#77 Steve Jobs the bizarro years of Steve Jobs

Summary Notes


In "Steve Jobs and the Next Big Thing," Randall Strauss chronicles the tumultuous journey of Steve Jobs post-Apple, as he ambitiously founded NeXT with the intention of revolutionizing the computer industry once again. Despite Jobs' relentless drive and the infusion of over $250 million in capital, NeXT floundered, plagued by strategic blunders, an overpriced product, and a misjudged market focus. Jobs' refusal to accept failure and his inability to manage resources effectively led to a series of disastrous decisions, from lavish spending on aesthetics to targeting a small, disinterested education sector. Ultimately, the most crucial pivot to software was not Jobs' own decision but one he was persuaded into, showcasing his fallibility and the complexity of entrepreneurship. Despite the setbacks, Jobs' story is a testament to the non-fatal nature of mistakes and the potential for recovery, even in the face of what was once deemed the most expensive flop in entrepreneurial history.

Summary Notes

Steve Jobs' Ambition and the Next Venture

  • Steve Jobs founded NeXT after leaving Apple in 1985, aiming to create the next big thing in computing.
  • Despite his ambition, NeXT struggled for eight years without yielding a profitable business model.
  • Misjudgments and strategic blunders characterized NeXT's business operations.
  • The company's reliance on external investment capital was significant, with over $250 million invested and no net profit to show.
  • NeXT's story is noted for the gullibility of those who invested in Jobs' vision.

"The amount of money that was sunk into the NeXT venture made it a story for the history books, but not in the way that Jobs intended."

The quote highlights the significant financial investment in NeXT, which ultimately did not yield the expected successful outcomes, making it a historical example of a failed business venture.

Misrepresentation of NeXT's Success

  • Jobs manipulated public perception of NeXT by omitting failures and focusing on potential future success.
  • NeXT's financial "success" was often misrepresented by excluding crucial expenses, painting an inaccurately positive picture.
  • The company's management misled both the public and its own employees about its financial health.

"The profits that NeXT wanted the world to notice were an accounting phantom and excluded interest payments for loans."

This quote emphasizes that NeXT's proclaimed profits were misleading, as they did not account for significant financial obligations like interest payments, showcasing Jobs' manipulation of financial reporting to present the company more favorably.

NeXT's Strategic Pivot and Layoffs

  • In 1993, NeXT shifted away from hardware manufacturing to focus on its operating system.
  • This pivot was a forced decision, not initially Jobs' choice, and resulted in massive layoffs.
  • The abrupt change in strategy and the way layoffs were communicated highlighted internal issues within NeXT.

"The company was immediately abandoning computer manufacturing and laying off 330 of its 500 employees..."

The quote details the drastic measures NeXT took to abandon its hardware business, which was a significant strategic shift for the company and affected a large portion of its workforce.

Steve Jobs' Entrepreneurial Journey and Book Reading Order

  • The podcast host suggests a chronological order for reading books about Steve Jobs to understand his entrepreneurial journey.
  • The order begins with the success at Apple, followed by the failures at NeXT, and then his return to Apple.

"If I could do it over again, I would read all of them, but I would do it in the order of the time period that they study."

This quote from the podcast host provides a recommended reading strategy to gain a comprehensive understanding of Steve Jobs' career and the lessons learned from his various ventures.

NeXT's Private Company Challenges and Misleading Metrics

  • As a private company, NeXT faced the challenge of developing a product and maintaining investor confidence.
  • Jobs was compared to the "wizard of Oz," selectively revealing information to the public.
  • NeXT employed misleading metrics to create a facade of profitability.

"Steve Jobs was making up his own metrics, and this is an example of that."

The quote indicates that NeXT, under Jobs' leadership, used creative accounting practices to fabricate a more successful image of the company's financial situation.

Learning from Mistakes and the Importance of Persistence

  • The host emphasizes that even great entrepreneurs like Steve Jobs make strategic mistakes.
  • It's crucial to learn from these mistakes and persist, as Jobs did when he returned to lead Apple to unprecedented success.

"Everybody is capable of making mistakes."

This quote underlines the universal truth that all individuals, including successful entrepreneurs, are prone to errors, and the key is to learn from these experiences.

The Founding Mistakes of NeXT

  • The initial product, market focus, and resource management at NeXT were all strategic mistakes.
  • Jobs' confidence and ambition sometimes led to poor decision-making.

"Even great entrepreneurs are prone to strategic mistakes."

This quote reinforces the notion that even the most successful entrepreneurs can make poor strategic decisions, as evidenced by the early choices made during the founding of NeXT.

The Transition from Hardware to Software at NeXT

  • NeXT's transition from hardware to software was a difficult and resource-draining process.
  • The company faced a period with no revenue-producing products, which was a precarious situation.

"Next was an eight year old company that was attempting the most awkward of all possible transitions..."

The quote describes the challenging situation NeXT faced as it tried to pivot from its established hardware business to a new focus on software without a clear path to revenue.

Steve Jobs' Historical Comparisons and Desire for Impact

  • Jobs likened his work to historical figures like Alexander Graham Bell and Henry Ford, seeking a place in history rather than financial gain.
  • He believed in the power of technology to provide leverage for individuals to make a significant impact.

"The computer industry is still at a young, formative stage, and its future development is imagined as a long arc."

Jobs' quote captures his belief in the potential for individual influence in the rapidly evolving computer industry, likening it to a trajectory that can be significantly altered with a small initial nudge.

The Importance of Compounding Success

  • The podcast host reflects on the value of sticking with successful ventures and the power of compounding.
  • Serial entrepreneurship is contrasted with the idea of focusing on one's best idea and growing it over time.

"All good things in life come from compounding."

This quote from the podcast host emphasizes the concept that sustained effort and focus on a successful venture can lead to greater long-term rewards than constantly starting new ones.

The Contrast of Success and Failure

  • The book "Steve Jobs and the Next Big Thing" contrasts the success of Apple with the failure of NeXT.
  • Jobs' story serves as a reminder that time alone does not guarantee success; the nature of one's work is crucial.

"For eight years, he pursued at NeXT a quixotic quest to conjure back the elusive magic that had borne Apple..."

The quote summarizes the essence of the book, which is Jobs' persistent yet ultimately unsuccessful attempt to replicate the success he found at Apple with his subsequent venture, NeXT.

Key Theme: Lessons from the Lisa Debacle

  • The Lisa computer's failure highlighted several key lessons for engaging with customers and product development.
  • Importance of staying connected with customers to avoid isolation.
  • Customers are price-sensitive and won't pay any price for the latest technology.
  • Providing bridges between old and new technology can facilitate customer adoption of new standards.
  • Less expensive products with fewer features or less advanced technology can sustain a company financially.
  • Flagship products help establish market presence but shouldn't be the sole focus.
  • Steve Jobs ignored these lessons with the launch of NeXT.

"The lesson that one could draw from the Lisa debacle included these. Keep in touch with the intended customers and avoid the pitfalls of isolation."

This quote emphasizes the importance of understanding and maintaining a connection with customers to ensure that their needs and expectations are being met.

"Do not assume that customers will pay any price to secure the latest computer technology, ease the way for customers to adopt a new computer standard by providing software and hardware bridges that help connect older machines to new ones."

The quote suggests that affordability and ease of transition are critical factors in customer adoption of new technology.

"Rely upon less expensive products that have fewer features or less advanced technology to pay the bills, while the top of the line flagship computer establishes a secure place in the market."

This quote underscores the strategy of offering a range of products to cater to different market segments and financial considerations.

Key Theme: Missteps in Targeting the Educational Market with NeXT

  • Steve Jobs chose to target the educational market with NeXT, a strategy that was complicated and ultimately flawed.
  • Jobs did not fully understand the needs of universities or their collective decision-making processes.
  • The sales strategy that worked for Apple did not translate well for NeXT.
  • NeXT's high price point and lack of immediate software variety made it a difficult sell to universities.
  • Jobs misinterpreted the success factors that made Apple appealing to the educational sector.

"Steve Jobs had many reasons to be grateful for higher education's early embrace of the Macintosh."

This quote indicates that Jobs was aware of the educational sector's potential, having seen its impact on the Macintosh's success, but he failed to adapt his approach for NeXT.

"Jobs did not have the skill or the patience for persuading the lower levels of the academic power structure."

The quote highlights Jobs' lack of understanding and patience for the complex decision-making in educational institutions, which contributed to his strategic missteps with NeXT.

Key Theme: The Reality Distortion Field and Resourcefulness

  • Steve Jobs was known for creating a work environment that felt like a scrappy startup, even within a successful company.
  • The "reality distortion field" was a term used by employees to describe Jobs' ability to make them believe in the impossible.
  • Jobs abandoned the frugal startup ethos with NeXT, starting the company with significant personal wealth.
  • The initial resourcefulness of a company is often key to its success, and Jobs' approach with NeXT lacked this element.

"He took a small team, and basically with what at the time, his employees called his reality distortion field, he gave them the impression that there wasn't a hugely successful billion-dollar company already."

This quote explains how Jobs motivated his team by creating a perception of being underdogs, which was not the case with NeXT.

"Instead of choosing the least expensive office space available in the area, like your parents' garage, for example, he chose some of the most expensive."

The quote illustrates Jobs' shift from a cost-conscious startup mentality to a more extravagant approach with NeXT, which did not prioritize financial prudence.

Key Theme: Overconfidence and Lack of Urgency at NeXT

  • NeXT began with a significant financial cushion, which led to a lack of urgency and financial discipline.
  • Jobs' past successes instilled a sense of invincibility in the team, overshadowing the need for a realistic business approach.
  • The company's overconfidence and disregard for market demands contributed to its struggles.

"Next began its life with a major, if unrecognized, problem. It had too much money, courtesy of a single person."

This quote points out the paradoxical issue of having too much initial capital, which can remove the pressure to be financially disciplined and market-driven.

"The founders, preceded by seat of the pants instincts because of the underlying feeling of invincibility that their earlier success at Apple had instilled in them."

The quote reflects the overconfidence of NeXT's founders, stemming from their previous success, which may have blinded them to the realities of starting a new venture.

Key Theme: Strategic Flaws in NeXT's Plan

  • NeXT's plan to target universities required the product to be significantly better than existing options.
  • The company faced a tight deadline to meet the university purchasing cycle, adding pressure to deliver on time.
  • Jobs' focus on non-essential aspects like office design and logos further detracted from product development.

"The next employees in the fall of 1985 were clear-eyed about the problems that they faced."

This quote reveals that despite awareness of the challenges, NeXT's strategic plan had serious flaws, particularly in its ambitious goals and tight timeline.

"If next was late, it would not have another chance until the following academic year's purchase cycle."

The quote highlights the critical timing issue for NeXT, where missing the university purchasing window could result in significant delays and financial strain.

Key Theme: Charisma vs. Lunacy in Leadership

  • Charisma is a powerful trait in leaders, but it can be a double-edged sword.
  • Jobs' charisma was linked to his ambition to change the world, which attracted followers.
  • The distinction between a charismatic leader and a lunatic depends on the ability to attract followers.

"If a man runs naked down the street proclaiming that he alone can save others from impending doom, and if he immediately wins a following, then he is a charismatic leader."

This quote humorously illustrates the fine line between being seen as a charismatic visionary or a delusional individual, depending on the presence of followers.

"Charismatic power cannot exist in isolation, however, without followers."

The quote emphasizes that charisma's effectiveness is contingent on the ability to inspire and gather supporters who believe in the leader's vision.

Steve Jobs' Fiscal Management at NeXT

  • Steve Jobs was known for his meticulous negotiation with vendors and suppliers at Apple.
  • At NeXT, Jobs failed to apply the same cost-saving strategies he employed at Apple.
  • The company's fiscal complacency led to financial difficulties.
  • Jobs intended NeXT to be employee-owned, but financial constraints forced him to seek VC investment.

"Steve Jobs was like a penny pincher like no other." This quote emphasizes Jobs' reputation for being extremely cost-conscious during his time at Apple.

The quote highlights the contrast between Jobs' approach to financial management at Apple versus his approach at NeXT, where he did not exhibit the same level of frugality.

NeXT's Overvaluation and Investment Challenges

  • NeXT was overvalued without having a market-ready product.
  • Jobs' pitch relied on past successes and urgency rather than extensive investigation.
  • Ross Perot's investment and the subsequent investments from Stanford and Carnegie Mellon were based on Jobs' reputation and not on NeXT's financials.

"The $126,000,000 valuation was the highest for any company in Silicon Valley history. Without a product." This quote points out the extraordinary valuation of NeXT despite the lack of a tangible product.

The quote is significant because it demonstrates the confidence investors had in Steve Jobs based on his past achievements, even though the valuation was not justified by the company's actual financial situation.

Ross Perot's Perception of Steve Jobs

  • Ross Perot's investment in NeXT was influenced by a TV show and his belief in Jobs' potential.
  • Perot saw Jobs as a modest and smart entrepreneur, contrary to the public perception of Jobs' ego.
  • Perot's narrative of Jobs' success against IBM is questioned by the author.

"This young man went up against IBM in a capital intensive business and ate him alive." This quote from Ross Perot illustrates his admiration for Steve Jobs' perceived triumph over IBM.

The quote is relevant because it contrasts with the reality of IBM's success and Apple's struggles during that period, reflecting Perot's possibly skewed perception of Jobs.

Missteps in Product and Manufacturing Strategy

  • NeXT focused on the aesthetics of its products at the expense of performance and cost.
  • Jobs ignored market demands for competitive pricing and performance.
  • The decision to build an automated factory for manufacturing was costly and premature.

"Most important of all, the cube needed to be offered at a competitive price. Yet the very details that comprise its perfect appearance were chosen without heed to cost." This quote criticizes the prioritization of design over cost-efficiency in NeXT's product strategy.

The quote is important because it showcases a fundamental flaw in Jobs' strategy, which was the disregard for cost control in pursuit of design perfection, leading to an uncompetitive product.

Steve Jobs' Leadership and Decision-Making at NeXT

  • Jobs' refusal to accept bad news led to a culture of misinformation within NeXT.
  • The lack of clear strategic thinking was evident in the marketing and sales approaches.
  • Jobs' vision for a "personal workstation" was misaligned with market needs.

"Screaming at the head of the chip design team, do you realize you're killing our company?" This quote illustrates Jobs' harsh response to delays and his tendency to blame his team.

The quote is crucial as it depicts Jobs' management style at NeXT, which contributed to a negative work environment and impaired the company's ability to address issues realistically.

NeXT's Misguided Focus on the Education Market

  • NeXT overestimated the education market's size and interest in its products.
  • Historical parallels from the 1960s showed similar overestimations in the education sector.
  • The Staples study revealed that NeXT's cube was not suited for its target market.

"The grandiose overestimate of the education market was hardly new, going back to 1960s again in 1966." This quote links NeXT's miscalculation of the education market to previous historical overestimations.

The quote underscores the importance of learning from history to avoid repeating the same mistakes, which Jobs failed to do in his approach to the education market with NeXT.

NeXT's Transition to Business Market and Subsequent Failures

  • NeXT shifted focus from education to business without adapting its product features.
  • The partnership with Businessland was based on unrealistic sales forecasts.
  • NeXT's production capacity was vastly underutilized due to low demand.

"Businessland forecasts sales of 150,000,000 in next computers in its first year, that they sign a contract to be its exclusive distributors." This quote demonstrates the overly optimistic and unrealistic sales expectations for NeXT computers.

The quote is indicative of the lack of market understanding and the disconnect between NeXT's ambitions and the reality of consumer demand.

Hiring Philosophy of Steve Jobs

  • Steve Jobs professed to hire motivated people and let them work independently.
  • In practice, Jobs micromanaged and controlled every aspect of operations, even trivial matters.
  • His behavior might be attributed to egoism, believing no one else was his equal in decision-making.

"I only hire people. I, you know, point him in the direction he'd go and get a hell of a way. But that's not how he actually managed."

This quote reflects Jobs' stated hiring philosophy, which contrasts with his actual management style of closely overseeing all aspects of the business.

Steve Jobs' Attention to Detail

  • Jobs would intervene in minor details, such as instructing gardeners on the placement of sprinkler heads.
  • His focus on minutiae often came at the expense of addressing more critical business issues.

"He spends 20 minutes telling them exactly where he wants the sprinkler headers."

This quote exemplifies Jobs' tendency to involve himself in seemingly minor details, which could distract from more pressing business concerns.

Egoism and Management

  • Jobs' management style was influenced by his belief in his superior competence.
  • He saw himself as a visionary akin to historical figures like Henry Ford and the Wright brothers, despite lacking formal business training.
  • Jobs' ego led him to take credit for successes and blame others for failures.

"If no one was his equal, then it would be best to have all decisions made by the most competent person available, that is, himself."

The quote suggests that Jobs' egoism justified his need to make all decisions, as he believed he was the most competent person in any situation.

Businessland Partnership and Blame

  • Jobs blamed the poor sales of NeXT computers on Businessland, despite initially praising the company.
  • He refused to acknowledge his own role in the product's market failure.

"He convinced himself that he had set up a quality organization that produced a quality computer."

This quote indicates Jobs' refusal to accept responsibility for the failures of NeXT, instead placing blame on external partners.

Financial Mismanagement at NeXT

  • Jobs ignored suggestions to conserve money, instead choosing to spend to maintain an image of success.
  • NeXT's lavish spending did not translate to sales success, leading to financial strain.

"More buildings were leased, even though some would remain unoccupied."

The quote highlights Jobs' decision to spend on appearances despite the lack of necessity, contributing to NeXT's financial difficulties.

Ross Perot's Investment and Withdrawal

  • Ross Perot regretted his substantial investment in NeXT, as Jobs' spending habits did not change.
  • Perot's departure signified a lack of confidence in Jobs' financial stewardship.

"I shouldn't have let you guys have all that money."

Perot's quote expresses his regret in enabling Jobs' unchecked spending by providing a large investment without requiring fiscal discipline.

NeXT's Shift from Hardware to Software

  • NeXT's pivot from hardware to software was not initiated by Jobs but was a necessary strategic change.
  • The switch to software was resisted by Jobs but proved to be a crucial decision for the company's survival.

"The most important decision about the fate of next didn't even come from Steve Jobs."

This quote illustrates that despite Jobs' leadership, the pivotal decision that saved NeXT from total failure was not his own, but rather a result of external pressures and internal advocacy.

Steve Jobs' Legacy and Philosophy

  • Jobs is recognized for his visionary perspective on the significance of the computer industry.
  • He believed the information revolution would surpass the petrochemical revolution in impact.

"The information revolution just begun frees intellectual energy and will dwarf the petrochemical revolution in its impact."

Jobs' quote conveys his belief in the transformative power of the information revolution, which he saw as a historically significant era in human progress.

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