Cook’s meticulous approach took a toll on those who worked under him. The team gave up evenings, holidays, weekends, and vacations to fulfill the promises that Cook made. When Jobs decided to change one of the colors in a new iPod shuffle lineup on a Christmas Eve six weeks before launch, Cook expected them to come in on Christmas Day to make it happen. In the early days, some of the old hands jokingly referred to themselves as “slaves.”
When they weren’t giving up their own time off, they were turning the screws on their Asian manufacturing partners to keep their factories churning around the clock. It was a particularly difficult task during Chinese New Year, the workers’ most important holiday, when they expected to go home to their families.
Price negotiations with suppliers were emotionally grueling for all but the most hardened operations staff. People would sometimes break down in front of their Apple counterparts because they couldn’t meet the company’s pricing demands and were afraid of going back to their bosses empty-handed. One manager felt she was being deceptive when she extracted concessions from a supplier for a short-term contract, knowing that the other side was hoping for a permanent relationship.
Yet despite these efforts, the operations team rarely felt appreciated. They knew they had been relegated to the bottom of Apple’s hierarchy, below the industrial design, hardware, and software units. Even before Jobs’s return, operations had been described as a “bowel movement.” Their lowly status only solidified under Jobs, who considered engineering, marketing, and design to be king.
During the holidays, the industrial design and engineering teams enjoyed lavish soirées at exclusive venues while the operations team was exiled to buffet lunches near Cupertino with iPods, iPads, and MacBooks as door prizes. When the first iPod touch launched, the engineering team was invited to the Exploratorium museum in San Francisco for a celebration with hors d’oeuvres, wine, and live music. Operations got nothing.
That gap extended into compensation. The rank and file in the operations unit received lower pay, bonuses, and stock allocations compared to their counterparts on other teams. Their salaries were respectable by industry standards, but as Apple became successful and their jobs grew more demanding, it didn’t seem fair that designers could afford Aston Martins and multimillion-dollar homes in San Francisco while the serfs had to scrimp and save to buy a home in San Jose.
Amid such tensions, one manager found a crafty way to seek additional compensation. Paul Shin Devine, a global supply manager, was arrested in August 2010 for taking more than a million dollars in kickbacks from six Apple suppliers in South Korea, China, Taiwan, and Singapore. Devine was part of the iPod and accessories procurement operations team, responsible for selecting suppliers for parts and materials. Going back four years, he had provided suppliers with confidential information that would give them an edge in their negotiations with Apple.
To one Chinese company, he emailed step-by-step instructions on how it should negotiate with Apple to obtain money for new manufacturing tools that it needed to make Apple’s products.
“I will propose 5 new sets,” he wrote. “1) I will ask you to send me a quote for 5 new sets at full price ($120k x5=$600K). 2) I will then say too expensive. 3) I will suggest that you pay for 2 tool sets ($240K) and Apple pay for 3 tool sets ($360K). Which means I will try to get about $360K USD for Kaedar. What do you think?”
To another company, he recommended that it offer Apple a price of two U.S. cents for a part, in between the one cent that Apple was looking for and the four cents submitted by a competitor. Devine tried to avoid detection by using Hotmail and Gmail accounts and asking for payments in amounts less than ten thousand dollars, but he was eventually caught. The word among suppliers was that one of his contacts had felt exploited by the scheme and informed on him.
When the news became public, those who knew Devine were shocked. He was smart and well educated. Nothing about him had suggested any crookedness.
Devine, who pleaded guilty to fraud charges, was clearly on the wrong side of the law. But the case also provided a glimpse into the dark underbelly of Apple’s success. Even though Devine made a good living—an average of $133,000 a year in salary and bonuses—he hadn’t felt that his package was commensurate with the work he put into his job. Suppliers were desperate for any advantage in their negotiations with Apple. All of them were able to get away with it for as long as they did because Apple’s massive scale of operations made it harder to keep a close track of its employees.
The dirty secret was that Devine wasn’t the only one. Apple subsequently caught a handful of others who had done similar things and quietly showed them the door.
Apple’s success brought pressure to the bottom end of the supply chain, too. In January 2010, a young factory worker in China jumped off his high-rise dormitory at a plant run by Foxconn, Apple’s contract manufacturer. Ma Xiangqian had previously worked long overnight shifts, forging plastic and metal into electronics parts, but had been demoted to cleaning toilets after he broke some equipment by mistake. He had been earning the equivalent of one dollar an hour, working triple the legal overtime limit.
More than a dozen more deaths followed as other workers jumped off company buildings.
“Life is hard for us workers,” said Ma Xiangqian’s sister Ma Liqun shortly after her brother’s death. “It’s like they’re training us to be machines.”
The reasons behind the suicides were complex. Workers were certainly suffering as a result of the long hours and intense pressure they faced in their jobs. But a big part of it also had to do with China’s social upheaval. Many of them were mere teenagers far from home and alone for the first time. It wasn’t surprising that some of them would be emotionally unstable, especially if they were troubled by conflicts with coworkers, dorm-mates, or friends.
Those nuances, however, were lost as Foxconn’s customers took a beating for profiting from the cheap, hard labor that these workers provided. Though many major technology companies did business with Foxconn, Apple received the most attention in the media because it was the highest-profile customer.
Unused to the limelight, Foxconn was slow and clumsy in its initial response. Then, as the scandal spun out of control, the manufacturer went on an unprecedented PR offensive and invited dozens of journalists to speak with its chief executive on the same factory grounds where most of the suicides took place.
“We’re reviewing everything,” Terry Gou told the reporters in a press conference as he apologized and bowed several times. “We will leave no stone unturned, and we’ll make sure to find a way to reduce these suicide tendencies.”
Afterward, Gou led a tour around the campus that included visits to dormitories, a hospital, a production line, and a counseling center. His aim was to show how well Foxconn treated its workers. But the visitors’ eyes kept returning to the yellow mesh nets that Foxconn had begun installing around its buildings to catch jumpers.
It wasn’t soon enough. Just hours later, a worker found a Foxconn building without a net and leapt to his death.
5
The Next Lily Pad
At dawn one brisk November morning in 2010, two empty buses rumbled in front of Apple’s deserted corporate campus. As the drivers waited for their passengers, the chill gray of the parking lot was broken by the headlights of arriving cars. In Apple’s intense culture, showing up early for work was not unusual, but the senior executives were gathering for a different mission. Instead of heading for their offices, they boarded the buses, idly chatting as they kept an eye out the windows to see who had been chosen to join them.
They were on their way to a Top 100 meeting, a secret corporate retreat hosted by Jobs at a resort south of Monterey Bay. Apple had just introduced a lineup of lighter and smaller MacBook Air laptop computers, and the company was heading into a busy holiday sales season. With new versions of the iPad and the iPhone also in the works, it was a good time to step away from the daily grind to think about Apple’s future strategy.<
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Top 100s were meant for the company’s brain trust. Everything about it was supposed to be kept hush-hush, and nobody was allowed to log it into their calendars. Those who made it onto the list were asked to keep the invitations to themselves, so their inclusion didn’t spark jealousy. The secrecy added to the allure, reinforcing the sense that the company was working on things too exciting and special to share with just anyone.
In reality, the secrecy was a farce. There was no way that the disappearance of a hundred executives could go unnoticed, especially when they needed help from their staff to prepare. In their absence, some of the staff would hold a tongue-in-cheek “Bottom 100” get-together. It was usually low-key: lunch or a few drinks, snacks, and a bit of unwinding. One favorite place to go was BJ’s Restaurant and Brewhouse, which was so close that employees treated it like their private watering hole. They jokingly called it IL7, the unofficial seventh building on campus.
The core of the elite group included all of Jobs’s inner circle of lieutenants such as Cook, Ive, mobile software head Scott Forstall, marketing chief Phil Schiller, and iTunes lead Eddy Cue. The rest of the handpicked names telegraphed Jobs’s priorities and could change from year to year. Sales executives were largely excluded because Jobs viewed them as replaceable. Lee Clow, the creative lead at TBWAChiatDay, the agency responsible for Apple’s award-winning ads, was routinely invited even though he was an outsider. Jobs thought the hip and edgy campaigns that Clow’s team dreamed up were crucial to Apple’s brand. Intel executive Paul Otellini, as well as AT&T’s key contact Glenn Lurie, had also attended a portion of the confabs in past years. The rumor was that Jobs preferred to mix it up by making sure that about a third of the list was composed of fresh faces.
Previous attendance was no guarantee of another invite. And even if you were chosen, your invitation could evaporate in an instant. One year, a new manager in the iTunes unit was pulled off one of the buses as it was leaving. After a meeting had gone poorly a few days earlier, Jobs had labeled him “an idiot” and ordered the hapless man disinvited.
Jobs called the Top 100 meetings irregularly and always with only about a month’s notice. Some years there were two gatherings; other years none. Apple’s biggest products and services were first unveiled internally at these meetings. Past participants heard about Apple’s retail strategy and got early peeks at the iPhone and iPad. One year, Jobs solicited names for the digital music player Apple was developing. It was an exciting yet deflating moment.
After the audience eagerly suggested names like iPlay and iMusic, Jobs said, “Those are all shit. I’m sticking with what I’ve got.”
A Top 100 invitation was a mixed blessing. To be chosen was unquestionably a privilege. But if you were asked to make a presentation, the pressure was nerve-racking. Jobs cared deeply about aesthetics, and those tastes extended to everything including slides, created on Apple’s presentation software Keynote. Jobs had strict rules about them: one font family per presentation, three or five bullet points per slide, never four, and titles 30 percent above the center line. The file size also could not be more than eight megabytes, just enough to show up well on a projection screen. Jobs hated big files. Making the task all the more onerous, there was no instruction manual. Some had a knack for intuiting what their boss wanted. Bob Borchers, a product marketing executive for iPhones, had been so skillful that his colleagues used to call him the “Slide Bitch.”
To get to the retreat, everyone had to take the chartered buses to the Carmel Valley Ranch, a five-hundred-acre resort surrounded by vineyards and lavender plants. It had a golf course, nine tennis courts, two pools, and two fitness centers. Not that these amenities mattered. The executives were there for work, not play.
This year, after the group arrived at the resort and checked into their rooms, they gathered in a large meeting room. Jobs kicked it off with a big speech.
“I’m going to give out a lot of secretive stuff here. I don’t want to see a tweet or an email,” he said. Jobs made sure there were no resort staff present. The executives knew enough not to bring computers into the room. Jobs threatened to fire anyone who broke his trust.
Over the next couple of days, each of Apple’s business units took turns presenting to the entire group. The aim was to preview new products, explain strategy, and rally everyone behind what the company was doing. The sessions were intense, but there were no structured discussions, and attendees were free to ask questions or offer opinions. This created its own pressure. None of them wanted to embarrass themselves, but they needed to show Jobs that they were contributing.
In one of the first sessions, participants got to see the iPad 2 and the magnetic cover which latched on to the device and automatically woke the device when it was opened and put it to sleep when it closed. When it came time for the question-and-answer session, everyone wanted to know more about the cover, which could also fold into a stand to watch videos or make it easier to type.
“Enough with the fucking cover!” Jobs finally interjected. “Can we talk about the iPad?”
Another presentation addressed iAd, Apple’s new mobile advertising service, which built on the company’s $275 million acquisition of a mobile ad company called Quattro Wireless. Using one of his favorite analogies for describing essential products and services, Jobs introduced iAd as one of Apple’s “tent poles.” When the team’s leader, Andy Miller, finished his presentation, one of the first questions came from Tim Cook, seated in the back.
“Andy, you know we bought your company and I know it wasn’t the easiest integration,” he said. “What can we do to make sure that we learn from this?”
“Well, the first thing I’d do is I’d recommend that the new guy doesn’t report to this guy,” Miller responded, pointing to Jobs.
For a moment there was dead silence. Then Jobs started laughing, and everyone joined in.
Cook’s question was insightful because it wasn’t about the product but about how to run the company. Historically, Apple had preferred to develop its own technologies. Acquisitions had been few, and there was little precedent for incorporating them into Apple. Newly absorbed staff often had trouble being accepted into the company’s tight-knit culture. There was also no process in place to integrate them. Some showed up to find they had not even been assigned desks. As Apple acquired more companies, this lack of support needed to change. The question was one that would only occur to someone who was thinking deeply about the future.
The pace of the Top 100 was brutal. The days started with breakfast, and breaks were short. After dinner, many of the executives checked their emails and made phone calls even though they weren’t supposed to be working during the retreat. Those who had presentations the following day would practice their lines over and over again.
The timing of the 2010 gathering was particularly heartbreaking for the baseball fans. The San Francisco Giants were back in the World Series for the first time since 2002, and the fifth game was scheduled that Monday, with the Giants ahead in the series 3-1. If they won this one, it would be their first World Series title since the team left New York in 1958. As beautiful as the resort was, Carmel Valley was the last place they wanted to be. As a small consolation, someone found a television and brought it into one of the halls. But they were called into dinner during the fifth inning. Neither team had scored yet. The fans tore themselves away from the action and reluctantly joined Jobs, who had been sitting alone in the restaurant, stewing. He had no interest in sports. When news of the Giants’ victory spread through the dining room twenty minutes later, the fans made eye contact and rejoiced quietly so as not to further annoy their irritated CEO.
The Top 100s hadn’t always been so serious. In the past, attendees had time to relax over drinks in the evenings. At some of the meetings, they played basketball. Schiller and Cue would often team up. One year, Apple’s fearsome media spokeswoman Katie Cotton had supposedly dressed up as a cheerleader.
This time, the sessions were more som
ber. It was clear that Jobs wasn’t feeling well. No one talked about it, but he was having trouble walking, and he looked depleted. One night, he left dinner early. The biggest sign that he wasn’t himself was that he didn’t chew anyone out. Past Top 100s could be dangerous encounters. Sometimes you couldn’t even finish your presentation before Jobs interrupted. If he didn’t like what you had to say, there would often be a feeding frenzy as other senior executives joined in the criticism. This time, the CEO was relatively quiet.
On the last day, employees were treated to a special moment. Jobs pulled up a chair in the front of the room.
“You’ve got Steve Jobs sitting right here,” he said. “You’re my guys. You can ask me anything you want. I don’t care how dumb it is or insulting it is. I want to make you all feel comfortable about whatever questions you have about the company.”
Hands shot right up. One of the most memorable questions was concerning rumors that had been spreading on the Internet about Apple’s plans for a television.
“Are we going to make a TV?” someone asked.
Jobs didn’t hesitate. “No,” he replied. “TV is a terrible business. They don’t turn over, and the margins suck.” He added, however, that he wanted to own the living room.
Some in the audience took that as a sign that the Internet chatter was wrong, but those familiar with Jobs’s cryptic ways weren’t so sure. The veterans in the room interpreted his comments as a message to concentrate on what was before them now.
Jobs also talked about schools and how it pained him to see his kids walking to class with a heavy backpack full of outdated textbooks. He described the Apple TV digital media receiver as a hobby until the company got all the content. The question-and-answer session lasted about an hour and a half. Had the executives known that this would be his last Top 100, they probably would have kept him there longer.
Jobs knew that his cancer had returned. He was in pain again and having trouble eating. He was convinced that he was going to die soon and grew emotional at the thought that he might not celebrate any more of his children’s birthdays. His son had just graduated from high school, and he had two younger daughters.
Haunted Empire: Apple After Steve Jobs Page 8
