Co -written with John Straw and with contributions from Julien de Salaberry and Harriet Green
It seems incredible now that the world’s largest company almost went bust ten years ago. Before that, it had to seek help from the enemy in order to survive. Apple aficionados said the company had sold its soul when in 1997 it was forced to date and then sleep with Microsoft. On 6 August 1997, their despair was palpable when, on the occasion of an Apple PR spectacular at the Mac World Expo in Boston, the words of a certain William Henry Gates (more commonly referred to as Bill Gates) echoed across the room like screechy brakes, apparently heralding the end of Apple’s reign as the world’s leading non-Microsoft compatible PC company.
It was a bitter‐sweet year. January of 1997 saw the return of the prodigal son, as Apple’s co‐founder Steve Jobs returned to the fold after years of enforced exile. But the prodigal son becoming the “de facto head” was seen as scant consolation on that auspicious day in August, when, as far as Apple fans were concerned, the devil walked amongst them. On one hand, the Apple faithful gave thanks for the return of Jobs; on the other hand they lamented the deal with the giant software company from Seattle. They spat venom at the very idea that MS Office was to run on Apple computers and Internet Explorer was to be the default browser for Mac OS for five years.
The new look Apple (then known as Apple Computers) with its reappointed head, enjoyed something of a recovery. In October 1998, it was able to announce its first profitable year since 1995, but the company continued to dice with failure. In the year 2000, Apple enjoyed a market capitalisation of nearly US $19 billion, but that was the year of the dotcom bust. By the first quarter of 2003, its market cap was $5.33 billion. During the post dotcom boom, investors across the world seemed to give up on the idea of technology companies altogether; Apple was seen by many as yesterday’s company, living off former glories.
Ten years and an iPod, iPhone and iPad later, Apple was valued at a fraction over half a trillion dollars (as of 17 December 2013, with a market cap of US $501 billion, according to Yahoo finance). To put that in context, the world’s second largest company by market cap was Exxon Mobile, worth US $424 billion.
The speed of the recovery and the turnaround is remarkable enough, but one question lurks: how did the company achieve it?
It appears that at least one factor, maybe the most important factor, is that change in technology made the Apple renaissance possible. This is an important theme of this book. When technology is not up to the tasks we demand of it, it is easy to become cynical, to adopt a dismissive attitude, claiming that it will take years and years before certain ideas become a possibility. But different technologies can converge, and technology’s march forward is relentless, and just a few minor developments in technological power mean that dreams suddenly become possible.
You would have expected John Sculley, the man who replaced Steve Jobs at the top of Apple in the 1983 only to be effectively forced out of the company in 1985, to be bitter and twisted about Apple’s famous co‐founder. Despite the circumstances of his leaving, however, Sculley appears to have nothing but praise for the man who many saw as his arch nemesis. In an interview conducted in 2010, while Jobs was still alive, a magnanimous Sculley explained the Apple turnaround as follows:
“For someone to build consumer products in the 1980s beyond what we did with the first Mac was literally impossible,” said Scully, but then he suggested that by the 1990s things began to change. At this point it was at least possible to get an idea of where consumer products were going. Scully said the key to this being possible was “Moore’s Law and… the homogenization of technology.” It changed with the dawn of the 21st century, when the cost of components, commoditization and miniaturization coincided to make things possible. Scully said: “The performance suddenly reached the point where you could actually build things that we can call digital consumer products.”
To try to summarise a very long interview with Sculley in a few words: Jobs was obsessive about design; he loved the way Sony built consumer electronics, and had an idea for turning computer technology into beautiful design – beautiful to look at and to use. However, during the 1980s and 1990s, his ideas were too ambitious. It was not possible to apply his idea of design to technology that was clunky, unwieldy and which frustrated users to the point of despair with its technical short‐comings. But as we moved beyond the year 2000, in the aftermath of the dotcom crash, things changed. Technology suddenly became advanced enough to turn Jobs’ vision into reality, and a brilliant plan unfolded. However, it was a plan that simply could not have gained traction a few years earlier.
Technology is like that. When it reaches a stage of sufficient power, it can help to promote a sudden explosion in creativity. It can also make ideas of the past that had seemed unrealistic, both possible and practical.
See it like the super cooling of water. It is generally believed that water freezes at zero degrees centigrade. This is not so. Ice melts at that temperature, but if it is pure and undisturbed, liquid water can remain in its liquid form at temperatures as low as minus 40 degrees. But when liquid water is super cooled in this way, something very interesting happens. When the pool of water begins to freeze, it does so immediately. There is no intermediate step; all the water that is being super cooled is either liquid or ice. Relatively speaking it is like that with technology. As long as it is not sufficiently powerful to provide certain key benefits, it appears to be clunky, cumbersome, and predictions of swanky future uses of technology seem to be stupid or naïve. But once the technology gains a certain critical mass in its capability, the applications taking advantage of it can explode onto the market. It seems to be human nature to overestimate how quickly technology will change, but to underestimate the effect it will have. It also appears to be human nature to become disenchanted with technology just before it reaches the transformational stage. During the dotcom boom, the human trait of over‐exuberance led to wild forecasts about how rapidly the internet would change the world. You could say this was the exuberant phase. In the aftermath of the crash, to many people, investors especially, the words internet or dotcom appeared to be synonymous with hype. You could say this was the sceptical phase. But the extraordinary rise of Apple that then followed showed how such cynicism was misplaced. Apple’s turnaround occurred as we entered the transformational phase.
To put it another way, for years many looked on and thought Apple seemed to be crawling into a pool of despair, but when technology converges and reaches a certain level of power, ideas and brilliant applications can shoot out of that pool, like Thunderbird One from the Tracy Island swimming pool.