The 12 Years that Changed Steve Jobs

KEYPOINTS

• 01

  Jobs wasn't simply fired in 1985; he lost a boardroom fight after a botched coup against John Sculley.

  The Macintosh was a cultural hit but sold poorly. By 1985 inventory and debt were piling up and Apple had its first layoffs. Jobs ran only the Mac division, yet he stormed into other teams' meetings calling them idiots and was told 'you're not even my boss'. He planned to send Sculley to China for a speaking gig and then ask the board to make him CEO, but he told his rival Jean-Louis Gassée in a parking lot, and Gassée warned Sculley that night.

• 02

  The product fight underneath was open versus closed, and in the 1980s the market wanted open.

  Jobs wanted an end-to-end machine with hardware, software, mouse and keyboard all controlled by one company, much like the iPhone later. Business buyers wanted machines they could customize with cards and slots, which is why the expandable Macintosh II, which Wozniak championed, kept Apple afloat. Cain says Jobs assumed buyers would beat down his door even for a closed box.

• 03

  NeXT began with top-shelf spending that set the company's cost base before it had a product.

  Apple sued Jobs when he took five talented employees, accusing him of taking ideas from a planned supercomputer-style '3M machine' for scientists and intelligence agencies. The 30-year-old Jobs, now rich with 'champagne taste', put $7 million of his own money into NeXT. When a single logo cost $100,000, that became the startup's normal unit of spending.

• 04

  Contrary to the movies, Jobs hired people who would argue with him and ran decisions as 'intellectual combat'.

  He'd ask candidates whether they were the best in their field, and if they hesitated he ended the interview and told them to send him whoever was. At hotel retreats, software, hardware, marketing and sales each had to stand up and fight for their ideas, and he pushed harder if they didn't fight enough. People weren't cowering. They told him plainly what would fail.

• 05

  The reality distortion field fooled Jobs himself, and that made it dangerous.

  Executives sent him emails spelling out the funding and sales NeXT needed by specific dates to survive. He replied that they'd sell 25,000 computers that year, with no distribution network, because 'I tried it today and it's a great computer'. Cain believes Jobs never saw himself as lying. He was building 'a monument to his own genius' and to revenge on Apple.

• 06

  NeXT's hardware failed but its software held the future: object-oriented NeXTSTEP later underpinned the iPhone.

  Having seen object-oriented programming at Xerox PARC, NeXT built software from reusable objects such as buttons and images instead of fragile line-by-line code where a single bug crashed everything. Customers like Wall Street trading desks, healthcare, satellite imaging, the CIA and the NSA bought the cube for the software. But because it was tied to expensive hardware, there was no installed base and no outside developers.

• 07

  By 1993 Jobs had alienated almost everyone and was a weekend away from closing NeXT.

  The cube sold a few dozen units a month. Canon had put in $100 million and Ross Perot $20 million, and an IBM deal had inflated NeXT's valuation into what Cain calls a smoke-and-mirrors bubble. All five co-founders had left, developers had quit, Canon wasn't answering his emails, and Fortune raised the 'snake oil salesman' label. He was burning about $50 million a year, much of it his own money, while personally funding Pixar too.

• 08

  The turnaround came when Jobs stepped back: NeXT posted its first profit in 1994, once he was largely gone.

  NeXT was about $400 million in debt after nine years of losses. A new CFO, Dominic Trumpot from Belgium, and his team told Jobs what had to change, and NeXT became an enterprise software company. Jobs, who had no interest in enterprise, put on an Armani suit and red tie and said NeXT's future would look like IBM. At Pixar he had agreed to stay out of creative decisions, leaving those to Ed Catmull and John Lasseter.

• 09

  Jobs went back to Apple reluctantly, and he insisted on being invited rather than seizing control.

  He first agreed only to be a part-time adviser with no title, ready to retreat to Pixar. In frustration he sold almost all his Apple shares. Larry Ellison pushed for a hostile takeover, but the older Jobs reasoned that it would cost him the goodwill he needed. He installed his NeXT chiefs, Jon Rubinstein for hardware and Avie Tevanian for software, first.

• 10

  His core lessons were to trust his people and bend his vision, including making peace with Bill Gates.

  In 1996 Jobs described the 'inverted pyramid': with great talent, the CEO sits at the bottom and has to keep people who could get another job in a minute. Back as CEO, he did a deal with his arch-rival Microsoft for Office on the Mac and a $150 million investment, which Cain says kept Apple from running out of money. He'd learned that total control requires scale, and scale requires concessions.