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.
I have to tell you that I showed this slide at Microsoft last week and I — prepared them and I said, “Please don’t take this the wrong way,” but I think it’s very telling. What you get when you open your box of a PC that you got at a retailer and what you get when you open your iMac box.
I want to do another slide that focuses more on the screen because I think it’s in the book and it’s a very important part of Apple’s mentality of saying, “No.” You know what the screen on an iMac looks like when you turn it on, I need to show what the screen of a PC looks like especially if you buy it from a retailer, your screen is littered with what Jobs referred as, “Crapware.” And Crapware are these icons from various vendors that the retailers or the manufacturers have done a deal with to goose their margin a little bit. I would suggest that it’s nothing short of insulting to the customer to put that on the screen and it’s something Apple wouldn’t dream of doing. Apple has faults by the way, but this is something Apple’s very good at.
I could go on about the beauty of saying no; Jobs would say that saying no is more important than saying yes. This extends to how Apple cooperates or engages with the rest of the world. Most companies will send its people out to events to interact in the hope that there might be some intangible benefit from interacting. Apple even killed the trade show that it was integral to starting although it was its own, Macworld. And then I just like showing this fanciful slide of an Apple executive being in a chair at the World Economic Forum in Davos where I was a few weeks ago. It’s inconceivable to think of an Apple person engaging in jawboning and talking about making the world a better place in Davos.
With what’s going on I shouldn’t say inconceivable, but it’s until now impossible and I think highly unlikely in the near future. You will know by the way if you see the CEO of Apple on stage in Davos that things have really changed at Apple. Apple has this concept of the directly responsible individual. It’s one of these things when I first heard about it, first of all Apple people have been talking about for years this pre-dates Jobs’ return in 1997, it’s not completely clear to me that it was even language that Jobs was all that familiar with which magnifies its importance to me that it’s so important at Apple.
At Apple there will be a list of items on the agenda for a meeting, for example, and next to the action item will be a name, that name is the DRI; the DRI is the one person whose job it is to get the job done on that specific task. It’s so simple, it’s so obvious, and yet my hunch and I’m going to try to test this with business school professors, is that most businesses don’t do it. And I know that I, oops, I don’t know what that’s about. My Outlook is open, I apologize.
I know there was a period when I was working on the article at Fortune that I started to become obnoxious within my own company by asking, “Well who’s the DRI on that?” This was often on the telephone because most of my colleagues are in New York, but I could feel the eyes rolling when I said it. I think it’s unique that Apple is a massively functional organization; this is the corollary to Jobs’ aversion to general management; he did not want jacks of all trades running businesses within the business, he wanted experts.
He would brag that Apple employs the best metallurgists in the world. And this is the case throughout the organization. This is I think one of the most important and most controversial aspects of how Apple does business in that in selected instances it behaves like a start-up. Of course Apple is not a start-up, I’m not so naive as to think that it is; there are many elements of the company that behave just like any big business anywhere.
But where it’s relevant, where Apple decides that it’s going to create something new and do something fresh, it manages to hive off an area and let a relatively small group of people behave as if they are at a start-up. And I’ve likened this to a bunch of rich kids in that they’re off in a corner doing their own thing, but they have a very wealthy parent funding their research, and in Apple’s case this is a nearly $100 billion balance sheet funding their research.
I think by now since I wrote about it last May it’s become well known that Apple thinks a lot about the notion of small numbers. The British anthropologist Robin Dunbar referred to the Dunbar’s number as being about 150 or smaller, that most humans really can’t relate to a group of people much bigger than about 150. He was looking at primates in the wild, by the way, but he decided that that was applicable to humans as well.
And in fact for years Apple has been having this ultra top secret retreat of about 100 people whom Jobs characterized as the people he would want to take with him if he were to leave Apple, the 100 or so most important people. Very interestingly to me, by the way, this was not a rank thing with Jobs it was not a status thing it was who he literally thought were the most important people, not necessarily by title.
The stories about the top 100 are legendary and typical Apple; Jobs would require everybody attending the meeting to be bussed down to the Santa Cruz or Monterey area in a bus from Cupertino. And I had this image of certain senior executives who had attained great wealth being forced to get on a bus and drive for an hour and a half or a couple of hours because the boss didn’t want them driving their own car. He would sweep the room for bugs beforehand, legitimately paranoid that the competition might try to find out the secrets that were going to be revealed at a top 100 meeting. And indeed products for the next 18 months or so have been revealed at top 100 meetings.
Given how secretive Apple is Jobs thought that it was important for a slightly larger group than the 10 or so person executive team to be exposed to what was coming down the pike. The rest of the company was not invited to the meeting and would not be exposed. One of the fascinating elements of this secrecy that I’ve learned, the sales people at Apple are particularly frustrated because they don’t find out about what’s going on at the company in terms of new products any sooner than the rest of us do. And if you think about again how different that is from any normal company which obviously wants to prep the sales force so they can sell the product that’s coming.
On the subject of exclusion, I’m also told that Apple people to this day will gather in a cafeteria to watch a closed circuit television broadcast of the major keynotes whether it’s at Moscone or on their own campus because, and I think this is so interesting, they’re learning about the product that’s being revealed for the very first time at the same time the public is, at the same time journalists are. This includes people who worked on the product because they typically will only have seen the feature or the part of the feature that they worked on.
Apple’s marketing I think it’s fair to say is brilliant; one of the premises of the marketing at Apple is staying on the script. I hope I’m not gushing too much and suggesting that “1,000 songs in your pocket” is one of the more brilliant marketing lines in the history of consumer electronics marketing. Obviously MP3 players existed before the existing, the incumbents stressed storage capacity of their devices, Apple did talk about storage capacity in terms of pricing, but “1,000 songs in your pocket”, who can’t understand that and who can’t repeat it over and over? And that’s another important that you’d think would be normal in business but I think Apple does it better than most.
I’ve described how first of all very few people at Apple are allowed to speak publicly; it’s a discreet, finite number that is defined in preparation for a product launch and the language that they will use is preapproved and agreed upon. And so I quote an executive who was approved on the iPhone who explained to me in giving speeches on my book I can understand the mentality that when you give this message over and over the intellectual or human tendency is to change up your delivery because that’s how you keep yourself entertained.
But he said, “No, when you’re pitching an Apple product you deliver it over and over exactly the way we agreed it was going to be delivered. Why? Well because the listener’s hearing it for the first time and what we want is for the listener to repeat it to their friends and for their friends to start repeating it and pretty soon it’s being repeated back in the marketplace exactly the way we wrote it.” And it’s a very pure and very understandable approach when you think about it that way, but requires a ton of discipline.
Sometimes I’ve described Apple as a company of paradoxes because on the one hand Apple is described to me, Apple people describe Apple as being resource constrained. I came to understand what they’re really referring to is people; it’s very difficult to get enough of the right people on a project. But when Apple decides to make a product or market a product they will spend whatever it takes for seemingly trivial expenditures. And so the story I tell in the book is of Jobs’ desire to illustrate iMovie HD in 2005, the first launch of the high def version of iMovie. And there weren’t a lot of HD cameras or HD televisions in the marketplace at the time so he decided they should do a wedding because he knew that people used iMovie to shoot weddings. So they shot a wedding, it was an Apple employee; it was a beautiful, elegant affair at the Officers Club at the Presidio in San Francisco.
Only when Jobs decided his opinion was it was too elegant, it was too stuffy and he said, “I want a beach, I want feet in the sand, I want a tropical setting, Hawaii would be good.” He was fond of Hawaii. This was three weeks before Macworld. And to make a long story short, finding a beautiful actress who was getting married on Maui right before New Years’, the team got its image at tremendous expense and the expense was really irrelevant; this was for a 30 second or so clip at Macworld; they were able to show iMovie HD in beautiful, emotional terms; the money wasn’t what mattered.
So just to drive home the point, this is a replica of an actual wall in a marketing building at Apple; if you’re in this marketing group after you go in the door in the morning you walk around this wall every single day on your way to work to remind you what your approach to marketing should be at Apple. Only this isn’t exactly how the wall appears, this is.
Apple has an interesting relationship with the press and that includes me and I think there’s a profound business point here; there’s only one subject generally that Apple views worthy of it discussing publicly and that’s its products; doesn’t want to talk about how it does business which is the subject of my book, it doesn’t want to by and large with the exception of Steve Jobs it doesn’t want to talk about personalities, it doesn’t want to get involved in lifestyle issues of Apple, of Apple people, and so on. So it keeps the press at arm’s length with two kind of amusing exceptions and that’s David Pogue at the New York Times and Walt Mossberg at the Wall Street Journal. Apple will go to great lengths to keep the two of them happy and I encourage you to read the section in my book where I discuss that.
Apple also, by the way, is very tuned into the importance of celebrity and that celebrities play an important role in your image. And I describe in the book the day that Harry Connick, Jr. emailed Steve Jobs because he had a problem with his monitor and this is called an escalation. Jobs emailed Cook, Cook emailed a senior executive in the supply chain organization who emailed a junior executive in the supply chain organization, who got Harry Connick, Jr. his new monitor in a matter of a half hour or so.
And my very last point, and this can sort of serve as a jumping off point to discuss the future of Apple, one of these paradoxes about Apple is that it behaves in quite an entrepreneurial way and the risks it’s taken and the new products it’s come out with in the last 15 years have been a triumph of entrepreneurialism I would suggest. However, one of the sort of glaring realizations I made toward the end of writing the book is that really the great entrepreneur at Apple was Steve Jobs and in fact his family listed entrepreneur on his death certificate.
The most important remaining members of the executive team are not entrepreneurs. I mean Tim Cook bled IBM Blue for gosh sakes for the first 10 plus years of his career. He loves Apple but he’s not an entrepreneur. Scott Forstall who runs the mobile software has only worked for two companies in his career and both of them were headed by Steve Jobs; the first was NeXT. Jony Ive has been quoted publicly saying that when he ran his own design consultancy in London it was called Tangerine, and I think it’s really interesting that the two great companies of his career are Tangerine and Apple…commented that he didn’t really care for the business aspect of running Tangerine, he wanted to design and boy has he done a great job of designing.
But I leave you to think about what will be the meaning of an Apple that isn’t led by someone who identifies as an entrepreneur. I invite you to look at my brand new Website and as well as I put my Twitter handle up there and I would love to see some engagement on my Google+ profile as well and I’m happy to do that with you and to take your questions for 15 minutes.
There’s a mic right there. So thank you very much.
Question & Answer Session
Audience #1: Hello. Hey Adam, thanks a lot for the talk. So I actually have two questions: one question is like on your second slide you mentioned like everything Apple did is like quite contradict to what we learned in business school, so does this mean like, I don’t think, like, people, me, like what we learned in business school is wrong or like Apple is just like absolutely by chance it’s a great success, so what things we can learn from the success of Apple from both like say in academia or in business world so what thing we can really take from Apple?
Adam Lashinsky: Sure. So, thank you, so first of all I think that I am saying that in Apple’s opinion, some of the things that you learn in business school are in fact wrong. But I’m not suggesting that that’s an absolute, and I think that companies and people have to go down the list and consider each one and say, “Is this something that my company or that I can emulate at Apple or is this something that’s unique to Apple?”
And I’ll give you one example of one of these teachings that I think that all companies can think about. I mean some companies have to be revenue optimizers that’s just the way they’re set up, they’ve got to think about cash flow because maybe that’s their best bet, but other companies can take an approach that thinking about the revenue first is the wrong way. I also think that there isn’t a company out there of any size and in any industry that can’t ask itself the question, “Are we saying no often enough? Have we said no in each instance where it might have made sense to say no instead of yes? That’s one example I think.
Audience #1: Yeah. Thank you. One more question about like how I remember you have one slide about the integration. So we know like Apple is, uh…very few company that like do everything in a single chain within one company, for example, from the design, manufacture, operating system, and retail, and marketing. So what’s the reason do you think like they did a great job in operation and management for like integrate every parts like become a world leader not only in every area but also integrate very well in every part?
Adam Lashinsky: So I’ll give you, I’m going to give you two answers. And the first one is sort of cynical and is the conventional wisdom. The answer to your first question, why are they so good at integrating? You can answer in two words: Steve Jobs. And there’s a very strong current of thought within Apple including people who believe that the company will not fare well going forward that he was completely responsible for this integration through sheer force of brutal will and that that will be far more difficult after he’s gone, with him gone.
And then the more hopeful response is that he developed a system where the culture of the company includes this integration run by the executive team and the CEO and that this is a process at Apple. And I think this is, this will be one of the great questions of the next call in five years that will be answered: will they be able to integrate as well without him or not?
Audience #2: Hi, I had a question about Pixar. I wonder if you got any chance to compare the way Apple as a corporation is run compared to Pixar which is also I guess like Steve Jobs’ —
Adam Lashinsky: Sure.
Audience #2: step child.
Adam Lashinsky: So relatively little, I mean I read a very fine book called The Pixar Touch by David Price which is a great history of the company, very precise in terms of going over what happened for Pixar to become Pixar, including the fact that when Jobs bought Pixar, the Pixar assets from George Lucas neither he nor anyone else had any clue that it was going to be an important feature film company down the road; that was an accident which he absolutely deserves credit for recognizing. But I didn’t study Pixar for my book and this question has come up so my only observation would be that Jobs was never the day-to-day CEO of, number one of Pixar, he was the CEO for a time but he never spent all his time there.
And number two, the culture of Pixar — for the culture of Pixar, Ed Catmull and John Lasseter are extremely important to the way the company operates and the way the company thinks in the way that Jobs was for the ’97 to ’11 period at Apple. But that’s as deeply as I can go on Pixar.
Audience #3: So this might be a controversial question –if you look at the top management of Apple it’s glaring that it’s only white male. And unlike other beta companies there are no Indians and no Chinese, there are no women, there are no African Americans, no one. Is it part of the culture of secrecy that intends a white male to become a top of top manager versus —
Adam Lashinsky: I understand your question; all I can tell you is that I haven’t had that question before which suggests to me only that it’s not a top of mind conversation at Apple. I have had the question about the paucity of female executives, there are no female executives on the executive team, there are quite a handful in the vice president level, but I don’t know how that would compare statistically, I actually think it would compare probably comparably to statistics in corporate America, but obviously not the college graduate education by any means. So I’ll just give you, so I don’t have anything great to say about it.
I’ll give you a tangential point that I make in the book and this is in contrast as I understand it to Google, Apple is a headquarters centric, face-to-face meeting oriented company where meetings happen with people looking at each other not over teleconference or video conference; people travel but they come back to Cupertino for the important meetings. So now I’m theorizing, if a face-to-face headquarters culture engenders homogeneity that may be your answer, but I’m not going to state it in any sort of declarative way because it’s neither something that I’ve studied nor have a strong opinion on.
Audience #4: Thanks for all the fascinating insights, when are you going to do your book on Google?
Adam Lashinsky: Well, two very fine writers Ken Auletta and Steven Levy have written Google books in recent memory, so I’ll let their insights die down before I consider the fresh insights.
Audience #4: That was actually my joke questions. But —
Adam Lashinsky: Oh.
Audience #4: This could be serious, but —
Adam Lashinsky: I have other reasons why that’s not going to be my next book.
Audience #4: We’re all Googlers here but from your non-Googlers perspective how would you compare and contrast Google versus Apple?
Adam Lashinsky: Well culturally I’ve described the companies as the opposites in almost every single way, so from a cultural perspective as stated by its own beliefs and I believe practices, Google believes in openness, Apple does not. Google is predicated on the World Wide Web and ancillary technologies, Apple is not. There is a subtle similarity I believe in the way I’ve heard Larry and Sergey describe the graduate school environment of bitter arguments over substantive issues in getting to the best answer. That also characterizes Apple and I quote somebody in the book saying, “You bring your arguments about product, you bring your data about product into an argument at Apple and if your data is the best thing for the product you win.”
It’s not a beauty contest in that regard or a popularity contest. So I would say those two are similar but where the debate happens, I think the debate is a much more senior level closed debate at Apple and a broader, more inclusive debate at Google. And then there’s this fundamental product difference in orientation and I describe it in the book and I came to realize that this description of Google was based on a blog post that a departing engineer wrote about how Google would make, or how Google did make decisions about color pallets for example on a webpage, which was to try several shades of blue for example and then analyze the click through rates on a million clicks on google.com to choose the right shade. And I believe this person was expressing frustration but I’m not going to criticize that because I think it is a fundamental difference and an important way, an important aspect of decision making at Google.
And at Apple over the last 15 years the way the color pallet decision was made is that people would show Steve Jobs various shades of blue and he would choose the one — that he thought was right. Very, very different and we could go on for three hours on the differences.
Audience #5: So I saw earlier that you don’t use a Mac, are there any Apple products that you do use and were there any that you started to use after you wrote the book that you didn’t before?
Adam Lashinsky: I’m ready for this one. First of all I do use a Mac, I’m just not using one today and I will have this presentation in Keynote, I just don’t have it yet in Keynote, long story, details aren’t interesting, the details are not interesting.
Yeah, I have an iMac at home, I have an iPhone that’s turned off sitting over here, I have an iPad, I have an iPod and in fact, and I’ll tell you I have no problem telling you the thing that keeps me with a PC is Outlook. Being a journalist the information’s very important to me and my Outlook is extremely important to me and everyone criticizes Outlook on the Mac as being an inferior product and so I’m scared to go over to it full time. But however, there’s a serious point here and I make it toward the end of the book which is that when I joined Fortune, actually Fortune editorial is a Mac shop and the business side is a PC shop and I insisted on having a PC, this was 10 plus years ago because I was not a Mac guy and I didn’t want to go through the pain of shifting to a Mac; 10 years ago it was a lot harder than it is now.
And over the years I’ve started using Mac products, starting with iTunes and iPod and so on, and I maintain that the reason Apple is a $400 billion plus company today, it’s great success, is because of people like me not because of the enthusiasts who were going to buy Apple products no matter what. This is — their great success is in selling me stuff.
Audience #5: I have one other question: now you say that Apple, I mean you can’t be like Apple, but who do you see as the next Apple, and I don’t mean the next Apple —
Adam Lashinsky: Yeah.
Audience #5: Trying to be like Apple, but being as wildly successful doing things their own way, is there anyone on the horizon?
Adam Lashinsky: Well we could make up a list of startups which I’m loath to do because I think it’s too risky and you end up looking foolish talking about startups that could be like Apple or doing things their own way because they might be gone soon, although I do get into this in the book, I have some fun examples about how —
Audience #5: Sounds like I should buy the book.
Adam Lashinsky: I would hope so yeah. I would wish you would buy five, but —
I’ll give quick examples and then I’ll answer your question. Ness Labs is very interesting, run by an ex-Apple executive and they are certainly doing some very Apple-like things. So is Tesla, its showroom strategy is not like Apple retail, it is Apple retail and it’s run by an ex-Apple retail guy. And I think the big company right now that has the most similar characteristics to Apple is Amazon. I could list a bunch of things, the thing that is most similar is the way Amazon truly does not give a damn about what people think of its short term strategy; Amazon is very invested in the long term and I didn’t say it out loud today but Apple’s a very long-term oriented company.
Audience #6: From your research and experience what makes Apple employees happy and what makes them stay in the company?
Adam Lashinsky: Thank you. There was a period in my reporting, in particular for the magazine article, where I would go and ask people, “Are Apple employees happy?” And the standard response would be, “Apple people tend to buy into the mission of the company.” And I’d say, “Yes, but are they happy?” And the response would be, “People take great pride at Apple” in seeing their products used all over the place,” and so on.
And so I think it’s not trivial or an understatement to say that it helps everyone want to be on a winning team and you’re willing to overlook quite a bit to be on that winning team. And I am not, I don’t want to suggest that Apple is a joyless place because some people have drawn that conclusion from some of the stuff in my book about Apple as a workplace, but I think it’s fair to say that joy and fun is not at the top of the list. And I think again now trying to be non-judgmental about this there’s a certain purity about this from a shareholder perspective or from a customer perspective, would I settle for a little bit less in ease of use, for example, in exchange for a little more joy from the workforce?
I don’t know. Should I take one more Bernadette or am I done? One more please. Yeah.
Audience #7: Sorry I don’t have a chance to get over to the microphone. Would you say that Apple’s experience with Foxconn in China is a result of their corporate strategies and focus and the like or is that sort of anomalous having to do with labor conditions in general in China, does it come from Apple or is Apple just sort of a semi-willing participant?
Adam Lashinsky: So the question is, is Apple’s experience at Foxconn in China, essentially I’ll recraft your question, is it exceptional, is it different from the industry? And I have not gone deep on this topic so my superficial understanding first of all is that no their experiences in China are similar to everybody else’s experiences. And if anything, and I am neither excusing them nor criticizing them for what goes on in China, but am observing that Apple culturally is unused to being the top dog; they’re unused to the scrutiny of being number one; they identify with being the underdog, so I think they were shocked that they were being singled out. We’ll find out if they’re better or worse than everybody else but I think if you look at the New York Times’ article that has put this back on the agenda or has elevated this on the agenda, the Times went to great length to suggest that the article that it did on the situation at Foxconn could have been written about any of the big consumer electronics manufacturers who used contract manufacturers in China, which is all of them.
And you saw today that Apple has hired a third party auditor to audit themselves again and so we’ll see how that goes.
Bernadette: Thank you so much Adam. Please again join me in thanking Adam for coming.
Adam Lashinsky: Thank you.
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