Oct 9, 2011 11:42 AM

Frank Rose: Steve Jobs, In And Out of Exile At Apple (Part II)

In Friday’s excerpt from West of Eden — Wired contributor Frank Rose’s account of the three-year period at Apple that began with John Sculley’s recruitment as CEO and ended with Steve Jobs leaving to found NeXT — Jobs is removed from his position as head of the Macintosh division and installed in an otherwise empty […]

*In Friday's excerptfrom *West of Eden *— Wired contributor Frank Rose's account of the three-year period at Apple that began with John Sculley's recruitment as CEO and ended with Steve Jobs leaving to found NeXT — Jobs is removed from his position as head of the Macintosh division and installed in an otherwise empty office building he dubs "Siberia." Though nominally still chairman of the company, he has been stripped of any role in running it. Now he has to decide what to do next. *

Steve didn’t spend much time in Siberia. It was too depressing, and there was no reason for him to anyway. Instead he flew to Italy with his girlfriend. He wanted to wander the hill towns of Tuscany—timeworn villages like San Gimignano and Montepulciano, with their medieval towers and their Renaissance palazzi set amid vineyards and orange groves and straw-colored hills. It was a little like the San Francisco Peninsula, only with abbeys instead of shopping centers. After Tuscany there was Paris. Even in August, Paris was better than Cupertino. He began to think about not going back. He was young. He had money. Maybe he could become an expatriate.

But Steve’s expatriate phase didn’t last long; a week later, he was back in California. He still had no idea what to do next. For awhile he thought about politics. He had long fantasized about entering politics on the John Kennedy model, taking over the government, straightening out the bureaucracy. Some people saw in him the charisma, the larger-than-life quality of men like Kennedy and Reagan. It was too bad he had never registered to vote.

Then there was biology. The year before, at a lunch at Stanford, he had found himself seated next to Paul Berg, a Stanford biochemist and Nobel laureate. Steve came away from lunch with the impression that, in essence, life is soup. After countless millennia of inquiry, mankind was finally on the verge of discovering the secret of life, and what was it? A chemical stew in which information is encoded algorithmically, just as it is in computers. Biology and electronics were one—they just used a different encoding system. It was too much! So he called up Paul Berg and made a date for lunch. Maybe it was time to educate himself a bit.

They met at Stanford and talked about how biology works and how it might be simulated on a computer. When Steve asked why college professors didn’t run simulations of Berg’s experiments for their students, Berg told him most classrooms didn’t have computers powerful enough to do the job. Steve started thinking about what teachers might be able to do if they had the right tools—tools it apparently hadn’t even occurred to them to ask for.

After his return from Europe, Steve had started a list of the things he’d done over the past ten years that meant a lot to him. Three things began to pop out, each of them having to do with school. There was the Apple Education Foundation, which the company had set up to dispense grants of money and computers to schools and community groups. There was “Kids Can’t Wait,” which saw thousands of Apple IIs donated to California public schools in exchange for a tax write-off. And there was the Apple University Consortium, which made Macintosh available to colleges and universities at below-retail prices.

By this time, life for Steve had boiled down to a series of one-event days. He’d take an entire day to buy a new 35-millimeter camera. But lunch with Paul Berg helped crystallize a few ideas in his mind. He was beginning to think there was a need for a computer that would be powerful enough to simulate complex biochemistry experiments and yet inexpensive enough for colleges and college students to afford. Apple’s education efforts were staring out at him from the list he’d made. And the Macintosh crowd had been after him all summer to start a new venture.

People were telling him they wanted out—Bud Tribble, the original Macintosh software architect; Rich Page, a Mac hardware architect whose latest project at Apple had just been cancelled; George Crow, the engineer who’d made the Mac’s disk drive work; Susan Barnes, the Macintosh division’s controller. With Rich to design the digital boards, George to design the monitor and the power supply, Bud to do the software, and Susan to run finance, he’d have the nucleus of a computer company. All he lacked was marketing.

The obvious candidate for a company that would sell computers to universities was Dan’l Lewin, the young marketing guy who’d put together the University Consortium for Apple. Lewin knew the university market better than anyone. On the day after Labor Day, Steve picked up the phone and asked if he wanted to talk.

He called at a good moment. The University Consortium, while extremely profitable for Apple, had nearly been killed in the confusion of the June reorg because a lot of retailers—the lazy ones, Lewin thought—claimed it was taking business away from them. Lewin had helped fight that off, but he was frustrated by the consumer-goods management techniques—the secretiveness, the constant status worries—that had been introduced by Mike Lorelli, the new marketing director from Playtex. So he drove up to Steve’s house and they spent a couple of hours walking around the grounds. Dan’l thought his idea was interesting—extremely interesting. But he had some reservations, and he left without making any commitment.

The other four arrived for dinner a short while later—Bud, Rich, George, and Susan. They sat in the dining room and drank California wine and ate vegetarian pizza. Then Steve announced his plan: He was thinking of starting a new company that would make the next great computer for higher education. The others weren’t all convinced it would be successful, but they didn’t like what Apple was becoming and they did like working with Steve—the ideas, the excitement, the risk. It wasn’t long before they were talking about salaries and engineering features and what kind of company they wanted to build.

Steve called Dan’l a few days later to tell him he’d definitely be starting a new company. Dan’l was going to be traveling, but he promised to call Steve the following Tuesday night. The September board meeting was scheduled to being Thursday evening, and Steve wanted to use the occasion to announce his plans.

September was not a good time for Apple. The company was split down the middle on the Steve issue: Some people were glad to be rid of him, others were wearing T-shirts that read, We want our Jobs back. People at every level were nervous, insecure, fearful of the future. At the top there was a rudderless sensation. Even with Steve gone, Sculley seemed unable to give coherent direction to their efforts. Marketing programs were being blown, money was being wasted, and John just seemed to sit there as events swirled around him. They all seemed to be on their own. If the board didn’t intervene, the company might sink into oblivion. So the September board meeting came at a particularly awkward moment—dangerous for John, difficult for the executive staff, tricky for Steve, troublesome for the board.

The agenda consisted mainly of a series of presentations on the turnaround they’d accomplished since June. The board members seemed to greet them all coolly. The final item on the agenda was something labeled “chairman’s report.” Steve, speaking from a prepared script, quickly outlined his plans. Over the summer he’d thought about doing a number of things—going into politics, maybe going back to school, or starting a company of his own. He’d decided to do the last, and the company he wanted to start was one that would build computers for the higher-education market. He didn’t offer any details—at that point, he didn’t have any—but he did say that that his new venture would be complementary to Apple, not competitive with it. He added that he’d be taking a handful of people with him, and that he thought he should resign from Apple’s board.

Once he’d finished, the board members asked him to leave the room while they discussed the matter. His plans sounded interesting, they agreed, and if the new venture really wasn’t going to compete with Apple, they might even want to invest in it. After half an hour of discussion, the invited Steve back and told him as much.

As soon as the meeting was over, Steve drove home to Woodside. It was early evening, and the other five—George, Rich, Susan, Bud, and Dan’l—were waiting at his house. There was a charge in the air, a tingle of apprehension and excitement. Joining him was an act of blind faith, like stepping over a cliff, for regardless of how they felt about Apple, there was no question that it offered more security than Steve could. They were starting out with no business plan or stock plan or company charter or product definition. But there was no turning back now.

Over a dinner of fresh pasta, they debated what they should do next. Both Steve and George were intrigued by the idea that Apple might invest in them. But Susan went crazy at the thought. She was the only one there who worked on the same floor as the exec staff. She knew those guys, and they weren’t going to sit still for this. They were paranoid about Steve and what he was going to do for Apple. They’d kill.

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At 7:30 the next morning—Friday, September 13—the executive staff convened in the boardroom to deal with issues from the board meeting. John took his place at the head of the table and, in matter-of-fact tones, gave the six exec staff members the news: Steve was leaving to form a new company that would be noncompetitive with Apple; the board was thinking of investing in it; and the following five people were leaving with him. He read off the names, and almost immediately the meeting dissolved into pandemonium and outrage. Steve was taking their head of software? He was taking their head of education marketing, who knew the field better than anyone else? Steve was going to destroy the company he’d built—and John and the board were going to let him do it?

John and Al Eisenstat, the company counsel, looked nonplussed, as if they didn’t quite see the problem. The outburst swirled around them regardless. How could Steve do this to Apple? How could John and the board be so naïve? How could any of them say this new company would be noncompetitive? John sat slouched in his chair, biting his nails and fixing one or another of them with his cold, penetrating stare. Finally he went to his office and tried to get a couple of the board members on the phone. By the time he got back to the boardroom, the exec staff had reached a consensus: What Steve had done was wrong, and John had to take action. By the end of the morning, John and Al were beginning to see their point.

The exec staff met again on Sunday. There was talk about how Steve was viewed as some kind of messiah at Apple, and how they needed to expose him for the fraud he really was. Mike Markkula, the most influential board member, came in, and John made the case against Steve. Far from having vague intentions to start a complementary venture, John declared, Steve had actually planned and executed a raid on Apple. He’d breached his fiduciary responsibility as chairman. Markkula listened carefully, and as he did so he too became incensed. He’d been Steve’s mentor, his father-figure, and now Steve had crossed the line. Steve was uncontrollable. He agreed: They had to do something.

A few days later, Markkula issued a statement. “In light of recent events,” the statement concluded, “the board of directors continues to evaluate what possible actions should be taken to assure protection of Apple’s technology and assets.” After this rather thinly veiled threat, the dispute became a matter for the lawyers to handle.

Negotiations continued through the week. By Friday it looked as if they had reached a settlement. On Monday morning, however, a messenger appeared at the county courthouse in San Jose to file a complaint accusing Jobs of planning a “nefarious scheme” to form a company that would use some of Apple’s key employees and its “next-generation” technology to compete with Apple. The phrase “nefarious scheme” appeared repeatedly in the complaint, as though it were some kind of mantra, an hypnotic chant to break the fraud-messiah’s spell.

Most of October was taken up with legal skirmishes—discovery motions, protective orders, memoranda in support of proposed protective orders, that kind of thing. While the lawyers were jockeying for position, Steve and his followers had to set up a company. They chose NeXT, Inc. as the name of their new venture. In return for 70 per cent of the company, Steve committed $7 million to bankroll their efforts.

Steve was determined that NeXT, like Macintosh, should be a model work environment. Rather than rent space where it was cheap, such as the hot, flat, overdeveloped office corridor along US 101, he decided to set up shop in Palo Alto. They found a little office building near Stanford, nestled into a hillside and half-surrounded by open land. To make sure the renovation was done right, Steve hired the interior designer who’d overseen the renovation of the Macintosh building at Apple. He set to work creating an environment that would seem almost Japanese in its simplicity. Inevitably, the flooring had to be redone because the workmen didn’t join the boards properly. As with anything Steve put his name on, it had to be perfect.

The lawsuit made engineering work impossible, since they couldn’t start designing until they knew what was an Apple secret and what wasn’t. But they could do market research, so the six of them hit the road, trying to figure out what their customers wanted. The product they wanted to create would be a powerful and graphically sophisticated computer similar to the work stations made by Sun Microsystems, which sold for $20,000 and up. Most academics, however, wanted to pay something closer to $3,000. Since what Steve and his people had done with Macintosh was find great technology and pull it down to a price point that was affordable to large numbers of people, this seemed like an appropriate challenge to undertake.

Meanwhile, the lawyers were taking depositions, a process that could drag on forever. But when the judge took up Apple’s motion for a preliminary injunction, he suggested that this particular lawsuit wasn’t serving any useful purpose and ought to be resolved. Talk of a settlement had never entirely ended, but after this the conversations became more serious. By January they were faxing drafts of a settlement back and forth. The basic terms of the agreement strongly resembled the terms they’d discussed in September, before the suit was filed. Apple’s board approved them, and the signing was set for NeXT’s attorney’s office in San Francisco late one Friday afternoon.

As Steve rode the elevator to the top floor of 3 Embarcadero Center to sign the slip of paper that would free him from the enterprise he’d fathered, the others were all waiting by the radio in NeXT’s new offices. They had a little transistor radio tuned to an all-news station so they’d hear the instant it got out on the wire services. Bud went out to get champagne. The others all gathered on the second floor, around Steve’s desk.

It was dusk when Steve swooped in off 280 and into a parking space by the front door. He bounded past the piles of two-by-fours and sheetrock and up the steps as Bud was popping the cork. They all cheered and guzzled champagne and jumped up and down. Someone got on the phone and ordered dinner from Fuki Sushi, the little Japanese place on El Camino Real. They all pulled their chairs around Steve’s desk and started talking press strategy. Apple was trying to play the news as “NeXT settles.” They preferred to describe it as “Apple drops suit.” But either way, they were prepared to celebrate.

It would have been better, of course, if the lawsuit had never happened. It would have been better if lots of things had never happened: the bungled exit, the Siberian exile, the break with John, the failure—but you could keep adding to that list for a long time. At least with NeXT they had a way of reliving the Macintosh experience. The bond that had developed there, the sense that they were a tiny band bent on achieving their absolute best, guided by a charismatic leader who’d chosen them to realize his dream—that yielded a high few people in the conventional world of office parks and pinstripes seemed to know. That was why they’d joined Steve in September—for the chance to do it again.

As for Steve—well, if the new Apple was like Hewlett-Packard, a place where you turned a crank and the products came out, that meant it just stood for mediocrity. He’d wanted Apple to be a place where somebody who wanted to do something great in the world could do it, but nobody there seemed to talk about doing anything great any more. Mediocrity was fine, as long as it was on schedule. It made for such an unsatisfying end to what had once been such a wonderful story—his own. But he tried to tell himself it was okay. Life goes on; you start over and build something new.

Steve’s desk, like all the others, was a handsome piece of burled maple, hand-crafted by a Redwood City cabinet maker. The desks were large and blond and sleek. Like the art photographs on the walls, they were one ingredient in the making of the perfect enterprise. Even in the swirl of laughter and excitement that accompanied their triumph, however, it was hard not to notice something missing.

It was a small thing, really, just a shadow on Steve’s Macintosh. At the lower-left-hand corner of the machine, where the rainbow-hued Apple logo should have been, was a small, jagged hole. In a fit of fury and despair the logo had been gouged out, like a heart that wouldn’t stop beating. An angry scar had been left in the beige plastic case, and nothing could ever make it perfect again.

*No one — least of all Jobs — could know at the time what would follow. Though ultimately unsuccessful at its initial goal, NeXT did develop a powerful workstation and a breakthrough operating system. Meanwhile, Apple floundered, precisely as Jobs predicted it would. After achieving some initial success with Macintosh, Sculley was fired in 1993 following a series of missed deadlines, failed product launches, and increasingly disappointing financial results. Two other CEOs followed in quick succession. Finally, with Apple on the brink of collapse and desperately in need of a new Macintosh operating system, the company bought NeXT—and got Jobs in the bargain, setting the stage for its dramatic recovery and the string of successes that made Jobs an icon of American business. *