Steve Jobs

This was self-delusion, and it was a recipe for disaster. Jobs began to sense it early on. “We had different ways of looking at the world, different views on people, different values,” Jobs recalled. “I began to realize this a few months after he arrived. He didn’t learn things very quickly, and the people he wanted to promote were usually bozos.”

Yet Jobs knew that he could manipulate Sculley by encouraging his belief that they were so alike. And the more he manipulated Sculley, the more contemptuous of him he became. Canny observers in the Mac group, such as Joanna Hoffman, soon realized what was happening and knew that it would make the inevitable breakup more explosive. “Steve made Sculley feel like he was exceptional,” she said. “Sculley had never felt that. Sculley became infatuated, because Steve projected on him a whole bunch of attributes that he didn’t really have. When it became clear that Sculley didn’t match all of these projections, Steve’s distortion of reality had created an explosive situation.”

The ardor eventually began to cool on Sculley’s side as well. Part of his weakness in trying to manage a dysfunctional company was his desire to please other people, one of many traits that he did not share with Jobs. He was a polite person; this caused him to recoil at Jobs’s rudeness to their fellow workers. “We would go to the Mac building at eleven at night,” he recalled, “and they would bring him code to show. In some cases he wouldn’t even look at it. He would just take it and throw it back at them. I’d say, ‘How can you turn it down?’ And he would say, ‘I know they can do better.’” Sculley tried to coach him. “You’ve got to learn to hold things back,” he told him at one point. Jobs would agree, but it was not in his nature to filter his feelings through a gauze.

Sculley began to believe that Jobs’s mercurial personality and erratic treatment of people were rooted deep in his psychological makeup, perhaps the reflection of a mild bipolarity. There were big mood swings; sometimes he would be ecstatic, at other times he was depressed. At times he would launch into brutal tirades without warning, and Sculley would have to calm him down. “Twenty minutes later, I would get another call and be told to come over because Steve is losing it again,” he said.

Their first substantive disagreement was over how to price the Macintosh. It had been conceived as a $1,000 machine, but Jobs’s design changes had pushed up the cost so that the plan was to sell it at $1,995. However, when Jobs and Sculley began making plans for a huge launch and marketing push, Sculley decided that they needed to charge $500 more. To him, the marketing costs were like any other production cost and needed to be factored into the price. Jobs resisted, furiously. “It will destroy everything we stand for,” he said. “I want to make this a revolution, not an effort to squeeze out profits.” Sculley said it was a simple choice: He could have the $1,995 price or he could have the marketing budget for a big launch, but not both.

“You’re not going to like this,” Jobs told Hertzfeld and the other engineers, “but Sculley is insisting that we charge $2,495 for the Mac instead of $1,995.” Indeed the engineers were horrified. Hertzfeld pointed out that they were designing the Mac for people like themselves, and overpricing it would be a “betrayal” of what they stood for. So Jobs promised them, “Don’t worry, I’m not going to let him get away with it!” But in the end, Sculley prevailed. Even twenty-five years later Jobs seethed when recalling the decision: “It’s the main reason the Macintosh sales slowed and Microsoft got to dominate the market.” The decision made him feel that he was losing control of his product and company, and this was as dangerous as making a tiger feel cornered.

CHAPTER FIFTEEN

THE LAUNCH

A Dent in the Universe

The “1984” ad

Real Artists Ship

The high point of the October 1983 Apple sales conference in Hawaii was a skit based on a TV show called The Dating Game. Jobs played emcee, and his three contestants, whom he had convinced to fly to Hawaii, were Bill Gates and two other software executives, Mitch Kapor and Fred Gibbons. As the show’s jingly theme song played, the three took their stools. Gates, looking like a high school sophomore, got wild applause from the 750 Apple salesmen when he said, “During 1984, Microsoft expects to get half of its revenues from software for the Macintosh.” Jobs, clean-shaven and bouncy, gave a toothy smile and asked if he thought that the Macintosh’s new operating system would become one of the industry’s new standards. Gates answered, “To create a new standard takes not just making something that’s a little bit different, it takes something that’s really new and captures people’s imagination. And the Macintosh, of all the machines I’ve ever seen, is the only one that meets that standard.”

But even as Gates was speaking, Microsoft was edging away from being primarily a collaborator with Apple to being more of a competitor. It would continue to make application software, like Microsoft Word, for Apple, but a rapidly increasing share of its revenue would come from the operating system it had written for the IBM personal computer. The year before, 279,000 Apple IIs were sold, compared to 240,000 IBM PCs and its clones. But the figures for 1983 were coming in starkly different: 420,000 Apple IIs versus 1.3 million IBMs and its clones. And both the Apple III and the Lisa were dead in the water.

Just when the Apple sales force was arriving in Hawaii, this shift was hammered home on the cover of Business Week. Its headline: “Personal Computers: And the Winner Is . . . IBM.” The story inside detailed the rise of the IBM PC. “The battle for market supremacy is already over,” the magazine declared. “In a stunning blitz, IBM has taken more than 26% of the market in two years, and is expected to account for half the world market by 1985. An additional 25% of the market will be turning out IBM-compatible machines.”

That put all the more pressure on the Macintosh, due out in January 1984, three months away, to save the day against IBM. At the sales conference Jobs decided to play the showdown to the hilt. He took the stage and chronicled all the missteps made by IBM since 1958, and then in ominous tones described how it was now trying to take over the market for personal computers: “Will Big Blue dominate the entire computer industry? The entire information age? Was George Orwell right about 1984?” At that moment a screen came down from the ceiling and showed a preview of an upcoming sixty-second television ad for the Macintosh. In a few months it was destined to make advertising history, but in the meantime it served its purpose of rallying Apple’s demoralized sales force. Jobs had always been able to draw energy by imagining himself as a rebel pitted against the forces of darkness. Now he was able to energize his troops with the same vision.