Adam Lashinsky covers Silicon Valley and Wall Street for FORTUNE Magazine. Here in this talk, he talks about his 2012 bestseller Inside Apple: How America’s Most Admired – and Secretive – Company Really Works.
Adam Lashinsky – Author
A couple of caveats I’m going to steal a line from a telephone executive who would like to say I know it’s common to ask people to shut down their phones but he liked to hear the sound of ringing and so he encouraged people to leave their phones on. Rather than ask you to put down your laptops or your smartphones I will say that if you are looking into a screen I’m assuming you’re going to be posting to Google+ about how interesting this is and encouraging people to buy the book and that’ s just fine with me.
My other caveat is that although I do have direct comparisons in the book between Apple and Google and they will be part of my comments and I am happy to discuss them with you in the Q&A, I didn’t spend the last year of my life studying Google, I spent the last year of my life studying Apple. So beyond the conclusions that I am willing to draw or the observations that I am willing to make about the comparisons of the two companies, in particular cultural issues, I don’t want to put too much of the compare and contrast burden on me for comparing Apple and Google, I’ll put that burden on you and I’ll tell you about Apple and leave you to make your own conclusions about the differences between the two companies.
One of my major epiphanies in working on the book and on the article in Fortune Magazine before it is just how differently Apple does business from the way everybody else does business. And indeed how the Apple way of doing business is different from what’s taught in business school. And Steve Jobs was quite clear on this, he didn’t particularly care for business school and he didn’t particularly care for MBAs in general. And part of the reason for doing Apple University over the past four years was to, as he put it, “To try to create our own kind of MBA.”
And so I’ll ask you to keep in mind as I make my points how much Apple differs from everybody else. The question arises, well if they’re so exceptional and they’re so unique and they had this extraordinary one of a kind leader how much can we learn from them? And I would suggest there absolutely is a ‘don’t try this at home’ aspect to Apple’s way of doing business.
Having said that Apple is currently the world’s most valuable company and is absolutely crushing it in a way and growing in a way that no large company does, and maybe no large company ever has and so I would submit that if they do things differently it’s at least worth asking the question how and why. And I really wish we had one of those setups where we could pan the room because I just love people sitting on the floor for a talk – wonderful.
Apple in 1997
A moment on what Apple was like in 1997 when Steve Jobs returned to the company. He would be quoted frequently and in ensuing years talking about the fact that Apple was 90 days from insolvency when he rejoined the company in 1997. The company was a shambles; it had too many factories in the United States and abroad, it had too much inventory, it had too many middle managers, Jobs went on to fire about 4,000 of them. The culture in his opinion had become infected with people who were more interested in making money than they were in making beautiful products, and the company was structurally dysfunctional in a way that he would change.
And the example that I share in the book is that at the time Apple had 16 advertising budgets. Now the adverting budgets is a good metaphor for fiefdoms; if you were a general manager in the business and you had an advertising budget that probably wasn’t the only budget that you had, you were an important person in your own right. Jobs wanted to eliminate that, he wanted to get rid of fiefdoms, he got rid of the whole notion of general manager, and he wanted to emphasize the notion of one company, one brand, one Apple, and so on.
And in eliminating the advertising budgets he was able to say to people who were responsible for a product, “If you think your product deserves advertising spend then you’ll come to me and ask for advertising spend and I’ll decide whether or not to give it to you and we’ll make a decision at a central, at a corporate level about how to advertise.” And we all know how that’s gone for Apple.
This was not about cost cutting by the way; within short order advertising spending at Apple increased, it didn’t decrease and Apple developed this very virtuous circle of tending to only advertise one or two major things at a time, but there being a halo effect to the other products that weren’t being advertised and this worked particularly well once the stores were up and running and became a force of their own. Advertise an iPod and people might come in and buy an iPhone; advertise the iPhone and people have to walk past the Macintoshs to get to the iMac’s or the laptops to get to the iPhone and so on. And so that’s something that Jobs cleaned up in his first few years back at the company in ’97.
Leadership is an important topic when thinking about Apple, it’s also an example of Apple’s exceptionalism. This is Narcissus, the Greek god who was in love with his own image; here he is gazing into the pond to see his own beautiful self. And I just wanted to share the work of a psychotherapist and business coach named Michael Maccoby who wrote a Harvest Business School article and then a book called Narcissistic Leaders. And as I was reading this article it goes on explaining what a narcissist is first of all — a narcissist is someone who is visionary, who is charismatic, who has a willingness to bet the company on his or her vision, who expects to be followed but doesn’t necessarily care if they’re loved.
And as I was reading this I was thinking, “My God, this person is describing Steve Jobs without using his name.” And then in fact Jobs did appear as an example in Maccoby’s work. The productive narcissist, and I mentioned that Maccoby was a business coach and a trained psychotherapist, the productive narcissist is someone who can channel their narcissism in a productive way and he worked with clients to help them be not less narcissistic but more productively narcissistic.
And I think that if you dig into this topic you see that a lot of what makes Apple tick is because it has been led by this kind of personality. What then you ask happens after the productive narcissist is gone? Well there’s two other categories that Maccoby identifies as business people and he uses classical Jungian psychological terms for this. The second category is an obsessive and he talked about productive obsessives, these are people who make the trains run on time, they’re typically a sidekick to the productive narcissist, they can help the visionary realize their vision by executing it. Tim Cook is a classic, the current CEO of Apple, is a classic productive obsessive and he’s been in that role at Apple as Jobs’ sidekick for 10 years and now we’ll see how the productive obsessive can do as the CEO.
There are obsessives as CEOs of other companies, but Apple is very much characterized by this narcissistic led organization.
There’s a third category, by the way, that will be of interest to people in the room because I noticed that the CEO isn’t in the room and that is, unless I’m mistaken then I apologize Larry.
His third category it’s called erotics, an erotic is someone who in the Jungian sense is someone who does feel a need to be loved, who does not necessarily like to be criticized and wants approval. This is an excellent person to have on a team, not necessarily the person that you want running the company.
One of the essential teachings of the modern business era is that business leaders should empower their people, they should push decisions down into the organization, they should give people the rope to hang themselves and to execute the strategy of the company. This is not how Apple does things. Steve Jobs was a classic micromanager and the people beneath him micromanaged the people beneath them. No detail is beneath their attention.
I know I mentioned that he was a narcissist but he also had obsessive characteristics as well. And I discussed this with Maccoby by the way, I asked Maccoby what he was and he said, “Well I’m mostly an obsessive but I’ve got some narcissistic tendencies to me as well.”
And my example of it I discuss in the book is an exchange that Jobs had with the marketing executive whose job it was to send out an email concurrent with a keynote launch of a product. And this person would email Jobs days before the keynote to say, “Here’s the email that will go out.” And Jobs would object to the grammar in the email getting down to the placement of a comma or a semicolon and they would go back repeatedly 17 times until they got it right. To me this is bizarre behavior but not inconsistent with the micromanagement that Apple embraces.
I believe, by the way, from my conversations that Jobs’ opinion on the placement of the comma was wrong — but that doesn’t matter and I think that’s obvious. He obviously was very interested in language but not a grammarian as we know from the Think Different campaign.
A major part of my book and my research on Apple is analyzing its secrecy. I’ve been able to turn the what was a disadvantage for me in writing a book about a company that it’s very secretive into a thesis point about the company. And my line is that every company keeps secrets but at Apple everything is a secret and Apple is particularly good at keeping secrets.
They have a hint of a sense of humor about secrecy; this is an actual T-shirt that you can buy at the company store in Cupertino which is open to the public, “I visited the Apple campus. But that’s all I’m allowed to say.”
I will say it’s the one example of a sense of humor that I’ve been able to find at Apple — but I’m appreciative of it, very appreciative.
There is a sense of a culture of fear at Apple, I’ve heard this from many, many employees and I’ll say in anticipation of a question that I typically get is: who are my sources for the book? My sources are people typically who worked at Apple at all levels of the organization, very senior, very junior, and in between, and compared with Walter Isaacson’s biography of Steve Jobs which is very much a view from the top, I think that the perspective of a junior person, for example, is very valid in understanding how a company actually operates. And secrecy is so important at Apple that people are afraid to deviate from the secrecy.
And the hallmark of this is new employee orientation which is every Monday at Apple, except as I was told with a straight face when Monday comes on a holiday. That the security briefing is part of new employee orientation and new employees are told in a very matter of fact way, “Secrecy is important here, it’s worth money and measured in the hundreds of millions of dollars from the benefit that we get when a product is launched and retribution will be severe if you breach the rules of secrecy. Termination obviously, maybe you’ll be sued as well.” And this is on your first day of work at Apple.
Why keep secrets?
So why keep secrets? The first one is good basic business in my opinion. You don’t want your competitors knowing what you’re doing, you also don’t want customers knowing what you’re doing until you’re good and ready to tell them. Now this is a debatable topic in the Internet world and in the Web world and we can discuss it with as much time as we have, but Apple’s very clear on the subject. Customers, the world, but customers in particular, should learn about products the day that they’re released by us and not a moment before then.
And there’s good Silicon Valley precedent on this; other companies have fallen afoul of the basic rule if you’ve got products on the shelf in retailer’s stores and even more seriously if you’ve got product in warehouses, the last thing you want is customers believing that a new version is coming soon because who’s going to buy a product that’s sitting on shelves when a new version is coming soon?
And even Apple hasn’t been perfect about this; quarter before last they acknowledged that iPhone 4 sales were hurt because the public expected an iPhone 5. They didn’t get it, they were very disappointed about this, they got the iPhone 4S instead and it hurt Apple so badly that they went on to sell 37 million iPhones in the last quarter and rang up a $13 billion profit. But the quarter before that they did acknowledge that the rumor mill had had a negative impact. But that’s among the reasons anyway for keeping secrets to outsiders.
But what I’ve realized in studying the company is that Apple takes internal secrecy as seriously as it does external secrecy. And I’ve likened Apple employees to a horse fitted with blinders; you don’t look left, you don’t look right, you charge forward at Apple and you don’t multi-task by the way. It has been humbling for me when I came to realize how focused Apple people are because I’m a multi-tasker, I’m constantly doing many things, and at Apple below a certain level and that level is high you don’t do many things, you tend to do one thing.
I don’t know if it’s an unintended consequence but a realization that I had on this topic of internal secrecy is that I’ve been told over and over and I’ve come to believe that below a certain level again there’s very little politicking at Apple. And that makes sense because how can you play politics when you don’t have the information with which to play politics? It is none of your business what I’m doing — and it’s none of my business what you’re doing so what do we have to talk about?
And I skipped over an example on the outside world; it’s my belief from my 15 years in Silicon Valley that engineers in particular love to talk about what they do. And by the way journalists love to talk about what we do. And we keep of course keep secrets about what stories we’re working on, but we can talk ad nauseam about craft and past stories and whatnot. And my understanding is that this is something that Silicon Valley engineers enjoy engaging in; Apple people are told not to. And I describe in the book someone I know who plays in a regular poker game with a group of Apple people and this person does not work at Apple and when the subject of Apple comes up at the poker table the subject is changed.
And so I’ve described Apple not only metaphorically as the ultimate need-to-know culture but literally as the ultimate need-to-know culture. And this manifests itself in interesting linguistic ways and also in physical ways.
So Apple is a culture of disclosure. I say to you, “Are you disclosed on the following?” and I have to do a little kabuki if I don’t know if you’re disclosed on it, I can’t exactly say what it is. But if everyone in a meeting isn’t disclosed then not everyone is welcome at the meeting. And this is true also in a physical sense and I describe in the book how you’ll be working and all of a sudden barriers go up, windows that were clear become frosted, doors that didn’t exist now exist, security badges that once got you in to a certain area no longer get you into the area. And if you’re a typical worker what you know is that there’s a new project underfoot and that’s all you know.
If you knew your badge would get you into that area and it doesn’t. And most interestingly to me I’ve been told again more than once, people telling me that their bosses did not have access to the same areas that they had access to for reasons that they didn’t necessarily understand. This is an org chart that I created first in Fortune Magazine in May of last year, it’s actually highly accurate but you’re not expected to be able to read the fine print from where you’re sitting. But the key is this, and I like to say that candidly this was more dramatic when Steve Jobs, the Sun King, was at the center and the planets were revolving around him. This is in fact how Apple operates but I think one of the great unknowns is how it will continue to operate with Cook as the CEO or whoever follows him. But what you can see from this is what you might expect from Apple an incredibly tight and an incredibly focused org chart where the CEO, this ring around the inner circle are the vice presidents of Apple and I’ve got most but not all of them there. It’s a very small number of vice presidents and the CEO can reach down no more than one layer to really touch just about everything that’s going on at the company.
As part of the culture, by the way, you won’t be surprised to learn that org charts are frowned up at Apple; Apple doesn’t create and print org charts. And I was told that people were visibly nervous having my org chart from Fortune Magazine on their desks last year.
Apple’s famous for sweating the details and the example I give in the book is the packaging design room where a package designer had hundreds of prototypes of iPod boxes and their sole mission, and Apple teaches this, this case by the way is an example of attention to detail. This person’s sole mission was to peel off that little piece of clear tape that seals your box and do this over and over and make sure that the placement was just perfect.
Now it sounds silly except, and I won’t ask for a show of hands because it could be incriminating, but is there anyone in the room who has experienced the joy of peeling off that piece of tape and opening their iPod or iPhone box and taking the product out and seeing how everything is laid perfectly and then taking their device out and feeling this sense of joy?
Okay, I do have smiles and chuckles in the room, maybe some nervous laughter. But this is just one example and this pervades the organization and so you get a sense of why details are important at Apple.
Jobs was famous for saying that he didn’t think that Apple should do customer research and instead how could customers possibly know what they wanted when they don’t know what the product is that we’re going to give them, and we’ll give them the products that we think they should have. By the way, Jobs especially later in life like many of us was famous for repeating the same lines over and over again and this was one of his favorites because it resonated so well because it’s exactly the opposite of how other people, how other companies do things.
We now know that integration is key to the Apple’s excellence and the integration that this typically refers to, and it’s something that Jobs spoke about, was the integration of hardware and software. And it’s sort of astounding that over the past 15 years really only Apple has been particularly excellent at integrating its own hardware and software and its competitors have been bifurcated in hardware and software.
But my point is that the whole company is integrated extremely well, Apple is not whimsical as its advertising might suggest but extremely planned, extremely well organized, things happen according to a timeline that is written down, and the various parts of the company work well together in the past by force of will because Jobs made sure that people worked well together.
But a key to understanding Apple is the importance of design. And again Jony Ive has become famous as the head of industrial design at Apple, but what’s less well understood is just how important his seat at the table has been. And you can glean this from the fact that at Apple it would be inconceivable for say a financial person to sit in on the same early product development meeting where Jony Ive or Jony Ive’s people would have a conversation about what the product would look like. Steve Jobs, at least initially, would have been completely uninterested in a finance person’s opinion of what it might cost to do that or how we might pay for it or what kind of revenue we might be able to get from it; this is antithetical to the Apple way of thinking.
I likened it to a corollary to the personal maxim of, “Do what you love and the money will follow.” It’s a little corny, I have to refine that but it really does I think express Jobs’ approach to product was, “First we’ll think of the product, then we’ll think of how to make it beautiful and how to make it really good, then we’ll figure out what the market is for it.” And I would submit to you that’s not the normal decision making process at your typical big company.
A hallmark of Apple’s entire way of doing business is the power of saying no, and this is across the business and across product development. It says no to industries to get involved in, to who it will sell to, we know that it’s been famously uninterested in selling to big businesses over the years, which by the way has some history. Apple got beaten up badly in the 80’s selling to the enterprise and this scarred Jobs, many things scarred Jobs including this almost running out of cash at the beginning.