Michael Moritz - Return to the Little Kingdom: Steve Jobs and the Creation of Apple

Dozens of people agreed to be interviewed for this book. Many did not. I hope that those who opened their doors and interrupted more profitable pursuits dont feel they wasted their time. Others kindly let me rummage through filing cabinets and peer at photograph albums while the editors of the San Jose Mercury News made me welcome in their morgue. Dick Duncan, Times chief of correspondents, tolerated another of my disruptive excursions and gave me a leave of absence. Ben Cate, Times West Coast Bureau chief, provided the unwavering support that those who have worked for him will understand. Catazza Jones improved a first draft, Julian Bach took care of business, and Maria Guarnaschelli applied a deft and graceful touch.

MICHAEL MORITZ
Potrero Hill
Spring 1984

More than a quarter of a century has passed since I wrote the previous page on an Apple III computer. In 1984, as the first edition of this book made its way to the press, I received several letters from the publisherthose being the days before email had become the universal telegraph systemexpressing anxiety that Apples day in the sun might already have passed. The apprehension was understandable. The hullabaloo surrounding the introduction of the Macintoshtrumpeted with an Orwellian television commercial on Superbowl Sunday 1984had evaporated, and the notices had turned sour. IBMs personal computer business was gaining strength. Compaq had reached $100 million in sales faster than any previous company and Microsofts operating system, DOS, was winning licensees by the month. There were plenty of reasons to think that Apple was teetering.

Twenty five years later, when people are as familiar with the names iPod, iPhone, or Macintosh as they are Apple, it is hard, particularly for those reared on cell phones and social networks, to imagine a time when the company appeared to be just another technology firm that would be snuffed out or absorbed by a competitor. Since 1984, there have been plenty of technology companies that have faded to grey or gone to black, and its remarkably easy to come up with an alphabetical list for these casualties that runs from A to Z.

The letter A alone includes Aldus, Amiga, Ashton-Tate, AST and Atari. As for the rest of the alphabet theres always Borland, Cromemco, Digital Research, Everex, Farallon, Gavilan, Healthkit, Integrated Micro Solutions, Javelin Software, KayPro, Lotus Development, Mattel, Northstar Computers, Osborne Computer, Pertec, Quarterdeck, Radius, Software Publishing, Tandy, Univel, VectorGraphic, Victor, WordPerfect, Xywrite and Zenith Data Systems. The large technology companies that have weathered these decadesIBM and HPhave done so in areas far removed from personal computing. IBM, once the company that others in the personal computer industry feared, has even surrendered its franchise to the Chinese company Lenovo.

The mortality rate makes Apples survivallet alone prosperityeven more remarkable. Ive watched Apple, first as a journalist and later as an investor, for most of my adult life. Journalists suffer from the malady of not forgetting a topic that once interested them. Im no different. But a couple of years after I finished writing this book I found myself, thanks to some twists of fates, working at Sequoia Capital, the private investment partnership whose founder, Don Valentine, had helped assemble some of the formative blocks on which Apple was built. Since then, as an investor in young technology and growth private companies in China, India, Israel and the U.S., I have developed a keener sense for the massive gulf that separates the few astonishing enterprises from the thousands that are lucky to scratch out an asterisk in the footnotes of history books.

In 1984, if most consumers had been asked to predict which companySONY or Applewould play a greater role in their lives, I wager most would have voted for the former. SONYs success rested on two powerful forces: the restless drive of its founder, Akio Morita, and the miniaturization of electronics and products consumers yearned for. The Japanese company, which had been formed in 1946, had built up a following as a designer and maker of imaginative and reliable consumer electronic products: transistor radios, televisions, tape recorders and, in the 1970s and 1980s, video recorders, video cameras and the WalkMan, the first portable device to make music available anywhere at any time of day. Like the iPod, a generation later, the Walkman bore the stamp of the companys founder. It was created in a few months during 1979, it built its following largely by word of mouth and in the two decades prior to the advent of mp3 players sold over 250 million units. Now, as everyone knows, the tables have been turned and some years ago a cruel joke circulated which spelled out the change in circumstances, How do you spell SONY? The answer: A-P-P-L-E.

This begs the question of how Apple came to outrun SONY, but the more interesting topic is how the company came to rattle the bones of mighty industries and has forced music impresarios, movie producers, cable television owners, newspaper proprietors, printers, telephone operators, yellow page publishers and old line retailers to quaver. None of this seemed possible in 1984 when Ronald Reagan was President, half of American households tuned into the three television networks, U.S. morning newspaper circulation peaked at 63 million; LPs and cassette tapes outsold CDs by a margin of ninety to one; the Motorola DynaTAC 8000x cell phone weighed two pounds had thirty minutes of talk time and cost almost $4,000; Japans MITI was feared in the West; and the home of advanced manufacturing was Singapore.

Three mighty currents have flowed in Apples favor, but these waters were also navigable by other crews. The first swept electronics deeper into every nook and cranny of daily life so that now there is almost no place on earth beyond the reach of a computer or the bewildering collection of phones and entertainment devices with which we are surrounded. The second has made it possible for companies born in the era of the personal computer to develop consumer products. It has been far easier for computer companies with refined software sensibilities to design consumer products than for those whose lineage was consumer electronics and whose expertise lay largely in hardware design and manufacturing prowess. Its not a coincidence that some of the companies with the acutest envy towards Apple have names like Samsung, Panasonic, LG, Dell, Motorola and, of course, SONY. The third current was cloud computingthe idea that much of the computation, storage and security associated with popular software sits in hundreds of thousands of machines in factory-sized data centers. This is the computer architecture that, in the mid 1990s, supported services such as Amazon, Yahoo! eBay, Hotmail and Expedia and later came to underpin Google and the Apple services that light up Macs, iPods and iPhones. Today, for the first time, consumersnot businesses or governmentsenjoy the fastest, most reliable and most secure computer services.

In 1984 more immediate and mundane challenges confronted Apple. Faced with the challenge of managing a fast growing company in an increasingly competitive business, the Board of Directors of Apple, were faced with the most important task that confronts any board: selecting a person to run the company. Mike Markkula, who had joined Jobs and Wozniak in 1976, had made no secret of the fact that he had little appetite for life as Apples long-term CEO. Thus the Board, which included Steve Jobs, had to decide what course to take. This decisionand three similar decisions over the ensuing thirteen yearsshaped Apples future.

Only in retrospect have I come to understand the immense risk associated with hiring an outsiderlet alone a person from a different industryto run a company whose path has been heavily influenced by the determination and ferocity of its founder or founders. It is not an accident that most of the great companies of yesterday and today have, during their heydays, been run or controlled by the people who gave then life. The message is the same irrespective of industry, era or country and the name can be Ford, Standard Oil, Chrysler, Kodak, Hewlett-Packard, WalMart, Fedex, Intel, Microsoft, NewsCorp, Nike, Infosys, Disney, Oracle, IKEA, Amazon, Google, Baidu or Apple. The founder, acting with an owners instincts, will have the confidence, authority and skills to lead. Sometimes, when the founders instincts are wrong, this leads to ruin. But when they are right, nobody else comes close.