Chapter One Steve Jobs

f you had to pick a single individual who personified Silicon Valley, youd have a list of contenders who would probably include Bill Hewlett and David Packard, Bill Gates (even though Microsoft is not in the Valley), Andy Grove and the Google duo. But for a lot of people, the choice would be an easy one and they would plump for Steve Jobs. On one hand, he is the epitome of the cool geek, effortlessly blending a love and understanding of technology with a slightly alternative, left-of-field world view. And on the other, he is clearly an incredible businessman. Apple, of which he is Co-founder, Chairman and CEO, has an intuitive understanding of design and user interface that is arguably the finest of any company in the world. Indeed Apple, which Jobs personifies, is not so much a company as a cultural phenomenon. Its product launches are events, its consumers have a devotion that sometimes borders on religious mania, it splits opinion sharply, and anyone with an interest in design, or just the modern consumer world, should have an interest in Apple. And for many Apple is Jobs and Jobs is Apple. Jobs was born in 1955; his birth mother was single and he was given up for adoption. The couple who adopted him were Paul and Clara Jobs who lived in Mountain View, California. During his

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childhood and teens, nearby San Francisco was the capital of counterculture. But while Northern California may have been the hippy capital of the world, there was another revolution stirring nearby too. From the 1950s onward the research at Stanford University was turning Silicon Valley (the term was coined in 1971) into a global high-tech centre. Both of Northern Californias 20thcentury revolutions left their marks on Jobs. He is the quintessential West Coast liberal alternative in his views and, for that matter, the way he runs his company. Yet he is also one of the most influential businesspeople of the late 20th century and when it comes to high-end consumer electronics he is without equal. After finishing high school in Cupertino, California, Jobs went on to study sciences as well as literature and poetry at Reed College in Portland, Oregon. He lasted only a term, and returned to his home town, where he found employment as a technician at Atari. Already something of a geek, he also joined the now legendary Homebrew Computer Club, where he met Steve Wozniak. A trip to India for spiritual enlightenment followed, after which he returned to Atari. In 1976, Jobs and Wozniak, along with Ronald Wayne (who is now a forgotten and rather melancholy footnote in Valley history), co-founded Apple in the Jobs family garage. The Apple I was launched in 1977, without a keyboard, case or monitor; it was priced at $666.66, or just under $2,500 in 2010 dollars, and was an immediate success. The start-up moved quickly. In 1977, the company introduced the Apple II, and in 1979 the Apple II+. In 1980 the company went public, making Jobs worth $165 million. But it was a visit to Xerox in 1979 that really set Apple on its present path. Jobs had bought stock in the company and went to see the Xerox Alto, which was the first computer with a GUI the graphical user interface that virtually every desktop or laptop uses today. Apple had already been working on a GUI, but what Jobs saw at Xerox spurred it on and in 1983 it launched the Apple Lisa. Internal politics were becoming a factor, and Jobs had been pushed off the Lisa project. This was no bad thing, as Lisa was a commercial flop and it led Jobs

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to join the Macintosh project. In 1984, the Apple Mac launched to great fanfare with the companys famed 1984 ad. Although Jobs and Apple are considered pretty much indivisible, many people forget that he didnt last very long after the Macs launch, and the two parted ways for over a decade. In 1985, Jobs was pushed out of Apple after a power struggle with the CEO, John Sculley. The reasons behind this were perhaps unsurprising: Jobs was brilliant and inspiring but could be temperamental and capricious, and the company was becoming more bureaucratic and corporate as it grew. So he left to found NeXT, a computer company that is barely remembered outside geek circles. In fairness, its product, the NeXTcube, looked beautiful and it was technologically advanced perhaps in some ways too advanced. But the main problem was its price tag an eye-watering $6,500. As a result of this, the Cubes sales were lacklustre. In the meantime, Jobs had his fingers in other pies too. In 1986, he bought Pixar from George Lucas for $10 million. In 1995, Pixar released Toy Story, and then came its initial public offering Jobss stake was worth $585 million. But it was hard to escape the feeling that Apple and Jobs were like a great rock band whose difficult but brilliant frontman had left to pursue solo projects. They were very good apart, but nothing like what they were together. Apple did all right until the mid-1990s, when its share price began a steep decline. In 1996 Jobs sold NeXT to Apple for $430 million, which he took in shares. The company made a loss of $816 million that year. By 1997, many were predicting its demise a Newsweek story from July was typical of the view of many. The headline read: A death spiral: after years of decline, Apple needs a strategy and a savior. That saviour was the companys brilliant and difficult cofounder. Jobs returned to Apple and put NeXT people in key positions. And although commercially speaking NeXT was a bit of a damp squib,

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its influence on Apple and the computing world as a whole was significant. Firstly, NeXT represented a big leap forward in terms of graphical interfaces. And secondly, at NeXT Jobs had created a culture that he felt was the answer to the stifling bureaucracy. Shortly after rejoining, Jobs became interim CEO; two years later, the position was made permanent. With Jobs back at the helm, the company became focused and profitable again. He dumped a series of projects such as the Newton Handheld and concentrated on the iMac. He also began the process of diversification, which turned the company into as much a consumer electronics company as a computer seller. In 2001, the category-killing iPod music player was launched, and in 2007 the iPhone made its dbut it has done much the same for mobiles. Both now comfortably outsell the companys computers. In 2010, the company launched the iPad tablet. Many were uncertain (especially as tablets have such a chequered history), but its impressive sales suggested that Apples loyal customers were not among them. Indeed, the oft-repeated sentiment that Steve Jobs knows what you want before you want it seems to hold true. Many said that this was all very well, but, while the iPod and iPhone have carried all before them, these devices did little to boost the sale of Macs. In addition, while the company had 48 per cent of the operating system market, Microsoft has never had under 90 per cent, and the Mac has made few gains outside its traditional strongholds of the creative industries and image-conscious home users. But Jobs may be one step ahead again. Increasingly people do access their phones from a broad variety of devices, so perhaps transition from computer company to digital lifestyle company is the long-term smart move. The markets would certainly seem to agree. Perhaps because of the boutique image its products have and the anti-establishment pose it strikes, many people tend to forget just how huge Apple has become. In April 2010 it was second on the S&P 500, beaten only by Exxon Mobil (and ahead of arch-rival Microsoft). If you compare its five-

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year share performance with the performance of its main rivals, it is Apple that is the star. Indeed, for all its alternative posturing, Apple is a very successful and a very big business. You find this sort of contradiction all over the company too, and you could argue that they are key to both Apple and the man who embodies it. The company portrays itself as an outsider, when it commands over 70 per cent of the MP3 player market and around 50 per cent of the mobile phone market. It affects openness, yet the lockdown it has on its products is far stronger than anything Microsoft has (with Apple you buy both the hardware and the operating system). It somehow carries a whiff of hippy values about its products, but if you want a green computer you should buy a Dell, not a Mac. And, although Jobs has said that innovation is what distinguishes leaders from followers, Apple has not been the originator of any one of its products. Starting with the Xerox Alto and moving on through the iPod and the iPhone, someone else has always been first. Indeed, if you had to sum up the companys strategy, it would be brilliant second rather than genuine innovator. Lest this sounds like criticism, it isnt really. The title of the 2004 book Fast Second: How smart companies bypass radical innovation to enter and dominate new markets says it all really. Those who dive in first often fail to fully reap the rewards of the new market theyve entered. Better to be second when youve learned from your competitors mistakes. The first MP3 player, for those who are interested, was the MPMan F10, manufactured by Koreas SaeHan Information Systems. It arrived in 1998, three years before the iPod, and others followed it. But their difficult interfaces and fiddly natures meant they were for geeks only. The iPod, on the other hand, was easy to use, and thats why it came to dominate its market. Six years later, the iPhone repeated the trick, albeit in a much more mature market. It made something functional beautiful and easy to use. Apples genius lies at the customer interface, not in the nuts and bolts. Jobs knows that what people want is stuff that looks beautiful

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and is beautifully easy to use. Most people dont care about openness (as with the iPhone) or raw performance figures (as with the Macs processors) or even sound quality (the iPod is probably not a music geeks choice). They care about how things look and feel and Apples brilliant look and feel have won it not only legions of loyal customers, but legions of loyal customers who will pay a significant premium. These are typified by the stereotype of the Apple fanboi, a slavish devotee of the company and its products, who is best summed by a faux interview on the satirical site the Onion, in which a fanboi says Ill buy almost anything if its shiny and made by Apple. However, despite a long run of successes, there are a few storm clouds in Jobss universe. iPod sales have levelled off, and Android phones (which use Googles free open-source operating system) are making serious inroads into a market that the iPhone, until recently, ruled unchallenged. Indeed, for tech observers, its interesting to watch the MicrosoftGoogleApple dynamic change. A few years back, both Google and Apple were anti-Microsoft. But now things arent so clear. By far the biggest worry for Apple (from its fanbois to its staff to shareholders), though, is Jobss health. Hes had serious problems over the last 10 years first with pancreatic cancer and then with a liver transplant. So the big question that is being asked is: what happens to Apple if Jobs leaves? The precedent from the mid-1990s is not good. It is often said that in Apple only one persons opinion counts that of Steve Jobs. Can the company continue to be Apple without him?

References and further reading

Aguilar, Quinn (2010) Do you know Steve Jobs?, Silicon Valley Curious, 20 June Apple website, www.apple.com

Steve Jobs Appleyard, Bryan (2009) Steve Jobs: the man who polished Apple, Times, 16 August Booth, Cathy, Jackson, David S and Marchant, Valerie (1997) Steves job: restart Apple, Time, 18 August Campbell, Duncan (2004) Profile: Steve Jobs, Guardian, 18 June Cnet.com, Apple turns 30 Elkind, Peter (2008) The trouble with Steve Jobs, Fortune, 5 March Lohr, Steve (1997) Creating jobs, New York Times Magazine, 12 January Markides, Constantinos C and Geroski, Paul A (2004) Fast Second: How smart companies bypass radical innovation to enter and dominate new markets, Jossey-Bass, San Francisco, CA Usborne, David (2004) The iPod carrier, Independent on Sunday, 4 January Waters, Richard and Menn, Joseph (2010) Silicon Valley visionary who put Apple on top, Financial Times, 22 December

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