Interviews

Name: The Three Faces Of Steve (Brent Schlender)

Published in: Fortune

Date: Nov 9, 1998

Source URL: http://money.cnn.com/magazines/fortune/fortune_archive/1998/11/09/250880/index.htm

You knew it would be bleak when you went back to Apple. Just how bad was it?

Much worse than I could imagine. The people had been told they were losers for so long they were on the verge of giving up. The first six months were very bleak, and at times I got close to throwing in the towel too. I'd never been so tired in my life. I'd come home at about ten o'clock at night and flop straight into bed, then haul myself out at six the next morning and take a shower and go to work. My wife deserves all the credit for keeping me at it. She supported me and kept the family together with a husband in absentia.

A lot of people thought you had a plan in mind when you walked in the door because you moved so swiftly to cut off the clone business and extraneous projects like the Newton.

In a situation like that, you don't have time to study everything. But, yeah, I had some ideas. What I told people was that every decision didn't have to be right, just enough of them had to be right, so don't get paralyzed. There were some very hard decisions to make. Like the decision to end the clone business. In hindsight that looks smart, but have you ever gotten death threats? That was scary.

FORTUNE ran a story right after you came back to Apple in which we accused you of acting cynically, of returning just to satisfy your ego.

If I was cynical, why would I have put myself through all that?

But why did you sell all but one of your Apple shares before you even started trying to revive the company? You had to know that would send a bad signal.

There's an explanation. During the negotiations when Apple wanted to buy NeXT, Apple said it would pay me 1.5 million shares in stock--which was about a sixth of my share of the purchase price--and the rest in cash. There was a catch: They wanted it to be unregistered stock so I couldn't sell it for six months. It was a big mistake, and here's why. At the end of six months they had to register the stock with the SEC as they promised. When they did, the business press--a la you guys--assumed I was preparing to sell, even though I hadn't even thought about selling. When that all blew up, I thought, "Gee, Apple's taking a big PR hit on this. If I sell in three or six months, there will be a second hit, so I might as well sell now." This was, by the way, before the Apple board began to twist my arm to come back and run the company. Gil Amelio was running the place. So I was also thinking, "Do I really want this $20 million worth of stock when I think the company is going to be worthless in a year?" So I sold it. Literally within a few days, I got a call from [Apple director] Ed Woolard to discuss coming back. Selling that stock actually was a good thing. I don't get a salary at Apple. I get a dollar a year so that my family can be on the health plan, but that's it. You could argue, as you did, that I don't have a stake in Apple. But I was able to walk in with some moral authority and say, "Look, this isn't about me or the money I'm going to make. This is about what's right for Apple." It was purer in some ways.

Let's look ahead now. The iMac has begun shoring up Apple's market share. But can you really hope to make your share grow?

There are three kinds of iMac purchasers: No. 1, the Macintosh installed base; that's the most important segment. We're constantly listening to those folks, and we'll try to build computers that they want and need. They seem to be responding to the iMac. The second kind is new users. Between five million and ten million new users will enter the market in the next year or two, and we'd like to get a much greater proportion of those than our current market share. We're in a pretty good position to do that. The third place to get customers is from the Wintel installed base. Now, the Wintel market is actually two: diehard PC users--and we know we're not going to get many of them--and former Mac users who converted to Wintel. We are getting some of those people back.

Now that you've stabilized the ship, will Apple start pioneering again?

The iMac is a pretty good indication of where we're headed. The whole strategy for Apple now is, if you will, to be the Sony of the computer business. I don't really believe that televisions and computers are going to merge. I've spent enough time in entertainment to know that storytelling is linear. It's not interactive. You go to your TV when you want to turn your brain off. You go to your computer when you want to turn your brain on. Those are not the same. Computers have a bright future. The question is, where can Apple fit in? Dell and Compaq and Hewlett-Packard sell mainly to the corporate market. Yet there's this whole consumer market, which hardly anybody with the right skills is focusing on. In audio and video electronics, Sony has a consumer products business, which is their core, and a professional business, which serves broadcasters. Well, our professional business is our design/publishing business, and our consumer business is education and pure consumers. The consumer business is pretty cool because it's very high-volume and you really get to interact with individual customers. Beyond that, Apple's the only PC company left that makes the whole widget--hardware and software. That means Apple can really decide that it will make a system dramatically easier to use, which is a great asset when you're going after consumers. The technology isn't the hard part. The hard part is, What's the product? Or, Who's the customer? How are they going to buy it? How do you tell them about it? So besides having the ideas and the technology and the manufacturing, you have to have good marketing to be able to reach the consumer.

Can we expect Apple to move into related consumer electronics businesses?

If Mercedes made a bicycle or a hamburger or a computer, I don't think there'd be much advantage in having its logo on it. I don't think Apple would get much equity putting its name on an automobile, either. And just because the whole world is going digital--TV, audio, and all that--doesn't mean there's anything wrong with just being in the computer business. The computer business is huge. Listen, consumers are smart enough to know what the boundaries of brands are. If Apple can find things that are complementary to its core, that's great. I thought buying the PalmPilot from 3Com would have been complementary, but it didn't come to pass. I won't go into what other complementary things there might be, but when you look back in a year, it will all make sense. Here's a problem I see in spotting new products. People focus too much on entirely new ideas, as if that's what's required to grow a new business. Maybe that's not the right way to do it. Most good products really are extensions of previous products. For example, computers are still awful. They're too complicated and don't do what you really want them to do--or do those things as well as they could. We have a long way to go. People are still making automobiles after nearly 100 years. Telephones have been around a long time, but even so the cellular revolution was pretty exciting. That's why I think the computer revolution is still in its early stages. There's a lot of room for doing new and exciting things with the same basic product.

You're CEO of not one but two companies that are very different. Tell us about some of those differences.

Apple has some pretty amazing people, but the collection of people at Pixar is the highest concentration of remarkable people that I have ever witnessed. There's a person who's got a Ph.D. in computer-generated plants--3-D grass and trees and flowers. There's another who is the best in the world at putting imagery on film. Also, Pixar is more multidisciplinary than Apple ever will be. But the key thing is that it is much smaller. Pixar's got 450 people. You could never have the collection of people that Pixar has now if you went to 2,000 people. Another difference is that all the things in the computer business that we labored over 20 years ago are now discarded--part of the sedimentary layer. Nobody uses an Apple II anymore. Yet when Snow White [Disney's first big animated film] was re-released a few years back, we were one of the tens of millions of families that went to see it. That film is 60 years old, and my son loved it. I'd like to think people are going to love [Pixar's upcoming movie] A Bug's Life 60 years from now. But I doubt anybody will be beating on a Macintosh 60 years from now.

Have you seen Antz [a computer-animated film distributed by DreamWorks that is strikingly similar to A Bug's Life]?

I should have, but I've just been too busy. That reminds me of another big difference between Apple and Pixar: The computer business is a zero-sum game. If a customer buys the other guy's computer, he won't buy yours. But in the film industry, time and again, audiences have shown that if there are three really good films out there, they'll go see all three; but if there are three not-so-good films, they won't go see any. If A Bug's Life is really good, Antz is not going to hurt us much, even if it's really good too. We're competing with "Can we make a great movie?," not with Antz or another studio.

People you've worked with say the word that best describes your management style is persistent. Where did you get your persistence?

I don't think of it as persistence at all. When I was growing up, a guy across the street had a Volkswagen Bug. He really wanted to make it into a Porsche. He spent all his spare money and time accessorizing this VW, making it look and sound loud. By the time he was done, he did not have a Porsche. He had a loud, ugly VW. You've got to be careful choosing what you're going to do. Once you pick something you really care about, and it's a worthwhile thing to do, then you can kind of forget about it and just work at it. The dedication comes naturally.

You seem to enjoy building companies as much as you enjoy building products.

Uh, no. The only purpose for me in building a company is so that it can make products. Of course, building a very strong company and a foundation of talent and culture is essential over the long run to keep making great products. On the other hand, to me, the company is one of humanity's most amazing inventions. It's totally abstract. Sure, you have to build something with bricks and mortar to put the people in, but basically a company is this abstract construct we've invented, and it's incredibly powerful.

Still, if you look at your first tenure at Apple, part of your goal was to build a new kind of company. You had much the same goal at Pixar.

I was lucky to get into computers when it was a very young and idealistic industry. There weren't many degrees offered in computer science, so people in computers were brilliant people from mathematics, physics, music, zoology, whatever. They loved it, and no one was really in it for the money. My heroes--Dave Packard, for example, left all his money to his foundation; Bob Noyce [the late co-founder of Intel] was another. I'm old enough to have been able to know these guys. I met Andy Grove when I was 21. I called him and told him I'd heard he was really good at operations and asked if I could take him out to lunch. I did that with others too. These guys were all company builders, and the gestalt of Silicon Valley at that time made a big impression on me. There are people around here who start companies just to make money, but the great companies, well, that's not what they're about.

Maybe so, but today Silicon Valley seems to be fueled as much by stock options as by idealism.

Of course you want to have your people share in the wealth you create. At Apple we gave all our employees stock options very early on. We were among the first in Silicon Valley to do that. And when I returned, I took away most of the cash bonuses and replaced them with options. No cars, no planes, no bonuses. Basically, everybody gets a salary and stock. The great thing about stock is that if the value of one person's shares goes up, everyone's does. It's a very egalitarian way to run a company that Hewlett-Packard pioneered and that Apple, I would like to think, helped establish. At Pixar one of the most gratifying things is that there are a lot of folks who don't really care about getting rich but who care a lot about the art or the technology. Yet they will never have to worry about money for the rest of their lives. Their families can live in a nice house, and they can concentrate on what they really love to do. It's wonderful.

You've always taken time to troll for new technologies that you could turn into new kinds of products. Are you able to do that now as much as you used to?

There's a certain amount of homework involved, true; but mostly it's just picking up on things you can see on the periphery. Sometimes at night when you're almost asleep, you realize something you wouldn't otherwise have noted. I subscribe to a half-dozen Internet news services, and I get 300 E-mails a day, many from people I don't know, hawking crazy ideas. And I've always paid close attention to the whispers around me.

You're 43. You've already made it big in business, yet you're not on the downhill slope of your life yet. Have your motivations changed as a middle-ager?

I don't think much about my time of life. I just get up in the morning and it's a new day. Somebody told me when I was 17 to live each day as if it were my last, and that one day I'd be right. I am at a stage where I don't have to do things just to get by. But then I've always been that way because I've never really cared about money that much. I guess what I'm trying to say is that I feel the same way now as I felt when I was 17.

But you react to things differently now.

Of course. I'm an old man. When you're older, you realize that sometimes there's nothing you can do about certain things.

Do you ever think you may be getting a little conservative in your old age?

One of my role models is Bob Dylan. As I grew up, I learned the lyrics to all his songs and watched him never stand still. If you look at the artists, if they get really good, it always occurs to them at some point that they can do this one thing for the rest of their lives, and they can be really successful to the outside world but not really be 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. But even though I didn't know how bad things really were, I still had a lot to think about before I said yes. I had to consider the implications for Pixar, for my family, for my reputation. I decided that I didn't really care, because this is what I want to do. If I try my best and fail, well, I tried my best. What makes you become conservative is realizing that you have something to lose. Remember The Whole Earth Catalog? The last edition had a photo on the back cover of a remote country road you might find yourself on while hitchhiking up to Oregon. It was a beautiful shot, and it had a caption that really grabbed me. It said: "Stay hungry. Stay foolish." It wasn't an ad for anything--just one of Stewart Brand's profound statements. It's wisdom. "Stay hungry. Stay foolish."

Do you want to be a mentor to someone who could succeed you?

I don't think it works that way. You just are yourself, and you work with other people. If you're inspiring to other people, it makes an impression on them. For example, I hear people at Disney talking about what it was like to work with Walt. They loved him. I know that people at Pixar are going to talk about their days with John Lasseter in the same way. Who knows? Maybe someday somebody will feel that way about working with me. I have no idea.

But if you had a partner or an understudy, wouldn't it reassure those who worry about the word "interim" in your title?

Here's what that issue is about. I'm also CEO of Pixar, and I'd like to remain there for the foreseeable future because I love it. That does place some limitations on what I can do at Apple. What happened with me ever since I returned to Apple was that everybody was hounding me about this "interim" business, asking how long I was going to stay. Very early this year I remember waking up and thinking, "This is not my problem. This is their problem. I'm not losing sleep over it, and it doesn't make me work any less hard for Apple." So I just decided, with all the other problems that I'd taken on, that I didn't need this one too, and I haven't looked back a day.

What's your biggest screwup in your adult life?

Personal stuff.

No regrets about business decisions?

Sure, there are a zillion things I wish I'd done differently. But I think the things you most regret in life are things you didn't do. What you really regret was never asking that girl to dance. In business, if I knew earlier what I know now, I'd have probably done some things a lot better than I did, but I also would've probably done some other things a lot worse. But so what? It's more important to be engaged in the present. I'll give you a perfect example. On vacation recently I was reading this book by [physicist and Nobel laureate] Richard Feynmann. He had cancer, you know. In this book he was describing one of his last operations before he died. The doctor said to him, "Look, Richard, I'm not sure you're going to make it." And Feynmann made the doctor promise that if it became clear he wasn't going to survive, to take away the anesthetic. Do you know why? Feynmann said, "I want to feel what it's like to turn off." That's a good way to put yourself in the present--to look at what's affecting you right now and be curious about it even if it's bad. I'll tell you something else that makes you look at things differently. Once you have kids, it doesn't take a very big leap to realize that everybody is a kid. Everybody came out of their mother and was a baby, and hopefully everybody was loved by somebody as much as you love your kids. That may not sound profound, but a lot of people forget that. So when we laid some people off at Apple a year ago, or when I have to take people out of their jobs, it's harder for me now. Much harder. I do it because that's my job. But when I look at people when this happens, I also think of them as being 5 years old. And I think that person could be me coming home to tell my wife and kids that I just got laid off. Or that could be one of my kids in 20 years. I never took it so personally before. Life is short, and we're all going to die really soon. It's true, you know.