I Am John Galt (6 page)

The Granite Quarry

The ensuing years for Jobs turned out to be like Roark's time designing mere gas stations instead of great skyscrapers, and ultimately working as a day laborer in a granite quarry. Kept by the world from the work he loved, Jobs would live true to his own integrity, designing and building in areas where he saw value for his own sake. When they were ready to call him back on his own terms, he would be ready.

Jobs formed a company called NeXT to create the next-generation personal computer packed with all of the latest ideas that he felt restricted from pursuing within Apple's corporate confines. The device would use a powerful new Motorola chip, optical magnetic drives, a new breed of operating system called NeXTSTEP, and brilliant anti-aliased graphics, all housed in a 1 × 1 × 1-foot magnesium cube. He would target the higher education market with a computer powerful enough to run complex genetic research simulations while being simple enough for students to use in their dorm rooms.

With investments from Ross Perot and Japan's Canon, Jobs built out a lavish corporate headquarters, spending $1 million on a floating staircase designed by I. M. Pei and $100,000 for a logo from legendary graphic designer Paul Rand. He created a futuristic manufacturing facility filled with laser-guided robotics that outnumbered humans two to one.
30
But ultimately, the amazing design and operating system for the cube failed to overcome its hefty $10,000 price tag. While the computer did sell an estimated 50,000 units over four years,
31
it was a disappointing showing in an industry moving tens of millions of computers per year. Without the deep pockets of a public company and brand reputation in an increasingly mature market, NeXT had an uphill battle.

Meanwhile, always on the lookout for new ideas, he made a trip north to see George Lucas and his Lucasfilm-ILM operation in San Rafael, California. What he saw there stunned him. Here was a group of the most talented graphic artists in the world quietly creating groundbreaking digital images and film sequences on some of the most sophisticated computer systems he'd ever seen. “It was a Xerox PARC moment,” according to biographers.
32

Even more stunning was that Lucas, in need of immediate liquidity in the aftermath of his recent divorce, was eager to sell the entire operation lock, stock, and barrel for $30 million. Jobs was salivating, but his shrewd negotiating sense detected blood in the water, so he decided to wait Lucas out in hopes of a better deal. With such a unique asset, finding a willing suitor on short notice would be next to impossible. Jobs ended up buying the company for $10 million in 1986 and christened it Pixar.

Hearkening back to the early days of Apple, the company initially focused on selling hardware dubbed the Pixar Image Computer. The device was powerful, but found limited application mostly for complex image analysis in government intelligence services and medical markets. Disney Studios was also a customer. Though Uncle Walt's team still prided itself on traditional hand-drawn animation, it was slowly adopting computers to automate certain tedious coloring processes. It was the beginning of a relationship that would prove fortuitous for both companies in the coming years.

With Pixar in financial trouble from slack hardware sales, former Disney animator and then Pixar executive producer John Lasseter began creating computer-animated commercials for outside companies, generating a trickle of much-needed revenue. In 1988, Pixar also began licensing a software product it had developed earlier, called RenderMan, which allowed animators to quickly and easily refine complex 3-D scenes with appropriate shading and lighting. It remains the most widely used rendering standard in the industry today.

Advertising animation and software generated critical cash flow to keep Pixar on life support, but the company was still hemorrhaging $1 million per month. NeXT wasn't faring any better, and between the two Jobs spent tens of millions from his own pocket just to keep the companies alive. A man who was once one of the wealthiest people in the country now saw his fortune dwindling to perilously low levels.

Despite heart-wrenching cutbacks at Pixar and a bottom-line temptation to close down the animation group altogether, Jobs personally funded the cash outlay to develop a short film to be shown at the SIGGRAPH computer graphics conference in 1988. It was a critical decision that would change the face of moviemaking forever. It was also the kind of move that a play-it-safe bureaucratic CEO would never have made. But an individualist like Jobs could make it, just because he thought the animated short called
Tin Toy
was so cool. It was indeed cool. It would go on to win an Oscar and eventually become the basis for the blockbuster Disney collaboration
Toy Story
.

The late 1980s and early 1990s would spark an epiphany of sorts for Jobs, with curious parallels between NeXT and Pixar. Jobs began to realize that the hardware he had focused so much effort on since the early days at Apple would eventually become a “sedimentary layer”
33
in the evolution of technology upon which others would build. His metamorphosis was to grasp a paradigm that transcended hardware and software. He began to see how technology unlocked a unique experience even more lasting than the computers or software used to create them. Chips and programs lived short lives in the relentless march of technological progress. Music and stories endured for generations.

In his transition toward this experiential model, Jobs sold the Pixar Image Computer hardware division to Vicom systems in 1990
34
and retained fewer than 100 employees to focus on animation. Then in 1993, he withdrew NeXT from the hardware businesses and renamed the company NeXT Software to continue meeting a growing demand for their innovative object-oriented NeXTSTEP operating system.

NeXT hardware was never a commercial success, but it was a notable influence in the history and lore of computing. Tim Berners-Lee created the first Web browser in 1990 on a NeXT machine, claiming, “I could do in a couple of months what would take more like a year on other platforms, because on the NeXT, a lot of it was done for me already. There was an application builder to make all the menus as quickly as you could dream them up.”
35
John Carmack of id Software used a NeXT machine to develop the video game Doom—the landmark “first-person shooter.”
36
It was the object-oriented NeXTSTEP operating system that would prove to be the crown jewel in Jobs's kingdom, and his passport back to Apple.

Meanwhile, Pixar was struggling to stay afloat, but saw a potential lifeline through an increasing dialogue with Disney. In an attempt to break its string of mediocre films, for the first time ever Disney was thinking about using an outside company to produce a computer-animated feature, but was meeting internal resistance. In their fight against obsolescence, Disney's old-school pen-and-inksters claimed computer animation couldn't possibly live up to Disney's standard of quality. But some early—and secret—computer animation collaboration with Pixar on such classics as
Beauty and the Beast
built a level of trust among the Disney executives that it could indeed be done.

Although in 1991 his company was running out of oxygen, Jobs negotiated with Disney a deal for not one, but
three
feature movies. Disney would pay for production and give a slice of the net from the films back to Pixar. In turn, Pixar would retain all rights to technology and its secret creative sauce. And in a negotiating flourish that was pure Jobs—and must have been very difficult for Disney to swallow—the agreement permitted Pixar's animated logo to be displayed with equal prominence alongside Disney's famous image of Cinderella's castle at the beginning of each film.

Based on the
Tin Toy
short, Disney approved the script for
Toy Story
in mid-1993, clearing the way for production. But months later, Disney's head of feature films, Jeffrey Katzenberg, wasn't satisfied with the character development. On November 17, Pixar received formal notice that Disney was shutting down production.

The dawn of 1994 brought dark days for Jobs. Exactly a decade after the glittering launch of the Macintosh, he was at his personal and professional nadir. He had fallen from grace at Apple and been trounced in the press over problems at NeXT, and now his personal investment in Pixar was sinking beneath the waves while Disney sailed off on the horizon. Jobs was depressed and withdrawn. It seemed to him that his previous success as a boy wonder might just have been a fluke.

But he refused to give up or give in. Learning the ways of fickle Hollywood executives, he shrugged off Disney's blow and picked himself off the mat to fight again. After challenging his writers to recraft the script, he repitched it to Disney. Katzenberg liked the approach and unfroze the project. Then came a moment when Jobs wondered if he was a victor or a fool. With all the resources poured into the film, he figured it would need to gross $100 million at the box office just for Pixar to break even—more than any other Disney feature in recent history. At one point during the ordeal he confided, “If I knew in 1986 how much it was going to cost to keep Pixar going, I doubt if I would have bought the company.”

Toy Story
opened in November 1995 to rave reviews and a weekend box office take of $29 million—nearly equal to the full cost of production. The movie would eventually gross over $350 million worldwide with an additional $100 million in video sales. Sensing good advance buzz, Jobs had timed Pixar's IPO to coincide with the movie's release, going public on November 29, 1995, at $22. Shares quickly shot up to $44.50 during the first hour in trading. Jobs had invested a total of $60 million in the company and nurtured it for nine years. He was suddenly worth over $1 billion.
37

Unbelievably, some employees took him to task for being greedy and not allocating more of his 80 percent share in the firm to his workers. At least one former executive, cut from the cloth of Ayn Rand herself, disagreed. “We live in a world where everyone says, ‘It's unfair—somebody got more than me.'”
38
Employees negotiated their stock options up front and were fortunate that the company even survived through lean years on the strength of Jobs's checkbook. “Can you really blame Steve if he didn't feel like giving them more stock than they had agreed on when they were hired?”
39
Like Roark, Jobs neither gives nor asks for charity. As Roark puts it, “I am not an altruist. I do not contribute gifts of this nature.”

With future films
A Bug's Life
,
Toy Story 2
and
3
,
Monsters Inc.
, and many others, Pixar would rack up billions in earnings and earn the title of the most successful movie studio of all time. More important, Jobs had transformed an entire industry through his audacity and stalwart belief—both in the technologies he thought were cool and in himself. Computers would enter the mainstream of visual entertainment as a vehicle to tell enduring stories. And Jobs wasn't done yet.

Back on Top

By 1995, Apple was on the ropes and struggling to stay standing. Customers were flocking to the latest generation of improved Microsoft Windows software and it looked like Apple might become a footnote in the annals of computer history. Sculley had been forced out in 1993 after Apple's market share shriveled from 20 percent to a measly 8 percent under his watch. Turnaround expert Gil Amelio was installed to right the ship. He recognized that cost cutting would go only so far and began to push for a new operating system to first defend and then rebuild Apple's market share. Increasingly convinced that the foundering in-house team was incapable of developing a solution in time, he cast about for a third-party alternative.

After analyzing the field of players, including several conversations with Bill Gates at Microsoft, Amelio decided that NeXTSTEP might be his salvation and began negotiating with a surprised but amenable Jobs on buying his company outright. Apple eventually paid $325 million in cash to the investors and 1.5 million shares of Apple stock, which went to Steve Jobs.
40
Steve was also retained as a strategic adviser to Apple. NeXTSTEP would become the basis for the Mac OS X operating system and the company's path back to profitability. But it was too little, too late for Amelio.

In mid-1997, Apple's market share had fallen to 3 percent and the company reported a quarterly loss of $708 million. Amelio was ousted and Jobs was installed as interim president and CEO. He would work for the princely salary of $1. According to long-gone CEO Sculley, “I'm actually convinced that if Steve hadn't come back when he did—if they had waited another six months—Apple would have been history. It would have been gone, absolutely gone.”
41

Apple's stock price would seem to agree with Sculley—as we show in
Figure 1.1
.

Figure 1.1
Apple (AAPL) Stock Price