After Steve: How Apple Became a Trillion-Dollar Company and Lost Its Soul

by Tripp Mickle

The work fell to the team from QuesTek, who used computers to conceptualize a sturdier metal. Standard 18-karat gold is 75 percent gold and 25 percent other metals such as zinc and nickel. The proportion of those other metals determines the strength of the gold. Apple’s engineers came up with combinations for the rose gold and traditional alloys that included copper, silver, and palladium. The luxurious metal could be cast into blocks of gold and chiseled away to produce a single-body watch case. But what delighted Ive was the engineers’ assurance that it was twice as strong as traditional gold, luxurious yet durable.

In a phone, it got people’s attention because it vibrated at the same frequency as a mosquito’s buzz, a sound humans are evolutionarily disposed to hearing. But no one wanted mosquitos buzzing on people’s wrists,

Williams had earned the label because he continued to drive a Toyota Camry even after his total 2012 compensation had soared to $69 million. One of the first challenges Williams

“It is better to be a pirate than in the navy.”

Jobs had believed that accountants and lawyers should be largely kept out of decision making, treated more as implementers than as influencers. In his decade as finance chief, Oppenheimer had embodied that philosophy. He had raised questions about spending when warranted but had generally adopted Jobs’s view that sometimes a company needed to spend money to make money.

After Ive selected the kind of glass he thought Apple should use, Blevins invited glassmakers from Germany and China to the Grand Hyatt in Hong Kong. He reserved a series of adjoining conference rooms at the hotel and put each bidding company into its own room. He then went from room to room, pressuring the bidders to lower their prices. He told the Germans, who were seeking upward of $500 a square foot, that the Chinese were asking a fraction of that. He told them they had ten minutes to lower their price. “If you don’t agree to this number, the guys next door said they would,” he said. Moments after issuing the ultimatum, he exited the room, leaving his astounded colleagues to process his bluffs. As the clock ticked, the various bidders scrambled to figure out if they could reduce their prices and still make enough profit to make the project worthwhile. Meanwhile, Blevins cycled from room to room, intensifying the pressure. “The project is not moving forward,” he said. “We have a cost problem. You have fifteen minutes to give me the best possible deal you can offer.” The

It showed that Apple already accounted for the majority of the profits in the $500 billion consumer electronics industry and needed to move into other areas to deliver sales increases for shareholders.

The largest options were the $2 trillion auto industry and the $7 trillion health care industry. Turning to MBA-style analysis was disorienting for some engineers. Steve Jobs had disdained consultants; he had thought they made recommendations and moved to their next project without working to determine whether their ideas succeeded or failed.

Jobs preferred to be a disruptor rather than be disrupted. He had famously killed the iPod Mini, Apple’s best-selling product, and replaced it with the iPod Nano, a lighter, slimmer device that had gone on to even greater sales. Whereas Jobs might have guided the development of an industry-leading music app to replace iTunes, Cook

A skilled negotiator, Cook used the social media fiasco to demand an adjustment to the terms of the deal. In the days that followed, Apple shaved an estimated $200 million off its offering price. The reduction led staff at Beats to say that Apple had given Dre just enough of a haircut to make sure that he did not become a hip-hop billionaire. As the company prepared

The feature, which recalled Ive’s Blue Sky project at Newcastle, pushed Apple into the world of finance, where it could take a small fee on each of the millions of transactions worldwide. Returning to the stage, Cook said that it would “forever change the way all of us buy things.” “Now we’ve gone through

His friends would later joke with him, asking, Who really wants a watch that charges three fucking hours a day?

By 1980, it was estimated that a fifth of San Francisco’s population was gay. Men in its Castro neighborhood encouraged one another to be open about their sexuality. The supportive community that arose made the Bay Area a destination for gay, lesbian, bisexual, and transgender Americans, and their arrival coincided with a period of economic transformation as the PC era spilled into the dot-com boom.

And once we began, our progress was too slow, too slow on equality for African Americans, too slow on interracial marriage, which was only legalized fourteen years ago, and still too slow on equality for the LGBT community. Under the law, citizens of Alabama can still be fired based on their sexual orientation. We can’t change the past, but we can learn from it, and we can create a different future.”

Failing as the first CEO after Jobs would have been a personal setback, but failing as the first gay CEO after Jobs would have left a legacy that could limit opportunities for other LGBT executives.

He had managed to make the disclosure less about feeling liberated from some personal burden and instead emphasized why he thought his sexuality was a gift.

The search for answers unearthed two underlying problems. Apple had tapped Quanta Computer rather than its trusted partner Foxconn to assemble the watch because it wanted to diversify its supply chain and protect the project’s secrecy by using a manufacturing location far away from competitors

Apple set up a surveillance system to watch for people wiping dust from their hair and walking out with it at the end of the day. The engineers watching marveled at the absurdity of the financial imprecision of Ive’s precise design.

Paul Deneve, the former Yves Saint Laurent chief executive, designed a sales and distribution plan that borrowed from luxury brands such as Louis Vuitton and Hermès, which fostered a sense of scarcity and exclusivity to command higher prices and more prestige for their handbags and clothes. Deneve agreed with Ive that the watch could stand the test of time only if it was perceived as a personal accessory, instead of a computer on the wrist. To boost its desirability, Deneve sought to place the timepiece in high-end stores known for selling the world’s most coveted goods. He struck distribution deals to bring the watch to London’s Selfridges, Tokyo’s Isetan, and Paris’s Galeries Lafayette. In the weeks before the watch became widely available, the stainless-steel and gold models went on display in those stores alongside brands such as Cartier and Rolex, lending opulence to Apple’s everyday image.

the watch from fashion to fitness. FitBit’s sales were booming behind its emphasis on tracking people’s exercise. It showed that there was an appetite among users for devices that supported workouts. Apple needed to move its emphasis on the watch from runways to running. The new strategy gradually took shape. The company’s product marketing team would work with Nike to develop a co-branded watch that would provide a fitness halo for the entire product, and Iovine would work to get the watch onto the wrists of athletes such as tennis star Serena Williams. “All you gotta do is get Serena to wear it,” Iovine said. The group agreed that fitness was in and fashion was out. Ive wasn’t there to object.

The company’s role as gatekeeper was lucrative: Apple collected 30 percent of the sale price of every app it sold and a similar amount each month from subscription apps. The sales had made the store a fast-growing contributor to Apple’s bottom line, providing the majority of its $18 billion in services sales. But Cook saw an opportunity in the growing app economy to make more money by transitioning from distributing to making apps.

Meanwhile, the Beats engineers were adjusting to a proprietary coding language that only Apple used. They had developed their previous app with a widely used coding language common to thousands of app developers, but Apple wanted to use an exclusive code similar to what it had used to develop iTunes. The Beats engineers thought it loaded features more slowly than their native app, and they were scrambling to find a way around

The sales pitch was that if they would forgo their fees for three months, Apple would bring in millions of new subscribers who would listen to more songs and allow Apple to funnel more money back to the labels and artists. Though large labels like Sony and Universal agreed to deals, independent labels balked, leaving Apple without music from popular artists such as Adele and Radiohead. Their absence threatened to overshadow the launch by fueling stories about what Apple Music didn’t have instead of what it did.

Borchetta took a deep breath as he realized that he had been given the power to set the rate for the entire industry. At the time, Spotify was paying artists about $0.006 per stream.

“You know what the Spotify rate is,” Borchetta said. “Beat it.” What had seemed like a simple solution threatened to upend Apple Music’s finances by creating unaccounted-for costs. The company would need to dig into its coffers—the $200 billion it had on hand—to cover the unplanned payments to artists. Iovine and Cue conferred with Cook and got his approval to cut a deal. If they didn’t surrender, they would risk Swift’s letter emboldening other artists and triggering a mutiny against the service.

It was an ambitious concept that would require huge engineering leaps, but Cook endorsed a plan that would minimize the risks. The PrimeSense technology would become part of a premium iPhone that would sell at a higher price. The cost increase would offset the pricier components, but perhaps more important, it would moderate the demand for a product that many feared would be hard to make in the numbers a popular new iPhone would sell, upward of 50 million units in about three months. They would fulfill the excess demand—and hedge against a possible facial recognition failure—by complementing the premium phone with another minor update to the iPhone 6. The plan was a master class in risk management.

around. It had 10 million paid subscribers in six months, a milestone that its rival Spotify had taken six years to hit. Within a year, the number would hit 20 million.

They envisioned Apple doing to Tesla and the auto industry what it had done to Nokia and mobile phones: entering the market late with technology so superior that it would soon become dominant.

In the midst of working on the stores, Ive consulted for Ahrendts on a project she had dreamed up to further Apple’s business in China. She wanted to introduce a fleet of buses that would become Apple Stores on wheels, traveling around the world’s most populous nation selling iPhones in cities and towns where the company didn’t have a store. The plan called for the buses to return each night to a depot where they could be cleaned before being dispatched again the next day. Some members of Ahrendts’s team scoffed at the absurdity of enlisting one of the world’s great designers to work on upscale Greyhound buses.

Lynch intervened to say that there needed to be a balance between privacy and national security interests. Comey expanded on the government’s position, saying that companies should develop a system for court-ordered access to devices during investigations.

IN SOUTHERN CALIFORNIA, the FBI was playing a game of digital Russian roulette. It could make ten attempts to guess the four-digit passcode of the locked iPhone, but if they all failed, the device could automatically erase itself or be disabled, accessing it would become impossible, and their final lead in the case would be dead.

Hundreds of miles to the south near Riverside, California, Justice Department attorneys plotted to break the impasse. They drafted an application for a court order under the All Writs Act, a 1789 law that could force a company to assist in a criminal case. The rule, just two sentences long, had previously been used to get Apple’s assistance in gaining access to the phones of child sex abusers

Can the government compel Apple to write software that we believe would make hundreds of millions of customers vulnerable around the world?”

They reasoned that if privacy was as much of a human right as Cook said it was, he should defy the Chinese government as well. But in that country, where the government could restrict the sale of international brands, Cook had surrendered his moral high ground to protect sales and had explained the compromise away by saying that Apple abided by the rules of the countries where it operated. He had also cut a series of deals with Google

the Justice Department dropped the case. The government had cracked the terrorist’s iPhone without Apple’s help by paying professional hackers more than $1 million to break into it.

half since its release, sales of the Apple Watch still lagged behind the original projections. The company had sold an estimated 12 million smartwatches in the first year, more than the original iPhone after its launch but several million fewer units than the iPad after its debut. Given the way Apple’s customer base had swelled, many on Wall Street viewed the Apple Watch as a disappointment, especially because the company needed new businesses to offset its declining iPhone sales. The estimated $6 billion in revenue the watch generated was a poor substitute for the nearly $20 billion decline in iPhone revenue over the past year.

Instead, he went on with Apple’s preferred version of reality, focusing on the fact that the company had finished the year second in the world in watch industry revenue behind only Rolex.

A year before his death, Jobs had highlighted the company’s history of jettisoning some popular technologies such as floppy discs in favor of emerging ones such as CD-ROM drives. He believed that customers wanted Apple to make those choices for them and would reward the company if it was right by buying its products. “People call us crazy,” he recalled. “We have at least the courage of our convictions to say ‘We don’t think this is what makes a great product. We’re going to leave it out.’”

THE PUBLIC BLOWBACK against the iPhone 7 and AirPods was overshadowed by the ongoing turmoil engulfing Apple’s biggest competitor. Samsung recalled 2.5 million phones with faulty batteries and replaced them with phones with batteries from a different supplier. Then the replacement phones began overheating, and Samsung was forced to issue a second recall, an embarrassment that led some inside the company to darkly joke that the Note 7 was a topic too hot to touch. The mistakes cost Samsung at least $5 billion plus tremendous damage to its reputation.

COOK’S FIVE-YEAR EXPANSION of the Apple empire also hit a wall. Despite Buffett’s vote of confidence and the improved sales of the iPhone 7, the company continued to struggle in China. The iPhone business, which had tripled in size after Cook’s China Mobile deal, gave up some of its gains. Sales plunged 17 percent from their peak as a customer base obsessed with status symbols put off buying the 6s and 7 phones because they looked nearly identical to the iPhone 6 launched two years earlier. The very market that had fueled Apple’s expansion was contributing to its contraction.

The country’s government abruptly shut down sales of iTunes movies and books, closing off critical aspects of Apple’s growing services business.

Standing before everyone, he clicked to an image of an X-shaped chart that showed Apple’s hardware profit margins declining and its services profit margins rising. His message to the attendees was that Apple’s legacy business, the one most associated with Ive, had become a drag on its performance as the costs of adding more cameras and components to the iPhone had risen while the phone’s sales price remained flat. Meanwhile, services such as iCloud subscriptions were lifting the company’s bottom line because they had relatively fixed costs and more and more people were signing up to pay monthly fees for them. Stern’s job was to find a way to generate more of that easy money. The presentation alarmed some people in the audience. It depicted a future in which Ive—and the company’s business as a product maker—would matter less and Cook’s increasing emphasis on services—such as Apple Music and iCloud—would matter more.

Like many of his peers, Stringer could afford to leave or retire. The company had begun granting the fifty-two-year-old shares in Apple when its stock price was about $1, a figure that had appreciated over the years, particularly under Cook, to more than $133. The company’s success had made him a multimillionaire, with homes in the Bay Area, on Lake Tahoe, and in southern California. He could “vest in peace,” as they said at Apple, a joking reference to the growing number of early retirees who colleagues called VIPs.

an email to colleagues announcing his planned departure. He told them that he would not be in the design studio but available by email until his last day. He reminded them of what they had done together at Apple to make products to empower people and told them that it was an honor to work alongside many of them. He was fond of a line from the Persian poet Rumi, who said, “When you do things from your soul, you feel a river moving in you, a joy.” Playing off that line, Imran wrote, “Sadly, rivers dry out, and when they do, you look for a new one.” The email alarmed Ive and Dye. They feared that the message Chaudhri sent could be interpreted to mean that Apple’s best days had passed. Its river had run dry. It was one thing for outsiders to say that the company was no longer innovative, but another thing altogether for that critique to come from someone who had helped birth multitouch technology for the iPhone. They worried it would poison morale and moved to contain the damage. Shortly after the email, Dye fired Chaudhri.

THAT POINT, investors viewed Apple as “the iPhone company.” They considered the business to be mature and expected product costs to rise as sales contracted. The combination meant that Apple had a stubbornly low price-to-earnings ratio, the calculation of a company’s share price relative to its projections of future profits. Hardware companies such as Apple receive a lower price multiple than software companies because they are hit-driven businesses: an especially popular product such as the iPhone 6 could cause a sales surge, while a dud such as the iPhone 6s could pummel profit. The fear that Apple was one poor product away from irrelevance meant it had a fifteen times earnings ratio, less than half that of Google or Facebook. That bothered Cook because it depressed the company’s market value. He wanted Apple, then valued at $650 billion, to be a $1 trillion company.

The CEO boasted that Apple was responsible for 2 million American jobs, including 1.5 million app developers and about a half million suppliers’ employees. Cramer didn’t point out how much smaller that was than China, where Apple supported about 4.5 million workers, including 3 million in factories and 1.5 million developers. Instead, he focused on the United States, asking Cook if he would put money behind creating jobs there.

Members of the White House marveled at Cook’s maneuvering. He had given the president what he wanted by showing up and sitting at his right side. But he saved face with his staff in Cupertino by strategically leaking that he had challenged Trump on immigration, even though he had done it delicately and in private.

The new tax law required that Apple pay a onetime tax of 15.5 percent on its overseas profits, approximately $38 billion. The company planned to build a new customer support campus and data centers, as well as start other construction that would cost about $30 billion. Plus it was spending about $55 billion annually with U.S. suppliers and hiring about five thousand new employees annually in the United States. The company could thus claim that in the wake of tax reform it would be making a $350 billion direct contribution to the U.S. economy over the next five years, as well as adding twenty thousand new jobs. Those were the types of big, simple numbers that Trump loved.

Iovine didn’t know Zack Van Amburg and Jamie Erlicht, two executives at Sony, but they came recommended by friends. He loved that they had produced one of his favorite shows, Breaking Bad, and invited them to his home in Holmby Hills, an opulent neighborhood of $10 million mansions with lush green lawns and towering privacy gates.

The star-laden show signaled that Apple was serious. The company agreed to pay Aniston and Witherspoon more than $1 million an episode each, bringing the show’s total cost to $100 million. Believing that talent would help