The Biography of Steve Jobs (The Evolution of a Reckless Upstart into a Visionary Leader)

1. 0:00 – 7:04

   Why Becoming Steve Jobs and the Wilderness Years Matter

   1. DSDavid Senra0:00

      He shaped how I came to view the world. We were both strong-minded, but he had a fully formed aesthetic, and I did not. It is hard enough to see what is already there, to remove the many impediments to a clear view of reality, but Steve's gift was even greater. He saw clearly what was not there, what could be there, and what had to be there. His mind was never a captive of reality. Quite the contrary. He imagined what reality lacked and set out to remedy it. His ideas were not arguments, but intuitions, born of a true inner freedom. For this reason, he possessed an uncannily large sense of possibility, an epic sense of possibility. Steve's love of beauty and his impatience with ugliness pervaded our lives. No object was too small or insignificant to be exempt from Steve's examination of the meaning and the quality of its form. He looked at things and then created things from the standpoint of perfection. That could be an unforgiving standpoint, but over time, I came to see its reasons, to understand Steve's unbelievable rigor, which he imposed first and most strenuously on himself. He was the most unfettered thinker I have ever known. That was Steve's wife speaking at his memorial service after he passed away, and it is an excerpt from the book that I'm gonna talk to you about today, which is Becoming Steve Jobs: The Evolution of a Reckless Upstart into a Visionary Leader, and it was written by Brent Schlender and Rick Tetzeli. So this is the second time I read this book. I originally read it several years ago. It was episode 19 of Founders. At the f- at the time I first read this book, though, I had only read two books about Steve Jobs, so I didn't really have an advanced understanding of who he was and why his career is so important for ent- future generations of entrepreneurs to study. Since then, I've read over 10 books on Steve Jobs, many of them multiple times, and then I tracked down every single biography I could find about the people that he discussed, where they're heroes or influences or people he studied when he was building Apple. I made episodes about every single one of those books. I'm gonna include it in the show notes. You can also go to founderspodcast.com and you'll find it there. It's about 40 different episodes, and so all that reading and all that time invested heavily informs when I pick up the book the second time. And the reason I wanted to reread this book is because if... You should read, you know, as many books as possible as you can about Steve Jobs, in my opinion, but if you only had time to read one, or if you only wanted to read one, this is the one I would choose. And the reason for that is because it's the book that covers most deeply his evolution, the change from a reckless but gifted 20-year-old entrepreneur into the older, wiser, maybe greatest entrepreneur of all time. And Steve was able to make that transition because he was a learning machine, constantly honing his craft, which the author goes into right in the prologue when he tells us why he wrote the book. "I wanted to offer a fuller picture and deeper understanding of the man I had covered so intensely." So that is Brent writing, one of the co-authors, and he actually was a reporter and a writer. He covered Steve in the technology industry for over 20 years. And this is the perfect paragraph to start with 'cause it's gonna inform the discussion that you and I are gonna have about Steve today, right? The most basic question about Steve's career is this: How could the man who had been such an inconsistent, inconsiderate, rash, and wrongheaded businessman that he was exiled from the company he had founded become the venerated CEO who revived Apple and created a whole new set of culture-divining products that transformed the company into the most valuable and admired enterprise on Earth? And then he gets into the period of time in Steve's life, which I agree with what he's about to say here, is it's most important to study. There's a fantastic book I read a long time ago. After you read this book, I would read Steve Jobs and the Next Big Thing. It's written by Randall Stross. It covers his wilderness years, the years between when he left Apple and he returned. It's originally, uh, episode 77 of Founders. If you haven't listened to it, you might wanna listen to it after you get done with this episode. I kept coming back to the time that many have described as his wilderness years, the dozen years between his first tenure at Apple and his return. That era from 1985 to 1997 is easy to overlook. The lows aren't as dramatic as the blowups of his first tenure at Apple, and the highs aren't as thrilling as those engineered in the first decade of the 21st century. These were muddled, complicated times. I call them on that podcast, it is Bizarro Steve Jobs. And the reason I call it that is because you have one of the most gifted entrepreneurs of all time making r- bad decision after bad decision over and over again as he's trying to build Next. But those years are, in fact, the critical ones of his career. That is when he learned most everything that made his later success possible, and that is when he started to temper and channel his behavior. To overlook those years is to fall into the trap of only celebrating success. We can learn as much, if not more, from failure, from promising paths that turned into dead ends. The vision, understanding, patience, and wisdom that informed Steve's last decade were forged in the trials of those intervening years. And this next sentence is really the punchline of what he's trying to, to tell us, and I agree with it after reading, you know, all these books on Steve Jobs, especially, uh, Steve Jobs and the Next Big Thing. He had to go through that. The last act of his career, the most valuable work he ever did, would not have occurred without that happening. He mentioned that himself, if you have ever gone back and l- uh, listened to that commencement address that he gave at Stanford, I think back in 2005. The failures, stinging reversals, miscommunications, bad judgment calls, emphasis on the wrong values, the whole Pandora's box of immaturity. were necessary prerequisites to the clarity, moderation, reflection, and steadiness that he would display in later years. And yet even as you read about that time period, and he's making, you know, like you can clearly see in, in hindsight, "Whoa, Steve, that's a terrible idea. What are you... Why are you doing that?" You are s- impressed by his, his willing- his unwillingness to quit. His perseverance was remarkable. Driven and curious, even when things were tough, he was a learning machine during these years. And finally, I wanna wrap up this section before I go to what I think is the most important, one of the most important events that happened in Steve's childhood. Really, th- you can think about this section, this next section as, like, why the book is named Becoming Steve Jobs. And I wanted to include this because I really believe, like, this right now, this paragraph, this is the process that you and I are in the middle of. Most of the people that you and I study on the podcast are dead. Their story is written. You and I are writing our story now. Steve is a great object lesson in someone who masterfully improved his ability

2. 7:04 – 14:03

   A Father's Workbench and a Calculation Based on Arrogance

   1. DSDavid Senra7:04

      to make better use of his strengths, and to effectively mitigate those aspects of his personality that got in way of those strengths. His negative qualities did not go away, nor were they replaced by new good traits, but he learned how to manage himself. So let's go to when Steve was five years old. His father was a middle class, maybe lower middle class mechanic, craftsman. He made furniture, and he also rebuilt cars on the weekend. And even from a very young age, he taught his son to take pride in the quality of what you're making. And later in the book, and I'll talk to you about it later, there is a conversation that's happening between Steve Jobs and Jony Ive, and they're having a discussion on, how are we gonna define success at Apple? How do we know if we can consider the work that we're doing success? Like, what are the, what are we, uh, what are the metrics that we're actually gonna agree on? And I think the conclusion they arrive at is the correct one, and that discussion is completely informed, in my opinion, by what's happening when he was a young kid and the lessons that his father taught him. He taught his son the paramount value of taking one's time, paying attention to details, and since Paul was anything but rich, putting in the legwork to hunt for spare parts that were a good value. He had a workbench out in his garage. When I was about five or six, he sectioned off a little piece of it and said, "Steve, this is your workbench now." He showed me how to build things. It really was very good for me. He spent a lot of time with me, teaching me how to build things. Paul is also raising his son in the right area. This is the area that's now called Silicon Valley. This is in the late 1960s, late, uh, late 1960s and early 1970s, and this talks about the people that they're interacting with. This area attracted highly educated electrical engineers, chemists, uh, computer programmers, and physicists who were drawn to the region's blossoming semiconductor, telecommunications, and electronics company. Living there, a curious child could easily develop a much deeper sense of the leading edge of technology than those growing up elsewhere in the country. So you can combine the environment with what his father's teaching him. He's like, "Listen, everything around you was built by somebody else, and these are not great mysteries. You can learn to take them apart. You can learn to improve them. You can learn then to build your own things that add value to other people in the world." The implicit promise in all of this was that anything could be figured out, and since anything could be figured out, anything could be built. And that is so important because about 12 years after this is happening in Steve's life, he's hanging out with Steve Wozniak, and he's like, "Hey, we can also build our own computer. Other people are building computers. We don't have to build them, one, the way everybody else is doing it. But we can a- we can actually build a computer and sell it," that was Steve Jobs', uh, main contribution, "and sell it to other people." And so I wanna go to where Steve Wozniak and Steve Jobs are having this conversation, and where Steve makes a calculation based on arrogance, and he wound up being correct. This is really important. So at the time, for simplicity's sake, we can just think about what Wozniak is building as a computer. He's working at HP at the time, and he's like, "Hey, we-- Steve Jobs, we can't make our own computer. Why don't we pitch this to my employer? Like, they might wanna manufacture a versin- version of this concept." And the reason I say it's a calculation based on arrogance is because Steve has no education, no experience, no contacts, no resources, and very little money, and he's like, "We don't need HP." And this is what he says. He didn't think Woz needed HP. He thought he and Woz could develop a business of their own. That business, that idea morph- eventually morphs into Apple. And the premise, the idea behind what's happening here, you and I have seen over and over and over again in the history of entrepreneurship. I use that, that maxim as a way for, uh, t- for me to remember it because it came from that book, The Fish That Ate the Whale. I just reread that book. It's episode 255 if you haven't listened to it. But at the time, Sam Zemurray is an 18-year-old penniless immigrant living in Alabama. So you have o- him on one hand. On the other hand is one of the l- the world's largest multinational corporations at that time in history, United Fruit Company, and he's saying, "Hey, these bananas that you guys are just throwing out, I can actually find a market for. I can build this. I can build what y- your trash as the cornerstone, the foundation of my future empire." And that line is from that book. It was a calculation based on arrogance. And Zemurray, like Jobs where we are in this story, was right. And so Steve says, "Forget that. We don't need HP. Let's gather up our meager resources and sell them." So it says, "To raise cash, Steve sold his treasured Volkswagen minibus, and Woz, uh, sold his precious HP 65 programmable calculator." Uh, this is, this is so wild. Think about, you know, Apple today is what? Multiple trillion dollar company. This is the very first product they're gonna make together that they actually sell under the Apple brand, I should say, and they spend $1,000. And I wanna bring that up because I, I was reading this. It says, "After spending $1,000 on designing the board and contracting to have a few dozen made, uh, they wind up making their money back by selling these for $50 apiece. Of that $50 sales price, $30 is profit." And this is when Steve makes the decision. He's like, "Hey, we need to form a company. Let's name the company Apple." I'll get there in a minute, but when I got to this section, there's something that Jeff Bezos said that has never left my mind. And, and I've known this for years, and I've mentioned this several times on the podcast. But he talks about... He was talking about the experience, like, the unique experience Amazon has because they've grown multiple $10 million businesses into billion-dollar businesses. And he talks about having that institutional knowledge is very important, and he says it in a metaphor that's fantastic. And he says, "We know from our..." This is Jeff speaking now. "We know from our past experiences that big things start small. The biggest oak starts from an acorn. If you wanna do anything new, you've got to be willing to let that acorn grow into a little sapling, and then into a small tree, and maybe one day it will be a big business on its own." And this next story is an example of that. So they make their first version of their computer. They register Apple as a California business. This is in 1976, and they were part of this small group of hobbyists, people who are really enthusiastic about technology and, and personal computing. Uh, I don't even think there was such a term as personal computing at this time in history, if I'm not mistaken. And so they go to present it, and this is important. It says, "Steve and Woz made one more trip to the Homebrew Computer Club to show off their finished, fully assembled version of their new computer. The reaction from most club members, however, was tepid. Most were tinkerers who believed that half the fun of computing was in designing and building their own machines." There's a n- It's not in this book. There's another fantastic... Steve reflects on this later on in life in another book I read, and he's like, "What I... The one insight that I had is, like, for every one hobbyist, right, that actually wants to go through the trouble of, like, building their own computer and picking out the parts and doing all that stuff," he's like, "There's 1,000 customers that just wanna go to the store and buy a computer like they'd buy any other appliance." And so if you think about what's, what I'm about to read to you now, go back to that line.

3. 14:03 – 18:47

   The Byte Shop Deal and Asking for Help

   1. DSDavid Senra14:03

      It's a calculation based on arrogance, right? So they do this presentation. Almost everybody in the club is like, "No, this doesn't make sense. This is, like, against our ethos." Uh, it says, "With the Apple I, all you had to do was set it up, connect it to a keyboard and a monitor, plug it in, and turn it on." So they're like, "This is stupid. This isn't gonna work." Now, why is that important? 'Cause this next sentence is fantastic understanding of Steve Jobs, and I would argue almost every other person that you and I study on this podcast. He was a free thinker whose ideas would often run against the conventional wisdom of any community in which he operated. Steve didn't care at all. It was irrelevant, your criticism of what he wanted to do. He was going to make it happen, and it's what happens at the very end of this m- this meeting. This guy named Paul walks up to them. He owns a small com- uh, computer shop. I think it might be, like, a small chain of computer shops. And it says, "The owner of the Byte Shop computer store introduced himself to Steve and Woz after the presentation. He was impressed enough to wanna talk about doing some business." So Steve always jumps on things as fast as possible. They're like, "Okay, cool. We'll do some business." The next day, Steve walks into Paul's shop. He walks over to the Byte Shop, right? And he does a deal with Paul where he says, "Okay, you pay $500, and we'll make 50 of them." He goes from prototype the night before to $25,000 in sales. And this story was always hu- always humorous to me because you think about, you know, Apple, the multi-trillion dollar company today. Think about this. The first Apple sale ever made was made barefoot. Barefoot. He walks into the Byte Shop and does this sale. He does not have shoes on. And then there's a line here that I think is really important. Steve said yes first and then learned how to later. Without missing a beat, Steve happily promised delivery even though he and Woz had neither the wherewithal to buy the components nor anything like a factory or a labor force necessary to build anything. So at the beginning of Apple, we have the first major conflict in Steve's life. He has this famous saying that he says later on, this famous maxim. He's like, "Listen, it's more fun to be a pirate than join the Navy." He wanted to build insanely great products from the time he was a very young man until the day he died. He did not wanna be a businessman. As he told me several times, "I didn't wanna be a businessman because all the businessmen I knew I didn't wanna be like." Steve's natural inclination was to position himself as the critic, the rebel, the visionary, a nimble David against the stodgy Goliath. And so one way to resolve this conflict, he's like, "Listen, we ha- we know we're building a good product." They're in the, uh, they're about to build the Apple II, one of the most commercially successful Apple products of all time. But to do so, they need help. And so there's just one sentence here that anytime, if anyb- you've spent any time studying the life of Steve Jobs, you know it was one of his superpowers. He had no qualms about calling anyone up in search of information or help. That is a trait that he had at the very beginning of his life, the one he possessed his entire life. So I'm gonna go to another... I'm gonna go to my notebook. So I, I've, w- This is, like, several years ago. There's this interview with Steve. He's probably late 30s, maybe early 40s. I think this is, like, right before he goes back to Apple, and he's talking about his ability to ask for help, and he's talking about how this is something that separates people like him who accomplish things from people who just dream about it. And so this is, uh, these are notes from a talk that he gave, you know, probably 40 years ago, 30 years ago. He says, "Now, I've always actually found something to be very true, which is most people don't get those experiences because they never ask. I have never found anybody who didn't wanna help me when I've asked them for help. I have never found anyone who said no or hung up the phone when I called. I just asked. And when people ask me, I try to be as responsive to pay back that debt of gratitude. Most people never pick up the phone and call. Most people never ask, and that is what separates the people that do things from the people that just dream about them. You gotta act, and you gotta be willing to fail. You gotta be ready to crash and burn with people on the phone, with starting a company, with whatever. If you're afraid of failing, you won't get very far." And I think a key part here is the fact that Steve had a deep belief in the excellence of what him and Woz were building. And so he has no problem. He starts going around Silicon Valley, and one phone call after another, he's like, "I'm gonna find people that can help me. I'm gonna find venture capitalists. I'm gonna find company builders. I'm gonna find anybody that can tell me how can I take this idea and transform it into a company?" He had such faith in the excellence of his work that he just assumed that someone would eventually agree to fund it. And the way I think about that is like, how can I take that idea and never forget it? First you believe, and then you work on making other people believe too. He tirelessly navigated the Valley's network of experts one phone call and one meeting at a time.

4. 18:47 – 23:15

   Learning from Company Builders and Edwin Land

   1. DSDavid Senra18:47

      And so then we skip ahead in the timeline, and we see these two main ideas that I wanna talk to you about, which is this is about the evolution of Steve Jobs, the fact that he was not static, he changed, and that Steve, like every single other one of history's greatest entrepreneurs, spent their very valuable time studying the great entrepreneurs that came before them. That is why there's almost 40 episodes on Steve Jobs and the people he studied in the archive. Listen to this. Steve developed a reputation as an egomaniac who wasn't willing to learn from others. It is a fundamental misunderstanding of the man, even during his youngest, brashest, and most overbearing years, the time in history where we are, in Apple's history and in Steve's life history. While Steve didn't yet have the skills to build a great company, he admired those who had pulled it off, and he would go to great lengths to meet them and learn from them. Now, this is Steve talking about the lessons he learned from some of technology's greatest, uh, entrepreneurs and company builders, right? None of these people were really in it for the money. Dave Packard, for example, left all his money to the foundation, obviously one of the co-founders of HP. He may have died the richest guy in the cemetery, but he wasn't in it for the money. Bob Noyce, co-founder of Intel, is another. I'm old enough... So this is this quote that I'm reading you from Steve Jobs. This comes towards the end of his life, so he's reflecting back on it. He says, "I'm old enough to have been able to get to know these guys." Before they passed away is what he's talking about. "I met Andy Grove," who was then the CEO of Intel, "when I was 21. I called him up, and I told him..." There's that, there's his superpower again, right? He's just gonna call you on the phone. He winds up calling Bill Hewlett, which is Pa- David Packard's partner, obviously, when he was, like, 12 or 13 years old, 'cause everybody's, everybody's na- na- uh, name and number used to be in the white pages. So he just, he had the, like... That just proves, like, his, his level of, uh, I guess aggressiveness or his, like, default aggressive nature. He just calls him up. He's like, "Hey, I'm just 12 years old. I'm Steve Jobs. I'm trying to build a frequency counter. You guys have parts for them. Will you give me parts?" And, uh, Bill winds up laughing and laughing, and then not only gives him the parts, but gives him a job during the summer to, to assemble frequency counters at HP. So it says, uh, "I'm old enough to have known, to be able to get to know these guys. I met Andy Grove, CEO of Intel, when I was 21. I called him up and told him I had heard he was really good at operations and asked if he could take, if I could take him out to lunch. I did that with Jerry Sanders, founder of Advanced Micro Devices, and with Charlie Sporck, founder of National Semiconductor, and others. Basically, I got to..." This is the main reason I'm telling you this and why it's so important that you and I do the same, whether we do it in person or whether we have to use, you, you know, these, these people mentor us in, like, a historical context, which is exactly what books are. "Basically, I got to know these guys, who were all company builders, and the particular scent of Silicon Valley at that time made a very big impression on me." And on the very next page, he talks about the, the person I've spent [laughs] I just spent, what? The last... Right before I reread this book, I spent probably 10 days reading, it's gotta be close to 1,000 pages on Edwin Land. I just reread three books on Edwin Land. They're the last two episodes. Obviously, there's, uh, you know, five or six episodes on Edwin Land in the archive, and this is the reason. It's 'cause we have, in my opinion, Steve Jobs is the greatest entrepreneur to ever live, and he's saying, "Hey, this is my hero. This is the person I patterned my career off of." I just, uh, was interviewed on a podcast and a newsletter with my friend Frederick, and something he asked me, which I don't know if it'll make it in there, but he's like, "Why do you read books? Like, it's not, you don't just read one book on a person." Like, he was, he mentioned Edwin Land. He's like, "You read five books on Edwin Land." He's like, essentially like, "What is wrong with you?" [laughs] I told him, "I can't help it. I have to read. Once I find something interesting, I have to read every single thing I can find on him. I've just always been like that." Some were heroes like Edwin Land. Steve admired many things about Land. His obsessive commitment... Now, this is Steve talking about why he admired, one of the reasons he admired Edwin Land. His obsessive commitment to creating products of style, practicality, and great consumer appeal, and his reliance on gut instinct rather than consumer research, and the restless obsession and invention he brought to the company he founded. That is Steve describing Edwin Land. Come on. Come on. You could take out Edwin Land's name, put in Steve Jobs, and it's the exact... It still holds true. Steve had an obsessive commitment to creating products of style, practicality, and great consumer appeal. He r- Steve relied on gut instinct rather than consumer research, and Steve had a restless obsession and, uh, an invention that he brought to the company he founded. I never get tired of hearing stories like this. I absolutely love it. I'm gonna move ahead because I wanna hit on another thing. Again, this is not a summary of the book. These are just the ideas that I wanna remember, the ideas that I think I can use in my work, the ideas I know you can use in your work, and this is the idea. Like, the

5. 23:15 – 27:11

   Jobs's Storytelling at 22

   1. DSDavid Senra23:15

      storyteller, one of my favorite quotes of Steve Jobs is like, "The storyteller is the most powerful person in the world." And storytelling is a skill like anything else, and one that you can practice and get better at. And so listen to how good... Now, obviously, we all know, y- you've probably seen a lot of the, like, the product demonstrations and the interviews that Steve did later in his life. He was also gifted. Now, he's a better storyteller later, obviously, but he was gifted. Listen to the storytelling ability he has as a 22-year-old. This is remarkable. There is a long and wonderful quote from a New Yorker piece in late 1977 that offers rich proof of Steve's fully formed verbal mastery. It was written at a time when the average reader knew so little about computers. So the magazine's reporter is at a, like, a computer conference, right? And he finds a young Steve Jobs manning the Apple computer booth. And so he walks up to him, and here, let's go into Steve's verbal mastery. "I wish we had these personal machines when I was growing up," Jobs tells him, before continuing on for a total of 224 words. This is a masterclass in marketing, sales, and product positioning in 224 words, in my opinion. People have been hearing all sorts of things about computers during the past 10 years through the media. Supposedly, computers have been controlling various aspects of their lives. Yet, in spite of that, most adults have no idea what a computer really is or what it can or can't do. Now, for the first time, people can actually buy a computer for the price of a good stereo, interact with it, and find out what it's all about. Consider the camera. There are thousands of people across the country taking photography courses. They'll never be professional photographers. They just wanna understand what the photographic process is all about. Same with computers. We started a little personal computing manufacturing company in a garage in Los Altos in seven- in 1976. Now we're the largest per- personal computer company in the world. We make what we think of as the Rolls-Royce of personal computers. It's a domesticated computer. People expect blinking lights, but what they find is that it looks like a portable typewriter, which, connected to a suitable readout screen, is able to display in color. There's a feedback it gives to people who use it, and the enthusiasm of the users is tremendous. We're always asked what it can do, and what-- And it can do a lot of things, but in my opinion, the real thing it is doing right now is to teach people how to program the computer. That's the end of the 224 words. Then the, this author, this Brent's interpretation of what just occurred is fantastic, so I'm gonna read that to you as well. The reporter asked if Steve would mind us telling his age. 22. Speaking off the cuff to a passing journalist, Steve finds so many ways to demystify for the average person the insanely geeky device that he and Woz had created. He understood their fundamental fear that computers may take over too much of modern life. He sympathizes with their ignorance. He offers several analogies, which is how most people think. Analogies are extremely useful way to get ideas into other people's brains. He offers several analogies to comforting examples that they will understand. Typewriters, cameras. Indeed, he makes using a computer seem no more complicated than taking a photograph, going so far as to call the Apple II domesticated, and yet he elevates-- [laughs] This is, this is his gift. It's, uh, incredible that he was able to do this so at a young age. Listen to this. This is about the product positioning part I mentioned earlier. And yet he elevates both his computer-- excuse me, his company and its computer into something aspirational. He links this machine made a few months earlier, a few months ago, by some disheveled California misfits to Rolls-Royce, the 73-year-old paragon, paragon of sophisticated industrial manufacturing and elite consumer taste. He even calls Apple a world leader, an absolutely unprovable claim that rockets the little company into the same league as IBM, which was then the industry's giant. He was an extraordinary speaker, and he wielded that tool to great effect.

6. 27:11 – 33:36

   Early Blind Spots and Bill Gates's Software Insight

   1. DSDavid Senra27:11

      So that's the upside of young Steve Jobs. Let's go to the downside, or one of the downsides. This is the dividing line in Steve's life. If you are valuable to his-- If you're not valuable to his work, you are completely replaceable. And so this is somebody describing Steve at this point. His name's Lee Clow. He was the ad director. He went to becoming a very close friend of Steve Jobs. He says, "Steve had this incredible bandwidth, but he devoted almost all of it to work." And this is pre-evolution of Steve, right? He gets a-- He g- He's so much better at dealing with people, at leading people, at building a company in the second return to Apple than he was in the first. And he made a mistake that you and I know not to make, because when we went over Estée Lauder's fantastic autobiography, uh, it's back on episode 270. Or excuse me, 217. She made the point multiple times in that book, and I think I brought it to your attention multiple times on S- uh, in that episode, to never underestimate the value of an ally. Stop going around collecting enemies. Collect allies and friends. Steve was incapable, absolutely incapable of doing this at his point, this point in his career, and this leads him to getting kicked out of his own company when he turns 30. Steve's behavior isolated him within the company. He had little sense at this point of how important it can be to have true allies in a corporate setting. It was a blind spot that would catch up to him eventually. And so no study of Steve Jobs' life is n- is complete without introducing a main supporting character. Uh, their careers weave in and out of each other's for decades, and that's Bill Gates. This is the first time Bill Gates pops up in the story. The Apple II is already super successful. They're selling a ton of them. Uh, Steve is rich. Apple's already public. Bill Gates is on the come-up. They're meeting. They're both in their 20s. And it says, in 1981, Bill Gates visited Apple. The 26-year-old CEO of Microsoft made the trip fairly often since his company worked closely with Apple on programming languages. At the time, Steve was far richer and far more well-known. And the reason I'm bringing this to your attention is because it's a massive mistake Steve's about to make here. This is what Bill Gates saw that Steve Jobs missed, and it's the impact that a major company like IBM is going to have when it ships its first personal computer. And because of the immense success, they go from zero computers sold to a public company four years later that's printing money. The Apple II is a massive hit. And that quick success inflated, you know, Steve's already gigantic ego, and it opens up blind spots when you do that. The, the way I think about this, like if you go to sleep on a win, you're gonna wake up with a loss. Steve is about to go to sleep on a win. So let's go to what... Again, I love studying the early days of Bill Gates. Uh, I think maybe the most popular episode of Founders ever was episode 140 when I read that book, Hard Drive. I'm gonna reread the book again soon. And the reason I think that, that book is so fantastic is 'cause for as famous and as successful as Bill Gates is, there's not very many great biographies of him. And that is nearly the p- a perfect biography for you and I to study because it covers the first 35 years of his life. It-- [laughs] You, you have an understanding exactly who he is, how extreme he is, and then it ends on the Microsoft IPO And so at this point in the book that I'm holding in my hand where we're at, Gates comes to visit Steve. He's like, "Yo, do you see what's about to happen here, man?" And Steve is completely oblivious. Gates came to business naturally. Gates predicted, this is fascinating too, an entirely new kind of software industry would arise. Really, the author's telling us about what is the most important impact or insight Bill Gates had that impacted the technology industry. So think about the ideas, like to have a pure software company was not something people ever considered. Gates predicted an entirely new kind of software industry would arise. At that point, soft- And this is why. At that point, software development was mostly in the hands of the makers of computer hardware, who buried the development costs in the final price of the devices they sold. The prospect of making money by building software, Gates believed, would spur innovation, and he wrote a manifesto about this. It says, "Gates' manifesto was every bit as significant as Moore's law in the explosion of personal computing. Software development requires very little capital investment. It is basically intellectual capital. The main cost is the labor required to design and test it. There's no need for expensive factories. It can be replicated endlessly for practically nothing." Gates was right on this point. Accepting the fact that the soft- that software was worth paying for led to the emergence of a dynamic new industry. This was Gates' greatest contribution to the world, and it's so amazing he saw this before anybody else did. Think about wh- how much economic value comes from software today. Like, it's incalculable, right? And what's crazy is, like, he had this idea back in the 1970s. Microsoft winds up being the first company in history, I always found this fascinating, it's the first company in history to sell a billion dollars y- billion dollars of software in one year. And part of being able to do that is obviously he's re- he's relentless. I think I called him on that [chuckles] podcast. There's so many people that have sent me messages over the years about [laughs] I called Bill Gates, the young Bill Gates, uh, that he was Genghis Khan dressed as M- uh, in a, in a Mr. Rogers costume. [laughs] And I don't know where that came from, other than when you read the book, it's, it's clear, like, he's one of the most, uh, ruthless and relentless, uh, entrepreneurs in history. The... And you wouldn't picture that, like, looking at him. And people even knew that when he was 21. Somebody else k- uh, said that he was in this, uh [laughs] he was in this, um, fight over, uh, there was, like, some kind of lawsuit going on, and on the other side of the lawsuit is this new company and Bill's former partner. And Bill's former partner's like, "Dude, this is not gonna be easy. Us fighting this guy", they took a look at, you know, they're like, "This, this is some 21-year-old kid nerd with shaggy hair." He's like, "We'll eat him alive." And he says it was kinda like Churchill thinking he could deal with Stalin. [laughs] So I wasn't the only one to, to realize how extreme he was at that age. So let's go back to this, though. So it says, listen, you know, he was right. The idea that the, the software is worth paying for, that you can build entire new businesses around it, entire new industries that can enable so much more if you get it out of the hands of hardware makers, was Gates' greatest contribution to the world. Uh, it was his role as the first champion of the concept that software itself held va- had value. And again, I don't think you probably become the first or you, you found the, the company that becomes the first company to sell a billion dollars worth of software without arriving at that insight before most people even, like, before a lot of other people. Like, there is an advantage to just arriving at insights that is completely, uh, at odds with the existing nature of the, uh, the, the industry that you're operating in, right?

7. 33:36 – 40:45

   Three Failures, Exile, and Why Time Carries the Weight

   1. DSDavid Senra33:36

      Steve had always decided, and this is the problem. Z- So they're having this conversation, and you know, IBM's, uh, this is 1981, IBM's shipping its first computer, and Steve's like, "This is irrelevant. No one's gonna choose that ugly piece of thing over this, like, piece of art, this master, like, uh, result of this, this master craftsmanship that we have made here." Steve had always derided Big Blue, IBM, as a lumbering monstrosity [laughs] and truly believed that no discerning buyer would ever perfect or w- would, would ever prefer a, a computer from IBM to one made by Apple. Gates, on the other hand, knew this might be the beginning of something big. But on that fall afternoon, no one Gates spoke to at Apple seemed aware that their world was about to change. Must le- much less acted worried. Years later, Gates remembered that, "I kept walking around asking, 'Isn't this a big deal?' But no one seemed concerned." And then the book is just full, like spread out through so many pages. It... I hope you buy the book. I hope I can convince you to buy the book, and if you do, I would work through it very slowly. It's only 400 pages, uh, but still, it took me over 20 hours to really, like, digest and understand, and I do not, obviously never rush through it. Definitely not gonna rush through this book because there's just so, it covers just so much history of not only Steve's life, the technology industry, Apple in particular. But spread throughout the book, there's just these fantastic one-liners, and they don't need much explanation. They give you an insight of sort of who he was and what was important to him. He cared passionately, and he never dialed it in. So let's go through this idea that our strengths and weaknesses are constantly there. They complement each other. They work off each other. Our successes and failures do the same. If you really think about what's taking place, he's, at this point in the story, he's all, all, for all intents and purposes, gonna get kicked out of Apple. And it goes back to this idea that if you go to sleep on a win, you'll wake up with a loss. After the initial success with the Apple II, think about this. Steve, probably the greatest entrepreneur to ever live, is gonna have three commercial failures in a row: the Apple III, the Lisa, and the Macintosh. Now, the Macintosh obviously is, like, one of the most beloved computers, but commercially successful. Like, the, uh, the huge launch they did around it, the sales start off really, really great, and then they quickly peter out to the point, I think this book makes the point where a few years even after this, the Apple II is still responsible for something like 70 or 80% of all of Apple's revenue. So think about it. You can have a massive success, then you can have three straight failures, but even at the si- same time that he's having three straight failures, he is right about this. This is where he discovers hidden in George Lucas' Lucasfilm division is what's going to eventually become Pixar. Pixar is what makes Steve Jobs a billionaire. The entire unbelievable, unpredictable journey of how he goes from almost spending his last dollar on Pixar. When he leaves Apple, he has, like, $70 million. He puts 50 of it into Pixar over time, and they're still losing money before they do Toy Story. I, I did this entire podcast on this because the first CFO, the guy that Steve recruited, he wrote a book about the history of Pixar, which is fascinating. It's episode 235 if you haven't, um, listened to that. I-I would go back. We could-- There's... That's almost like another Steve Jobs episode because he's obviously a main character in there. But just the level of persistence is just unbelievable. So, uh, I, I don't wanna get distracted, though. The point I'm trying to make here is in the middle of failure to failure to failure is one of his greatest successes. He just didn't know it at the time. So he visits The Graphics Group, which is what Lucas's division is called. They're gonna be renamed Pixar, and he realizes, "Oh, these are, they're, these are the best in the world at what they're doing. Apple should buy them." At this point, he didn't have any sway with the board. He's just about to get kicked out, so they're like, "No, Steve, we're not buying them." Uh, he visited The Graphics Group made up of leading-edge computer graphic technicians who were working for film director George Lucas and began to think that the possibilities for computers with high-end 3D graphics images were limitless. This is in the '80s this is happening. So he suggested that the Apple board might wanna consider buying the group. "These guys were way ahead of us on graphics, way ahead," Steve said. "They were way, way, way ahead of anybody. I just knew in my bones that this was gonna be very important." The board was not paying much attention to Steve anymore, and they passed on acquiring what would eventually become known as Pixar. So he gets fired. He goes into a deep, deep depression. This is incra-incredibly important for you and I to realize the ups and downs of life never end until we die, and especially for entrepreneurs because this entrepreneurial emo-emotional rollercoaster. The best term I've ever heard about this comes from Marc Andreessen, where he's like, "Listen, if you're building a company, you only experience two emotions," and they're almost like there's like a bipolar-ness to this. It's euphoria and terror. We are in the terror part of Steve Jobs' story. You have one of the most aggressive, driven people that have ever lived, and he's completely lost. He's thinking about leaving the computer industry forever, retiring and being an artist in Europe. For a while, he behaved more like a retiree than one of the world's most highly driven 30-year-olds. He just wasn't ready. He did not have the skillset yet to cr- to be able to not only found a great company but to lead a great company. He was a slave to so much else, to his celebrity, to his unbalanced and obsessive desire for perfection, to his managerial flightiness, to his shortcomings as an analyst of his own industry, to his burning need for revenge, and the most important part, to his own blindness of his faults. At 30 years old, Steve Jobs wasn't ready. And why is that important for you and I to remind ourselves of that? Because in this industry, there's like this entrepreneurial industry that gives into this myth that you have these, like, l- like, young 20-something-year-old geniuses that start a company and can do it for a long time and, and they just intuitively get it. You and I know. How many biographies of, in the history of entrepreneurship have we gone over? I can't think of an example where the younger version of the entrepreneur is better than the older version. That doesn't mean you can't have success as a young person. Doesn't mean, obviously, you can't start a company. You can manage it and keep it. You can do it for decade after decade. But if all these entrepreneurs, if we could, if we could dig them up from their grave and ask them, "At what point in history did you think... At what point in your life do you think you were the, the, the, like, a peak of your powers, the best?" They're not gonna say, "When I was 20, when I was 25, when I was 30." A main theme of this podcast that is rooted in, like, my subconscious now is that time carries most of the weight. And in nearly every case, you could have a 40 or 50-year-old version of the entrepreneurs that you and I study, and if they, we were able to b- have them do a one-on-one battle for their 20 or 25-year-old version of themselves, they would kick the living shit out of them. The 45-year-old version of Steve Jobs could take 10 of the 25-year-old versions of Steve Jobs. And the reason I bring this up is because I talk to founders all the time, and someone's like, "Oh, I'm 30. I'm 35. I haven't achieved what I, what I, what I thought I would at this age," or, "Oh, it's too late." Bullshit. If you're in that spot, just keep going. People that are learning machines and they refuse to quit are incredibly hard to beat. Steve Jobs was a learning machine who refused to quit. And in this book that I hold in my hand right now, you have a 30-year-old Steve Jobs saying, "I give up. I can't do this anymore. I am brokenhearted." But that feeling passed. He got up, dusted himself off, said, "Okay, you win the first fight. Now best two out of three."

8. 40:45 – 44:01

   Botched IBM Deal at NeXT

   1. DSDavid Senra40:45

      Here's another example of Steve Jobs, a young Steve Jobs not being ready yet. He's raised a bunch of money from Ross Perot, from giant corporations. Every single decision he's making, it winds up being the wrong one. There's an entire book about that, like I mentioned earlier. Please do pick up that book and read it, especially if you're in the middle of building a company. And why did I just say that a 45-year-old Steve Jobs or a 40-year-old Steve Jobs would kick the living crap out of the younger version of him? He is trying to do a negotiation with a giant company, IBM. He needs this money right now. He needs a win. They're about to give him, them $60 million that he desperately needs, and we're gonna contrast this right now with the Disney Pixar negotiations that he's gonna do, like, 15 years into the future, which was a masterful negotiation. This is the, whatever the opposite of a masterful negotiation is. IBM had decided to license his NeXTstep operating system for use in, uh, for use in a line of its own engineering workstations. The world's biggest computer company running Steve's operating system seemed like it would be a great endorsement. They would also provide $60 million, which was critical operating capital for NeXT at this time because they were burning through its investors' money. But Steve never seemed to quite know how to play his cards with IBM. He displayed an unsettled and juvenile mix of hubris and uncertainty. There was one meeting where he went in, one meeting with IBM, obviously, where he went in and actually told them, "I really don't understand why you guys wanna help us." Psychologically and emotionally, signing on with IBM was every bit as complicated for Steve as begging Bill Gates to support his computer. So they're talk- They're referencing a story that happened earlier in the, the history of NeXT where he's like, "Bill, we..." Like, he's, at this point, uh, they were still... Steve was still trying to make NeXT hardware, and he's like, "Bill, we need you really to, uh, to build software for this thing, please." And remember, the reversal of fortunes. They meet in Steve's office. Steve's the richer, more successful one. Bill Gates is 26. Now a decade later, the roles are completely reversed, right? Steve-- I think at this time Bill Gates is close to being the, one of the richest people in the world, and Bill Gates tells Steve, "Develop for it, or piss on it." And so he shows his ruthlessness. He's like, "You're not selling anything. This market is tiny. I'm not developing anything for it." So that's what they're referencing there. So it says, "Steve wanted to be the hero, not a secondary partner to a more powerful computer company. Uh, if IBM sold a lot of com- computers running their version of NeXT, NeXTstep, the glory would be theirs and not his." Remember, there's ego. I understand it's not the ideal situation, but you're burning through money. You're not selling anything. He's about to have a mass exodus of, like, the first-- I think they, they start NeXT with him and, like, five other people. Almost all of them are about to leave very shortly, so he's in dire need. That's why you have to get this deal done. And so it says, "He killed the IBM deal by failing to follow through as a good business partner." So the person that eventually-- The, the person that reached out that wanted to do the deal, it gets replaced, so now there's another person running the company or the p- or in charge of this deve- this, uh, division rather, and his name is Canavino, I think. So it says, "Canavino logically assumed IBM could use NeXT's 2.0 version on its machines, but then Steve met him and held him up for more money, leading to another round of protracted negotiations." And this w- They say Steve overplayed his hand. This, this Canavino guy got pissed off, and he just stopped taking Steve's calls and just abandoned the project.

9. 44:01 – 50:33

   Pixar and Ed Catmull: Learning to Manage Creative People

   1. DSDavid Senra44:01

      And what this book does wonderfully is comparing and contrasting. When he's making every wrong decision at NeXT, right? He's in the middle of a giant failure. Another part of him was spending time at Pixar. And Pixar, the experience he has at Pixar is everything for Steve's growth as a leader and a CEO later on when he goes back to Apple. "At Pixar, he would lay the foundation of two of his greatest strengths: his ability to fight back in times of distress and his ability to make the most of an innovation that put him ahead of anyone else in that field. In other words, it taught him how to keep his head and fight back when cornered and how to run like the wind in the open field, and it became the place where he really learned." And this is, this is so important, th-the, what they're about to... The point he's try- they're gonna make right here. "Albeit slowly." So he's really learned, but slowly and reluctantly and against his natural instincts. This is the evolution. Remember, Becoming Steve Jobs: The Evolution of a Reckless Upstart into a Visionary Leader. This is the beginning of the evolution. He began to go against his natural instincts that sometimes the best management technique is to forgo micromanagement and give good, talented people the room they need to succeed. The co-founder of Pixar, the guy that wrote Creativity, Inc., Ed Catmull, taught more, taught Steve Jobs more about management than anyone else in his entire career. "Although it would take almost a decade, Steve's Pixar adventure would help him rediscover his self-respect, make him a billionaire, and align him with people who would teach him more about the management than anyone he'd ever worked with. Without the lessons he learned at Pixar, there would be no great second act at Apple." And they're gonna make the case that Catmull, Ed Catmull, is the best manager of creative people ever. "Overseeing the motley crew at Pixar had turned Catmull into an expert imaginative manager of creative people. He started treating management itself as a kind of art. This quiet, bearded man with a measured, professional demeanor knows more about managing and motivating creative people than anyone I've met." So this is now Brent. Remember, he covered the technology industry. He's interviewed a ton of people, '70s, '80s, '90s. All of these entrepreneurs and very formidable founders, many of which I've done, uh, episodes about, right? He's saying, "Listen, this guy knew more about managing and motivating creative people than anyone I've met, including Sony's founder, Akio Morita; Intel's Andy Grove; Bill Gates; Jeffrey Katzenberg; and Southwest Airlines' Herb Kelleher. His success would prove a powerful example for Steve." At the end of his fantastic book, Creativity, Inc., there's an afterword called "The Steve We Knew." I think it's, like, 20 or 30 pages, and he just tells the story of his relationship with Steve, and he's just like, "The Steve that's reported about in the news, his public persona," this is after he passed away, obviously, "is not the person that I worked every day with." Uh, you know, they, they had the longest uninterrupted partnership in Steve's life. It was, like, 25 or 26 years, 24 years, something like that. And so I just wanna pull out one or two things that Catmull says in this book because I think this is so important. Over time, Catmull became perhaps the keenest observer of Steve Jobs. Listen to what he says. He's like, "This reckless, jerky, asshole behavior that Steve was known for when he was in his 20s and 30s was true, but it was a deficit of skill." This blew my mind. Catmull call-- Catmull saw potain- potential for change. "There were times when the reactions against Steve baffled Steve. I remember him," meaning Steve, "sometimes saying to me, 'Why are they upset?' What, what that said to me was that he didn't intend to get that outcome." This is the most important sentence of what Ed is telling you and I. It was a lack of skill as opposed to meanness, a lack of skill of dealing with other people. And so I already mentioned earlier the fact that it's... How many investors would have done that? The idea is like, "I have $70 million. I believe in this. My, my main company, NeXT, is not doing well. I'm gonna dump $50 million of the $70 million I have into Pixar, and I'm still writing checks every month." Every month. The crazy thing is p- up until they do this d- distribution deal, the original distribution deal with Disney, Steve is floating the company every month. So it's like, it's, there's no end in sight here. And so this is just a few sentences, and there's j- it just jumps off the page if you've done any studying about Steve Jobs, Pixar, NeXT, Ed Catmull, and everything else. And so we go back to what Catmull says. "'Steve once told us that he had nothing to prove when he started NeXT,' Catmull recalls. 'Now, I don't believe that for a second. We knew that he had everything to prove with NeXT. We were the only other gamble that he took, and he said we turned out to be such a handful to begin with that he stopped taking any other gambles beyond those.'" Now, I'm gonna pause there before I get to my second point 'cause I wanna make the first point here. This is remarkable. He didn't know. If you think about what's tak- taking place and what Catmull just told us and where we are in the history of Steve Jobs' life, Steve did not know then, but these two bets were all he needed. Pixar is gonna make him a billionaire a few years from now. NeXT gets him back to Apple, and then the lessons he learned in his wilderness years turns, helps turn Apple into the most valuable company in the world. Then we get into Catmull's next point. Steve's main reason for keeping Pixar alive was that he still believed in this little band of geniuses and their leaders. The business seemed to be-- Even though the business seemed to be going nowhere, he had great admiration for Catmull's business and management expertise, and then the other co-founder is Lasseter, which is probably the greatest animator of all time. And Lasseter was one of those rare geniuses who can always make life seem full of possibilities. What's the second point there? Everyone tells you, "Bet on small groups of smart people. Bet on small groups of smart people." Steve actually did it. And then there's a caption in the photo overlay in the middle of the book. You see Ed Catmull's face. The caption is the perfect summary of what I'm trying to get across. Watching Pixar's president, Ed Catmull, Steve absorbed a series of lessons about managing a creative corporation that became the foundation of his moderated, evolved, is another way to think about that, right? His moderated behavior upon his return to Apple. At this point in Pixar's history, they're tr- still trying to sell... I'm pretty sure they're still trying to sell computer hardware. There's actually a, a c-c- their computer was named the Pixar computer. That's where the company's name came from. What Ed and Lasseter, what Catmull and Lasseter really wanna do is they wanna make the first, the world's first computer animated full feature length animated movie. And so to show off some of the things that their, their storytelling ability, and what their hardware and their technology could do, they would do these little short films. They could be like five minutes long, eight minutes long. But this is, like this is just a paragraph, but there's so many lessons embedded in here if we're gonna-- if me and you can pause for a second and really think about what's happening, okay? So

10. 50:33 – 51:47

    Tin Toy, Persevering, and Learning to Listen

    1. DSDavid Senra50:33

       main thing here is like, like Edwin Land, who you and I have just discovered the last, or just discussed the last two weeks, Edwin Land made a lot of non-economic decisions. Steve did s- Steve did too. When Lasseter had gone to Steve to get approval for the budget of a short film called The Tin Toy, Steve's response had been, "Just make it great." Tin Toy winds up winning the Oscar for the best short animated film. It's incredible. So then Steve winds up, after they win the Oscar, he takes everybody out that had worked on the short film to dinner, and this is now a part of his life, at least for one night, where we have the euphoria aspect of the emot- i-i, the entrepreneur emotional rollercoaster, euphoria and terror. At least for one night, this is the euphoria. "He was so proud," Lasseter said. "I remember grabbing the Oscar and putting it right in front of him at dinner. 'You asked me to make it great,' I told him. 'There you go.' That was the dinner where I met Laurene." This is gonna wind up being his wife. He's j- I think it's just his girlfriend at this point. She... Yep, that's right. "She and Steve had started dating a few months earlier. We just loved being with the two of them that night because Steve was so clearly in love. He had his arm around Laurene all night, and he was so happy, so full of feeling like everything is champagne bubbles in your life. He was so excited. He had won an Oscar, and he had this marvelous woman."

11. 51:47 – 59:02

    Deciding to Return to Apple and Simple Deal-Making

    1. DSDavid Senra51:47

       And so this is the note I wrote myself when I got to this part of the book. Pause here. Think about this. This is 1989. He has at least six to seven years of intense struggle ahead of him. He has already gone through four years of stagnant failure, and that is after having his heart ripped out by losing the company he founded. This is my punchline to myself that I wanna share with you. It is one thing to know that you have to persevere. It is another thing completely to actually do it. And something that's gonna help you persevere is a lesson that Steve learned directly from Pixar and their process in making movies, which can be applied to building any product or any company. And this is what he learned. Creative thinking at its best is chock-full of failures and dead ends. And Catmull says, "When you're out there on the edge, some things go right, and some things go wrong. If nothing is going wrong, you're fooling yourself." And Steve believed that, and Steve's receptive to learning from Ed because he believes in Ed's mind. "I liked him from the very moment I met him," Steve told me. He found him an intellectual match. "Ed is a quiet guy, and you can mistake the quietness for weakness, but it's not. It's strength. It-- Ed's really thoughtful." This is all Steve talking, okay? "Ed's really thoughtful, and he's really, really smart. He's used to hanging around with really smart people, and when you're around really smart people, you tend to listen to them." What did Michael Jordan tell us, right? I told you when I read Michael Jordan's biography, his 700-page biography, it's called Michael Jordan: The Life. It's all the way back on episode 212. That book changed my life. That's a main theme that Michael would say over and over again. He's like, "I'm not too dominant." And you know, you have one of the most, maybe the best at his job than anybody's ever been at their job, right? Then you have one of the most aggressive and dominant, like, alpha personalities, so like alpha male personalities, right? And yet he's telling you over and over again, he's like, "I'm not so dominant that I don't listen. Successful people listen. Those that don't listen don't last long." That is a quote from Michael Jordan. What are we hearing this? When you're around really smart people, you tend to listen to them. Steve listened. He listened to Catmull. Steve was constantly trying to learn. So at this point in the story, Apple has already brought NeXT. Steve's still trying to figure out, "Okay, do I wanna become back as, like, full-time CEO? Like, what am I actually gonna do? My life is pretty good." But in the meantime, he's, like, renegotiating the Pixar deal for, uh, with Disney. That was his main thing. He's like, he was their protector, he was their financier, but he also did all the negotiating 'cause they didn't need his advice on how to make a movie. He's just like, that's not the role he's, he's playing. Now, this highlight I'm about to read to you is one of my favorite highlights that I made in this book. Remember, I haven't read this book probably, it's probably been four years since I read it the first time, and it expresses an idea that I've compressed down to a maxim that I've repeated over and over again on this podcast, and that's bad boys move in silence. When you have something that's working, you do not talk about it. You shut up, because the more you talk about it, the more broadcast you, broadcasting you do about it, the more it encourages competition. Steve is intensely studying the business model of animation. W- what, like, what is the po- Like, how valuable could it possibly be to Disney? And he realizes Disney shuts up about it because they don't want to encourage competition, and he does it In a fantastical sh-short story. He was truly proud that he and Lawrence Levy had studied Hollywood closely. That is the guy I told you, the CFO that wrote the book that I did in the past podcast, okay? And they had learned enough to understand how Pixar could cut a great deal in an industry that thrived on plundering, this is Steve's own word here, the industry thrives on plundering the dumb money of starstruck outsiders. This is my favorite part. This is Steve talking. "You can't go to the library and find a book titled The Business Model of Animation. The reason you can't is because there's only been one company, Disney, that has ever done it well, and they were not interested in telling the world how lucrative it was." So then we go into Steve's deliberation, this decision, am I going to... Is it even, he didn't even know if it was possible to be CEO of two publicly traded companies, 'cause he was CEO of Pixar at this time, too. And so we go into, like, his deliberation, and then there's just a hilarious Andy Grove story. To know Andy, or to know about Andy, is to love him, [laughs] as you'll see in a minute. According to his wife Lorene, he was still torn about whether to go back. She knew that her husband was most fulfilled when he was tackling something gripping and important. And there's all these series of questions he's asking. Was he even convinced that it, that Apple had the people and the resources to become competitive? Did he really wanna work that hard now that he had a young family? Did he wanna risk what was left of his reputation? Steve didn't know it at the time, but his indecisiveness was actually the kind of breakthrough. Steve was de-developing a more nuanced, measured approach to decision-making. More about his evolution, right? The point of the book is to study his evolution, to realize who you are today is not going to be who you are at your, f- in your final form. Steve was developing a more nuanced, measured approach to decision-making. Then Steve called his friend and confidant, Andy Grove. Steve told Grove that he was torn about whether or not to return as Apple's CEO, and wound his way through his tortured deliberations. Grove growled, "Steve, I don't give a shit about Apple. Just make up your mind." And then he hung up the phone. And that helped Steve make the decision, 'cause he's like, "Oh, I do give a shit about Apple." [laughs] This is the CFO of Apple at the time describing why it had to be Steve. "We needed a spiritual leader that could bring Apple back as a great product and marketing company, and nobody else great who had those skills was gonna take on Apple at that time. We had to have Steve." Again, the founder is the guardian of the company's soul. Steve was the guardian of Apple's soul. Then I wanna bring up another point, one of my favorite stories. Again, I think speaks to this evolution of Steve, where remember, he, he was complicating a deal that he desperately needed done, uh, with NeXT and IBM. He completely c- overcomplicated it, moved too slow, messed it up, right? Now he's coming back to Apple. They're losing a bunch of money. He, so he calls up Bill Gates, and this is Bill Gates on Steve's simplicity. And Bill does a fantastic job of comparing and contrasting the way Steve negotiated a deal d- with the way that the previous CEO, Gil Amelio, did. Reaching an agreement with Microsoft was absolutely critical to laying the foundation of Apple to be saved. When Steve called on Gates, he kept things simple. He explained that he would be willing to drop the litigation, they're involved in patent litigation, but for a price. Microsoft would need to publicly announce a five-year commitment to provide, uh, Office, so M- uh, Microsoft Office for the Mac, and then 100, and then make an investment of $150 million in Apple. "It was classic," remembers Gates. "I'd been negotiating this deal with Amelio, and Gil wanted six things, most of which were not important. Gil was complicated, and I'd be calling him on the phone, faxing him stuff over the holidays, and then when Steve comes in, he looks at the deal and says, 'Here are the two things I want,' and we got a deal done very, very quickly." So we're still in the late '90s. Steve is still trying to turn around Apple, and this is where the author gets to actually have an interview and a conversation with him. And he's asks a question, and this is one of my favorite parts of the book, because Steve tells us, "Okay, this is why I build companies." And he has a line in here that's just fantastic. He says, "The company is one of the most amazing inventions of humans."

12. 59:02 – 1:06:32

    Why Build Companies: Outsider Confidants, Involvement, and Work-Family Balance

    1. DSDavid Senra59:02

       So it says, One day I asked him if he had come to enjoy the process of building companies, now that he was trying to do i- do so for the third time. "Uh, no," he said, as if I were a fool. But if he didn't enjoy building companies, he sure had a thoughtful and convincing way of describing why he kept doing it. This is what Steve said. "The only purpose for me in building a company is so that the company can make products. One is a means to the other. Over a period of time, you realize that building a very strong company and a very strong foundation of talent and culture in a company is essential to keep making great products. The company is one of the most amazing inventions of humans, this abstract construct that's incredibly powerful. Even so, for me, it's about the products. It's about working together with really fun, smart, creative people and making wonderful things. It is not about the money. What a company is, then, is a group of people who can make more than just the next big thing. It is a talent. It is a capability. It is a culture. It is a point of view. And it is a way of working together to make the next thing, and the next one, and the next one." So in the last episode, I talked about this idea that Edwin Land used, that Akio Morita used, and I think it's a very powerful idea. It's this id- idea that you should hire a paid critic. In the building of Sony and Polaroid, they both used that idea to great effect. It's a way to constantly improve the quality of the product that you're selling to your customers. This is another idea that's similar to that. Hire an outsider that you can trust and that you can organize your thoughts with. So there is, and I'm gonna go into how he uses this idea, but something I learned from, um, when I read Katherine Graham's fantastic autobiography. That was back on episode 152. A main character in that book is Warren Buffett, 'cause Warren Buffett does a major investment into Graham's company. I think this is happening back in maybe the '70s or something like that. She had taken over the company, right? And her husband had committed suicide. She wasn't expecting to run, uh, such a large business. And so Warren becomes, like, this mentor, and he's, like, like her, his, her- Not only teaching her everything he knows about business, imagine [chuckles] having Warren Buffett your one-on-one tutor as you build your company. It's gotta be insane, right? But he also was the person that she would organize her thoughts with, and there's a line from that book I wanna read to you because it's called, it's Charlie Munger's Orangutan Theory. "Warren told me he subscribed to Charlie Munger's Orangutan Theory, which essentially contended that if a smart person goes into a room with an orangutan and explains whatever his or her idea is, the orangutan just sits there eating his banana, and at the end of the conversation, the person explaining comes out smarter. Warren claimed to be my orangutan. I heard myself talk when I was with him, and I always got a better idea of what I was saying." Steve used that idea in the rebuilding of Apple, his last and final act. Steve liked having a confidant, someone he could banter with outside the formal lines of responsibility of daily corporate life. Mike Slade served that function. So Mike Slade is gonna wind up being close friends with both Steve Jobs and Bill Gates, but he did not have a formal position. He would just drop in and sh- essentially shadow, uh, Steve for like a day or two, and then they would just talk, right? So he said he had made it, uh, clear that Mike, that is, he had made it clear he did not want an executive position at Apple. Slade would show up in Cupertino on Mondays and Tuesdays flying down from Seattle. No one reported to him, and Steve had told the group that he had no particular authority. But when he was at Apple, he almost never left Steve's side. Steve did not allow himself to relax with his inner circle the way he would with Slade. So again, you have an outsider, one that you know you can trust, and somebody you can organize your thoughts with. They help your company, but they're not part of your company. Another trait of history's greatest entrepreneurs, they are involved. They're not putting their feet up, impassive to what the state of their product or the state of their company is. This is the level of Steve's involvement. We went over OS X again and again, pixel by pixel, feature by feature, screen by screen. There is nothing in that operating system that Steve Jobs did not approve. And so how was Steve able to do this and still have a family life? This was actually really interesting 'cause this is an idea that I've, uh, that's come up a bunch that work y- in many cases, like you'll s- there'll be like a line in a biography that's like, oh, like his or her work was their hobby. Work as a hobby is basically the idea. It's just like they happen to love it. They're obsessed with it. And so for Steve, he's like he had two basically things he wanted to focus on, work and family. And so this is Steve's schedule. They're on better footing. They're not gonna go out of business like when they were almost, you know, maybe on the precipice of bankruptcy. Uh, he's putting a lot more time and effort, but now he's st- again, he's not... He's building out talent just like Ed built out talent at Pixar. And so I just wanna read this to you 'cause I think it might be enlightening on how he spent his time. Back when he had been leading the Mac team or driving NeXT, Steve had spent many late nights in the office as part of a small team trying to deliver the next great thing. But now his role at Apple was so different. He was heading up a company with thousands of employees, and Steve managed everything through his small team of senior executives. He could do much of his work via email. He would make it home for dinner almost every night, spend time with his wife and the kids, and then work on his computer late into the night. On a spectrum plotting how much time parents spend with their kids versus how much time they spend focused on their job, Steve would land far towards the latter end, meaning spending most of his time at work. Both he and Laurene knew Steve would always work very, very hard. It had been a basic assumption when they'd gotten married. "Neither of us had much of a social life," says Laurene. "It was never important to us." Laurene often worked beside him at night. He'd spend an hour or two talking over Apple business with her. They'd often then catch a TV show before falling asleep. So that's his basic schedule. I will have to say the way to think about this and, you know, um, there's a big struggle with, you know, you have a family or you're addicted to your work or you're very passionate about whatever it is. There's two people I think, you know, there's not... You're not gonna be g- Like, there's not a perfect, not a perfect solution to this, but two ideas that may help you is Estée Lauder struggled with this and Sam Walton struggled with this, and their partial compromise or partial solution, how you think about it, is they made it a family business. So Estée's Lauder's husband sold his business. She, he worked full-time with them. Her son was in college. They would send them, this is when Estée Lauder was a private company. They'd send him like all the financials. They would send him email. There's no email at the time. They'd send him letters about decisions they're making, essentially like making sure the communication about the family business, he was in the loop even when he wasn't working on there full time. So when he came back to the company, he'd know what's going on. So they, there's like, they, they... It's like kinda like what Jeff Bezos said. He's like, "I don't believe in work-life balance. I believe in work-life harmony." So for them, they just said, "Okay, well, we're still gonna spend a lot of time together, but we're gonna spend time together working on the business that, you know, is, is providing the life that our family enjoys." Sam Walton did this similarly where he had his kids work in Walmart stores from a very, very young age. Again, I don't think, it's not that Estée Lauder spent an insane amount of time with her children. Sam Walton didn't either. Steve Jobs didn't as well. But it, it's, it's a way to spend more time. And as they just said, it's also a way to spend more time with his wife because they're sitting next to each other at the computer at night. He's talking about Apple to her. He's like then you're basically involving with her. And again, it's an, a, a way to organize his thoughts, and maybe more importantly now that I'm sitting here thinking about it, it's like a way to organize your thoughts with somebody that you know you can implicitly trust.

13. 1:06:32 – 1:11:14

    Focus on the Interface, Control, and the Apple Experience

    1. DSDavid Senra1:06:32

       Another good question for you to ask, what do I focus on that sets me apart from my competitors? Steve was always most fascinated with the contact point between a person and a computer. There were good reasons that Steve found this point of interaction so critical. If the point at which a person interacted with a machine was complicated, remember, he just got done saying, um, they went through every pixel, every screen, every button, everything. He did this for all the devices. There's a fantastic book that talks about this, especially with the development of the iPhone. It's called Creative Selection. It's one of the bonus episodes I did in probably two years ago. I think I've read the book three times. Anybody building a product should order "Creative Selection" immediately. It's written by a programmer who demoed and worked directly with Steve. You can read it in a weekend. It g- gives you an insight into how he thought about building products, but it's this idea where he was just completely obsessed about the point in which a person interacts with the machine. And this is the reason. If that point of interaction's complicated, then the customer will likely never unlock its secrets. Most people don't care about the innards of their computer. They care only what's on the screen and what they can get to through that screen. Steve understood the profound importance of this from the very beginning of his career. It was part of what distinguished him from many of the other computer makers, most of whom were engineers who believed that a rational customer... Point me to the ra- to, to a rational human being. [laughs] I don't... I'm pretty sure that's like a unicorn, right? Uh, most of whom were engineers who believed that a rational customer would, of course, care deeply about the insides of his or her computer. So again, Steve focused on the interface, what's on the screen, the point of contact between the products he makes and the customers he wants to delight, to sell his products to and to delight. And the qu- the way to think about this paragraph, we don't have to remember the details. All we have to say is, "Okay, what am I focusing on that sets me apart from my competitors?" And if you can't come up with something, that's a sign there's more work to do. Another main theme in the career of Steve and almost every other [laughs] entrepreneur we studied, they're obsessed with control. They do not want people in between them and their customers, and so they have this idea. It's like, "We're selling all these freaking Apple computers," and Steve's like, "I hate these outlets." It's just like they're crappy big box department stores, computer retailers. The salespeople are idiots, or he calls them shit. I forgot what he calls them. [laughs] But, uh, again, he evolved and modulated his behavior, but he's still an extreme person, so he never, he never got, like, a n- They said he deviated very far from the mean. [laughs] So he kept that, that trait his entire life. I got tears in my eyes right now thinking about it. But, um, so he, he, he has this idea. It's like, okay, well, we're building products that are different than anybody else. We- our point of focus is different than everybody else. Why are we selling them the same way everybody else sells? So he's like, just a few months after he comes back from Apple, he asked a couple people in the company. He's like, "We need to come up with an online store where Apple could sell its computers directly to customers." And so this guy named Eddie Cue is one of the people that is put in charge of this, and they have this giant meeting, and everybody in the meeting besides Eddie and Steve thinks this isn't gonna happen because we can't do that because our distribution partners, these channels, as they call them, uh, they're gonna be mad at us. We don't wanna make them mad. And so it says Steve asked the others in the room about Cue's proposal, which is about the basic idea of selling direct to the customers online. They were all worried. The most worrisome about, about this idea is the potential for alienating our retail partners. So one of them that's in this meeting says that, "Steve, isn't all this pointless? You're not gonna do this because the channel will hate it." Cue turned to the person that said that and said, "The channel? We lost two billion dollars last year. Who gives a fuck about the channel?" Steve perked up. "You," he said, pointing to the senior exec, "are wrong, and you," he said, looking at Cue, "are right." He asked Cue to create an online store and have it completed in two months. Another great idea Steve learned through experience. He has this idea called the Apple experience, but you could put your co- company name in that, the your company name experience, and it's the fact that every single, uh, experience a customer has with your company will either add or subtract from that customer's, like, impression of your company. And so that's why Steve obsessed about every single interaction point, not only with the customer and the screen and the device, but also as simple as, like, uploading a credit card or paying for something. Literally every single time the, the customer interacts with their company, look at that point and eliminate any points of friction or unhappiness that could, could cause a withdrawal from your company's reputation with that customer. Steve had begun calling this the Apple experience. Steve understood that every interaction a customer had with Apple could increase or decrease his or her respect for the company. As he put it, "A company could accumulate or withdraw credits from its reputation," which is why he worked so hard to ensure that every single interaction a customer might have with Hap- Apple, from using a Mac to calling customer support to buying a single from the iTunes stores and then getting billed for it, was excellent.

14. 1:11:14 – 1:17:02

    Steve the Synthesizer and Connecting the Dots

    1. DSDavid Senra1:11:14

       So then I just stumbled across this fantastic paragraph which describes, like, the-- You just cannot believe from the state of Apple was in 1997 when he comes back to now. They've revamped the line. They've s- they've i- increased profitability. They-- Tim Cook's got inventory under control. Their product line is actually understandable to the cu- consumer. They're starting to... They at one point only saw themselves as a computer company. Now they're starting to make little devices. In fact, what was remarkable was, like, the building of the iPod. They considered it like a... Making a, a computer peripheral is the na- is the, the term they put on it, which is, like, akin to making, like, a printer. That is a massive success. Then they build the iTunes store, and they're, they're building all these other things around this. But the point is, is that they lack the skills as a company to do so, and then once they ge- the, the more they gathered skills, the more they gathered learning, it opened opportunities and unlocked opportunities they couldn't see. And so this is why I'm gonna, like, preach this from the, the rooftop as much as I can and maybe even, like, make a shirt and sell it, is just, like, time carries most of the weight. Like, stay in the game as long as possible. Let me just read this, and hopefully it makes sense to you. It is so hard to remember, given Apple's string of hits, the resulting ubiquity of its later products and the dominant role it eventually assumed in our culture, that this rise was entirely unexpected and a surprise even to the people who engineered it. One little thing led to another. One success, one particular challenge could spur thoughts about another product or a different iteration of an existing product or a whole new channel of revenue. As Steve liked to say, "You can only connect the dots of how things really happened in hindsight." Another idea that I think you and I can use, Steve the synthesizer. Steve did not like the idea of relegating all forward-looking tinkering to a separate area. Apple did not have a formal research and dev- development, uh, unit per se. Instead, research projects flowered in pockets all around the company, many of them without Steve's blessing or even awareness. They'd come to Steve's attention only if one of his key managers decided that the project or technology showed real potential. In that case, Steve would check it out... And the information he-- This is... Oh, my goodness gracious. This is so important. I might-- I'm gonna read this part two times. In that case, Steve would check it out, and the information he'd glean would go into the learning machine that was his brain. Sometimes that's where it would sit and nothing would happen. Sometimes, on the other hand, he'd concoct a way to combine it with something else that he'd seen, or perhaps to twist it in a way to benefit an entirely different project altogether. This was one of his great talents, the ability to synthesize separate developments and technologies into something previously unimaginable. That is Steve the synthesizer. That is going to happen the more time you spend on your company. It is also going to happen the more episodes that you listen to Founders, the more of these books. This is, what Steve's doing inside his company, we're doing for the entire history of entrepreneurship. There's gonna be these weird ideas, these weird lines that you hear, these weird stories that you re- uh, read when you pick up the book that you might use two years from now, five years from now, 10 years from now. You might use it next week. It might spawn an idea that you have from a previous experience, like, "Ooh, I'll combine the two." All you're doing is exposing your brain, downloading your brain a bunch of different ideas from geniuses. When it comes to their work, the people that you and I are studying on this podcast are geniuses. Think, think about it. They're so good at what they do, somebody wrote a book about it. [chuckles] That is crazy. And they are doing exactly what's... And I'm do- I'm trying to do this myself. You're obviously already d- doing it. I assume you're doing it as well. But that's exactly what Steve's saying. It's like, dude, all these things are pocking up o- over, all these ideas are coming from all these different places. Many of them are occurring without our blessing or even our awareness, right? All these people built our companies. In many cases, they built them and ran them their entire lives before you and I were even born. And [chuckles] that's... They didn't need our blessing, and we weren't even aware of it because we didn't exist. Then they come to Steve's attention only if one of his key managers decided that the project or technology showed real potential. In that case, Steve would check it out, and the information he would glean would go into the learning machine that would his-- w- was his brain. Sometimes that is where it would sit and nothing would happen. Sometimes, on the other hand, he'd concoct a way to combine it with something else he'd seen, or perhaps to twist it in a way to benefit an entirely different project altogether. This was one of his great talents, the ability to synthesize separate developments and technologies into something previously unimaginable. And I just realized something now that I'm rereading this paragraph before I read it to you. Embedded in that idea is seeing yourself as just one in a line of en- the entrepreneurs and company builders that came before you. And so I, uh, interesting, a couple of days ago when I got to this section for the first time, or I guess the second time because I've read the book twice now, I just pulled out just one paragraph from his amazing commencement spe- speech at Stanford. "I felt that I had let the previous generation of entrepreneurs down." He's talking about what he felt like after he got kicked out of Apple, okay? "I felt that I had left the prev- let the previous generations of entrepreneurs down, that I had dropped the baton as it was being passed to me. I met with David Packard and Bob Noyce and tried to apologize for screwing up so badly. I was a very public failure and even thought about running away from the valley. But something slowly began to dawn on me. I still love what I did. The turn of events at Apple had not changed that one bit. I had been rejected, but I was still in love, and so I decided to start over." So I mentioned earlier, huge theme of the book is the evolution of Steve compared, you know, him d- making, n- needing that deal with IBM when he's at NeXT, messing it up terribly. And I said at that point, "Hey, we're gonna compare this with his beautiful negotiation." He winds up St- uh, you may already know this, but Steve Jobs winds up being the, the largest single shareholder in Disney. And [chuckles] I'm gonna read some notes that I have, took from years back, about synthesizing this in a minute. But

15. 1:17:02 – 1:25:21

    Pixar's IPO, Disney Deals, and Closing on Defining Success

    1. DSDavid Senra1:17:02

       I wanna read you Bill Gates [chuckles] on Steve Jobs' Disney negotiation. Because Bill's, again, Bill's a main character in the book. He's hilarious. But it says, "Bill Gates was astounded by what Steve had been able to negotiate. 'When he's got the upper hand, he's good at using it,' says Gates. 'You know, he would wait people out. Just look at how much of the resulting company,' meaning Disney, 'ends up being owned by this fairly small and, yes, very high tech and very brilliant animation studio. They end up owning a very substantial percentage of the entire Disney, ABC, ESPN entity. It is owned by this little animation studio.' That took three rounds of negotiation, and by the time the acquisition is being done, Disney is just flat on its back saying, 'Take me.' Because of the political dynamics of Disney at the time, they needed that win, and Steve knew they needed it." And so several years ago, I wrote out in like a quick post form, uh, like just how remarkable this, this turn of events was that like how the hell did Steve wind up being [chuckles] like not only you found Apple, you making it, you know, make the most successful consumer device of all time or product of all time before you die. But like you wind up being the largest shareholder in Disney. Like how could you not want to study and learn from Steve Jobs? It's insane. So I'm just gonna read you... You know, I suck at writing. These are really just like my synthesis of all these books I was reading, and this is like years ago. But, uh, it says, uh, "In 1986, Steve Jobs was in exile from Apple, the company that would one day become Pixar." I'm reading my own notes to you. This is not in the book, obviously. Uh, "It was called Graphics Group and was owned by Star Wars creator George Lucas. George Lucas was going through a divorce and needed to sell off some assets. Steve agreed to give George Lucas $5 million for Graphics Group and invest another five million in the company. They renamed the company Pixar. Steve would eventually invest more than 50 million of his own money. This made him the majority owner of Pixar." This is important to know. "This was not the first time Steve Jobs had expressed interest in the technology behind Graphics Group. Years earlier, he had tried to get Apple's board to buy the company. They turned him down. Uh, after several years of failing to make the Pixar image computer, Pixar decided to go all in on making films. The problem was that after years of poor sales and rising expenses, they were short on cash. To solve this problem, Steve signed a $26 million deal to produce three animated films for Disney. The first of these movies was Toy Story, the world's first entirely computer-animated feature film. Now, here's where the story gets interesting. Steve decided to capitalize on the publicity of s- Toy Story's release and take Pixar public at the same time. Toy Story was released on November 22nd, 1995. Pixar went public on four days later." November 29th, 1995. His two partners, Ed Catmull and John Lasseter, did not want to go public. They thought it was too early. They wanted to make a few more movies first. That is, until Steve laid out his strategy and told him what it was li-- what was likely coming from Disney. Steve said, "Let's assume Toy Story is a big success." It was. It wound up grossing over three hundred and seventy million the first year. Well, when that happens, this is, again, I'm just so impressed by the clarity of his thinking. Check this out. He's laying this out before it happened. When that happens, the CEO of Disney, who at the time was Michael Eisner, will realize that he inadvertently created a rival company for Disney Animation. Pixar only had to make two more films for Disney, and then they'd be free to do as they like. Steve said Eisner's next move would be to negotiate, to renegotiate with Pixar and keep Pixar closer to Disney's control. Steve said that if they went public and they had more money, they'd be able to negotiate better terms with Disney. Now, why did he say that? Because their deal with Disney, they only got, like, 12 or 15% of the revenue because Disney's putting up all the money. So Steve's like, "Yo, let's take the money, some of the money we got from Pixar. Let's then go public, right, the same week that that is a massive success. Then we'll take that money, and we'll come back to Disney and be like, 'Hey, uh, we can put up 50/50. We're gonna be 50/50 partners. I'm putting up 50% of the money. I want 50% of the profits.'" And so let's go back to where I'm at in these notes. Steve said that when they went public, they'd, and had more money, they'd be able to negotiate better terms with Disney. Steve wanted a 50/50 split with Disney on returns. In order to request this, Pixar had to be able to put up 50% of the production costs. Going public would allow Pixar to be able to afford this. "The time is now," Steve said. "This is our moment," and he was right. A few months later, Eisner approached Jobs and said he wanted to keep Pixar as a partner. Eisner accepted Steve's 50/50 deal. The good times were not to last. Steve and Michael Eisner were like oil and water. They did not get along. A few years later, negotiations broke down completely, and Pixar started looking for other partners. Then Michael Eisner got fired. The new CEO of Disney was Bob Iger. When Bob Iger found out that he was going to be the CEO, the next CEO of Disney, he called his daughters. The next person he called was Steve Jobs. He laid all of his cards out on the table. He told Steve he valued Pixar and wanted to make a deal. This is Bob explaining why he felt Disney needed to buy Pixar. Michael Eisner did not understand that Disney's problems in animation were as acute as ever. That manifested itself in the way in which he dealt with Pixar. He was, like, really rough with Jobs. When Iger's like, "We can't afford to be rough with him, right? Because we need h- those assets. We need Pixar's assets." He never felt he needed Pixar as much as he really did. Eisner did. Every negotiation needed to be resolved by compromises. Neither one of them, Eisner and Jobs, is a master of compromise. So that's what Bob... That's the mindset Bob Iger is coming into this negotiation when he's about to buy Pixar for $7 billion, right? Still in my notes, by the way. So this is extremely hel- helpful. I should do this more often. Anyways, but wait a minute. How did Bob come to the realization that Disney needed Pixar? You won't believe this. A random parade at a Disney, at Disney Hong Kong made him realize how important Pixar was to Disney. Iger realized he's standing next to Eisner when this is happening. This is amazing. Iger realized that the only characters in the parade that had been created in the past decade were Pixar's. A light bulb went off. I'm standing next to Michael, but I kept it completely to myself because it was such an indictment of his leadership of animation during that period. After 10 years of The Lion King, Beauty and the Beast, and Aladdin, there were 10 years of nothing. Bob begins to negotiate with Steve to buy Pixar and does something very unusual. He does something anyone negotiating would tell you never to do. He tells Steve how badly Disney needs Pixar. Even more surprising, that worked. This is how Steve reacted. That is why I love Bob Iger. He just blurted it out. Now, that's the dumbest thing you can do as you enter a negotiation, at least according to tra- the traditional rulebook. He just put his cards out on the table and said, "We're screwed." I immediately like the guy because that's how I work too. Let's just put all the cards out on the table and see where they fall. And was it really a dumb idea? No, of course not, because Disney purchased Pixar for $7.4 billion. How much would Pixar be worth today if it was still a private company? Hell of a lot more than $7.4 billion. And the fact that Disney can capitalize on those assets, like, to a greater degree than any other comp- company in the world, right? Steve Jobs was the single largest shareholder in Pixar. This made Steve Jobs the single largest individual shareholder in Disney. That is how Steve Jobs ended up owning so more d- so many Disney shares. So that is exactly what Bill Gates... That's a longer story, more detail. That came from multiple books I had read, and then syn- synthesizing that information across multiple books into just, like, one note that is, you know, is extremely useful for me to go back and, and just relearn these lessons over and over again. And so now we get to the part where I actually wanna end. It's what I mentioned earlier. I started the podcast with, to me, one of the most important events in Steve Jobs' life as a kid, five, six years old, his dad telling him, "This is your workbench now. You can build things. You can make things. Let's explore all the made objects around us. Let's learn how they're made, and let's add a contribution to the world." That is what you and I are doing as product builders, s- as creators of products that make other people's lives better, right? That is all a business is, just an idea that makes somebody else's life better. So once we do that, then we need to define what success is. And this is the way Steve and Jony Ive defined success. "I remember a conversation in which we talked about how do we define our metrics for feeling that we have really succeeded," Jony said. "We both agreed clearly it is not about share price. Is it about the number of computers we sell? No. It all came back to whether we felt really proud of what we collectively had designed and built. Were we proud of that?" That was a great question to ask ourselves. It's a great question to close on. For the full story, buy the book. If you buy the book using the link that's in the show notes, also available at founderspodcast.com, you'll be supporting the podcast at the same time. That is 265 books down, 1,000 to go, and I'll talk to you again soon.

Episode duration: 1:25:21