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At NeXT, Steve Jobs Balanced Reality Distortion With Startup Realities

BY JOHN GREATHOUSE MARCH 14, 2012POSTED IN: ENTREPRENEUR, ICONIC ADVICE

While working, I often listen to YouTube videos in the background, much like a podcast. Depending on what I am working on and the degree to which the video is compelling, my focus on the videos content fades in and out. Occasionally a video compels me to take a break and devote all of my attention to it. This occurred while I was listening to the embedded video below. I found this video compelling, because it provides insights into Jobs as an internal leader, rather than the externally facing, reality-distorting CEO. With that said, I realize that whenever a camera is involved, everyones behavior changes. Thus, if you are looking for rants, screaming tantrums or derisive putdowns, you will have to look elsewhere. Rather than an imperious Jobs, the video shows him addressing his teams emotional rollercoaster; from the initial euphoria, to the harsh realities of life at a startup. This process is complicated by the external reality distortion which Jobs was concurrently propagating outside of NeXT. This is an important balancing act for all startup leaders one best learned from a master. If you haven't already subscribed yet, subscribe now for free weekly Infochachkie articles!

You can watch the twenty-one minute video below or on YouTube here: http://youtu.be/sOlqqriBvUM. The video appears to be taken from an analog tape. Do not be deterred by the initial bad audio and tracking skip to 1:20 to avoid the lame intro of Jobs harvesting carrots while wearing in a neatly pressed, white dress shirt. For those who may want to only watch portions of the video, I time stamp the major topics below. Logo Madness <1:20 2:35>

The video opens with the unveiling of the companys new logo. I groaned when the egregiously over-paid logo designer, Paul Rand, holds up a blank book and says, Dont get scared, this is not the design. The reason I did this was to floor Steve. You know, Jesus, a hundred thousand bucks down the drain. Mr. Rand obviously missed the irony of this statement. His logo, not the blank page, is what represented a hundred thousand bucks down the drain. As I note in Lousy Startup Names, in their early days, startups should obsess on developing their value proposition and avoid paying over-priced consultants to devise clever logos. In contrast to Paul Rands NeXT logo, the original Apple logo was created for free. It was not until it was apparent that the company had devised a sustainable value prop that money was spent to create the iconic, multi-colored logo which Apple used for the next 22-years. Note the small army of NeXT employees flipping through Mr. Rands style guides. The logo presentation takes place during the ventures first few weeks. The team is intoxicated with their newfound freedom, as most of them had recently departed the confines of Apple which, in their minds, had become a Big Dumb Company. They are soon sobered by the realities of startup life. First Offsite Startup Exuberance <3:53 13:40> In December, 1985, the company held its first offsite in Pebble Beach CA. For those of you not familiar with Pebble Beach, its a freakin expensive place to host an event. The company had only been in business about 90-days at the time of the ocean-front retreat. While describing Jobs opening remarks, the narrator states, In effect, he is planting the seeds of a new corporate culture. Yes indeed he was, by both his words and his actions. At one point, Steve conveys that, One of the things that made Apple great in the early days was that it was built from the heart. Now unfortunately, we didnt always use our head. Steve was also sending significant signals about the new companys culture by selecting an extravagant venue for the offsite. Tip: No revenue = no oceanfront retreats. After much debate, the company agrees on their number one priority: to deliver a compelling product to the higher-education market by the Spring of 1987. The montage from 6:57 through 13:17 offers intriguing insights into a high-profile startups struggle to define itself. At 12:10, in response to a particularly pointed comment regarding potential product delays, Jobs replies, Well, George, I cant change the world. What do you want me to do? I dont want to hear just because we blew it last time, were gonna blow it this time. Such exchanges are enlightening, as it shows how Jobs (albeit with the cameras running) dealt with internal dissention. Near the end of this segment, Jobs throws cold water on his teams idealistic intoxication, stating, What I want is probably irrelevant here. There are certain realities here, both psychological and market, that are gonna come into playno matter what I say or anyone else says. With these remarks, Steve is trying to balance the aggressive reality distortion campaign he was waging externally with the media, investors and potential partners with the reality clarity that is necessary within an organization. In the next scene (obviously it is hard to know the true sequence of the remarks), Steve returns to a positive tone by reminding his team that, I find myself making lists of things we dont know and then I remember that our company is 90-days old and I look back, to all the things we do know. Its really phenomenal how far we have come in 90-days.The sincerity and pride in his voice is authentic.

Note the irony of the worlds leading technologists using an overhead projector, which makes the video seem ancient. I have included a photo at left, for anyone born after 1990. Second Offsite Financial Realities Suck <13:40 18:43> In March, 1986, the company holds its second retreat. Although it was only been 90days since the last company offsite, the tone is markedly different. Steve opens his remarks (at 14:10) by saying, The honeymoon is over. All of those things we got for just being, are now just old news. Jobs is referring to the torrent of popular press un-earned adulation that the company received in its early days. He goes on to say, We are like every other startup. The bottom line is that the world doesnt really care. What the world cares about is what we produce. We have been a startup for six months and we have been spending moneyfor six months. I hopeour feet are on the ground and we realize that were going to be judged like every other startup from here on out. And that is by what our product is and how timely we bring it to market. Not on the fact that we are really good people who had a lot to do with Macintosh. That stuff is irrelevant at this point. After Steves sobering remarks, the conversation shifts to finances. A woman, who I assume was the CFO or some such, tells the former Apple team, There are not million dollar buckets out there to identify (for) spending cuts. Its going to take everybody in this room to doing a mind-set change. Jobs adds, We are not scrounging. We used to find people who would give us good employee discounts. Weve stopped nickel and diming for that stuff and it all adds up. One of the things I dont seeis that startup hustle. It would be a shame to have lost the war because we won a few we battles. We are not keeping the war in perspective. The war is called survival. The war is called not run out of money before we get our product in the market. Steve is again trying to balance internal reality clarity with external reality distortion. He knows that he can distort the perceptions of stakeholders realities, but he must temper this by ensuring that his employees understand the reality that no company can survive indefinitely on investor capital. Not even a company founded by a really, really rich 30-year old. Legacy Building The remainder of the video focuses on Steves legacy and is frankly rather boring. He relates, at length, an often told story about his trip to an elementary school during Apples early days. This anecdote is conveyed in a more energized and inspiring manner HERE, when Steve spoke to a small group in 1980. In this early video, Jobs was not yet a technology celebrity and thus did not have an image to uphold, let alone a legacy to promote. Thus, he is relaxed and conveys an authenticity missing in many of his more widely publicized talks. For instance, a humble, understated Jobs jokes at the beginning of the talk that he was late because he could not find a parking space. He later interrupts his comments to amateurishly fumble with the microphone. As has been widely chronicled, NeXT was eventually purchased in late 1996, 11-years after its founding, by Apple for $429 million in cash and 1.5 million shares of Apple stock (all of which was distributed to Steve). Jobs joined Apple shortly thereafter as its Interim CEO. From its early, heady days as Steve Jobs next startup, to its many years of slogging it out in the dying workstation market, NeXT reached the finish line by modulating a balance between internal reality clarity and external reality distortion. Nice job Steve. John Greathouse has held a number of senior executive positions with successful startups during the past fifteen years, spearheading transactions, which generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition. John is currently a partner at Rincon Venture Partners, a venture capital firm investing in early stage web-based businesses, and is a Co-Founder of RevUpNet, a performance-based online marketing agency.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara's Faculty where he teaches several entrepreneurial courses. Note: All of my advice in this blog is that of a layman. I am not a lawyer and I never played one on TV. You should always assess the veracity of any third-party advice that might have far-reaching implications (be it legal, accounting, personnel, tax or otherwise) with your trusted professional of choice.