right?

And there were great people at Apple still, but many had left. And by then you had the first dot-com boom going on. You had all these crazy valuations of stupid startups and stuff that, you know, people were tempted by it well if it's if it's a process of finding the diamonds in the rough and also bringing in the the the people he likes him next but um obviously one of the bigger diamonds in the rough is is johnny and um do you were you around when when steve discovers that hit no by the time i got by the time i got there uh steve had already figured out that he loved johnny and so i mean i think i had heard from him anecdotally but i wasn't around for those moments when he first met him. There was this computer they had. This was the funny story that they

showed me, and I think it might be in one of the books. So the computer that Johnny designed before the IMAQ was this educational computer that was sort of a holdover from the last vestiges of Apple before Steve took over. That was a thing that internally was very similar to an IMAC, but was looked like an IMAC with like, you know, boils and like, you know, the plague. like it was this giant bulbous thing with like every port known demand parallel cereal USB 1.0 you know ADB keyboard like the most complicated thing you've ever seen and removable this and you know every checklist item and it was huge and ugly but it had some design elements in it mostly around dots and texture that were sort of the precursor of the iMac and that's what's the thing that Steve likes now you know the story You probably heard the story of the IMAQ, which is that it was supposed to be a network computer, the world's most horrible idea. And they had built, designed it as such.

And Steve was like, this is stupid. Nobody's going to buy one of these things. The Internet's too slow. They need a hard disk. And Fred Anderson famously said, the non-technical CFO said, why don't we just cram a hard disk in there and boot System 7 on it? And they all said, we can't do that. We can't cool it. And Steve said, sure, we can like that.

You know, he's like, sure. They had this impossible task that they managed to do. And that's why if you look at the first IMac, which is sort of a see-through computer, it's kind of ugly inside because it was kind of a hack job, right? But a really good idea. Well, they sort of sold that as is, look, you can see the guts. How cool is that? Well, that's just because Johnny had clever ideas.

And, you know, Bondi Blue and everything. So at the time I got there, they had already shipped that thing, and they were trying to do the next round of them. And there was an amazing amount of time spent on what colors we should do. We did five colors. We licensed this song from an old Rolling Stones album called Colors. It has a piano intro and it's do, do, do, do, do, do, do. And which one of my favorite songs of all time.

And there was a lot of debate about which colors to do. And then how hard was it logistically do the colors. And what was really interesting was they shipped and it wasn't at all even. Like one or two colors just dominated. Almost nobody bought the yellow one or whatever it was. It was kind of comical. It was almost pointless to have the colors, but it seemed cool. Stepping backwards again into saving the company, because obviously the IMAC, the IMAC is sort of one of the things that helps save it.

But strategic thinking, like I read an interview with Heidi Royzen where she said that when Steve came back, he didn't necessarily have a plan. But then also there's that famous, you know, four quadrant chart. We're going to simplify down everything to, you know, one entry level computer, one pro computer, one entry level laptop, one pro laptop. So from your recollection, right, exactly. From your recollection, was there a particular strategy that he came in with or was it just sort of? Yeah, yeah. Yes. He basically decided that they were trying to do, you know, they were almost broke, right?

And so there were two parts of the strategy on sort of the supply side. one part was make and sell lots of high margin computers, mostly towers, but also expensive laptops, right? And two, simplify the product line drastically and you'll be able to get rid of people and make it successful. So they went from 17 hardware product lines to four. He would always talk about that, and that was where the two-by-two grid came from, where one dimension was pro versus consumer and the other was desktop versus laptop. And you have to remember in those days, desktops outsold laptops. And so it was kind of novel to focus so much on laptops.

So they did the iMac. It was a very low-margin computer. They're making a lot of money on towers with G3s and G4s and the man on the titanium power book, which is a big hit. And then they introduced the iBook, which was sort of a – if you look at a picture of an eyebook, it's really ugly and stupid, but it was novel, so it sold fairly well. You know, not the original white Mac book, but the original Ibook was this curvy thing that looked like kind of a pancake version of an IMac.

And it really is sort of stupid looking, but it sold pretty well. And then he did the cube, which was a huge mistake. And the cube, most people don't know about this. The idea behind the cube was to have the little box, the cube, and then have this new high-speed bus for all the peripherals, which today is a really good idea, was ahead of its time in 2000. And they never finished the bus, so they just shipped the thing without any external connectivity,

right, without any slots. And it ended up being kind of expensive and nobody bought it, but it was pretty. So you mentioned that you were sitting in on some of the marketing campaigns as well. All of them. Right, so tell me just the evolution of the Think Different campaign,

because that also was key to turning around Apple's fortunes in terms of, you know, getting people to realize, hey, we're back to doing our best stuff. Okay, so this is kind of funny. So I was still working at StarWave in, I believe it's early 98. The think different campaign runs in 98. And what happens is I get a phone call from Steve and he says, hey, I need your help. And I wasn't working there.

I was still running Starwave. And he goes, I need your help. I'm working on this ad campaign. And we're having an argument about something. I need your help. And I go, sure. So he goes, this guy you don't know named Lee Klau is going to call you. And I want you to look at something and tell me what you think.

Okay. So Lee Klau calls me, and he's kind of, we now are really good friends. But he was kind of pissed off. He knew who I was, but he didn't know me. And he was like, okay, Steve wants me to do this, blah, blah, blah. And so they had the think different commercial, you know, here's to the crazy ones. They had it done. And they were arguing about who should narrate it.

So he goes, I'm going to send you both versions. And in 1998 to send me both versions meant they had to fed out. sorry, do a satellite uplink and then burn to a VHS or a DVD. I can't remember which. I think it was a VHS, the clip. And so they did this thing to the Seattle office. They messengers it over to my office and Bellevue. The whole thing probably cost $1,000 just to do, right?

And so anyway, this VHS shows up when I stick at my TV in my office, and I watch both the versions of Think Different. The first version is Steve narrating it, and the second version is Richard Dreyfus narrating. and the agency wanted Steve to narrate it. They thought it would be cool, kind of like Lee Ayacocca. Remember, I built the K-Car, in Christos, back.

And Steve didn't really want to do it. And he didn't want to do it mostly because he didn't like to exploit his fame, which is not what most people think, but he really didn't. And he was self-conscious, in fact that Apple hadn't really made it back yet, so it would be kind of like pumping your chest.

You know, it'd be like some, you know, washed up rock or pimping his new group or something, right? you know so anyway and they really wanted to do it for all the obvious reasons and i listened to it and they kind of they kind of said it's up to you like he he did that thing where he wanted to let somebody else decide so he wouldn't take the heat kind of you know so they sort of maybe he just did this to be cute but it was positioned to me like you're going to decide it like i'm like okay so anyway i liked the richard rife's version way better just because i like his voice better Steve's voice could be a little squeaky at the high end, right?

He'd get kind of like that. He'd be all excited. And Richard Dreyfus, that's a wonderful voice. He's one of my favorite actors. And I was like, you know, forget about all this other stuff. Lee. It's just a better commercial, right? It's still a good commercial.

You have zero chance of someone being distracted by the fact of, is it Steve or not, which is not the reason you're doing the commercial. You're doing the commercial is a great commercial. So just do it. And so they did do Richard Dreyfus. I don't know how much, I don't know how much credit to take. for it, but that's what happened. And it was pretty funny. So by the time I got there, they all knew me from this incident, right? I said, oh, you're that guy, right? So we would sit

in all these meetings and, you know, and go over all the ad campaigns, some of which were pretty mundane. And, you know, one of the things people forget is that before Think Different, or maybe about the same time, sorry, right after Think Different, they did this ad campaign for the towers where they made fun of Intel, where they taught, they had this thing with Tank, it's really a cornball techie speeds and feeds add about how Motorola chips were faster than Intel chips. And it was all just so they could sell those high margin towers because they made a couple thousand bucks a tower on those. And that way, you know, when Steve came back to Apple, they had almost no cash.

And a couple years later, they had $4 billion in cash. And that was all from selling those high end towers. That's all it was. So, right. when they suddenly have profitability again. Like that first time he walks off the stage, oh, by the way, we're profitable. Well, it wasn't just that. It was that they were high margin, right?

So Apple was emphasizing all these weird product lines. And it was like, we just got to sell some high margin towers. You know, they would always sell three or 400,000 towers a year. And, you know, you can do the math, a couple thousand dollars a gross margin in a tower. That's a lot of money, right? And so that's how they built a balance sheet back up in a couple of years. and also some much smarter management of inventory and supplies and stuff. And so by the time all those strategic things were happening like, you know, music, iPod, you know, everything, iPhone, everything.

They already had $4 billion of cash in the bank. And so you could have lost $100 million a quarter for 40 quarters, right? So there was no doubt of its survival anymore. One of the funny things is that people always think of the Microsoft investment was the key to their survival. It was only $150 million bucks. They made more than that in any quarter just in cash flow from selling towers. So it was kind of a symbolic thing when they did that investment. And then, of course, the irony was Microsoft CFO Greg Maffa hedged it, so they didn't make any money on it.

They did it. Oops. But anyway, so the key was those towers in terms of getting the company stabilized. Before we move on for marketing, were you around for the Mac versus PC guy, or was that after your... time. Well, what happened was is that we did a lot of product-oriented advertising from 98 to like 03, and

we did a lot of some other like tactical stuff. We did a couple of music ads and stuff, but a lot of it, and the original couple of iPod ads, which were very people forget how sort of straightforward the first iPod ad. It was a picture of a video of a guy in an apartment listening to his music on his laptop and then

plugging in his iPod and leaving with the same music in it. The tagline was just a thousand songs in your pocket. There were no dancing girls or anything. And so this guy, James Vincent, was kind of the account executive. Normally an ad agency has a bunch of guys in suits, and then the creative guys get to come and go, and the suits do most of the talking to the CEO, or the guy in charge. And Steve didn't want that. So he was sort of the VP of marketing. And he just had Lee Cloud, the chief creative officer for all of the conglomerate, and his team come up each week. And then this one guy, the only non-creative or media person that got to come to the meeting was this guy,

James Vincent, who's a really smart British guy who was kind of younger and hipper and didn't really act like an account exec, even though he was nominally an account exec. So we would have these brainstorming meetings, and he and I, James Vincent and I were the two guys who were pushing Steve to compare Mac to Windows. This never really was relevant until Vista. Once Vista came and was such a disaster, and by this time, Mac OS10 had A shipped and B by its second rev, was kind of useful and apps are being ported to it. So it wasn't embarrassing to talk about our platform because Mac OS 9 was, it would crash all the time and it was old school technology.

And it honestly wasn't as safe or as stable as Windows, right? But MacOS 10 was. So once we got to that point, we were like we should really play up this notion that people are switching and they like it. And you may remember before Mac versus PC, there was an ad campaign called Switchers, where they hired a guy, I was around for this, They hired a guy, a famous documentary filmmaker, and he did all these interviews with people who had switched from PC to Mac.

And they talked, his name was Errol Morris. Errol Morris, yeah, yeah, yeah. Yeah. And so those ads, James and I kind of cooked up the whole process for them, and they did a series of interviews with people. And those are kind of the precursor of Mac versus PC because they were very vivid ads, right? And then they kind of realized that why do it with people? higher actors. They're better.

And so Mac versus PC was sort of the son of that campaign in a way, if you think about it. Because there's the same message, right? Yeah. Directly compare, right? Blah, blah, blah. So I don't remember. I think Mac versus PC is after I left. Yeah.

But that was kind of James's baby. All right. So to jump back in time again because we're going to try to get into the iPod here. This is a story that I read so you can either fill in the gaps for me or you can correct me if it's wrong. But at CES in 2000, Bill Gates gives a keynote, and he outlines, like, computers becoming home media centers. Digital Hub. The Digital Hub story. And so after this, there's an offsite executive staff meeting or something, and you basically... There was an offside at the Palo Alto Garden Court Hotel. That's right. I was at it. And so you pitch this to Steve as...

I did. Okay, go ahead. I basically, yeah, so this is a true story. So what happened is Bill gives the keynote at CES, I think it's 2001. I don't know. We could look at it up, whatever year it is. It's 2000 or 2001. And he says the digital hub, blah, blah, blah, blah, blah. And, you know, Microsoft had been doing this forever. And it was a really good pitch, except they didn't really have any of it, right? And so we were in this offside, and I basically regurgitated the pitch, right,

using my unique talent of irony. And everybody instantly realized the point, which was that since Apple was always the creator's computer, they should be the one that was the digital hub, not Microsoft, right? And it'd be easy for us to do because we already had iMovie, and it was sort of a layup to do all these apps and connect things to a Mac, blah. This was before the iPod.

And so it was the idea came from, I won't take credit for the idea, doing the digital hub, I'll take credit for the idea of laying the spark by, because one of my jobs at Apple was to be the Microsoft kind of guru, right? So I would always sort of like know what was going on for my friends, because in those days I still had a lot of friends that worked at Microsoft and I'd know what they were doing and what was going right and what was going wrong. And I would, like, for example, it took me like two years to get Apple to have good support for exchange servers and their mail client because I was like, guys are like 200 million people

using exchange worldwide. Everyone in business uses it, right? So, like, you should support it. None of them had ever used it, right? So I didn't understand, right? So things like that. So, yeah, I regurgitated the digital hub strategy and then pointed out that they were a long way

from fulfilling it and how lame their stuff was, and everybody got really excited. And so that's where the apps division kind of started from, is that Sina, so what had happened was Sina Tommodin had supervised the buy, They were working on this product called Final Cut Pro. They bought for Macromedia to compete with Adobe. And there was a brilliant guy working on it in Glenn Reed who built a consumerized version of it called Imovie.

So the Imovie project was a really radical project, as you can imagine, right? Because in 1998, who would make a movie on a computer, right? So they basically took a super complicated video editing program, got it down to like five menu items and four screens, and shipped it on every IMac. And what's funny is that to make a movie then meant that you had to have a digital tape camera. There were two types of video cameras. There were ones that were regular. There was a new kind called digital, but they still had little tape cassette. And it had a firewire port on it.

Sony made them and I was he'll made them. And so since every IMAQ had a firewire port on it, you could hook up the camera. So what you do is you would make the movie. You would make a bunch of footage with your video camera. and then instead of just looking at it, you could import it in real time, like second by second, edit like crazy and add titles and credits and music and all this great stuff. And then you had this beautiful movie, and the only problem was, you know, three of them filled up your whole hard disk.

And what did you do with the movie? So we had to do was there were no DVD burners yet. You had to spool it back out to the tape second by second through this firewire. interface. And Steve gave the whole executive team a Sony digital video camera, an iMac, and a copy of iMovie before he shipped it and gave us an assignment by the, for on a Monday, he said, by next Monday, you will come back with a movie. We're going to watch everybody's movie. So we all made movies and came back in the next week for the whole staff meeting. We just watched the movies. So we were the testers for it, the executive team. Well, and as you're pointing out, though,

super complicated. And so I almost have the sense. It was way ahead of its time. It was almost, it turned out to be a flawed strategy because it caused them to miss the initial ray run of Napster and CD burning. Okay, that's exactly what I was going to say. I almost had the sense that the reason that iTunes sort of comes next is because in that Napster era, what is easy is everybody's playing around with these MP3 files on their hard-dress.

Because they're much smaller files than video files. Yeah, so what happens is. Steve gets all excited about Imovie because, you know, he has little kids and we all do and we're making these. The movies we made were mostly about how adorable our kids were, right? And then the people who didn't have kids made really funny movies, like Fred Anderson, whose kids were older and away from the home, he made a movie about, I'm glad I'm not you. And then I remember Tim Cook made a movie about trying to buy a house in Palo Alto and how expensive it was. and John Rubinstein, who was single then made the funniest movie. He had to go to IBM for some damn chip meeting in Dallas.

And so he, like, made a movie about how he spent this birthday in this boring hotel room in Dallas. So he gets up to the camera, shoots himself with the mirror and says, happy birthday, John. And then he goes to this meeting at IBM, turns the camera on and says, wish me a happy birthday, everybody. And they're all like, turn that camera off. What are you doing? Like that. That was the best.

movie of all was that one because it was so ironically funny but anyway so then yeah what happens is meanwhile young kids with PCs with stickers on them are burning ripping files off and burning them like crazy and there's real jukebox and there's music match and all these super complicated things and so steve ships this thing called an iMac div which is a DVD player in it and that's firewire and iMovie and does this kluji thing for making movies and then we realize that it's really hard to make movies and people don't do it very often and so they panic. The next version of the iMac has a CD readwrite drive in it,

which is a tray load, not a slot load, which is ugly, but cheaper and easier. And so then he buys iTunes, which was this guy, Jeff Robbins, who had worked at Apple and had left and had this little startup. He buys his Mac jukebox program. What? Was it Sound Jam?

Yeah, yeah. Sound Jam, which was a perfectly nice program and really ugly, and they turned it into iTunes, which I was there for, which was super cool. and we're in a meeting. So they started this apps division because of this offset that you mentioned. So after I movie, the next one is iTunes.

And so we come in to design iTunes with this code base and Jeff is there and Cina's there and a bunch of designers there and Steve's there and I'm there and Phil Schiller's there or whoever's there. And we walk in and all these jukebox programs were like nuclear submarines. They're really complicated,

lots of dialogue boxes, tons of sliders. People were kind of competing on how many features they had, right? It was so geeky. So Steve walks in and he goes, one screen, no dialogue boxes. It's always those. He goes, one screen, no dialogue boxes. And people were like, what?

And that's how we designed iTunes. It was from, with that list of criteria. One screen, no dialogue boxes. And so what they would do, it was so interesting having worked at Microsoft where people had these long specks that they rode and a priest would toil in the corner writing the sacred spec, and then you shall implement the spec according to the spec and thou doth not protest or deviate from the spec.

The spec was what Steve likes. And so they'd do these really expensive color printouts of screens, and he picked the ones he liked and didn't like. And then we just kind of implement it. And you know how in the original iTunes, it still has it today, there's a series of sliders up on top. It's just like genre artist's album, right? Well, that's called the List View,

and it was invented in Next Step. No computers had that until next step. and I argued vociferously to put it in iTunes. And Steve didn't want to have it. He just wanted to have a scrolling list of songs that you could click on the columns to sort them. And I was like, that'll be too long. And he goes, no, people will just search.

And I was like, no, people would love to go click, click, click. And I, like, couldn't get him to do it. He thought it was ugly. And it would muck up his beautiful one-screen simple user interface, which, you know, he had the right idea, which is to keep it radically simple. But this was really a powerful feature and easy to use. And so I finally one day just threw a tantrum.

I was like a real shithead. I just had this tantrum. I insulted him. I yelled. I was like moaned. I got cynical and I got it in. Well, sometimes people say that he responded to if you fought back on him. That's what that's what happened.

So anyway, then they did this thing where they totally pivoted. There's a great commercial they did where there's a bunch of people. in a concert hall. They have all these famous musicians to sort of simulate what it's like to put together a playlist. And they had this commercial, this ad campaign called Rip Mix Burn. Now remember it well. You remember the second.

And everybody got mad about it. And the reason they got mad about it, including Michael Eisner, is that people thought RipNet rip off. What Rip really means is raster image process. And it means digitize an analog source, right? that's what it means. So rip does not mean rip off. Right, right.

So nobody got that in Hollywood because they're a bunch of moron. Well, they were in the midst of the Napster panic freakouts. I know, I know. And so anyway, you're like, no, you moron. It means take the CD you already bought and put them in a hard desk. So anyway, they did that and then the iPod came after that. Well, all right. At the same time, we were working on iPoto.

Those two things sort of came around the same time. Well, let me, let's not yada yada over the. that let's um do you remember hearing uh first hearing of the of the ipod project because people that weren't there they find it a little funny that iTunes came before ipod but it seems logical like you after you organize your songs of burning CDs yes of course well so what happened was that steve once he realized that the the i-movie strategy was flawed um he he got really into music And so I remember there was a meeting with Mark Levinson. Mark Levinson is famous as an audio designer, and he used to be married to the woman on sex in the city.

What's her name? Kim Contraw? Yes. He's married to Kim Controll. So he was kind of like a show horse. So he came to Apple one time with this company he had, he had a company called Mark Levinson Audio, and he lost control of it. And he had a new company that had a different name, even though his name was Mark Levinson. and he wanted Steve to buy it.

And so there was this discussion about buying it and getting into high-end audio and making speakers and everything. And instead, so Steve was like, we got to do something in music, music's the key, blah, blah, blah, blah. And so he was always looking for the next great thing. You know, being the 3% market share wasn't really enough for him, right, even though the Mac at this point was stable, but it was never going to get to 50% market share. Windows was too entrenched. So they decided not to do that.

And then out of that, the I, what happened, see, the thing that people don't really realize is that three things were already happening that got you sort of halfway to the iPod. The first was every Mac shipped with a firewire port in it. And in fact, Fred Anderson would yell in the staff meeting that it was 50 bucks a unit and it was killing our gross margin on the IMac because no one used it. So the firewire port was the thing that Apple and Sony co-invented that was about the same speed as USB 2.0. Only there wasn't USB 2.0 in those days. All there was was USB 1.0, which was really slow. So it was really fast, and when you plugged something into it, it charged the device at the same time,

which today seems like no big deal, but it was magic then, right? So other than Apple, the only places where you saw Firewire were on most Sony's, although they used a different implementation that didn't have power, and on a few high-end PCs that had a card installed them. So because every Mac had firewire, starting with the towers and then the laptops and the IMAX, there was this whole class of devices people used around Apple that were 20 and 40 and 5 and 10 and 20 and 40 gigabyte hard disks that plugged into the firewire ports. They didn't have a power cord. So they were about twice the size of an iPod, right?

I had one. Yeah, you remember this, right? And people would have their music libraries on them. I used to get an entire music library for somebody. He'd just hand it to me, right? And you could boot a Mac off of it. So if you had a different code, you were going to show it to someone, you could boot off of that disc and everything.

So it's kind of like having a computer in your pocket, right? Because it was, it didn't have a power cord. You could just plug it into the Mac and it automatically booted up and was powered on and had a high-speed transfer rate. So lots of people would say to themselves, kind of only the thing out of the user interface, right? Because there already were a disk man, you know, where people had these things where they could burn,

instead of burning a 17-song CD, they could burn a digital CD with a couple hundred songs on it, arranged in folders, right? So you could do that, and you still see cars that have that user interface for what folder, what catalog, right? So you can have a couple hundred songs on a disc, or you could have a really low capacity digital music player that a bunch of people, Creative Labs, Nike, all these people made.

And they all had little tiny amounts of flash memory in them. So maybe they held 20 or 40 songs, right? You remember all this, right? And they were all USB 1.0. They weren't powered and they were slow to load, but they were kind of cool. So there was already a company, Creative Labs, making a hard disk-based player. It was about the size of a discus. it had a 5-gibite hard disk in it.

Okay, guess what? I had that also. Okay, you had it. And although it wasn't that bad from a, it wasn't that heavy, but it had two big problems. One was the software was just horrible. I don't know if it was music match or worse.

And the second thing was it had USB 1. Point out, which meant it took like all day to load. Right. Like literally all day, like 10 hours. You just loaded it once and then never tried to load it again. But it just so the combat. of knowing about Firewire and knowing about these disks meant that the notion of what an iPod could be wasn't all that novel. I'm not trying to minimize the uniqueness of it. I'm just trying to

say that the idea of doing it didn't seem crazy. It seemed like a logical next step. So then what happened is, and this has been written about, you know, Rubenstein would always go to China and Japan and see all the vendors. And usually it was like, I have a new hard disk, it's bigger, it has more capacity, and it's faster, and blah, blah, blah. So instead that Toshiba said, you know, typical strange Japanese company, we have a hard disk that isn't bigger and isn't faster, but it's smaller. And normally you'd say, like, well, who cares, right?

They all fit in laptops anyway. But this was the hard disk that ended up in the original iPod. So it was radically smaller, and it didn't, it wasn't as fast, but it didn't really matter. It was a 5-gig hard disk. And so that's where the idea came from, was from what can we do with this disk, given what's already going on in the industry, right? So if you think about the first iPod from the standpoint of it required a Mac, it wasn't a Mac and PC product, right? It totally changes what you could do and where your mindset would kind of come from, if you know what I mean? because you'd like, oh yeah, well, I already know about Firewire, so it doesn't need power,

and I can assume it connects quickly, and I already have iTunes, right? So off we go. So that's where it came from. Now, I didn't spend a lot of time with the teams. I knew it was coming. Steve told me about it, and I remember when Phil brought in, so Phil was always kind of a gadget freak, and Phil brought in a Bang and Olison remote, because he was one of those guys. We all remember those kinds of people who had Bangan Olson gear, right?

You kind of roll your eyes at them. Like, geez, really? You know? So he had all sorts of B&O gear, and the B&O remote looked an awful lot like the scroll wheel and the iPod. Like exactly like it. And guess who never patented it, B&O? Right. So that's where it came from, is that Phil loved those remotes, and they had a little scroll wheel,

a mechanical scroll, like, to navigate channels or whatever, right, or volume or whatever. And so, you know, you can all read about Tony Fidel and the team and licensing the heart, the strange operating system and everything. But, you know, that's where it came from. And then probably the most interesting thing I was involved in was what to call the damn thing. Because they couldn't make up their mind what to call it, you know, should it be called Tune Man or iTunes this or, you know, everything. And Steve was kind of adamant about it not being labeled as a music player. because he thought it was kind of a crappy category. So he agitated for the word not to be tune or tune man or walkman or whatever.

The agency came up with Pod, not Steve. A Shia Day came up with it from a long list. And in retrospect, the I part was kind of obvious because it was IMac and I book and, you know, et cetera, et cetera. So, but the pod was really brilliant. Well, and that's that. It's that analogy of the hub. It's a pod off of the mothership, basically. Yeah, sure, that's right. That's right. That's right. And then, you know, the first ad, I always tell people is my favorite Apple ad ever because it's such a make love to the product, cram a lot into an ad. Explain, take, Apple didn't do a, we have a better iPod ad. They did it. This is a brand new category. You never heard of that, right? That first ad to me is brilliant on so many levels, right? Because it shows the software, shows how to use it. But the benefit is the guy walks off with music, a thousand

songs in his pocket and you're like, holy shit. So I used to fly, you know, I flew every week on Alaska Airlines from Seattle to San Jose and back, sometimes twice a week. And I was always in first class. Thank you, Steve. And I was always talking on stewardesses. And they knew me because I did it so often. And I had this all of a sudden I had this iPod.

And they were like, I mean, they thought it was like, no one, it wasn't that they thought it was cool. No one understood what it was. But they're like, what is that? Like, what do you mean? You show it to them, and you turn the wheel, and they go, huh? And you'd show them all thousands of songs. And I loaded the thing up.

People just looked at you like you were a magician. Like, there's no way this is possible. Two more things, and then I'll let you go that I want you to hear your perspective on around this story, around the iPod and iTunes. The first being, you know, famously jobs didn't want to open up. iTunes to PC users. He said it was him against everyone else. Do you remember any of those arguments about,

listen, Steve, we got to take this to everybody. Sure. I mean, the thing you have to realize is that all people cared about was selling more IMAX, right? The IMAQ wasn't selling that well. So is that, is that literally the argument that Steve is like, no, we can use this to sell more Macs? The original idea was that this will

sell more Macs and it'll be a virtuous circle, right? And then, and we sold a fair amount, even the first quarter, right? And so then what happened was that people, not so much me, although I was in the camp as well, but other people like Greg Jawswayak and stuff and other people, were agitating that it would be easy to sell it in the PC. And you got to remember, it took two years before iTunes got ported to the PC. Right. The iPod shipped in October of 2001, a month after September 11th. And the version with the store and iTunes on Windows wasn't until late 2003. So in between, they had this horrible hack solution, which is why Steve didn't like it,

which was that they got music match to come in and pitch them. I got my buddies at Real Networks to come in and pitch them. They picked music match partly because Steve had this thing in the license agreement that said that whoever the party was that did the deal couldn't, ever use the word syncing. He wanted to have rights in perpetuity to sinking things. Like I was such a naked power grab and realized we're not doing this deal. And music match is like, sure, we'll do anything, right?

So they did music. But so it was a horrible solution. It had this crappy software called Music Match and you had to have a PC with a firewire card on it or a Sony PC, right, which almost nobody had. Well, I did because again, I guess I'm all of... I'm just saying, but you're a geek, right? So I'm saying, you know it was not mainstream at all. I had a Sony laptop that had the firewire, yep.

Right, right. And Sony sold lots of laptops. But anyway, so I think Steve didn't like it for two reasons. One was he thought it would sell Macs, which wasn't really true. He didn't realize it could be such a big thing on its own. And two, he thought it would be yucky, which it was. Right. At that part, he was right about it was really yucky, right?

And it was, it was, it was, the PC solution was vulnerable to somebody doing it better, whereas the Macs solution wasn't, right? He never liked those things, right? He didn't want to do something unless it was great. But then, you know, he changed his mind. It wasn't that many months after shipment, but they did the thing. So he came around pretty quickly, partly because it was selling well, right? Yeah.

You know, once it was selling well, he was like, oh, my God, I can sell this to PC users. This is great. You know, finally I have, you know, an opening to Windows, right? The other thing, because we've already kind of glanced on it is doing the store. Again, people are like, wait, iTunes was around before you could actually buy things, buy songs on it. Were you privy to any of those negotiations? Like with the- Yeah. That took a long time. Steve wanted to do that from the moment the iPod shipped, and I was in some meetings with the record labels and stuff in 2001 and 2002, where they were like

just, remember, they did these two brain dead joint ventures, music match and what was the other one? One was music match was like, so not music match. Music, what was it called? Music Net. And it was universal and maybe Warner and real networks. And then the other one was Sony. Anyway, the point was is that they weren't all on board one platform. No, they each 60% were on one.

It was just stupid. And they had all these restrictions on you couldn't. They basically made it impossible to the consumer to have any fun, right? It's like the NFL. And so those things already, and that's what they thought was the, right strategy. We weren't going to let Steve Jobs snook or us or anybody else. And then about the time I left, he and Eddie Q and Sina figured out that if they made it Mac only, it might be a palatable experiment for people. Now, the thing that helped them a lot was that there are things that

already flamed out. So in between 01 and 03, their things were such colossal failures, right? that that got the more open-minded about doing something else. And of course, Steve is, you know, once Steve gets involved, you know, by this time, Pixar was really successful. And, you know, people want to hang out with Steve. Even if he can be rude, people just are, he was a very sexy and charismatic guy to be with. And so all else being equal, you'll do the thing Steve tells you to do just because he's so charismatic, right? Never fails. Well, and at that point, it's almost helpful that he can be thought of.

as a Hollywood mogul like them. Like he's coming as an equal. By 2003, he was. Right, exactly. He looked at the Pixar track record by then. That's right. He knew more than they did. That's right.

You know, Pixar was making more money than they were. So, yeah, that all helped. And he legitimately was that smart. So, but there was not a new idea. It was always the idea, right, to sell songs, which is hard to get the deal done, right? And he did it brilliant. Well, I mean, however, specifically to sell songs individually,

was there a lot of pushback on that? because they're, you know, they're trying to protect the... Well, but that's a classic example of Steve using the fact that their thing had failed to leverage his own insane demand for simplicity, you know, like 99 cents. He didn't want a dollar. He wanted 99 cents. And his whole thing was he thought correctly that albums were rip-off. You know, every stoner who bought an album knows that of the 12 songs on it,

three or four filler, or sometimes nine or ten or filler, right? So he knew that, right? And he thought it would be simpler to just have 99 cents a song. And that way you wouldn't have to spend very much money and it would be approachable and everything. So, yeah, mostly he was just a guy who loved simplicity more than anything else. And any sort of like, oh, well, for this, it's that and this, it's that. And on Tuesdays it's that he hated that stuff, right? He hated it like, you know, it was the same reason why he wanted to open his own stores is that he hated the experience of going into somebody else.

to store and seeing them messing up his beautiful marketing, right? And giving the margin to do it. Like, why should I give these guys 12 points and just add no value to subtract value, you know? So same thing, the love of simplicity. Well, final question then. So you believe around 2004. Yeah, I left when he got sick. So what happened was he came into my office, shut the door, and he said, can I talk to you?

And I go, sure. And he goes, I have pancreatic cancer. I'm going to die. And I'm like, what? And you start crying. And then, you know, it was a really heavy duty moment. And then that was on a Monday. And then on Tuesday, he comes back in my office and he goes, I don't have pancreatic cancer.

I'm like, what the fuck? And he goes, I have this other kind of tumor called an is an islet cell tumor, which is rare, but treatable, blah, blah, blah, blah. So he then stopped going to work. It was a secret. So from late 2003 to mid-0-4, he went to work about a day a week. And no one knew it was big secret. And he did everything but surgery.

He did acupuncture and all other stuff, and it didn't work, and then he finally agreed to have surgery in the summer of 2004. And so once he started work, stopped going there all the time, I stopped going there because my job was to be with him, kind of, right? And then when he got well, we were both kind of like, well, you know, the company doesn't need a change agent as much anymore, you know, so we kind of mutually agreed to stop it. I did it for about six years. Well, but that was going to be my final question. So it's this era 2004, 2005, where, you know, I think it's around them. They drop computer from their name. So sort of my question is, is, you know, as you're observing this, a company that had only done computers for, what, 20, 25 years, and then now is in the media business selling songs, is now in the consumer electronics business.

Just from your perspective, the evolution of Apple into something that's more than just we make computers. Was that, was that, because of the iPod. Right. And was it an organic change? Was it like sort of, okay, wow, if we can do this, maybe we can do these other things. Maybe we should do camcorders. Yeah, you know, so the funny thing is that not really by design, the iPod and the retail stores launched like the same month, right? Just by coincidence.

Right, right. So, and the iPod slowly but surely becomes a monster hit. Like I remember after a couple of quarters doing a couple of spreadsheets for Steve about some other project we're working on. And I was like, I said to him, you know, look, if you, if this and this happened, the iPod could be a billion dollar business. And at the time Apple was about a $7 billion, $8 billion revenue run rate company. And they were kind of flat, right? And I was like, and he was like, you know, come on. I'm like, well, look, you know, and it was only like a couple of X, couple of X bump from where they were already.

right. So you could see even after a couple of quarters that they could be, it could be a billion dollar business. And once I think a billion dollar business, it could be anything, right? And so the iPod, and as you point out, after a few months that they sold it on Windows, and even though a mere mortal might not have been able to figure it out, lots of people did, right? And so you could go into the Apple store and buy something that didn't require Mac OS10, right, which is a big deal. because most people had windows. 95% of the world had windows. So that was a really big deal.

And then you see them kind of get more aggressive. You know, I remember being in the meeting where Steve showed us the video of 50 cent singing that he was a motherfucking P-I-M-P while he was holding an iPod. Steve was like telling how much we paid for it and he's kind of shaking his head like, oh, geez. So, you know, it was already happening, right? In 2002, 2003, as the iPod became more and more successful and equally important, sold to people who had never bought anything from Apple before.

That's the thing people kind of forget, is that even though its creation never would have happened without it being Mac only, you know, pretty quickly, it grew and gave people a different way to feel about it. It was the first time they ever beat Microsoft did anything, right? since, you know, 1985. So it had this double benefit of making you confident about their ability to grow as a company, right? Right. And in lots of different ways. Like it had such a psychological impact that they realize that it's not, we're not just a Mac business. We're in anything we want to do business if we can do it right.

Well, and the other thing, the thing people don't, a lot of people forget is that be way before the iPhone, remember a bunch of people sort of competing with the iPod. So sand disk and all these people were making, you know, little hard disk-based players. Because remember, after the iPod gets to 5 and 10 and 20, you get the Mini. Remember the Mini? Right, of course. The Mini was a hard disk-based player with a 2-and-4-gig drive, not a flash-based drive. And then everybody started doing those because they had lower cogs. And even though the libraries weren't as big, it was an approachable price point.

So then Apple blows everybody away with the Nano. And so this is all Tim Cook. This is Tim Cook figuring out that if you use your market power, you can take Flash, which at the time was like buying gold, which is so expensive, right? And you can drive the price down. And they cornered the market on Flash that year. They did this crazy forward buy on Flash. And so mostly through supply chain work, not through anything else, they totally changed the market. And overnight Flash went from an exotic thing that only geeky rich people buy.

bought for in small quantities to like a mainstream thing. Remember the nano? What a big deal of the nano was? It was so small. And that's all Tim Cook. That's all supply chain and wizardry. Well, and not only... He was sick then.

Not only does that keep the price down, but then it prevents others from coming into the space. You don't have... No, because they locked up to supply, a flash for like over a year. That's right. That's what I mean. In addition to driving the price down,

they did two things. It was this gutsy move because what if it hadn't sold well? right and in addition to that it blew away the competition so in one fell school they started acting like Microsoft used to act right as a company with market power well and that was a huge deal actually the third thing is when you think about it though it's also that because the the the mini was the best seller of the iPods of that era so that's that first move of we're going to eat our young we're going to innovate ourselves well and the other thing that's funny is that Steve tried to cancel the mini twice.

So the mini, Steve thought two and four was too small, right, of a music library. The people had five, tenths, and twenties. And so he tried to cancel it twice before a shift, and Rubenstein basically ignored him. He just ignored his pleas to cancel it. And then, and I remember I said to him, I was like being kind of cynical. I was like, it's so good looking, who cares? Don't ever, it's just pretty. People will buy it because it's cute.

And that became true. Oh, no, I was right. It just seemed sort of, at the time, it seemed like a really cynical thing to say, right? You know, like, but it was true, right? So cute, right? But anyway, and then the nano just blew it away, right? I was looking at the nano. The nano was September 7th, 2005.

And that was the first flash-based, let's see. They pulled it out of his watch pocket. The small pocket in the jeans, right, right, right. He said something like, I always wondered what this pocket was for. Right, right. And it was, let's see, the first one, one, two, and four. Yeah, right. Unbelievable.

So that's a really big deal to me. That's probably, even though they were working on the iPhone, sort of the moment I always thought when Apple arrived is this company that wasn't just doing well, but was like dominating a category, right? They left all those other guys flat-footed, right? Well, Mike, once again, I'm so glad that you agreed to come back and do this because those are all the juicy stories that I was hoping for. Yeah, there's probably more, but yeah, yeah, yeah. But right, that's kind of what I was living.

Yeah. Well, Mike Slade, thanks for coming back on the Internet History podcast and just amazing stuff. Thanks. You bet. My pleasure. All right. Talk you later. If this is the first time you're listening to this podcast, please subscribe to us on your podcast.

app of choice. There's plenty more great internet history where that came from. And if you're a long-time listener, then you know what to do to help us out. Rate and review us on iTunes. Because iTunes gives credit to reviews and ratings, and the more great reviews we get, the more people will discover us. As always, there's more info on our website, www.com.com. The show's Twitter handle is at NetHistryPod, and my personal Twitter is at Brian MCC. Thanks for listening.