Haunted Empire: Apple After Steve Jobs

by Yukari Iwatani Kane

  After increasingly insistent legal advice, Jobs sent out another letter nine days later:

  Team,

  I am sure all of you saw my letter last week sharing something very personal with the Apple community. Unfortunately, the curiosity over my personal health continues to be a distraction not only for me and my family, but everyone else at Apple as well. In addition, during the past week I have learned that my health-related issues are more complex than I originally thought.

  In order to take myself out of the limelight and focus on my health, and to allow everyone at Apple to focus on delivering extraordinary products, I have decided to take a medical leave of absence until the end of June.

  I have asked Tim Cook to be responsible for Apple’s day to day operations, and I know he and the rest of the executive management team will do a great job. As CEO, I plan to remain involved in major strategic decisions while I am out. Our board of directors fully supports this plan.

  I look forward to seeing all of you this summer.

  Steve

  The letter was as disingenuous as the first. Media speculation had nothing to do with why Jobs was taking medical leave. But it brought the public up to date enough on his health and then took him out of the equation so he would no longer be legally obligated to say more.

  Reporters and shareholders dissected the two missives, trying to figure out the truth. What had Jobs meant by a “hormone imbalance”? How much was Apple keeping to itself? The company was secretive about everything, but it was usually good about setting the record straight on false rumors. Why wasn’t it doing so this time? Apple wanted the public to believe that there was nothing seriously wrong with Jobs, but they seemed unwilling to make any definitive statements that could reassure the public. Apple’s share price dropped below eighty dollars as the doubts crept back about whether Jobs had really just had “a common bug” during WWDC.

  Investors began clamoring for information about Apple’s succession plan. “This is the biggest wake-up call for the investor community to come to the reality that there will be a post–Steve Jobs Apple,” said Gene Munster, an analyst with Piper Jaffray. A few days later, the Securities and Exchange Commission, which regulates the nation’s stock markets, opened an informal inquiry into Apple’s disclosures.

  Employees inside Apple tracked the media reports with dismay as they worried about both Jobs’s and Apple’s future. Looking back, there had been rumors among some of the managers that Jobs was ill. And there had been times that Jobs seemed more distracted and impatient than usual, flying off the handle for no good reason. But he had always seemed to come around again, and they had bought his story that he wasn’t sick. Many employees blamed the media for making an overly big deal out of it.

  The split in opinions, however, wasn’t only taking place in the public and among employees. It also existed on the board of directors.

  Though small, Apple’s seven-member board, which included Jobs, was one of the most involved corporate boards around. Mickey Drexler, the chief executive of J.Crew and former head of Gap, was instrumental in setting up Apple retail stores. As chair of the audit committee, Jerry York, the former chief financial officer of IBM and Chrysler, was Apple’s watchdog on corporate governance. Former vice president Al Gore applied his political skills to synthesize multiple views and package them into one idea. He was indispensable in creating consensus on the board. Andrea Jung, the chief executive of Avon, was the newest member and was still finding her footing, but the rest of them had been together for a long time, and there was a collegial atmosphere. Even during the Macworld uproar in December, Drexler had stopped by the J.Crew store at the Stanford Shopping Center to pick up a box of Christmas-themed boxers and socks for everyone. The directors were so delighted you would have thought they had never seen underwear before.

  Among the board members, its two co-lead directors, Art Levinson and Bill Campbell, had been regularly consulted on Jobs’s health. The rest of the board was not as fully informed. Levinson, who had been the chief executive of biotechnology firm Genentech, had extensive medical knowledge that could help Jobs. Genentech also made many of the drugs that Jobs was taking. Campbell, a former Apple executive and Intuit CEO, was a personal friend and confidant who regularly took walks with Jobs. Known affectionately as “Coach” in Silicon Valley for his mentoring of younger entrepreneurs, Campbell was the cheerleader on Apple’s board. When Jobs showed off a new product or prototype, Campbell was usually the first one to start clapping. Jobs appreciated his support and tended to listen to him more than to the other board members, so much so that other directors often went to Campbell rather than Jobs when they wanted to bring up an issue.

  Levinson and Campbell were loyal to Jobs and wanted to respect his privacy as much as possible. Most of the other members supported their discretion. “It was really up to Steve to go beyond what the law requires, but he was adamant that he didn’t want his privacy invaded. His wishes should be respected,” Gore would later say. “We hired outside counsel to do a review of what the law required and what the best practices were, and we handled it all by the book. I sound defensive, but the criticism really pissed me off.”

  At least one member had misgivings. As the head of the audit committee for a decade, Jerry York took corporate governance seriously. York was so disgusted by Apple’s handling of the situation that he considered resigning. He ultimately decided against it because he knew it would cause a ruckus. He shared his concerns with almost no one. When his thinking later became public, the board found it hard to believe because York had never voiced his disapproval in a meeting. Some of his colleagues chalked it up to Monday morning quarterbacking. Officially, the board appeared to be unified.

  Apple took unremitting heat for its veil of secrecy, but the commotion would have likely been worse if it hadn’t coincided with a period of unprecedented growth.

  Since the summer of 2008, the company had hit its stride in the mobile phone business with the launch of the iPhone 3G and the App Store. Its strategy to lure developers had worked beyond its wildest expectations, boosted by a revenue split model that allowed the developers to keep 70 percent of any app sales. Within months, Apple had thousands of apps in its store. A $2.99 app called iBeer that was created by magicians allowed users to tilt their phone like a mug and pretend to drink beer. iLightr was nothing more than a virtual lighter. But the ability to interact with them via the iPhone’s big touchscreen provided a completely novel experience that was refreshing to consumers. And it wasn’t long before more groundbreaking apps came along. Internet radio company Pandora’s free, advertising-supported app let users pick a song, album, or artist and build a radio station around it on the go. The ninety-nine-cent Ocarina app made a wind instrument out of the phone by turning the microphone into an airflow sensor. All of these offerings added to the allure of the iPhone while the device’s faster 3G Internet connectivity and cheaper price made it irresistible. Apple sold nearly 6.9 million iPhone 3Gs in the first three months as users collectively downloaded nearly 200 million apps. The more people downloaded apps, the more money developers were making, which in turn attracted media attention and even more developers to the App Store, which made the iPhone even more enticing. Apple had created a virtuous circle.

  The growth was so spectacular that Jobs had made a rare appearance in Apple’s quarterly earnings conference call with analysts that previous October.

  “If this isn’t stunning, I don’t know what is,” he said, adding that the iPhone outpaced sales of Research In Motion’s BlackBerry device. “RIM is a good company that makes good products so it is surprising that after only fifteen months in the market, we could outsell them in any quarter,” he said with false modesty. Apple’s accomplishment was all the more remarkable, given that the rest of the world was experiencing the worst financial crisis since the Great Depression. Housing prices had plummeted, banks were facing total collapse, and consumer confidence was at an all-time low. While other companies in the
tech sector such as Intel were closing factories and cutting jobs, Apple kept growing.

  If Jobs had to go away for a while, January 2009 was not a bad time to do so. Despite the uncertainty over his health, investors were more optimistic than they had ever been about Apple. Its PR machine also worked behind the curtains to promote the idea that Cook and the rest of the executive team could steer the company just fine without Jobs.

  That gave Tim Cook a huge advantage when he became interim CEO.

  Jobs and Cook were a study in contrasts. One was a creative genius from California, known for his mercurial personality, and the other was an operations wiz from Alabama, known for his hyperrationality. Whereas Jobs might tell you that your idea was “shit” if he didn’t like something, Cook took a more Socratic approach, asking question after question in increasing detail until he uncovered the weakness in an idea. Jobs had a presence that demanded attention. Cook’s aura was more understated.

  The difference between the two was precisely why Cook made an ideal deputy. Cook’s expertise—from supply-chain management to customer support and inventory control—covered everything that his boss hated to do. As an operations expert, he set up a highly efficient system, so the beautiful prototypes that Jobs and Ive dreamed up could be mass-produced. Unlike some of the other executives who had passed through Apple, Cook also seemed content to stay behind the scenes, so he posed no threat to Jobs’s star power. Unbeknownst to the public, Cook had been taking on more and more of the responsibilities of running Apple since he filled in for Jobs during his first medical leave of absence in mid-2004.

  Aside from the occasional gossip in the media about Jobs’s whereabouts, life without him at Apple was surprisingly normal. In the weeks after Cook took over the helm, he told an acquaintance, “I’m just going to stop listening to the press, turn it off, and get back to doing my work here at Apple.” True to his word, Cook kept tight control over the company. Products were developed on schedule, and dealings with business partners continued as they had always done.

  “We’re just trying to do what we do every day,” Schiller said in an interview that March.

  Despite the cancer, Jobs continued to work on the company’s most important strategies and products from home, and he regularly reviewed products and product plans, including the user interface for Apple’s newest iPhone operating system. Cook and Ive met with him regularly at his home. But in general, executives were careful not to pull him into discussions unless it was absolutely necessary. Occasionally, someone would stand up and say, “Well, this is what Steve would do,” as a tactic to get a point across, but Jobs was involved enough that not many people tried it. If he didn’t like something, they still got emails or messages from him saying, “That’s a dumb-ass idea.”

  One issue that Jobs concerned himself with that spring was the naming of Apple’s new iPhone. Should it be iPhone 3G Speed? iPhone 3GS? Or iPhone 3G S with a space in between the G and S? Should the letters be capitalized? Italicized? Jobs ultimately approved the name iPhone 3G S, with a space in between the two letters, though he later got rid of the space.

  Still, for all of his involvement, Jobs’s absence from the public eye was conspicuous, particularly at occasions like the annual shareholders’ meeting. Apple maintained its silence on his health throughout the spring, and its media relations department actively tried to discourage reporters from drawing attention to his absence. When the Wall Street Journal wrote a story in April about what Apple was like without Jobs, a spokesman demanded, “Why is this even a story?”

  When Jobs went on medical leave, the tumors in his liver had already spread so much that he needed a transplant quickly. The problem was that the waiting list in California was one of the longest in the nation. The transplant network in the United States was closely monitored, and patients were ranked on a list using a complex algorithm that determined how critical the need was. But the law allowed him to sign up for a transplant in multiple locations as long as he could get there in time. Since he owned a private jet and distance wasn’t an obstacle, he signed up in Tennessee, which had a much shorter transplant list than many other states. Jobs had a friend who knew the head of the transplant center at Methodist University Hospital in Memphis, ensuring that he would be well cared for.

  Soon, renovations at a yellow, 5,800-square-foot mansion in Memphis’s wealthy Morningside Park attracted the attention of curious residents. The area was a small neighborhood of about twenty homes with only one way in and one way out. Everyone knew everyone else. Many of them had been inside the five-bedroom, six-bath house before it was sold. They knew that the house had been well kept and updated. It had a large backyard with a beautiful pool. What kind of renovations could it possibly need? They realized the new owner was Jobs when a neighbor recognized his wife from an Internet search.

  Jobs almost didn’t make it, but on the weekend of March 21, 2009, a liver became available after a young man in his twenties died in a car crash. Jobs received the transplant and then stayed in Tennessee to recuperate until May, when he flew back with his wife and sister. They were met at the private airport terminal in San Jose by Cook and Ive, who joined them in a toast with sparkling apple cider. Jobs was eager to get back to work. He considered speaking at WWDC in early June, where Apple was launching the iPhone 3GS, but he decided against doing so because he still looked unhealthy.

  When the Wall Street Journal found out about the transplant and called Apple’s PR chief, Katie Cotton, she gave the standard response.

  “Steve continues to look forward to returning at the end of June, and there’s nothing further to say,” she said before quickly getting off the phone. Cotton and her team had frequently deployed every tactic in their playbook to challenge reporters. “You’re going to discredit yourself and your publication,” they would say. But this time, she behaved as if she was afraid to say anything misleading that would get the company into legal trouble later on.

  Once the story went out, media outlets figured out where Jobs had been treated. Methodist University Hospital eventually confirmed the news.

  I am pleased to confirm today, with the patient’s permission, that Steve Jobs received a liver transplant at Methodist University Hospital Transplant Institute in partnership with the University of Tennessee Health Science Center in Memphis. Mr. Jobs underwent a complete transplant evaluation and was listed for transplantation for an approved indication in accordance with the Transplant Institute policies and United Network for Organ Sharing (UNOS) policies. He received a liver transplant because he was the patient with the highest MELD score (Model for End-Stage Liver Disease) of his blood type and, therefore, the sickest patient on the waiting list at the time a donor organ became available. Mr. Jobs is now recovering well and has an excellent prognosis.

  It was the perfect solution for Apple, which knew its disclosures were being closely watched by corporate governance watchdogs. By having the hospital confirm the details, Apple itself could continue to avoid the obligation to provide details about its CEO’s health.

  In the aftermath, the company received much criticism about its handling of the situation. Prominent experts like former SEC chairman Harvey Pitt questioned why Apple didn’t disclose the transplant sooner.

  “We haven’t gotten to the point where liver transplants are viewed as routine surgery,” he said in an interview, adding that he had questions about the board’s processes.

  Inquiries eventually died down. As unsatisfying as its disclosures may have been, Apple’s board and attorneys had done everything by the book.

  Jobs was motivated to get better quickly, and as part of his regimen, he took many walks. One day, he invited the Wall Street Journal’s star technology reviewer, Walt Mossberg, to accompany him.

  Mossberg, who had known Jobs for decades, spoke to him often and was one of the select few who received previews of new products. It was sunny and warm when Mossberg pulled up to Jobs’s house in a quiet, unassuming Palo Alto neighborhood. The home l
ooked like an English cottage. It was large and attractive, but not unreasonably so. A variety of apple trees, including the Macintosh, stood in the front yard.

  Mossberg and Jobs set out toward a park a few blocks away. As they walked, they passed other homes. Many of them were relatively modest in size, and none were ostentatious, but if you looked closely, there were signs of wealth—hidden security cameras, exotic trees on their lawns, luxury cars in their driveways, and a few homes with gates. But the neighborhood was friendly. Residents set out baskets of free apples from their trees in autumn and put up handmade signs that invited passersby to come into their garden and sit.

  Jobs loved to gossip, so he and Mossberg talked about products and the industry. Sometimes he would make extreme assertions about people to get a reaction out of the journalist. Other times he would ask for an opinion. Jobs told Mossberg that he took walks every day and that each day he set a farther goal for himself. Today it was the neighborhood garden a half mile away. At one point, Jobs looked pale, and suddenly stopped. Mossberg, who didn’t know CPR, could see a headline in his head: “Helpless Reporter Lets Steve Jobs Die on the Sidewalk.”

  As the pair arrived at the Elizabeth Gamble Garden, they were greeted by the delicate scent of the blooms from the sweet osmanthus tree. The talk became reflective. Sitting on one of the benches, they spoke about life, family, and illness. Mossberg had had a heart attack some years before, and he still suffered from diabetes. Jobs had always had a soft spot for people who were ill. Some years ago, when a teenager with muscular dystrophy visited Apple as part of his Make-A-Wish Foundation request, Jobs showed a gentleness that he rarely exhibited, taking the boy and his parents to lunch at the cafeteria, showing them around, and sitting with them in his office.

  But now being ill himself, he was even more sensitive to health issues. Perhaps because of everything he had experienced, he didn’t want others to make the same mistakes that he had made. Jobs lectured Mossberg about staying healthy.