Haunted Empire: Apple After Steve Jobs Read online

  Dedication

  For Patrick

  Contents

  Dedication

  Author’s Note

  Prologue: I Used to Rule the World

  1 The Disappearing Visionary

  2 Reality Distortion

  3 Vertical

  4 Attila the Hun of Inventory

  5 The Next Lily Pad

  6 Ghost and Cipher

  7 Joy City

  8 Into the Fire

  9 Looks Like Rain

  10 Thermonuclear

  11 The Innovator’s Dilemma

  12 Boundless Oceans, Vast Skies

  13 Fight Club

  14 Typhoon

  15 Revolt

  16 Velvin

  17 Critical Mass

  18 Holy Grail

  19 The Red Chair

  20 Manifesto

  Epilogue

  Acknowledgments

  Notes

  Index

  About the Author

  Credits

  Copyright

  About the Publisher

  Author’s Note

  This is a work of nonfiction, based on five years of reporting, including three years that I spent covering Apple for the Wall Street Journal. All of the names and details described are real.

  When I embarked on this project before Steve Jobs’s death, I had planned to chronicle how the CEO and his team had rescued Apple from near bankruptcy and turned it into a breathtakingly successful empire. About a year into my reporting, however, I realized that a more compelling story about the company’s leadership transition was unfolding right in front of me. Having previously covered Sony and seen its decline following the departure of its founder, I was particularly interested in how Apple would handle these challenging first years in an increasingly complex business environment. And so I started over again with one question—can a great company stay great without its visionary leader? I thought that if any company could, it would be Apple.

  Although I had access to the company’s media events and some of its executives during my reporting for the newspaper, Apple chose not to grant any further access apart from one shareholders’ meeting. Even so, I was able to draw from more than two hundred interviews with nearly two hundred sources who have firsthand knowledge of Apple’s world in the United States, Europe, and Asia. They include Apple executives and employees—past and present—as well as business partners, lawyers, friends, and acquaintances who have come into close contact with Apple’s inner circle at various points in the company’s history. I also interviewed former Foxconn and Samsung employees, executives, consultants, and business partners. Because of the secretive nature of all three of these corporate giants, most of these sources asked not to be named for fear of repercussions. A couple of sources feared reprisals from the Chinese government.

  In pursuit of this story, I traveled around the world, starting with the company’s headquarters in Cupertino, California, before heading for Chicago, Boston, London, Frankfurt, Beijing, Hong Kong, Seoul, and Tokyo. I visited Tim Cook’s hometown of Robertsdale, Alabama, interviewing the CEO’s former teachers, driving by his high school, and having fried chicken at Mama Lou’s restaurant. I attended the Apple v. Samsung trial in San Jose, visited a black market in Shenzhen, and watched the waves of workers entering the gates of Foxconn’s massive complex in Longhua. In Taipei, I went to Hon Hai’s headquarters in the industrial Tucheng district, where stern-looking guards forbade me from taking photos of the building from their side of the road. I also scoured public records of Apple’s corporate dealings and reviewed thousands of pages of court transcripts, internal memos, company emails, and other documents, all of which helped me piece together parts of the story.

  Though I witnessed some of the scenes and dialogue in the book firsthand or watched them on videos, other sections are reconstructed from interviews, transcripts, and research. By necessity, some details are based on the recollections of my sources. Mindful of the vagaries of memory, I have made every attempt to confirm their accuracy. When I mention someone by name, readers should not assume that the subject granted me an interview. Many of the statements or occurrences unfolded before an audience or became widely known quickly as they were shared inside Apple.

  In many sections, I consulted experts in various fields for help in providing background and context on technical subjects such as patent law, corporate governance, and software design. I also drew on the insights, observations, and reporting by esteemed journalist colleagues around the world, who generously provided material to supplement my reporting and are mentioned by name in the acknowledgments.

  To tell this truly global story, I relied extensively on news articles and books written not just in English but also in Chinese, Korean, and Japanese. Having been partly educated in Japan, I had no trouble reading the Japanese articles. For the Chinese and Korean materials, I relied on assistants fluent in those languages.

  For specifics on how each chapter was reported, please see the endnotes.

  Prologue

  I Used to Rule the World

  That Wednesday, the empire went silent.

  Across the country, from Boston to San Francisco, Apple stores shooed away customers in the middle of the day and locked their doors. In Chicago, the staff hung a white curtain across its glass storefront. In Washington, D.C., a security guard stood watch in front of the entrance. In Manhattan, the lights and computers were still on, but the floor was eerily vacant.

  Inside all of these stores, employees gathered around video monitors for the start of the memorial service to honor the untimely death of their visionary leader. Steve Jobs had been battling cancer for years, so his passing in early October 2011 had not been surprising, but it was no less devastating. In Apple’s Tokyo store, employees openly cried. It was the middle of the night, but they had come in just for this occasion. They had been present when Jobs had stopped by a few years before, and it was inconceivable for them not to bear witness to his last gathering.

  On the other side of the world, at Apple’s One Infinite Loop headquarters in Northern California, it was morning. Fans from near and far had made a pilgrimage to the campus, placing flowers, balloons, and notes in a makeshift memorial alongside the sidewalk in front of Jobs’s office building. As employees headed to the courtyard for the ceremony, they passed a colorful string of a thousand paper cranes hanging on a tree in a Japanese symbol of peace. The American, Californian, and Apple flags at the entrance flew at half-staff. Posted signs asked employees to refrain from putting up photos online. Secrecy was law at Apple, but it was particularly important on this day. The company wanted to mourn the loss of its CEO quietly, away from the public’s gaze.

  One enterprising television station dispatched a helicopter that hovered over the campus with a video camera that captured the scene. The live footage showed people packed around the company’s outdoor amphitheater. Fall was coming, and the leaves on the trees were blushing red. Thousands of employees filled the courtyard. More lined up outside as shuttle buses delivered workers from Apple’s satellite offices. Jobs’s widow, Laurene, sat discreetly to the left of the stage. Dressed in black, her eyes hidden behind sunglasses, she flashed the barest of smiles.

  Apple employees whose offices faced the courtyard looked out from their balconies. Next to them, draped on the buildings, were massive black-and-white photos of Jobs two stories high. The deification of the fallen emperor had begun. In one photo, a young Jobs sat in lotus position, cradling an original Macintosh computer in his lap. In another shot from 2004, Jobs clasped his hands, a hint of a smile suggesting a quiet confidence, almost as if he foresaw Apple’s coming ascendency. T
he third image would adorn the cover of his biography—a bearded Jobs with his hand touching his chin—a portrait of a man who knew he had changed the world.

  Nearby lay stacks of white program books with the title “Remembering Steve.” Inside was a copy of a commencement speech that Jobs had given at Stanford University in 2005.

  “Your time is limited, so don’t waste it living someone else’s life,” it said. “Don’t be trapped by dogma—which is living with the results of other people’s thinking. Don’t let the noise of others’ opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition.”

  Lost in the inspirational messages was the hubristic side of Jobs: arrogant and controlling, an obsessive-compulsive tyrant. Now that he was gone, these complexities only added to his myth.

  Although Apple’s faithful were gathered to celebrate their CEO’s extraordinary life, many in attendance were eager to prove that Apple would endure without him. The executive team had been running the company for some time, but they were painfully conscious of the immense challenge ahead. The world would be watching for any sign of faltering. Former vice president Al Gore, a member of Apple’s board of directors, told the crowd to have faith. Jobs had prepared them for this moment, instilling the passion and drive to dream up transformative products. “Keep on skating to where the puck will be,” he said, repeating the Wayne Gretzky line that Jobs used to quote.

  The crowd was comforted when Jonathan Ive, Apple’s lead industrial designer, appeared onstage. He and Jobs had created Apple’s beautifully designed products. He was Jobs’s closest colleague.

  “He, better than anyone, understood that while ideas ultimately can be so powerful, they begin as fragile, barely formed thoughts so easily missed, so easily compromised, so easily just squished,” Ive said. “His, I think, was a victory for beauty, for purity, and . . . for giving a damn.”

  Now it would be up to Ive to keep those ideals from slipping away. The same was true of Jobs’s other lieutenants. Each shouldered the responsibility for Apple’s continued success.

  Tim Cook, the company’s new CEO, was known as a stoic. But as he stepped to the microphone to talk about Apple’s loss, his voice cracked.

  “The last two weeks for me have been the saddest of my life by far,” Cook admitted. Jobs, he said, had been called “a visionary, a creative genius, a rebel, a nonconformist, an original, the greatest CEO ever, the best innovator of all time, the ultimate entrepreneur. He had the curiosity of a child and the mind of a genius. All of these are true and the fact that all of them were embodied in one man is amazing. But for those of us who knew and loved him, none of these words, by themselves or in total, adequately define who Steve was.”

  Cook summarized Jobs’s thinking eloquently, quoting some of Jobs’s most famous credos.

  “Simple can be harder than complex. . . . You have to work hard to get your thinking clean, to make it simple. . . . Just figure out what’s next.”

  Knowing what to do next was one thing. Executing it was another. Apple’s business in the past few years had become much more complex. Bigger, more global, and higher profile, the company now had much to lose. Apple was engaged in a fierce global battle against rivals in the smartphone and tablet markets, and it was under greater scrutiny from the government. Cook had to manage a sprawling supply chain in Asia, while also satisfying the public’s insatiable appetite for “insanely great” products. Jobs’s stupendous feats had built their expectations to stratospheric levels, and each success made the next one that much harder to achieve.

  Jobs didn’t expect Cook to do what he would have done. He didn’t even want Cook to ask that question.

  “Just do what’s right,” he had advised.

  After working side by side with Jobs for almost fifteen years, Cook found his absence inconceivable. How would Cook make his mark in a company so infused with Jobs’s persona that even the bottle of water placed at his side was Glacéau Smartwater—Jobs’s brand of choice? Apple was Jobs and Jobs was Apple. Throughout history, many an empire had fallen into chaos or faded into irrelevance after the death of a beloved but feared leader. How would Cook steer Apple away from the same fate?

  At the end of his remarks, Cook played a little-known audio recording of the words to Apple’s famous “Think Different” campaign as read by Jobs. His disembodied voice played over the reverent crowd.

  “Here’s to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes, the ones who see things differently.”

  The words quietly sank in. No wonder Jobs had identified with this ad. It described him precisely.

  “They’re not fond of rules and they have no respect for the status quo.”

  He’d subverted not just rules but the truth. He’d created his own reality.

  “You can quote them, disagree with them, glorify or vilify them. About the only thing you can’t do is ignore them.”

  The ceremony ended with a performance by Coldplay, one of Jobs’s favorite bands. The lyrics to “Viva la Vida” floated across the courtyard.

  I used to rule the world

  Seas would rise when I gave the word

  Now in the morning I sleep alone

  Sweep the streets I used to own

  I used to roll the dice

  Feel the fear in my enemy’s eyes

  Listen as the crowd would sing

  “Now the old king is dead! Long live the king!”

  As the throngs departed, their emperor watched on, gazing down upon them from the banners. Unblinking. Looming. Waiting to see how his lieutenants would shepherd his creation into the future.

  1

  The Disappearing Visionary

  JUNE 2008

  For a company at the epicenter of American business and culture, Apple’s headquarters couldn’t have been located in a more forgettable place. An hour’s drive south of San Francisco, the campus was situated deep in Silicon Valley in Cupertino, a quiet suburb where technology companies coexisted with relatively modest residential homes, big-box retailers, and chain restaurants like T.G.I. Friday’s. As cities go, Cupertino was nondescript. It didn’t have a downtown to speak of, nor did it have a major shopping mall. Many of Apple’s employees preferred to live in San Francisco, so the company ran luxury commuter buses for them with wireless Internet and leather seats. Every weekday morning, the buses rolled down Interstate 280 alongside the Santa Cruz Mountains to arrive at De Anza Boulevard. Occasionally, Jobs would be spotted cutting off other drivers as he turned onto the campus road in his silver Mercedes-Benz convertible. His car stood out because it had no license plate.

  Apple’s many offices were sprinkled throughout the area. The iTunes team inhabited buildings on Valley Green Drive. The marketing and communications department worked out of a large office on Mariani Avenue. Passersby would not know that a building belonged to Apple unless they happened to spot the discreet sign with a small Apple logo. That is, if it had a sign at all.

  It was only after visitors turned into a side street to the east of De Anza behind BJ’s Restaurant and Brewhouse that they could see a group of six buildings that together formed Apple’s main oval-shaped campus. It was Cupertino’s most famous address: One Infinite Loop. The four-story buildings, labeled IL1 through 6, looked mostly the same from the outside—concrete boxes with plenty of windows that gave them a clean, open feel. But the interiors were designed by different architects to give each building its own personality. IL2, which housed the iPhone software team, had a 1990s-style postmodern look with angles and curves. The industrial design studio, which shared part of the building, had a sleek interior with frosted glass and stainless steel. IL6, where the operations team resided, was more classic and subdued. The names of meeting rooms in each of the buildings reflected Apple’s playful culture. The developer relations team in IL3 named their rooms after evangelists like Tammy Faye and Pat Robertson. The product marketing team called theirs “Here,” �
��There,” and “North by Northwest.” The iPhone software team’s rooms were tongue-in-cheek. “Between” was literally flanked by two rooms called “Rock” and “A Hard Place.”

  What the buildings had in common was that they forced people to interact. Offices were lined with windows. Hallways opened up into common spaces. The floor plan made it impossible not to bump into other teams. Longtime Apple employees swore that these informal encounters were part of the secret to its success because they fostered collaboration.

  The first building that one saw when driving onto campus was IL1, also known as “Steve’s building.” Part of the ground floor was occupied by the company store, where Apple devotees could buy T-shirts that said, “I visited the mothership.” If they looked past the lime-green sign with the number “1” and the manicured evergreen hedge out front, they would see employees hanging out in an airy, glass atrium. The executive offices were on the top floor, but access was restricted. Jobs occupied a corner office facing the quad. It contained a huge desk, a couple of chairs, a sofa, coffee table, and a credenza. Piles of books, papers, and random items that people sent to him were strewn everywhere. It was so functional and devoid of character that executives who had spent time there struggled to describe it.

  Jobs didn’t care what his office looked like. He was hardly ever there. He met most people in the boardroom by the floor entrance or in the conference room next to his office. Otherwise, he’d usually be walking around, hanging out with Ive, or visiting the industrial design studio, where there were always interesting projects and prototypes to look at. Jobs loved the studio. It was one of the reasons he had it moved some years ago from the other side of De Anza Boulevard to IL2, right next door to him.

  One morning that summer, Jobs was sitting in the front row of Town Hall—Apple’s auditorium—doing one of the things he did best: terrifying others into outperforming themselves. The Worldwide Developers Conference, Apple’s annual meeting for developers, was coming up soon, and he was there to watch the rehearsals.