Steve Jobs: The Puppet Master

[Blue Velvet]

Here's a piece by Robert X. Cringely at pbs.org... enjoy.

The Puppet Master: Love Steve Jobs or hate him, just don't ignore him.

I have never before quoted myself at length in a column, but this week’s Apple iPhone pricing fiasco calls for it, so here is the beginning of a column I wrote back in January 2002:

In 1999, I was commissioned by Vanity Fair magazine to write a story about the relationship between Bill Gates and Steve Jobs. While I know both men, I know them separately, not together, and I just wanted to better understand how they got along. The only hint I had was from a joint interview they did several years ago for Fortune magazine in which Gates said that when they were together, Jobs bossed him around. It is very hard to imagine anyone bossing around Bill Gates. I had to know more.

So I contacted Steve and asked for some time with him to talk solely about his relationship with Bill. Steve’s first response was to call the editor-in-chief of Vanity Fair to discuss the story. This gives some insight into Jobs: I predict that whenever his children have trouble at school Steve doesn’t call the teacher, he calls the Superintendent of Schools, and that’s only if the Secretary of Education is out of town. A short negotiation followed in which Steve agreed to do the interview, but only if I talked to Bill first.

Neither Bill Gates nor Steve Jobs is anywhere close to what one might define as “normal,” but in these procedural things, Gates is a lot more normal than Jobs. It took a month or so to arrange, but I eventually had an hour with Bill, during which we spoke only about his relationship with Steve. I still have a tape of that interview, which was VERY interesting, but I promised I wouldn’t use it for any other project, so it remains inside my fireproof safe.

The promised interview with Jobs never happened. His excuse was that the antitrust case against Microsoft had reached a point where it would have been imprudent for Jobs to comment on Gates. Come back when the case is over (or Hell freezes, whichever comes first).

While I suppose there may have been some legal reason not to talk, I really doubt that was the issue. Rather, Steve Jobs just liked snubbing the world’s richest man. It was classic Jobs, and I should have seen it coming. We both should have. So the Vanity Fair story never happened.

One thing that Gates told me in that interview was he didn’t understand why Jobs had gone back to Apple at all. “Why would he do that?” Bill asked. “He has to know that he can never win.”

Okay, we’re back in 2007, eight years after that interview with Bill Gates and the subsequent snub by Jobs and the question being asked about Jobs is still the same: "Why did he do that?" And the answer is still the same: "Because he can."

This week’s iPhone pricing story, in which Apple punished its most loyal users by dropping the price of an 8-gig iPhone from $599 to $399 less than three months after the product’s introduction, is classic Steve Jobs. It wasn’t an accident. It wasn’t a thoughtless mistake. It was a calculated and tightly scripted exercise in marketing and ego gratification. In the mind of Steve Jobs the entire incident had no downside, none at all, which is yet another reason why he is not like you or me.

Let’s deconstruct the incident. Apple announced a variety of new and kinda-new iPods dominated by the iPod Touch (iPhone minus the phone) and an iPod Nano with video (great for watching miniseries). At the very end of the presentation, Jobs announced the iPhone price cut. Why did he wait until the very end? Because he knew the news would be disruptive and might have obscured his presentation of the new products. He KNEW there was going to be controversy. So much for the “Steve is simply out of touch with the world” theory.

So why did he do it? Why did he cut the price? I have no inside information here, but it seems pretty obvious to me: Apple introduced the iPhone at $599 to milk the early adopters and somewhat limit demand then dropped the price to $399 (the REAL price) to stimulate demand now that the product is a critical success and relatively bug-free. At least 500,000 iPhones went out at the old price, which means Apple made $100 million in extra profit.

Had nobody complained, Apple would have left it at that. But Jobs expected complaints and had an answer waiting — the $100 Apple store credit. This was no knee-jerk reaction, either. It was already there just waiting if needed. Apple keeps an undeserved $50 million and customers get $50 million back. Or do they? Some customers will never use their store credit. Those who do use it will nearly all buy something that costs more than $100. And, most importantly, those who bought their iPhones at an AT&T store will have to make what might be their first of many visits to an Apple Store. That is alone worth the $50 per customer this escapade will eventually cost Apple, taking into account unused credits and Apple Store wholesale costs.

So Apple still comes out $75 million ahead, which is important to Steve Jobs.

Steve has a love-hate relationship with, well, everyone. Customers buy Apple products and they appreciate Steve’s design and market sense, but they also have opinions and NEEDS — two characteristics Jobs (and for that matter almost any CEO) would like to do without.

So Steve slapped his customers around a bit and what happened? Apple got free publicity worth tens of millions and the iPhone, which was already the top-selling smartphone in the world, will now sell two million units by the end of the year, up from an estimated one million. And Steve, having deliberately alienated his best customers, now gets a chance to woo them back. He has finally placed millions of people in the role of every key Apple employee — being alternately seduced and tormented. In this case the torment is over and the seduction will come next month when Apple ships OS X 10.5 (Leopard) — the company’s last chance to position its products for Christmas. Look for 1-2 very un-Leopard surprises at that event — surprises intended to get us all dreamy-eyed over Steve Jobs again.

So Steve does things like this because he can. It reaffirms his iron grip over both Apple and Apple’s customers. It’s a lot about ego and a little about business, though with Steve Jobs they are hard to differentiate.

Here is something very important to remember about Steve Jobs (and probably the only part of this column that will bother him in the least): most of his business moves are still in reaction to having been fired by Apple back in 1985.

Back then Steve was a willful and profligate creator of new products but not very interested in profits. When he put himself up against John Sculley, wanting the Apple board to fire Sculley and make Jobs the CEO, what killed Jobs’ chance for the position was the board’s belief that he wouldn’t deliver the numbers. And they were correct. The Steve Jobs of 1985 was a terrible manager. The board was wrong, however, in believing that Sculley could provide an acceptable substitute for Jobs’ technology vision.

In the 22 years since that humiliation, Jobs has devoted himself to proving: 1) that he can deliver the numbers (and does he — Apple is the best-managed computer company on Earth), and; 2) that he is a better marketer than Sculley, the supposed marketing genius. The product vision part is easy. Not only does Jobs push these products out without apparent effort, he couldn’t make himself not do it if he tried. It’s an obsession. So he puts the real sweat into managing and marketing and occasionally beating up on anyone who gets too close.

And that 1999 quote from Bill Gates about Jobs: “He has to know that he can never win.”

I don’t think Steve knows that at all.

http://www.pbs.org/cringely/pulpit/2007/pulpit_20070906_002891.html

 

[Jasonbot]

Oh no, SJ is a Master of Puppets!!!

Relevant pic:

 

[rdowns]

More like the Lemmings Master.

 

[Shorties]

I do think that the $499 and $599 were the real prices, but that was back in January by the time of the actual launch, it seemed overpriced compared to its specs, and I think thats where apple realized they could keep it at that higher price for a few months then drop it as the article suggests, I don't believe that back in macworld they planned to drop it to $399.

 

[jackc]

Oh no, SJ is a Master of Puppets!!!

Relevant pic:

Nice, some choice lyrics from Master of Puppets:

"Taste me you will see
More is all you need..."

"Pain monopoly, ritual misery"

 

[CalBoy]

Hmmm...very interesting. However, it seems to me that all good leaders and people in positions of power need to be a little Jobs-ish. Without that attitude and ego combintion, there will insubordination and a loss of direction.

As for the price cut, I think it really was more a matter of testing the waters. If 500,000 people (according to the article) wanted an iPhone at $600, then surely far more would want one at $400 (heck, even I'm thinking about it, what with my lack of income and all). Since it's been a success, Apple can afford to drop the price and sell more units to make up the profit. Had it gone badly, then it would have been less of a problem because the margins were quite good on the iPhone. I also feel that early adopters have nothing to complain about. They know that they're buying an expensive, untested product when they hand their credit card over. They have no legitimate complaint when the price drops at a later time.

 

[IJ Reilly]

This just in: The Pope is still Catholic.

Now, I like Cringely's stuff -- a lot. Even when he seems to be winging it, he knows far more than the average tech commentator and he's way more interesting. But really, isn't this just a whole lot of belaboring the obvious?

I'd break into his vault to hear that tape, though.

 

[shecky]

agreed - none of this is a surprise nor unexpected; i think cringley is right on. every great CEO is a little eccentric and thats what adds to them being so damn good at what they do (richard branson anyone?)

 

[EricNau]

This is the first time I recall reading any of Cringely's work, and I must admit I'm not impressed.

The diction and tone of his article portrays Steve Jobs as a cunning and manipulative jerk. Sure, it's well known that Steve Jobs has a very "strong" personality, but I think he was portrayed more negatively than deserved.

I have no doubt that much of what Cringely said is right on, but I guess I just didn't like his tone.

 

[CalBoy]

The diction and tone of his article portrays Steve Jobs as a cunning and manipulative jerk.

Frankly, I think most leaders end up seeming like cunning and manipulative jerks. It's almost a job requirement. I doubt any CEO would be described as "honest, kind, and thoughtful." I think this writer would probably describe all the CEOs he interviews like that.

 

[CanadaRAM]

The thing that gets me in that article (and here in many posts at MR) is the concept that Apple reaped "Undeserved" profit.

Excuse me, but this was a bargain that each and every buyer entered into willingly (and more, with lineups and all the attendant hype, enabled and amplified by the media, MR included).

Apple "Deserves" every penny of what they made - they created the product, the demand, and the sales at that price point.

I agree with Cringely in that the whole meal deal -- price, drop, reaction and rebate would have had to be anticipated and scripted from soup to nuts by Apple for maximum effect.

The iPhone is a new product market for Apple, it is instructive to compare the marketing with the parallel situation of Microsoft selling XBlockses below cost and THEN having to spend a billion dollars to fix them after the fact. Apple starts to look brilliant, here.

 

[EricNau]

Frankly, I think most leaders end up seeming like cunning and manipulative jerks. It's almost a job requirement. I doubt any CEO would be described as "honest, kind, and thoughtful." I think this writer would probably describe all the CEOs he interviews like that.

Basically, what I'm saying is that the author of that article used words that carry very negative connotations, and I feel he went a bit overboard.

I'll copy and paste a few key lines from the article quotes in italic, key words in red:

• "Apple punished its most loyal users"
  Were they really punished?
  
  
• "It wasn’t an accident. It wasn’t a thoughtless mistake. It was a calculated and tightly scripted exercise in marketing and ego gratification."
  So, does Steve Jobs really drop prices and anger his customers for his own ego?
  
  
• "Because he knew the news would be disruptive and might have obscured his presentation of the new products. He KNEW there was going to be controversy."
  It's interesting how the author contradicts himself. On one hand, Steve Jobs "KNEW" there would be controversy, and on the other hand, Apple had the money waiting "if needed."
  
  
• "Apple introduced the iPhone at $599 to milk the early adopters"
  Did Apple really "milk" their customers, or were they innocently caught up in the economics of the situation?
  
  
• "So Steve slapped his customers around a bit and what happened?"

Perhaps the only manipulative one around here is Cringely.

 

[IJ Reilly]

He's a writer. I'll cut him some slack to use colorful adjectives if I think he's not completely off base. I also have the benefit of knowing that Cringely is not an Apple basher.

He does lay down one tantalizing bit, which I think he deliberately left hanging in the air: I wonder if Bill still thinks Steve "can't win."

I'll bet he does. The essence of His Billness is that he believes that nobody but he should win, or even deserves to win.

 

[CalBoy]

Perhaps the only manipulative one around here is Cringely.

I can see what you're saying, but I think this is just how writers approach things. It's just spice, nothing more. He's not as bad as some other writers out there.

 

[mcarnes]

I think a lot of the article is crap. It reminds of all those 911 conspiracy theories, like it was all a plan by Bush, etc. I don't think Steve planned the price drop in advance. He just doesn't strike me as a that kind of deceiver. But I do agree with the end of the article that Steve was less focused on profit in the 80's then he is now. I think it is likely a reaction to being fired by Apple back then and to show that he can be a good manager.

But the bulk of the article is just silly. Why do people always think successful people have this big master plot to deceive people? I get that sometimes at my job. It's stupid.

 

[redfirebird08]

Frankly, I think most leaders end up seeming like cunning and manipulative jerks. It's almost a job requirement. I doubt any CEO would be described as "honest, kind, and thoughtful." I think this writer would probably describe all the CEOs he interviews like that.

No. Jobs is a manipulative guy, more manipulative than plenty of other CEO's out there. He's also a visionary and I am thankful he has helped with some technology revolutions. Bill Gates, though I really don't like his products, has been described as far more down to earth with his employees than Jobs. There's plenty of CEO's out there that are kind and thoughtful including Gates, but in general quite a few of them are more in the mold of Jobs as you mentioned. I'd say the ratio is 60/40 in favor of the manipulative types.

 

[papadopolis1024]

I'd break into his vault to hear that tape, though.

You know I could help you with that... I REALLY want to hear that tape!!!!

 

[mcarnes]

I'd say the ratio is 60/40 in favor of the manipulative types.

The ratio is clearly closer to 65/35.

 

[CalBoy]

No. Jobs is a manipulative guy, more manipulative than plenty of other CEO's out there. He's also a visionary and I am thankful he has helped with some technology revolutions. Bill Gates, though I really don't like his products, has been described as far more down to earth with his employees than Jobs. There's plenty of CEO's out there that are kind and thoughtful including Gates, but in general quite a few of them are more in the mold of Jobs as you mentioned. I'd say the ratio is 60/40 in favor of the manipulative types.

Well, I'm willing to cut CEOs some slack as long as they're good leaders and they don't falisfy records and documents. I think that in order to be a good CEO, manipulation and cleverness are essential. As long as the CEO delivers good results and makes shareholders, customers, and employees happy, I think that they're a good CEO. The only black mark on Jobs' record is the back-dating scandal. Whether or not he knew about it is what is critical. If he did in fact have knowledge and allowed it to happen, then he does deserve prison time. If not, then he can keep doing what he's doing, because he's damn good at it.

The ratio is clearly closer to 65/35.

Best response EVER!

 

[IJ Reilly]

You know I could help you with that... I REALLY want to hear that tape!!!!

Ah, a conspiracy... excellent!

Another thing occurred to me. Cringely seems to view Jobs as the sole decider within Apple, as if every move the company makes, no matter how minute, is carefully choreographed by Steve himself. Now, I realize he's a control freak, but really -- he does have people for some of these things!

 

[CalBoy]

Another thing occurred to me. Cringely seems to view Jobs as the sole decider within Apple, as if every move the company makes, no matter how minute, is carefully choreographed by Steve himself. Now, I realize he's a control freak, but really -- he does have people for some of these things!

I think this view is popular because so much of Apple is Steve Jobs. His charisma seems to be the driving force behind Apple. Granted, he's not god or anything, but he does give off that impression.

 

[QuarterSwede]

But the bulk of the article is just silly. Why do people always think successful people have this big master plot to deceive people? I get that sometimes at my job. It's stupid.

Same here. The people under me think I control a lot more than I do. A lot of the magic just my experience and knowledge over theirs.

I think people also forget that Jobs is very demanding. If the project isn't done on time or to his liking (ie. near perfection), heads will roll. Fear is a powerful persuader. Yet when a product is put out that you've worked on and the marketing is so good that it makes you willing to sell your mother for it, you feel proud and glad that he pushed you so hard.

 

[IJ Reilly]

I think this view is popular because so much of Apple is Steve Jobs. His charisma seems to be the driving force behind Apple. Granted, he's not god or anything, but he does give off that impression.

The popular view, yes -- but I expect Cringely to know a lot more about the inner workings of Apple than the popular viewer. The more I think about it, the more I wonder if Cringely isn't being a little too arch in his theories about Jobs and his machinations. For a reason, maybe.

 

[CalBoy]

The popular view, yes -- but I expect Cringely to know a lot more about the inner workings of Apple than the popular viewer. The more I think about it, the more I wonder if Cringely isn't being a little too arch in his theories about Jobs and his machinations. For a reason, maybe.

Maybe he did mean it to be a light-hearted peace. Perhaps it's the effects of these forums that creates the impressions some of us have.

 

[edesignuk]

Excellent piece, and I agree with all of it.

No company just decides to give away millions of dollars unless it was planned for in the first place.

Jobs brilliance is paralleled by his arrogance. He knows best, and he will do exactly what he wants to do, you (the customers) will do it to. Like it or not.