September 15, 2013

(Chapter 7 Excerpt) Setting the Record Straight about NeXT

“The most effective way to destroy people is to 
deny and obliterate their own understanding of their history.”
— George Orwell

“Bitterness is like cancer. It eats upon the host. 
But anger is like fire. It burns it all clean.” 
― Maya Angelou

Setting the Record Straight

After departing Apple in 1985, Apple was now in Steve’s rearview mirror, and with it went the baggage of being at the mercy of Apple’s authorities. At least, that’s what we’re supposed to believe. 

So the story goes, Steve went on to found his own company. There, his unleashed temper tantrums and poor leadership led to the failure long predicted by Apple’s grownups. Like most folklore, this tale is missing some important pieces that change the events almost entirely.

Steve was positive that Apple’s course would lead to self-inflicted destruction under the direction of Sculley. Major vulnerabilities would open up because of pricing mistakes and lack of a driving pursuit of excellence. In his own words, “Microsoft will win, and the technology world will enter into a dark age for at least a decade, maybe longer.” While his words were dismissed as hyperbole at the time, in retrospect, he wasn’t far off the mark.

Public humiliation came in a tsunami from the press thrilled to assist in Steve’s public dressing down. The sharks smelled the blood and were ravenous. He was dismissed vocally as an irrelevant snake-oil salesman by the technology in-crowd composed mostly of his competition. Practically anyone who had ever felt humiliated by Steve’s criticism of their shoddy workmanship or small thinking was handed a microphone.

At this point, Steve seriously considered literally tending to his garden and shifting to a private life. Instead, he decided that bringing his vision to life in some form was worth risking further public humiliation and possible financial ruin. 

Having established a strong rapport with the outstanding people in his Mac division, those who shared his values, left Apple to join Steve. With five co-founders, he established his next company. A firm believer in sending a message, it was creatively titled…NeXT, Inc. 

Steve and his team set out to gather great concepts and create the future of technology. At NeXT, his passion and drive led him to seek out and embrace technology that was a decade ahead of Microsoft and Apple. Apple immediately became incensed and filed suit against Steve and NeXT.

Apple’s bizarre lawsuit against him was clearly schizophrenic. They publicly claimed Steve had been an impediment at Apple, not an asset. Yet, they were deeply threatened by the idea of directly competing with Steve and his band of five people. They even tried to claim ownership of the very concepts Steve supported that Apple management had rejected repeatedly.

Steve was incredulous. He told Newsweek at the time that, “There is nothing, by the way, that says Apple can’t compete with us if they think what we’re doing is such a great idea. It’s hard to think that a $2 billion company with 4,300+ people couldn’t compete with six people in blue jeans⁠2.” Steve was a Spartan CEO who was convinced that his “six people in blue jeans” could take on 4,300 Apple employees and win. So why didn’t they?

Looking at the successful strategy Steve has used since becoming Apple’s CEO, the foundation of it is obviously the home computer market. While the rest of the computer industry was practically established to cater to the enterprise market, Apple today barely makes any accommodations to them. Steve recognized this years before anyone, but was handcuffed when he left Apple to found NeXT. Those handcuffs only came off when Apple welcomed him home twelve years later. “The roots of Apple were to build computers for people, not for corporations. The world doesn’t need another Dell or Compaq⁠3,” Steve would later tell Time in 1999.

The settlement terms of the Apple lawsuit placed a proverbial moat around NeXT. They were prohibited from selling to the home computer market, pre-college education or directly against the Mac in business markets. This left only the high-end workstation market and higher education markets. Performing badly doesn’t mean you’re a bad performer. It can simply mean you’re on the wrong stage.

Steve didn’t make a decision to be locked into the corporate or higher education markets, where his consumer strengths became weaknesses. He simply believed he could hurdle over the moat surrounding him. He nearly succeeded.

Pundits like to write off NeXT as an unremarkable vendor of overpriced $10,000 computers. In reality, relative to comparable workstations, NeXT machines offered better hardware, cross platform compatibility and still had prices thousands of dollars less than competitors. Compaq, DEC, Sun, high end Macs, HP and SGI were all more expensive than NeXT machines.

Keep in mind that NeXT machines included signature and industry-leading advanced features like speech-enabled email messaging, Digital Signal Processors for lifelike audio, PostScript color and transparency, a documentation reference library, dictionary, and even the complete works of Shakespeare.

It’s commonly repeated that Steve overpriced hardware. Repetition, however constant, doesn’t make a thing true.

Taking comparable models, here’s what we get⁠4:

Compaq 486L vs. NeXTstation Turbo Color -- NeXT offered a comparable processor, the same memory, a larger hard drive, higher resolution display, a larger monitor, and included a far larger software bundle. The Compaq 486L was priced at $17,274. The NeXTstation Turbo Color? $9,995.

A cheaper Compaq model with a slower processor, half the RAM, and a far smaller hard drive, was available for $9,453. The comparable NeXT still offered double the RAM, while matching the other specs, for $7,995.

DEC Model 25 vs NeXTstation Turbo -- Both machines offered the same memory and hard drive space and roughly comparable processors. The NeXT machine still sold for $500 less.

Apple Macintosh Quadra 700 vs NeXTstation Turbo Color -- NeXT blew away its old alma mater here: More RAM, a faster processor delivering roughly double the performance, 4096 color graphics compared to the Mac’s 256, a larger monitor, far higher graphics resolution and nearly double the hard drive space, yet it sold for $8,995. Apple’s offering was $9,652. $650 more, while offering far less computer. Not bad for six guys in blue jeans.

Examples where Apple was cheaper, such as the Macintosh IIfx vs. NeXTcube Turbo/ NeXTdimension, become irrelevant once the difference in specs comes into play. The NeXT didn’t have a direct competitor, and offered far higher performance models, albeit at a higher price.

Even IBM’s PS/2, Model 70/386 cost far more than a comparable NeXT machine. The IBM lacked even basic features like cutting & pasting sound, text, and graphics between applications and true multitasking, because it was still running DOS. NeXT offered all those superior capabilities and far more. The NexT machine had triple the processing performance, quadruple the memory, and nearly double the hard drive space. The IBM machine still cost $1,156 more than the NeXT machine⁠5. NeXT was not overpriced.

So, it wasn’t overpriced hardware that hampered NeXT. Maybe NeXT just didn’t play well with other platforms and was so incompatible that it couldn’t compete? Not at all.

The NeXT platform ran versions of the best emulators then available. The SoftPC emulator allowed running all DOS and Windows 3.1 software on NeXT. In fact, the software was so good that Microsoft later bought SoftPC, and used it to bring Windows and DOS compatibility to Windows 95. The entire Mac OS and its applications ran on NeXT OS under an emulator that even had a fully licensed ROM chip. It didn’t lack compatibility.

The only possible remaining reasonable explanation would be if software developers had shunned the NeXT Platform. Well, scratch that off, because over 700 native applications were available for NeXT. The list included mainstays of the day such as Adobe Illustrator, Lotus Improv and Wordperfect. This was long before the Microsoft Office hegemony, so its absence had no bearing on the platform. NeXT didn’t lack software.

Steve had put all his considerable might behind making NeXT a success. Steve had famously called computers ‘bicycles for the mind’, even wanting to rename the Macintosh project to ‘Bicycle’. NeXT was an amazing, compatible, affordable, and next generation ‘bicycle’. Regardless, no matter how hard one pedals a bicycle, it won’t ever cross a moat. What one needs is a bridge. Unfortunately, the bridge was blocked by a troll.

NeXT had technology, talent, and a drive to change the world. CEO Steve was surrounded by the highest quality marketing, design and engineering people. Yet there was almost no sales traction. So what was the real issue?

Introducing a new platform was extraordinarily difficult in the late 1980s. Even mighty business titan IBM failed to establish its impressive OS/2, despite all its reputation, experience and resources. The kingpin of DOS, Microsoft, was struggling for widespread acceptance of its new Windows platform. They had access to the full gamut of available markets, from entry-level home consumers up to high-end workstations.

Steve had decided to eliminate the hardware part of the equation and moved NeXT to become a purely software platform. NeXT OS and software would run on any existing PC compatible hardware. That versatility didn’t remove the blockades and the troll still demanded his toll.

It’s hardly questionable that NeXT OS faced greater difficulty getting established than the producer of Microsoft DOS. Microsoft already had the IBM stamp of approval and provided the well-known DOS, and was now moving to a graphical OS with Windows 1.0. Moreover, Microsoft had already begun erecting substantial anti-competitive barriers through exclusive licensing agreements with all the main PC vendors. Others, such as the BeOS faced the same issues as NeXT and also failed to win acceptance. NeXT’s lack of market traction was just one example of many running headlong into Microsoft’s ‘open’ wall.

Steve had built a team at NeXT composed of loyal, extremely talented, credentialed and experienced individuals that later came with him to Apple. This disproves many claims about him lacking team-building skills.

At Apple, Steve had often been accused of being a bully and having terrible personal skills by his critics. Conversely, his appreciators considered him a leader in high quality. Steve now had the chance to prove what was valid and what wasn’t. 

When he started NeXT, he wanted to assemble a team of people who were comfortable with him, who weren’t awed or intimidated by his presence, who didn’t believe his mythology and who wouldn’t treat him as an icon. In short, he knew the key to killing hidden resentment was to hire equals.

Accused of being a flip-flopper, he later shed light in an interview -- “You’ll find people who said I had a very strong opinion. They presented evidence to the contrary, and five minutes later I’d completely changed my mind. Because I’m like that. I don’t mind being wrong.” Rather than digging in, long past realizing a mistake, Steve was comfortable valuing results above his pride.

The five equals who would be NeXT’s co-founders stood on common ground. Like Steve, they were mostly in their early thirties, smart and idealistic. Unlike him, they had softer-edged and lower-key personalities and boasted impressive academic credentials.

Steve was outright fanatical about hiring only the best. He proclaimed that they would interview a hundred people for every one they finally chose. People chosen were massively overqualified for the assigned position. There was a method to his madness.

Take Alex, for example. In the book The Second Coming of Steve Jobs, we learn that he came from the middle ranks at Apple before he applied at NeXT. Credentialed with an undergraduate degree from Harvard and an art collector, he was confident of being hired by Steve. Would he become a marketing executive or possibly a project manager? Steve made him the receptionist. 

The book further details how applicants had to interview with thirty different NeXT employees before being hired. “You basically had to meet everyone in the entire company and they all had to give you the thumbs-up. It really felt like a fraternity. Everyone had to love you. So the feeling you got was that anyone who got through had to be ’the best of the best’—that was the phrase they used. In the early days they had the ability to hire anybody. There was one after another phenomenally talented person. People wanted to be around Steve and be a part of this”. 

Steve was accused of overcompensating for being a college dropout by demanding such overqualified people be placed in positions below their credentials. But was he overcompensating? 

The result of this hiring method at NeXT was a perception that since the receptionists needed Harvard degrees, the engineers must be geniuses.

When Steve returned to Apple, he fine tuned this method. He developed an industry-wide notoriety for setting a high bar, on new hires, across the resurgent company. Ensuring that even the most minute details of employee training were thought through was something he took pride in. The result was a level of quality unheard of in the industry, customer satisfaction ratings in the high 90% range, and a retail operation that, per square foot, outsells every other retail store in the country. 

Maybe it wasn’t overcompensating, after all.

Some outsiders were confused by the fact that Steve could play both ‘good cop’ and ‘bad cop’ himself, depending on the situation. At other companies, the good cops and the bad cops were different people. 

Co-founder Susan Barnes had an MBA from Wharton business school. Her degree in finance matched her position at NeXT. Susan has described Steve through many examples. “He told me, ‘Susan, when you’re upset, you’re not articulate,’” recalls Barnes. “The same is true of Steve. But when he’s upset, it’s for a reason. Steve had brutal delivery mechanisms, but if you listened through his yelling, Steve had good ideas. And Steve is a rare person because even if he’s really mad at you, you can hang up and later he’ll call you and talk more calmly⁠6.”

Another trick to working well with Steve was understanding that while he was a smart, ruthless editor of other people’s ideas, he desperately needed other people to be smart, ruthless editors of his own constant onslaught of brainstorms. “Steve’s great strength is throwing out a hundred ideas, and ninety-nine are stupid but one is great,” said Susan. If she thought his latest idea was stupid, she would just ignore it. “That’s what I like about you,” he once said.

“Steve’s frustration level would build up when he thought that he was the only one who got it,” Susan recalled. 

Steve had no reservation about playing the ‘bad cop’. While terrifyingly real to his critics, it was often just a theatrical role to him. It was useful whenever he thought it would get results. Susan has related her peek backstage. Once, when they were still at Apple, while bringing Steve some papers to sign, she stood outside Steve’s cubicle. He was screaming into the phone and shouting a stream of obscenities. Then he hung up. All the tension instantly disappeared and he began laughing. He was obviously pleased with his extremely dramatic performance. “Well, we’ll see if that method works!” he said optimistically and smiled⁠7

Sales experience was not lacking at the company. Dan’l Lewin was NeXT’s marketing executive. Serving as his Vice President of Sales was Todd Rulon-Miller, a star salesman from IBM who had studied at Princeton. 

Other NeXT executives believed that Steve was simply a passionate soul given to hyperbole. His fiery words needed to be discounted from their face value, and translated to find their real message. “When Steve says you’re an idiot, that doesn’t mean he thinks you’re an idiot,” says David Wertheimer. “It means he disagrees with you⁠8.”

Bud Tribble was head of software at NeXT. He had a combined M.D. and Ph.D. He had worked on the creation of the Macintosh at Apple, during a three-year break from medical school, before coming to NeXT. Bud was an even-tempered, quiet and thoughtful person. His self-confidence came from mastery of his craft. Steve’s behavior didn’t perturb Bud, because he saw it in an entirely different light. 

Being a graduate of medical school gave Bud a quite different frame of reference. He was used to pupils receiving that kind of harsh treatment from his brilliant teachers. Chief Surgeons would come down like a hammer and berate the interns over seemingly trivial matters. 

That was understood to be how the great surgeons demonstrated the discipline and carefulness that their trainees would need to acquire. No mistakes were overlooked or excused. Every mistake was treated as a major lapse in judgement and unacceptable. The surgeons were completely unwilling to prioritize a student’s pride over their results. Often, they saw that very pride as the problem. Humility was what led one to double, and triple, check the minute details that would ensure success. Treating success as requiring every possible investment was what led to greatness. The interns might have cursed the chiefs, but later they would appreciate the crucial experience.

Steve would later relate to a reporter his view that many people aren’t used to working in a place where excellence is the norm, not the exception. There was no praise for delivering the expected results. But there was certainly a vocal message when your contribution didn’t meet that expected quality.

Receiving criticism from Steve “wasn’t a pleasant experience,” says Bud, “but it let the engineers know that it wasn’t OK to be sloppy in anything they did, even the 99% that Steve would never look at. It’s almost like a training mechanism, and it’s effective”. It was Steve’s way of infusing his perfectionism into the work of hundreds of people. “He was incredibly picky,” Bud says, “but it set the tone for thousands of other decisions that Steve was not involved in at all.”

Steve thought it was essential that his NeXT co-founders share his passion for aesthetics. When he and the staff took a business trip to Carnegie Mellon University, he arranged for them to spend an entire day privately touring Fallingwater, Frank Lloyd Wright’s architectural masterpiece. The landmark was a modernistic house made of concrete, glass, and steel, cantilevered above a waterfall. He wanted them to understand the nature of great design by studying a beautiful and functional creation. 

At another off-site meeting for the entire staff at the Garden Court hotel in Palo Alto, Steve brought in aikido masters to conduct an hour-long demonstration and explanation of their art. The class was meant to be a metaphor for their relationship to the rest of the industry. Like an aikido master, Steve wanted them to deflect the hostility and negative energy of the outside world that was attacking NeXT, and them personally. Instead, they should turn it into their own positive force or energy, and let it fuel their success. He didn’t explicitly make the connection, but they understood the message. It was a message that impressed them so much that they would remember it years later.

Sometimes that negative energy and hostility came from inside NeXT. NeXT’s investor Canon brought Peter van Cuylenburg in to serve as COO in 1992. The Chief Operating Officer’s job was to help Steve run the company. Instead, he had the gall to call the CEO of Sun, Scott McNealy, and ask him to buy NeXT, fire Steve, and install him as head of the new operation. 

McNealy told Steve about the betrayal and van Cuylenburg left soon afterwards. This opened wounds barely healed, and despite having left the Sculley episode in the rearview mirror, Steve got a painful reminder of that betrayal. This time, however, someone had his back, and shut the attempted coup down. History doesn’t always repeat itself, sometimes it only stutters.

Forced out of Apple in ’85, Steve’s inner fire led him to create Apple’s ‘rescue package’ at NeXT. Eventually, CEO Steve persuaded Apple to recognize they were far better off together and merged his two families into a far stronger whole. However, leading Apple back from the brink would take an explorer. Entering uncharted technology categories and making tough decisions based on conviction when data wasn’t available, were Steve’s proven specialties.

- From Anatomy of an Apple
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1 Maya Angelou. (n.d.). Retrieved August 25, 2013, from Web site:
2 Newsweek, September 30, 1985
3 Time, October 18, 1999
4 All Prices are MSRP.
6 Deutschman, Alan. "NeXt." The second coming of Steve Jobs. New York: Broadway Books, 2000
7 Deutschman, Alan. "NeXt." The second coming of Steve Jobs. New York: Broadway Books, 2000

8 Deutschman, Alan. "NeXt." The second coming of Steve Jobs. New York: Broadway Books, 2000