Return to the Little Kingdom

by Michael Moritz

  After Burge saw Jobs emerge from the kitchen with his jeans, sandals, unwashed dank hair, and thin beard, his discomfort grew. “I forgot about being rude. For about two minutes I was just thinking of escaping. In about three minutes two things hit me. First, he was an incredibly smart young man. Second, I didn’t understand a fiftieth of what he was talking about.” Impressed, Burge checked Jobs’s credentials with another agency client, Paul Terrell of the Byte Shops. Terrell told Burge, “They have overextended themselves and need some organization. Jobs isn’t very comfortable in a marketing role.” A couple of weeks later, another of the McKenna executives met Jobs and suggested that the agency might be prepared to handle Apple’s entire marketing campaign for a share of the company’s sales revenue. He added that they should all await the result of Apple’s first advertisement and also subject the computer to some closer scrutiny. An agency memo noted the extent of Jobs’s progress: “Though he moved a quantity into retail distribution, there is as yet no evidence that the retailer(s) are successful in finding customers.” The memo concluded that “Steve is young and inexperienced,” but the final line cautioned: “Bushnell was young when he started Atari. And he claims to be worth $10,000,000 now.”

  Eventually Jobs and Wozniak were introduced to the head of the agency, Regis McKenna. His business card, which carried the impish line REGIS MCKENNA, HIMSELF, sounded sturdier than the bearer whose fragile appearance offered a clue to his chronic diabetes. McKenna had careful eyes, thinning fair hair, and a soft manner of speaking that concealed some tough bones. But the business card did reveal his stock-in-trade, which was to make companies appear larger, more stable, and more imposing than they were. As one of seven sons, McKenna had grown up in the blue-collar shadows of the Pittsburgh steel barons, hadn’t bothered to graduate from college, and had moved to California at the start of the sixties as an advertising salesman for a family-run magazine company. He moved to the Peninsula during its hush-hush, super-super secret days, slipped into the electronics industry, and wound up at Fairchild. When National Semiconductor was taken over in the late sixties by some disenchanted Fairchild employees, McKenna also defected. He helped build National’s image by using ploys that included the distribution of pictures and profiles of the executives on baseball cards.

  When McKenna started his own company in 1970 he won the business of Intel which had been founded by yet more refugees from Fairchild. For some time McKenna looked after the account by himself, wrote the advertising copy, and arranged for interviews with journalists. He suffered all the pains of starting and building a business and won some clients by keeping an eye on activity at new buildings around the industrial parks. Every now and again when he rewarded himself with a pay raise, he wound up putting the money back into his business. McKenna’s own taste was often reflected in his clients’ advertisements. His cashmere jackets came from Wilkes Bashford, a swank outfitter in San Francisco, while he paid for a work by the French surrealist Joan Miró by mortgaging his home in Palo Alto.

  Yet the image of Intel, which formed the keystone of McKenna’s business, was probably shaped more by public relations than advertising. McKenna had taken pains to step beyond the electronics trade journals and cultivate reporters and editors at magazines like Business Week, Fortune, and Forbes. He had the cunning to make most journalists believe he was confiding secrets, and he was far more patient with journalists than the electronics executives who would invariably find some reason to complain and grumble about reporters and press coverage. Andrew Grove, then the executive vice-president of Intel, said, “He taught us to build relationships with the press rather than firing off press releases and hoping for wonderful things to happen.” McKenna had earned a reputation with reporters for being straightforward and not resorting to subterfuge. He liked to share industry gossip, made no secret of his pet likes and dislikes, and always practiced his wife’s advice: “Don’t pick a fight with anyone who buys ink by the barrel.” He seemed to gain more satisfaction from seeing a page-long story about one of his clients than an advertisement, but would occasionally sound like a Madison Avenue account executive—as in “We rolled out the Byte Shops with a full page in Business Week.”

  By 1976 McKenna already had some experience with marketing microcomputers. His agency was responsible for the general image of the Byte Shops and had also designed some advertisements for Intel’s single-board computers, which featured a young boy with a sunny, all-American look. So when Jobs and Wozniak appeared in his office McKenna was heading an agency that, like some of its clients, had built a reputation far beyond its size. The meeting was uncomfortable. McKenna asked to take a look at an article about the Apple computer that Wozniak was writing for a trade magazine and stressed that it should not be too technical. Wozniak, with all an engineer’s ruffled pride, retorted: “I don’t want any PR man touching my copy.” To which, with a stubborn rush of Irish blood to the face, McKenna replied, “Well, you better both get out.” Jobs played peacemaker and negotiated an uneasy truce.

  Apple’s encounter with McKenna revealed a hint of grander plans. But those plans were useless without money. The rest of the microcomputer industry was growing more quickly than Apple, and Jobs didn’t have enough money to match his expanding ambitions. Apple was not in the same league as Processor Technology which was regularly buying five pages of color advertising in magazines like Byte. Jobs returned to Atari and asked Nolan Bushnell for advice about where he should turn for more money. Bushnell gave him a tutorial on the world of venture capitalists, men who would supply money in return for a stake in the company, and told Jobs, “The longer you can go without having to go to those guys the better off you are.” But Bushnell also suggested he call Don Valentine, an investor in Atari.

  When he drove his Mercedes Benz from his office in Menlo Park to the Jobses’ garage, Valentine was embarking on one of those inspection trips that usually didn’t pay off. But it was a tribute to his curiosity—as well as to his nose for profit—that Valentine even bothered to make the drive. Valentine was the son of a New York truck driver and a venture capitalist who looked like a weathered version of the frat brother who organized the weekend football pool. He had worked during the sixties as the marketing head of Fairchild, helping sell the virtues of integrated circuits first to the military and then, when the prices started to drop, to commercial customers with military connections like General Dynamics, Hughes Aircraft, and Raytheon. He had run the marketing department at National, was frustrated by the growth of a corporate bureaucracy, and left to start a venture-capital firm which he named Sequoia Capital. He specialized in maintaining an impassive, impenetrable exterior, leaving even his friend Regis McKenna with the impression, “He can be a hard-nosed rug merchant if he’s trying to buy or sell from you.” All in all, Valentine wasn’t likely to be softened by sentimental appeals. He frequently took refuge in one of his favorite aphorisms: “If a man comes into my office and says he wants to be a millionaire, I’m bored to death. If he says he wants a net worth of fifty to a hundred million dollars, I’m interested. If he says he wants to make a billion dollars, I say, ‘Tell me about it,’ because if he comes close we’re all going to clean up.”

  Valentine had brushed up against Jobs while he was considering investing in Atari and also knew that the McKenna Agency, where he was a member of the board, was dallying with Apple. Valentine wore button-down shirts and regimental ties and thought Jobs looked like “a renegade from the human race” and his meeting with the Apple duo was not a success. The younger pair explained, in a stumbling manner, that if the market for single-board computers was going to be as large as some people were predicting, they would be more than content to nibble at the edges and make a couple of thousand boards a year. That was not a line guaranteed to win Valentine’s heart; he thought, “Neither one knew anything about marketing. Neither one had any sense of the size of the potential market. They weren’t thinking anywhere near big enough.” Valentine resorted to yet another of his pet sayi
ngs: “Big thinkers often do big things. Small thinkers never do big things,” and told the younger pair that he was not prepared to invest since nobody connected with Apple had any marketing experience. Jobs immediately asked Valentine to suggest some candidates who might fill the bill. Valentine returned to his office, riffled through his Rolodex, selected three names he knew from his days in the semiconductor industry, and checked their progress with people he trusted. One, Mike Markkula (who became irritated when addressed by either of his given names, Armas or Clifford), had worked for Valentine in the mid-sixties at Fairchild.

  On Valentine’s urging, Markkula (whose last name was Finnish) arranged to meet Wozniak and Jobs. Markkula was thirty-three years old and lived in youthful retirement in Cupertino. He was one of dozens of men who had made money from a young company’s public stock issue only to decide that there was more to life than becoming a corporate vice-president. In Markkula’s case the company had been Intel where he had worked for four years after leaving Fairchild. He had made no secret of the fact that one of his goals in life was to become a millionaire by the time he was thirty, and when he managed to do so, he also didn’t bother to conceal his satisfaction. Markkula was, in the words of one of his wealthier Intel colleagues, “a multimillionaire but a small multimillionaire”. He had been raised in Southern California, had earned both a bachelor’s and a master’s degree in electrical engineering from the University of Southern California, and after graduating, had joined Hughes Aircraft Company where he worked in a research and development laboratory.

  After leaving Fairchild and joining Intel Markkula was buried deep in the ritual of the semiconductor industry. He worked on the pricing strategy for new chips, composed data sheets, helped solve customers’ problems, and was considered steady and reliable but not a rising star. His main claim to fame was guiding the development of Intel’s computer system for processing customer orders, where he immersed himself in the nitty-gritty details of the programming. He watched the growth of Intel’s line of memory chips and realized the importance of good financial contacts and the need for reliable distributors and dealers. Intel’s technical edge, the strong demand for its chips, and keen attention to promotion and public relations helped make the marketing department’s task easier.

  In an industry where salesmen like to boast of, and if the opportunity presents itself practice, cocksmanship, Markkula was Mister Squeaky Clean. He preferred to curl into the lap of his own family, was uncomfortable with small talk, was punctilious and level-headed, and played his cards close to his chest. He managed his financial affairs quietly and borrowed money to buy stock before Intel went public. One of his colleagues, Richard Melmon, said, “He wasn’t one of the boys. A lot of people couldn’t stand him. He wasn’t a hell raiser. He was a fussy fellow who always had to know the answer even when he didn’t.” Peeved when a vice-president of marketing was appointed over him, Markkula surprised his workmates and left Intel. He retired to the warmth of Cupertino, muddled about his house, watched his two young children grow, splashed about in his swimming pool, installed garden sprinklers, built cabinets for his stereo system, strummed a guitar, and learned the ins and outs of oil and gas shelters. His body still had the trim look of the high-school gymnast and he openly admired Jerry Sanders, the flashy founder of Advanced Micro Devices, who, unlike most semiconductor executives, said he liked the expensive things of life. Markkula’s taste leaned toward the conspicuous, like the prominent watch he wore on his wrist and the gold-colored Chevrolet Corvette he drove to Jobs’s garage.

  Markkula talked to Jobs and Wozniak, inspected the computer, and was enthralled by the gadgetry. “It was what I had wanted since I left high school.” He also sought Don Valentine’s counsel in a two-story wooden office building in Menlo Park set around a courtyard and studded with the discreet brass nameplates and thin lettering that were sure signs of the presence of several venture-capital firms. Valentine and Markkula chatted about Apple’s prospects in an office brimming with advertisements, prospectuses, and Lucite blocks that commemorated some of the venture capitalist’s more visible coups. It was also decorated with sepia photographs of the Sundance Kid and a sign that read ANYBODY CAUGHT SMOKING ON THE PREMISES WILL BE HUNG BY THE TOENAILS AND PUMMELLED INTO UNCONSCIOUSNESS WITH ORGANIC CARROTS.

  Bolstered by his chat with Valentine, Markkula offered to give Jobs and Wozniak advice about how to organize Apple. They got together in the evenings and over weekends and Markkula gradually became more enchanted with the business. He talked matters over with his wife, promised that he would give Apple only four years of his life, and eventually told Jobs that to help pay for the development and introduction of the Apple II, he would underwrite a $250,000 bank loan: an amount less than one tenth of his net worth. Markkula called McKenna, said he was about to invest in Apple, and asked him to tolerate Jobs and Wozniak. Jobs, Wozniak, and Holt all trooped to Markkula’s house and in a cabana alongside the swimming pool spent several evenings mulling over Apple’s future shape and prospects. In return for investing in Apple, Markkula wanted to own a third of the business, though distributing the shares caused some ill-feeling when Wozniak questioned whether any company would be prepared to pay Jobs what he himself was earning at Hewlett-Packard. Markkula rose to Jobs’s defense and Wozniak was taken aback. “He had a lot of confidence in Steve. He saw him as a future executive, as a future Mike Markkula.” Holt listened to the conversations and, with the practical bent of a Revolutionary Socialist, decided he would fare well if he wound up with one tenth of the shares Jobs received. Holt also harbored some doubts about Markkula. “He had a certain arrogant bearing and the subtle self-confidence of those people who have a lot of money and believe that somehow or other they have a birthright to it. I was suspicious.” Holt was also suspicious that Markkula would help draw up a business plan and then leave the company. The suspicion was mutual. Markkula checked all of Holt’s references back to high school.

  Wozniak considered Markkula’s confidence entirely misplaced and predicted to his parents with steadfast assurance that Apple’s bigtime investor would lose every penny. Wozniak did not share Markkula’s enthusiasm and was wondering whether to accept Hewlett-Packard’s invitation to transfer to Oregon. Nor was his wife, Alice, very enthusiastic about the business that consumed so much time and hadn’t produced much money. She said, “I liked security and the paycheck coming in.” When Markkula made it a condition of his investment that Wozniak join Apple full time, matters came to a head. Markkula, Jobs, and Holt discussed whether they could muddle through without Wozniak and issued all sorts of threats. Holt recalled, “We told him if he didn’t come to work full time for Apple Computer he was out. Even then he didn’t come waltzing through the door. He moaned and groaned and puttered around for a couple of weeks.” Jobs staged a fierce campaign to persuade Wozniak to join Apple. He called Wozniak’s friends, moaned that he was at his wits’ end and asked them to place persuasive telephone calls. He went around to Wozniak’s parents’ house, broke into tears, and begged for their help. Markkula provided a quieter pressure, patiently explaining to Wozniak, “You go to a company when you want to turn an idea into money.” Wozniak said, “Once I decided I was doing it to make money, it made the rest of the decisions easy.”

  There were a few practical considerations. The Apple Computer Company was officially formed on January 3, 1977, and in March 1977, bought out the partnership for $5,308.96. To avoid any possible complication Markkula insisted that the company purchase Ron Wayne’s share of the partnership. Wayne was delighted when he received a check and discovered that it was worth $1,700 more than the paper it was printed on. There were also some larger matters. Since Markkula had never expressed any desire to run the business, there was also a pressing need to find somebody who would look after the nuts and chips. Wozniak recalled, “Mike said if he was putting money in, he wanted someone to mind the pennies.”

  Markkula’s idea of a penny minder was Michael Scott whose career had been
interwoven with his own. When both started work at Fairchild on the same September day in 1967, they were given adjoining offices. For a short time Markkula worked for Scott who was a year his junior. They did the sorts of things contemporaries did. They joshed about company chitchat and predicted to each other the speed with which prices for semiconductors would fall. After they discovered that they shared the same birth date, February 11, they made it a point to have an annual celebratory lunch. It was at their ritual meal in 1977 that Markkula asked Scott whether he would be interested in becoming president of Apple.

  Scott, like Markkula, was an engineer at heart. He had grown up in Gainesville, Florida, and in his teens had spent afternoons and weekends playing around in a university data-processing department with an IBM 650—which, in the late fifties, had been the most popular computer in the world. He chose the California Institute of Technology over MIT because he preferred sun to snow, and he specialized in physics. After graduating he spent a couple of years as an engineer at Beckman Instruments Systems Division in Southern California which was building ground instruments for checking Saturn rockets. Beckman happened to be a regular port of call for Fairchild salesmen anxious to meet quotas and targets set by Don Valentine. Scott joined Fairchild (where he was lured partly by the promise of a $100 reward for leads to other recruits). He stayed a couple of years, was disillusioned by corporate politicking, and left to join National Semiconductor.

  On his thirty-second birthday Scott was running a $30 million a year manufacturing line which made chips that combined analog and digital electronics. It was not the most glamorous place to be at National but Scott’s position as a director of a line was one of the keystones in the company’s system of management, and he was, in effect, running a business that employed eight hundred people. He prospered, endured table-pounding sessions with the company’s president where coffee cups were known to bounce, turned down an offer to run a plant in the Far East, and decided he wanted to stay in California. By the time he lunched with Markkula, Scott said, “I was bored. I had been doing the same job for four years.” He saw the formation of a company in engineer’s terms: “It’s like a chess game except the moves continue to happen. The challenge is to put together a whole system that works without being minded and that has its own checks and balances. I wanted to see if I could build a system from scratch.” He was a tubby man who walked with his fists clenched. He wore spectacles, had short hair that he would curl with his fingers, usually wore T-shirts that bulged over his belt, and on a good day looked like the benevolent proprietor of an automobile wrecking yard. There was about him more than just a hint that he would have been happy running an automated factory from a seat behind a computer terminal, with a can of Budweiser at his side while “The Ride of the Valkyries” thundered in the background.